<PAGE>
As filed with the Securities and Exchange Commission on February 3, 2000
Registration 333-93273
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ONVIA.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7375 91-1859172
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------
1000 Dexter Avenue, Suite 400
Seattle, Washington 98109
(206) 282-5170
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Glenn Ballman
President and Chief Executive Officer
Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, Washington 98109
(206) 282-5170
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
Mark J. Handfelt Mark A. Bertelsen
David R. Young Jose F. Macias
David T. Sobota Don S. Williams
Gordon Empey Burke Norton
Venture Law Group Wilson Sonsini Goodrich & Rosati
A Professional Corporation Professional Corporation
4750 Carillon Point 650 Page Mill Road
Kirkland, Washington 98033 Palo Alto, California 94304
(425) 739-8700 (650) 493-9300
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration
statement.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum
Title Of Each Class Of Aggregate Amount Of
Securities To Be Registered Offering Price(1) Registration Fee
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<S> <C> <C>
Common Stock, $0.0001 par value........... $119,600,000 $31,575(2)
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</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating
the amount of the registration fee.
(2) $26,400 of this amount has been 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 this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 3, 2000
8,000,000 Shares
[LOGO OF ONVIA.COM]
Common Stock
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$11.00 and $13.00 per share. We have applied to list our common stock on the
Nasdaq Stock Market's National Market under the symbol "ONVI."
The underwriters have a 30-day option to purchase a maximum of 1,200,000
additional shares to cover over-allotments of shares.
Investing in the common stock involves risks. See "Risk Factors" on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Onvia.com
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.................................... $ $ $
Total........................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about , 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
Chase H&Q
Robertson Stephens
E*OFFERING
William Blair & Company
The date of this Prospectus is , 2000.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
You Should Not Rely On Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 29
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 43
Related Party Transactions................................................. 54
Principal Stockholders..................................................... 58
Description of Capital Stock............................................... 60
Shares Eligible for Future Sale............................................ 63
Underwriting............................................................... 65
Notice to Canadian Residents............................................... 67
Legal Matters.............................................................. 68
Experts.................................................................... 68
Where To Find Additional Information....................................... 68
Index to Consolidated Financial Statements................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is
legal to sell these securities. The information contained in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of
delivery of the prospectus or of any sale of the common stock.
OnviaMail, Work. Wisely. and OnviaFlash are our trademarks, and we have
filed for trademark registration for chaperoned access, CheckPoint, the Onvia
checkmark logo, Onvia and Onvia.com. This prospectus also includes trade
dress, trade names, trademarks and service marks of other companies.
Dealer Prospectus Delivery Obligation
Until , 2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our financial statements and notes to those statements appearing
elsewhere in this prospectus.
Onvia.com, Inc.
We are the leading business-to-business emarketplace for small business
buyers and sellers. Our emarketplace is designed to help small businesses
succeed by providing a single online destination where small businesses can buy
and sell services and products, exchange valuable news, product and service
information and access productivity tools. We have designed our emarketplace to
incorporate all of these functions so that small businesses can conduct
e-commerce and exchange information without leaving our web site. By
aggregating a large and targeted audience of small businesses, our emarketplace
provides a new and powerful sales channel for both small and large vendors to
the small business market.
Businesses are increasingly using the Internet to communicate and transact
commerce with their partners, suppliers and customers. To facilitate the
electronic exchange of information, services and products, businesses are
beginning to form electronic marketplaces, or emarketplaces, that aggregate
buyers and sellers in a central Internet destination.
As small businesses, which we define as businesses with fewer than 100
employees and income-generating home offices, increasingly rely on the
Internet, we believe that a significant market opportunity exists to provide
small businesses with an emarketplace specifically designed for their needs.
Small businesses account for roughly half of the United States gross domestic
product, according to the U.S. Small Business Administration. We believe that
the growth in the number of small businesses and in the volume of small
business e-commerce will drive the need for an emarketplace that offers sellers
a channel to reach the large, fragmented market of small business buyers and
provides these buyers with a single Internet location to meet all of their
needs.
Our emarketplace currently consists of:
. a small business services trading hub, which includes more than 18,000
businesses that act as suppliers across 100 services in our request for
quote network, a network which enables buyers to submit electronically
requests for quotes for various business services and sellers to respond
with pricing and fulfillment information;
. more than 37,000 products and nine business services selected for the
particular needs of small businesses that can be purchased quickly and
conveniently through our "Purchase Now" system; and
. a collection of timely news, information, editorial content and business
tools designed to help small businesses enhance their operations.
We intend to build on our leadership position as the first comprehensive
emarketplace for small businesses by expanding our service, product and
information offerings to become the single source for all small business needs.
We believe that by expanding our offerings we will attract more small
businesses to our emarketplace, creating additional marketing opportunities for
our sellers. We believe that this will create a network effect in which the
value of our emarketplace increases with the addition of each participant.
Onvia.com was incorporated as MegaDepot, Inc. in Washington in March 1997.
In February 1999, we changed our name to MegaDepot.com, Inc., and in May 1999
we changed our name to Onvia.com, Inc. We intend to reincorporate in Delaware
prior to the closing of this offering. Our principal executive offices are
located at 1000 Dexter Avenue, Suite 400, Seattle, Washington 98109, and our
telephone number is (206) 282-5170. Our web site is located at www.onvia.com.
The information contained on our web site is not part of this prospectus.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered................................ 8,000,000 shares
Common stock to be outstanding after the offering... 76,180,762 shares
Use of proceeds..................................... For general corporate
purposes, including
working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. ONVI
</TABLE>
This table is based on shares outstanding as of December 31, 1999 and
excludes the following shares:
. 1,262,638 shares issuable upon exercise of warrants outstanding as of
December 31, 1999 at a weighted average exercise price of $0.93 per
share;
. 5,875,382 shares issuable upon exercise of options outstanding as of
December 31, 1999 at a weighted average exercise price of $1.60 per
share;
. 5,678,412 shares of common stock available for future grant under our
1999 stock option plan;
. 600,000 shares of common stock available for issuance under our 2000
directors' stock option plan; and
. 600,000 shares of common stock available for issuance under our 2000
employee stock purchase plan.
----------------
Unless otherwise indicated, the information in this prospectus reflects the
number of shares outstanding on December 31, 1999 assuming:
. the conversion of all outstanding shares of preferred stock into common
stock upon the closing of this offering;
. a two-for-one forward stock split of our capital stock to be effected
prior to the closing of this offering;
. our reincorporation into Delaware which will be effected prior to the
closing of this offering;
. the filing of our amended and restated certificate of incorporation;
. the exercise of warrants to purchase 705,144 shares of our common stock
that will expire if not exercised before the closing of this offering;
and
. no exercise of the underwriters' over-allotment option.
4
<PAGE>
Summary Consolidated Financial Data
<TABLE>
<CAPTION>
March 25,
1997
(inception)
to Year Ended Year Ended
December 31, December 31, December 31,
1997 1998 1999
------------ ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C>
Consolidated Statements of Operations
Data:
Revenue................................ $ 62 $1,037 $ 27,177
Gross margin........................... 15 (45) (4,397)
Total operating expenses............... 146 623 38,428
Loss from operations................... (130) (669) (42,825)
Net loss............................... $( 130) $ (672) $(43,366)
Net loss attributable to common
stockholders.......................... $ (130) $ (672) $(57,373)
Basic and diluted net loss per common
share................................. $(0.02) $(0.08) $ (4.59)
Basic and diluted weighted average
shares outstanding.................... 8,001 8,001 12,508
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-------------------
Pro Forma
Actual As Adjusted
------- -----------
(in thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................................... $38,518 $126,448
Total assets................................................ 50,279 138,209
Long-term debt.............................................. 5,171 5,171
Total stockholders' equity.................................. 26,613 114,543
</TABLE>
The pro forma as adjusted information in the above consolidated balance
sheet data table is adjusted to reflect the sale of 8,000,000 shares of common
stock offered by us at an assumed initial public offering price of $12.00 per
share, after deduction of the estimated underwriting discounts and commissions
and estimated offering expenses, and the exercise of warrants to purchase
705,144 shares of our common stock that will expire if not exercised before the
closing of this offering.
See note 1 of the notes to our consolidated financial statements for an
explanation of the determination of the number of weighted average shares used
to compute net loss per share amounts.
5
<PAGE>
RISK FACTORS
This offering and an investment in our common stock involve a high degree of
risk. You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline
substantially due to any of these risks, and you may lose all or part of your
investment.
Risks Related to Our Business
We have a limited operating history of less than three years, making it
difficult to evaluate our future prospects
We were incorporated in March 1997. In July 1997, we launched the initial
version of our emarketplace, targeted at the Canadian market. In July 1998, we
introduced our emarketplace for U.S. small businesses. We have a limited
operating history upon which an investor may evaluate our business and
prospects. Our potential for future profitability must be considered in light
of the risks, uncertainties, expenses and difficulties frequently encountered
by companies in their early stages of development, particularly companies in
new and rapidly evolving markets, such as emarketplaces in general and those
catering to small businesses in particular. We may not successfully address any
of these risks. If we do not successfully address these risks, our business
will be seriously harmed.
We have incurred losses in each quarter since inception, and we expect to incur
significant operating losses for the foreseeable future
We have incurred net losses from operations in each quarter since inception
and, as of December 31, 1999, had an accumulated deficit of $58.2 million. We
expect to continue to incur losses for the foreseeable future. Most of our
revenue to date has been generated by selling products at or below cost. We
expect to increase significantly our operating expenses in the near future as
we attempt to build our brand, expand our customer base and improve our
technology infrastructure. To become profitable, we must increase revenue
substantially and achieve and maintain positive gross margins. To increase
revenue, we will need to continue to attract customers and suppliers to our
emarketplace and expand our service and product offerings. To improve our gross
margins, we will need to increase the proportion of revenue generated from
higher-margin services, reduce service and product discounts and lower service
and product costs. We may not be able to increase revenue and gross margins
sufficiently to achieve profitability.
Our quarterly financial results are subject to fluctuations which may make it
difficult to forecast our future performance
We expect our revenue and operating results to vary significantly from
quarter to quarter making it difficult to formulate meaningful comparisons of
our results between quarters. Our limited operating history and new and
unproven business model further contribute to the difficulty of making
meaningful quarterly comparisons. Factors that may affect our quarterly results
include those discussed throughout this "Risk Factors" section.
Substantially all of our revenue for a particular quarter is derived from
transactions that are initiated and completed during that quarter. Our current
and future levels of operating expenses and capital expenditures are based
largely on our growth plans and estimates of future revenue. These expenditure
levels are, to a large extent, fixed in the short term. We will not be able to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall, and any significant shortfall in revenue relative to planned
expenditures could harm our business and results of operations. In addition,
our quarterly results will be affected by the mix of revenue generated from the
sale of services and products. If the percentage of revenue from products
increases and the percentage of revenue from services decreases, our gross
margin will likely be negatively impacted.
6
<PAGE>
Our limited operating history and rapid growth make it difficult to assess
the seasonal factors in our business. Nevertheless, we expect there to be
seasonal fluctuations in our business, reflecting a combination of seasonal
trends for the services and products we offer, seasonal trends in the buying
habits of our target small business customers and seasonal trends reflecting
Internet usage. For example, Internet use generally declines during the summer
months.
Our network and software are vulnerable to security breaches and similar
threats which could result in our liability for damages and harm our reputation
Our network infrastructure is vulnerable to computer viruses, break-ins,
network attacks and similar disruptive problems. This could result in our
liability for damages, and our reputation could suffer, thus deterring
potential customers from transacting with us. Security problems caused by third
parties could lead to interruptions and delays or to the cessation of service
to our customers. Furthermore, inappropriate use of the network by third
parties could also jeopardize the security of confidential information stored
in our computer systems.
In July 1999, our former web site in Canada, MegaDepot.com, was subject to a
security breach in which an outside party was able to gain access to the
private account information, including credit card numbers, of some of our
customers. This security breach occurred when we inadvertently provided a few
of our customers with the URL link to our internal database, and also
inadvertently left the password protection for our internal database turned
off. Information about this security breach was forwarded to a newspaper
reporter in Toronto, Canada, prior to our becoming aware of the breach. This
resulted in negative publicity concerning our former web site for several days
in several Canadian newspapers. Even though we have taken steps to prevent the
recurrence of this specific security breach as well as other disruptive
problems, a security breach could occur again in the future.
To help reduce our network's vulnerability to security breaches, we have
completed a network security audit, upgraded all of our network components,
updated our software to current release levels and implemented extensive site
monitoring software. Further, we have hired employees dedicated solely to
ensuring network security and developing related policies, procedures and
internal controls.
We intend to continue to implement industry-standard security measures, but
we cannot assure you that the measures we implement will not be circumvented.
The costs and resources required to alleviate security problems may result in
interruptions, delays or cessation of service to our customers, which could
harm our business.
The development of our brand is essential to our future success and requires
significant expenditures
We believe that development of the Onvia.com brand is crucial to our future
success. The importance of brand recognition will increase as more companies
engage in commerce over the Internet. Because the online commerce aspects of
our business model have limited legal, technological and financial barriers to
entry, if we are unable to establish a trusted brand name, our business will
suffer.
We currently intend to invest significant capital resources to develop our
brand, including spending significant amounts of money on advertising and
promotions. Furthermore, the cost of advertising and promotions is growing
rapidly. In addition, if our competitors significantly increase their
advertising and promotions spending, we may be forced to increase our
expenditures accordingly. We cannot be certain that our efforts to promote our
brand will be successful or that we will have adequate financial resources to
continue to promote our brand.
7
<PAGE>
If we fail to increase traffic to our web site and the proportion of visitors
who purchase services or products, our business will not grow as we expect
To generate revenue, we must drive traffic to our web site and convert
visitors into purchasers of services and products. We use a number of
techniques to increase traffic to our web site, including developing
relationships with third parties, advertising, e-mail and contests. Currently,
we are using a variety of techniques to increase customer conversion rates,
including using discounts on selected items and other incentives. Many of these
techniques are new and unproven, and we cannot be certain that any of them will
be successful in helping us increase traffic or conversion rates. If we are
unable to draw significantly higher traffic to our web site and convert a
significant number of web site visitors into customers, our business will not
grow as we expect.
Intense competition could impede our ability to gain market share and harm our
financial results
Emarketplaces are new, rapidly evolving and intensely competitive. In
addition, the traditional non-Internet-based markets for business products such
as computer hardware and software, office furniture, office equipment and
office supplies are also intensely competitive. We compete with both
traditional distribution channels as well as other online services. Our current
and potential competitors include:
. Internet sites that target the small business market including
BizBuyer.com, Digitalwork.com and Works.com;
. Internet sites targeting the consumer market that also sell to small
business customers, including Beyond.com, Buy.com and Onsale.com;
. companies such as America Online, Microsoft, NBCi and Yahoo! that offer
a broad array of Internet-related services and either offer business-to-
business e-commerce services presently or have announced plans to
introduce such services in the future; and
. traditional non-internet-based retailers that sell of resell business
service and products such as AT&T Wireless, Circuit City and CompUSA.
There are minimal barriers to entry to our market, and new competitors could
launch a competitive web site offering services and products targeted to the
small business market. To compete successfully and to gain market share, we
must significantly increase awareness of our brand name and our web site. In
addition, we must increase our customer base and the volume of services and
products we sell through our web site. Our failure to achieve these objectives
could cause our revenue to decline and limit our ability to achieve
profitability.
We may not compete successfully against current or future competitors, many
of which have substantially more capital, longer operating histories, greater
brand recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. These competitors may also be
more successful than we in engaging in more extensive development of their
technologies, adopting more aggressive pricing policies and establishing more
comprehensive marketing and advertising campaigns. Our competitors may develop
web sites that are more sophisticated than ours with better online tools, and
that have service and product offerings superior to ours. Many of our
competitors have had success raising money from well-known sources. For
example, according to VentureSource in May 1999 Works.com received
approximately $25 million in venture capital financing from investors including
Bowman Capital Management, Hummer Winblad Venture Partners and Merrill Lynch
Venture Capital. Also, according to VentureSource in August 1999
AllBusiness.com received $17 million in venture capital financing from
investors including Technology Crossover Ventures, Canaan Partners and Intel.
In February 2000, AllBusiness.com entered into an agreement to be acquired by
NBCi. For these or other reasons, our competitors' web sites may achieve
greater acceptance than ours, limiting our ability to gain market share and
customer loyalty and to generate sufficient revenue to achieve profitability.
8
<PAGE>
Our business model is new, unproven and evolving and may not prove to be viable
in the long run
Our business model is new, unproven and continues to evolve. In particular,
our business model is based on several assumptions, any one of which may not
prove to be true, including the following:
. a significant number of small businesses will be willing to purchase
their business services and products online;
. a significant number of small businesses and small business service
providers will use our emarketplace to buy and sell services and
products; or
. small business customers will provide us data about themselves.
If any of these assumptions does not prove to be true, our business may not
be viable in the long run.
In addition, to date we have sold many of our products at or below our cost,
causing us to incur negative gross margins. We cannot assure you that if, in
the future, we choose to increase the prices at which we sell our products, we
will be able to retain existing customers and attract new customers. If we are
unable to retain and grow our existing customer base, our business model may
not prove to be viable.
If we fail to increase the proportion of revenue derived from sales of
services, our gross margins will not improve
In general, we derive higher gross margins from the sale of services than
from the sale of products. If we are to improve gross margins, we must increase
the proportion of revenue generated from sales of services. To date, our sales
of services have been minimal, and the sale of services over the Internet has
not yet achieved broad market acceptance. The sale of services through the
Internet may not achieve broad market acceptance, and, even if it does, we may
not achieve significant sales of services.
If we do not develop additional and maintain existing relationships with third
parties, we may be unable to increase traffic to our web site
We depend on relationships with third parties to direct traffic to our web
site. Most of these agreements call for the third party to be paid a monthly
fee. Some of these relationships require us to pay the third party a percentage
of revenue generated from customers who make a purchase after linking through
from the third party's web site. Most of these relationships are for terms of
six months or less and many of them are cancelable by either party without
cause upon limited notice. We must maintain our existing relationships and
develop new relationships on terms acceptable to us to continue to increase
traffic to our web site. The termination of any of these existing agreements,
or the failure to secure similar relationships with new third parties would
limit the growth in traffic to our web site or cause it to decline, and would
likely impede our ability to attract a large enough customer base to make our
business viable. Additionally, we do not know if we will be able to renew any
or all of these agreements on acceptable terms.
Even if we maintain our existing relationships, because most of them have
been formed recently and several of them have not yet been fully established,
we do not have sufficient historical data to assess accurately whether they
will be successful in drawing sufficient traffic to our web site. Any
unexpected decline in traffic to the web sites of the third parties with whom
we have relationships could have a negative impact on the traffic to our web
site.
If we are unable to maintain our relationships on commercially favorable terms
with the small number of suppliers of the products we sell, our business will
suffer
We purchase substantially all of our products from only four major vendors:
Ingram Micro, TechData, Merisel and United Stationers. For the fiscal year
ended December 31, 1999, approximately 78% of our revenue was derived from
sales of products supplied by Ingram Micro.
9
<PAGE>
We do not typically maintain physical inventory but may do so for scarce
resources or when otherwise appropriate. Our relationships with our suppliers
are in the form of standard agreements. We do not have minimum commitments or
guaranteed pricing with any of our suppliers. Individual transactions become
contracts by way of our issuing purchase orders. Our agreements with our
suppliers are cancellable at any time by either party. Our suppliers could:
. discontinue service to us at any time with little or no notice, in which
case we may be unable to obtain alternate supply sources on comparable
or acceptable terms;
. raise prices above the level at which we can profitably sell products to
our customers;
. establish more favorable pricing structures for our competitors; or
. establish strict payment terms that constrain our working capital.
Any unfavorable action or event concerning our supplier relationships that
hinders our ability to fulfill orders quickly, accurately and on competitive
terms would harm our business.
We have grown very quickly and if we fail to manage this growth, our ability to
increase revenue and achieve profitability will be harmed
We have rapidly and significantly expanded our operations, and we need to
grow quickly in the future. From January 1, 1999 to December 31, 1999, we
increased our employee base from 15 to 203. This growth has placed a
significant strain on our employees, management systems and other resources and
will continue to do so. If we do not manage our growth effectively, our revenue
may not grow as we expect, and we may never achieve profitability.
Effectively managing our expected future growth will require, among other
things, that we successfully upgrade our operating systems, improve our
management reporting capabilities and strengthen internal controls. For
example, we are currently migrating our accounting and control systems to a new
software package. We will also need to attract, hire and retain highly skilled
and motivated officers and employees. We must also maintain close coordination
among our marketing, operations, engineering and accounting departments. We may
not succeed in achieving any of these objectives.
Our business will suffer if we are unable to hire and retain highly qualified
employees
Our future success depends on our ability to identify, hire, train and
retain highly qualified sales and marketing, technical, managerial and
administrative personnel. As we continue to introduce new services, products
and features on our web site, and as our customer base and revenue continue to
grow, we will need to hire a significant number of qualified personnel.
Competition for qualified personnel, especially those with Internet experience,
is intense, and we may not be able to attract, train, assimilate or retain
qualified personnel in the future. Our failure to attract, train, assimilate
and retain qualified personnel could seriously disrupt our operations and could
increase our costs as we would be required to use more expensive outside
consultants.
Our executive officers and key employees are critical to our business, and
these officers and key employees may not remain with us in the future
Our business and operations are substantially dependent on the performance
of our key employees, all of whom are employed on an at-will basis and have
worked together for only a short period of time. We believe that our key
employees include all of the executive officers and the key employee listed
under the caption "Management -- Executive Officers, Directors and Key
Employee," although the loss of many of our other employees not listed in that
section could adversely affect our business. See "Related Party Transactions --
Employment Agreements" for a description of the employment agreements that
exist between us and some of our executive officers. We do not maintain "key
person" life insurance on any of our executives other than Glenn Ballman, our
founder, President and Chief Executive Officer. The loss of Mr. Ballman or
other key executives would likely harm our business.
10
<PAGE>
We will require significant additional capital in the future, which may not be
available on suitable terms, or at all
The expansion and development of our business will require significant
additional capital, which we may be unable to obtain on suitable terms, or at
all. If we are unable to obtain adequate funding on suitable terms, or at all,
we may have to delay, reduce or eliminate some or all of our advertising,
marketing, co-branding relationships, engineering efforts, general operations
or any other initiatives. We will require substantial additional funds to carry
out and expand our planned advertising and marketing activities and to continue
to develop and upgrade our technology. During the next 12 months, we expect to
meet our cash requirements with existing cash, cash equivalents and the net
proceeds from this offering. However, if our capital requirements vary
materially from those currently planned, we may require additional funding
sooner than anticipated. If we issue convertible debt or equity securities to
raise additional funds, our existing stockholders will be diluted.
If we fail to expand our current technology infrastructure, we will be unable
to accommodate our anticipated growth
To be successful, we must continue to increase substantially traffic to our
web site and convert web site visitors into customers. Accommodating this
potential growth in web site traffic and customer transactions will require us
to continue to develop our technology infrastructure. To maintain the necessary
technological platform in the future, we must continue to expand and stabilize
the performance of our web servers, improve our transaction processing system,
optimize the performance of our network servers and ensure the stable
performance of our entire network. We may not be successful in our ongoing
efforts to upgrade our systems, or if we do successfully upgrade our systems,
we may not do so on time and within budget. If we fail to achieve a stable
technological platform in time to handle increasing web site traffic or
customer order volume, potential customers could be discouraged from using our
emarketplace, our reputation could be damaged and our business could be harmed.
The performance of our web site is critical to our business and our reputation
Any system failure that causes an interruption in the service of our web
site or a decrease in its responsiveness could result in reduced user traffic
and reduced revenue. Further, prolonged or ongoing performance problems on our
web site could damage our reputation and result in the permanent loss of
customers to our competitors' web sites. We have occasionally experienced
system interruptions that have made our web site totally unavailable, slowed
its response time or prevented us from efficiently fulfilling orders, and these
problems may occur again in the future.
In April 1999, we entered into an agreement with Exodus Communications to
maintain all of our web servers and database servers at Exodus's Seattle
location. Our operations depend on Exodus's ability to protect its and our
systems against damage from fire, power loss, water damage, telecommunications
failures, vandalism and similar unexpected adverse events. Any disruption in
the services provided by Exodus could severely disrupt our operations. Our
backup systems may not be sufficient to prevent major interruptions to our
operations, and we do not have a formal disaster recovery plan. We may not have
sufficient business interruption insurance to cover losses from major
interruptions.
Our customers and visitors to our web site depend on their own Internet
service providers, online service providers and other web site operators for
access to the Onvia.com web site. Each of these providers has experienced
significant outages in the past, and could experience outages, delays and other
difficulties due to system failures unrelated to our systems.
We expect to engage in future acquisitions or investments, which may harm our
operating results
Although we have no current agreements relating to acquisitions or
investments in other companies, we expect in the future to make acquisitions or
investments designed to increase our customer base, broaden our offerings and
expand our technology platform. We have not made acquisitions or investments in
the past, and
11
<PAGE>
therefore our ability to conduct acquisitions and investments is unproven. If
we fail to evaluate and to execute successfully acquisitions or investments,
they may seriously harm our business. To complete successfully an acquisition,
we must:
. properly evaluate the technology;
. accurately forecast the financial impact of the transaction, including
accounting charges and transaction expenses;
. integrate and retain personnel;
. combine potentially different corporate cultures; and
. effectively integrate services and products and technology, sales,
marketing and support operations.
If we fail to do any of these, we may suffer losses or our management may be
distracted from our day-to-day operations. In addition, if we conduct
acquisitions using convertible debt or equity securities, existing stockholders
may be diluted, which could affect the market price of our stock.
We may be harmed by issues related to the "Year 2000" problem
Many computer programs have been written using two digits rather than four
digits to define the applicable year. This could pose a problem because these
computer programs may recognize a date using "00" as the year 1900, rather than
the year 2000. This in turn could result in major system failures or
miscalculations and is generally referred to as the Year 2000 problem. The
risks posed by Year 2000 issues could adversely affect our business in a number
of significant ways.
As an e-commerce company, we are dependent, to a very substantial degree, on
the proper functioning of our computer systems and on those of all of our
customers and suppliers. Any problems associated with the Year 2000 problem
that impede our systems or those of our customers or suppliers could seriously
harm our business. We believe after examining and testing our systems that our
internally developed technology, as well as third-party technology incorporated
into our systems, is Year 2000 compliant. Moreover, to date we have not
detected any disruptions in our software applications or in the applications of
our vendors arising from the roll-over to the Year 2000. Nonetheless, we may
experience significant unanticipated problems caused by undetected errors or
defects.
We also use third-party systems in our internal business operations.
Although we have received assurance from most of our vendors that these systems
are Year 2000 compliant, and to our knowledge these products have not
experienced Year 2000 disruptions following the roll-over to the Year 2000,
these systems could in the coming weeks or months suffer from unexpected Year
2000 issues. Any such Year 2000 issues could harm our business.
We also cannot assure that customers will be able to access our web site
without serious disruptions arising from the Year 2000 problem. Given the
pervasive nature of the Year 2000 problem, we cannot assure that disruptions
will not occur to the Internet as a whole or to specific industries or market
segments in the entire economy. Moreover, the costs related to Year 2000
compliance, which thus far have not been material, could ultimately be
significant. In the event that we experience disruptions as a result of the
Year 2000 issue, our business could be harmed. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Impact of Year
2000."
Our services and products depend upon the continued availability of licensed
technology from third parties
We license and will continue to license technology integral to our services
and products from third parties. If we are unable to acquire or retain key
third-party product licenses or integrate the related third-party products into
our services and products, our service and product development may be delayed.
We also expect to require new licenses in the future as our business grows and
technology evolves. We may not be able to obtain these licenses on commercially
reasonable terms, if at all.
12
<PAGE>
If we expand our international sales and marketing activities, our business
will be susceptible to numerous risks associated with international operations
In the near future, we intend to expand our international operations and
hire additional personnel abroad. Therefore, we may commit significant
resources to expand our international sales and marketing activities. If
successful, we will be subject to a number of risks associated with
international business activities. These risks generally include:
. currency exchange rate fluctuations;
. seasonal fluctuations in purchasing patterns;
. unexpected changes in regulatory requirements;
. tariffs, export controls and other trade barriers;
. longer accounts receivable payment cycles and difficulties in collecting
accounts receivable;
. difficulties in managing and staffing international operations;
. potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
. burdens of complying with a wide variety of foreign laws;
. risks related to the recent global economic turbulence; and
. political instability.
Risks Related to the Internet and Our Industry
We will not be able to grow our business unless small businesses increase their
use of the Internet to conduct commerce and the Internet is able to support the
demands of this growth
Our success depends on the increasing use of the Internet by small
businesses. If use of the Internet as a medium for consumer and business
communications and commerce does not continue to increase, demand for our
services and products will be limited and our financial results will suffer.
Even if small businesses increase their use of the Internet, the Internet
infrastructure may not be able to support the demands of this growth. The
Internet infrastructure must be continually improved and expanded in order to
alleviate overloading and congestion. If the Internet's infrastructure is not
improved or expanded, the Internet's performance and reliability will be
degraded. Internet users may experience service interruptions as a result of
outages and other delays occurring throughout the Internet. Frequent outages or
delays may cause consumers and businesses to slow or stop their use of the
Internet as a transaction-based medium.
We may not be able to keep up with rapid technological and industry changes
The Internet and online commerce markets are characterized by rapid
technological change, frequent introductions of new or enhanced hardware and
software products, evolving industry standards and changes in customer
preferences and requirements. We may not be able to keep up with any of these
or other rapid technological changes, and if we do not, our business will be
harmed. These changes and the emergence of new industry standards and practices
could render our existing web site and operational infrastructure obsolete. The
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require us to incur
substantial expenditures to modify or adapt our operating practices or
infrastructure. To be successful, we must enhance our web site responsiveness,
functionality and features, acquire and license leading technologies, enhance
our existing service and product offerings, and respond to technological
advances and emerging industry standards and practices in a timely and cost
effective manner.
13
<PAGE>
Future regulations could be enacted that either directly restrict our business
or indirectly impact our business by limiting the growth of e-commerce
As e-commerce evolves, federal, state and foreign agencies could adopt
regulations covering issues such as privacy, content and taxation of services
and products. If enacted, government regulations could limit the market for our
services and products. Although many regulations might not apply to our
business directly, we expect that laws regulating the collection or processing
of personal or consumer information could indirectly affect our business. It is
possible that legislation could expose companies involved in e-commerce to
liability, which could limit the growth of e-commerce generally. Legislation
could hinder the growth in Internet use and decrease its acceptance as a medium
for communication and commerce.
Risks Related to Our Offering
You may not be able to resell your stock at or above the initial public
offering price
Before this offering, there has not been a public trading market for our
common stock, and an active trading market for our common stock may not develop
or be sustained after this offering. For this reason and for various other
reasons listed throughout these risk factors, the market price of our common
stock may decline below the initial public offering price. The initial public
offering price will be determined by negotiations between the representatives
of the underwriters and us. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price.
Our stock price may be volatile
The stock market and specifically the stock prices of Internet-related
companies have been very volatile. This broad market and industry volatility
may reduce the price of our common stock, without regard to our operating
performance. Due to this volatility, the market price of our common stock could
significantly decrease.
Our principal stockholders, officers and directors will own a controlling
interest in our voting stock
Upon completion of this offering, our officers, directors and stockholders
with greater than 5% holdings will, in the aggregate, beneficially own
approximately 76.2% of our outstanding common stock, or 75.1% if the
underwriters' over-allotment option is exercised in full. As a result, these
stockholders, acting together, will have the ability to control substantially
all matters submitted to our stockholders for approval, including:
. election of our board of directors;
. removal of any of our directors;
. amendment of our certificate of incorporation or bylaws; and
. adoption of measures that could delay or prevent a change in control or
impede a merger, takeover or other business combination involving us.
These stockholders will have substantial influence over our management and
our affairs. Accordingly, this concentration of ownership may have the effect
of impeding a merger, consolidation, takeover or other business consolidation
involving us, or discouraging a potential acquiror from making a tender offer
for our shares, causing our stock price to decline.
Substantial future sales of shares may impact the market price of our common
stock
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, the market
price of our common stock may fall. Such sales might also make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate. See "Shares Eligible for Future Sale."
14
<PAGE>
We have broad discretion in using the proceeds from this offering, which may
increase the risk that the proceeds will not be applied effectively
The net proceeds of this offering are not allocated for specific purposes.
We will have broad discretion in determining how to spend the proceeds of this
offering and may spend proceeds in a manner that our stockholders may not deem
desirable. We cannot assure you that our investments will yield favorable
returns or results. See "Use of Proceeds."
You will experience immediate and substantial dilution
The initial public offering price of our common stock is substantially
higher than the book value per share of the outstanding common stock
immediately after this offering. At the estimated initial public offering price
of $12.00 per share, dilution to new investors will be $10.50 per share.
Accordingly, if you purchase shares of our common stock in this offering, you
will suffer immediate and substantial dilution. In addition, the issuance or
exercise of additional options or warrants to purchase our capital stock could
be dilutive to purchasers of shares in this offering. The table below shows the
number of outstanding warrants and options, including reserved but unissued
options, as of December 31, 1999. For more information on the warrants, see
"Description of Capital Stock--Warrants," and for more information on the
options, see "Benefit Plans."
<TABLE>
<CAPTION>
Number of Shares Underlying Outstanding
Options and/or Warrants Plus Number of
Reserved
Plan or Group but Unissued Options and/or Shares
------------- ---------------------------------------
<S> <C>
1999 Stock Option Plan....................... 11,553,794
2000 Directors' Stock Option Plan............ 600,000
2000 Employee Stock Purchase Plan............ 600,000
Warrants..................................... 1,262,638
</TABLE>
We have implemented anti-takeover provisions that may discourage takeover
attempts and depress the market price of our stock
Provisions of our amended and restated certificate of incorporation and by-
laws as well as provisions of Delaware law, will make it more difficult for a
third party to acquire us, even if doing so would be beneficial to our
stockholders. In addition, following the closing of this offering we may adopt
a preferred shares rights agreement, which would also serve to discourage
takeover attempts. See "Description of Capital Stock" for a discussion of these
anti-takeover provisions.
We do not intend to pay dividends, you will not receive funds without selling
shares and you may lose the entire amount of your investment
We have never declared or paid any cash dividends on our capital stock and
do not intend to pay dividends in the foreseeable future. We intend to invest
our future earnings, if any, to fund our growth. Therefore, you will not
receive any funds without selling your shares. We further cannot assure you
that you will receive a return on your investment when you sell your shares or
that you will not lose the entire amount of your investment.
15
<PAGE>
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and in other sections of this prospectus are forward-
looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. These
factors are described in "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and other sections of this
prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," or the negative of these
terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable as of the date of this prospectus, we cannot
guarantee future results, levels of activity, performance or achievements.
16
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 8,000,000 shares of
common stock we are offering will be approximately $87.9 million, assuming an
initial public offering price of $12.00 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. If the underwriters' over-allotment option is exercised in full, we
estimate that our net proceeds will be approximately $101.3 million.
The principal purposes of this offering are to increase our working capital,
fund our operating expenses, create a public market for our common stock,
facilitate our future access to the public capital markets and fund potential
acquisitions. We have no current agreements relating to any acquisitions or
investments.
We will retain broad discretion in allocating the net proceeds of this
offering. Pending the use of the net proceeds, we will invest them in short-
term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock. We currently
intend to retain all available funds and any future earnings for use in the
operation and expansion of our business and do not anticipate paying any
dividends in the foreseeable future. Our existing borrowing agreements prohibit
the payment of dividends.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of all
outstanding shares of preferred stock into common stock and the exercise
of warrants to purchase 705,144 shares of common stock which will expire
if not exercised prior to this offering; and
. on a pro forma as adjusted basis after giving effect to our receipt of
the net proceeds from the sale of 8,000,000 shares of common stock in
this offering at an assumed initial public offering price of $12.00 per
share.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
----------------------------
Pro
Pro Forma As
Actual Forma Adjusted
-------- -------- --------
(in thousands, except
share data)
<S> <C> <C> <C>
Long-term debt................................... $ 5,171 $ 5,171 $ 5,171
Stockholders' equity:
Convertible preferred stock, par value $0.0001
per share; shares authorized:
46,000,000 actual and 15,000,000 pro forma and
pro forma as adjusted; shares outstanding:
38,143,068 actual and none pro forma and
pro forma as adjusted........................... 74,233 -- --
Common stock, par value $0.0001 per share; shares
authorized: 150,000,000 actual and 250,000,000
pro forma and pro forma as adjusted; shares
outstanding: 29,332,550 actual, 68,180,762 pro
forma and 76,180,762 pro forma as adjusted...... 3 7 8
Additional paid in capital....................... 24,904 99,133 187,062
Notes receivable from stockholders............... (156) (156) (156)
Unearned stock compensation...................... (14,195) (14,195) (14,195)
Accumulated deficit.............................. (58,176) (58,176) (58,176)
-------- -------- --------
Total stockholders' equity...................... 26,613 26,613 114,543
-------- -------- --------
Total capitalization........................... $ 31,784 $ 31,784 $119,714
======== ======== ========
</TABLE>
This table excludes the following shares:
. 1,262,638 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $0.93 per share;
. 5,875,382 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.60 per share;
. 5,678,412 shares of common stock available for future grant under our
1999 stock option plan;
. 600,000 shares of common stock available for issuance under our 2000
directors' stock option plan; and
. 600,000 shares of common stock available for issuance under our 2000
employee stock purchase plan.
18
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was $26.6
million, or approximately $0.91 per share. Pro forma net tangible book value
per share represents the amount of our total tangible assets less total
liabilities divided by the number of shares of common stock outstanding.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of common
stock immediately after the completion of this offering, assuming the
conversion of all outstanding shares of preferred stock into common stock and
the exercise of warrants to purchase 705,144 shares of common stock which will
expire if not exercised prior to this offering. After giving effect to the sale
of the 8,000,000 shares of common stock in this offering at an assumed initial
public offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses, our net
tangible book value at December 31, 1999 would have been $114.5 million, or
approximately $1.50 per share. This represents an immediate increase in net
tangible book value of $0.59 per share to existing stockholders and immediate
dilution of $10.50 per share to new investors purchasing shares in this
offering. The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $12.00
Pro forma net tangible book value per share as of December
31, 1999................................................... $0.91
Increase per share attributable to new investors............ .59
-----
Net tangible book value per share after this offering......... 1.50
------
Dilution per share to new investors........................... $10.50
======
</TABLE>
The following table sets forth, as of December 31, 1999, the differences
between the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing
stockholders and by new investors:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------- ----------------------- Price
Number Percentage Amount Percentage Per Share
---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders .. 67,475,618 89.4% $ 60,913,116 38.8% $ 0.90
New investors........... 8,000,000 10.6 96,000,000 61.2 12.00
---------- ----- ------------ -----
Total................. 75,475,618 100.0% $156,913,116 100.0% $ 2.08
========== ===== ============ =====
</TABLE>
The above table excludes the following shares:
. 1,262,638 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $0.93 per share;
. 705,144 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $0.0025 per share that expire if not
exercised prior to the closing of this offering;
. 5,875,382 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.60 per share;
. 5,678,412 shares of common stock available for future grant under our
1999 stock option plan;
. 600,000 shares of common stock available for issuance under our 2000
directors' stock option plan; and
. 600,000 shares of common stock available for issuance under our 2000
employee stock purchase plan.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
This section presents our historical financial data. You should read the
following selected consolidated financial data in conjunction with our
consolidated financial statements and the related notes and with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in this prospectus. The selected data in this section is not intended
to replace the financial statements.
The consolidated statements of operations data set forth below for the
period from March 25, 1997 (inception) to December 31, 1997, the years ended
December 31, 1998 and 1999 and consolidated balance sheet data as of December
31, 1998 and 1999 have been derived from our audited financial statements
included elsewhere in this prospectus, which have been audited by Deloitte &
Touche LLP. The consolidated balance sheet data as of December 31, 1997 have
been derived from our audited financial statements not included in this
prospectus. The historical results do not necessarily indicate the results you
should expect in any future period.
<TABLE>
<CAPTION>
March 25, 1997
(inception) to Year Ended Year Ended
December 31, December 31, December 31,
1997 1998 1999
-------------- ------------ ------------
<S> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenue............................. $ 62,174 $1,037,271 $ 27,177,082
Cost of goods sold.................. 46,894 1,082,448 31,574,214
--------- ---------- ------------
Gross margin........................ 15,280 (45,177) (4,397,132)
Operating expenses:
Sales and marketing................ 41,321 206,436 16,285,970
Technology and development......... 12,707 191,968 7,443,881
General and administrative......... 91,624 224,941 4,235,091
Noncash stock-based compensation... 10,462,762
--------- ---------- ------------
Total operating expenses......... 145,652 623,345 38,427,704
--------- ---------- ------------
Loss from operations................ (130,372) (668,522) (42,824,836)
Other income (expense), net......... (3,608) (540,934)
--------- ---------- ------------
Net loss............................ $(130,372) $ (672,130) $(43,365,770)
========= ========== ============
Net loss attributable to common
stockholders....................... $(130,372) $ (672,130) $(57,373,391)
========= ========== ============
Basic and diluted net loss per
common share....................... $ (0.02) $ (0.08) $ (4.59)
========= ========== ============
Basic and diluted weighted average
shares outstanding................. 8,000,800 8,000,800 12,507,500
========= ========== ============
<CAPTION>
December 31,
----------------------------------------
1997 1998 1999
-------------- ------------ ------------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........... $ 5,607 $ 44,659 $ 38,517,985
Working (deficit) capital........... (120,302) (813,357) 23,307,491
Total assets........................ 11,910 180,072 50,278,832
Long-term debt...................... 5,171,417
Total stockholders' (deficit)
equity............................. (120,302) (792,432) 26,613,343
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with our
consolidated financial statements, including the notes, appearing elsewhere in
this prospectus. Some information contained in the discussion and analysis set
forth below and elsewhere in this prospectus, including information with
respect to our plans and strategy for our business and related financing,
includes forward-looking statements that involve risk and uncertainties. See
"Risk Factors" for a discussion of important factors that could cause actual
results to differ materially from the results described in or implied by the
forward-looking statements contained in this prospectus.
Overview
We are the leading business-to-business emarketplace for small business
buyers and sellers. Since inception, we have devoted our resources to improving
and expanding our technology infrastructure, incorporating new services and
products into our emarketplace, attracting suppliers and acquiring new
customers. Improvements to our technology infrastructure include the
development of functional features on our web site, enhancements to our order
processing and procurement systems, expansion of our web servers and traffic
capacity on our web site, development of our underlying databases and
development of accurate and comprehensive management reporting capabilities.
Further, we developed the infrastructure that allows us to integrate our
systems with those of our suppliers. This enables us to monitor inventory
levels and prices from multiple suppliers, thereby facilitating an efficient
order process. Our operations are currently focused in the United States and
Canada. Our Canadian operations consist primarily of sales and marketing
personnel. See note 11 of the notes to our consolidated financial statements
for segment information relating to our U.S. and Canadian operations.
Our Sources of Revenue
We generate revenue from product sales and fees from sales of services.
Through December 31, 1999, we have derived substantially all of our revenue
from product sales. Product revenue includes sales of computer hardware and
software and other office machines and products. Product revenue is reported as
the aggregate value of the products we sell and is recognized upon receipt by
the customer. Orders are initiated directly from our customers through our web
site. We take title to products from shipment until receipt by the customer and
assume economic risk related to collections, customer service and returns.
Product orders are received on our web site, forwarded to a specific supplier
based on product availability and price and then shipped directly to our
customers with Onvia.com packaging. We do not typically maintain physical
inventory but may do so for scarce resources or when otherwise appropriate. We
have fulfillment relationships with several large suppliers, such as Ingram
Micro, Merisel, TechData and United Stationers. These relationships are in the
form of standard agreements. We do not have minimum commitments or guaranteed
pricing with any of our suppliers. Individual transactions become contracts by
way of our issuing purchase orders. Our agreements with our suppliers are
cancellable at any time by either party. We believe that we are in compliance
with the terms of each of these agreements.
One of our important strategies is to encourage our customers to begin to
participate more actively in our service offerings, such as long distance and
cellular phone services, credit card processing and payroll services, and
custom services that can be obtained through our request for quote program.
Because of the insignificant costs of goods sold associated with these
services, which are primarily commission-based, they carry significantly higher
margins. As a result, if we are successful in our strategy, we anticipate that
gross margin from service revenue will account for a greater portion of total
gross margin in the future.
Our Costs and Expenses
Cost of goods sold primarily consists of the cost of products sold to
customers, shipping charges and credit card fees. We acquire customers and
drive traffic to our web site in part by offering our customers competitive
prices, in some cases below cost and often with shipping discounts. As a result
of our aggressive
21
<PAGE>
customer acquisition strategies, we had a negative gross margin for the year
ended December 31, 1999. We intend to continue to sell some products at below
cost for the forseeable future. We plan to increase the proportion of revenue
from positive-margin products and higher-margin services. We believe the
combination of our service and product offerings, as well as our news,
information and tools, will support our efforts to retain and attract customers
in the future. In addition, although we do not expect to sell as many products
at or below cost, we intend to maintain competitive pricing on all products.
A substantial proportion of our total operating expenses for the year ended
December 31, 1999 was related to marketing and advertising programs designed to
build our brand and drive customer acquisition. We believe that our future
growth will depend on our ability to increase brand awareness and establish a
large and sustainable customer base. As a result, we expect that sales and
marketing expenses will increase significantly and continue to account for a
significant portion of our total operating expenses. In addition, we believe
that we must continue to expand our service and product offerings if we are to
become the primary purchasing hub for small businesses. We also plan to invest
significantly in technology and development. As a result, we anticipate
increasing losses for at least the next twelve months. We have incurred net
losses and negative operating cash flow in each quarterly period since our
inception, and, as of December 31, 1999, our accumulated deficit was $58.2
million.
Noncash Stock-based Compensation
We record noncash stock-based compensation in connection with the grant of
stock options and other equity instruments. This charge represents the
difference between the deemed value of our common stock for accounting purposes
and the exercise price of the options or sale price of other equity
instruments. This amount is presented as a reduction of stockholders' equity
and is amortized on an accelerated basis over the vesting period of the option,
typically four years. In addition, we have issued securities to some of our
non-employee advisors. In December 1999, our Board of Directors authorized the
acceleration of vesting on all such securities issued to non-employee advisors,
resulting in the recognition of $4.9 million in stock-based compensation
expense. At December 31, 1999, noncash stock-based compensation was $14.2
million, and we amortized $10.5 million of stock-based compensation expense for
the year ended December 31, 1999.
Results of Operations
In view of the rapidly changing nature of our business and our limited
operating history, we believe that a historical comparison of revenue and
operating results is not necessarily meaningful and should not be relied upon
as an indication of future performance. This is particularly true of companies
such as ours that operate in new and rapidly evolving markets. As a result, our
prospects must be considered in light of the risks, expenses and difficulties
encountered by companies in their early state of development, particularly
companies in new and rapidly evolving markets, such as ours. See "Risk Factors"
for a more complete description of the many risks we face.
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Quarterly Results of Operations
The following table sets forth our consolidated statement of operations data
for the four quarters ended December 31, 1999. This information has been
derived from our unaudited financial statements which, in the opinion of
management, include all necessary adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information in
accordance with generally accepted accounting principles. The results of
operations for any quarter should not be deemed necessarily indicative of the
results of operations for any future period.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------
June
March 31, 30, Sept. Dec. 31,
1999 1999 30, 1999 1999
--------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenue.............................. $ 1,476 $ 3,565 $ 8,128 $ 14,008
Cost of goods sold................... 1,826 4,226 9,657 15,865
------- ------- -------- --------
Gross margin......................... (350) (661) (1,529) (1,857)
Operating expenses:
Sales and marketing................ 170 1,198 5,152 9,766
Technology and development......... 76 378 2,227 4,763
General and administrative......... 498 905 1,019 1,813
Noncash stock-based compensation... 431 759 524 8,749
------- ------- -------- --------
Total operating expenses............. 1,175 3,240 8,922 25,091
------- ------- -------- --------
Loss from operations................. (1,525) (3,901) (10,451) (26,948)
Other income (expense), net.......... (75) 124 (374) (216)
------- ------- -------- --------
Net loss............................. $(1,600) $(3,777) $(10,825) $(27,164)
======= ======= ======== ========
</TABLE>
Revenue
Revenue increased sequentially on a quarterly basis from $1.5 million for
the quarter ended March 31, 1999 to $14.0 million for the quarter ended
December 31, 1999. Growth in revenue was attributable to increased sales of
products to new and existing customers.
Cost of Goods Sold
Cost of goods sold increased in each quarter from $1.8 million for the
quarter ended March 31, 1999 to $15.9 million for the quarter ended December
31, 1999. The increases in cost of goods sold were attributable to the
corresponding increases in revenue during the respective periods. In addition,
we have sold many products, inclusive of shipping, at prices at or below cost
to attract customers. As a result, we continued to experience negative gross
margins during this period. However, gross margin improved from negative 24%
for the quarter ended March 31, 1999 to negative 13% for the quarter ended
December 31, 1999. We expect to continue to experience negative gross margins
for the foreseeable future.
Sales and Marketing
Sales and marketing expenses consist primarily of advertising, including
payments related to our co-branding relationships, and salaries and related
costs of personnel. Sales and marketing expenses increased in each quarter from
$170,000 for the quarter ended March 31, 1999 to $9.8 million for the quarter
ended December 1999. The increases in sales and marketing expenses were due to
higher advertising expenses and increases in advertising and marketing
personnel. In particular, we launched a major advertising campaign and
initiated numerous co-branding relationships during the second, third and
fourth quarters of 1999. We anticipate that sales and marketing expenses will
increase significantly for the foreseeable future, particularly in the near
term, as we implement new advertising, branding and marketing campaigns.
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Technology and Development
Technology and development expenses consist primarily of fees paid to third
parties for consulting services, salaries and related costs of engineering and
operations personnel and amortization of costs for purchased software.
Technology and development expenses increased in each quarter from $76,000 for
the quarter ended March 31, 1999 to $4.8 million for the quarter ended December
31, 1999. The increases in technology and development expenses were
attributable to an increase in the number of technology and development
personnel from two on December 31, 1998 to 77 on December 31, 1999, consulting
expenses associated with the implementation of several engineering projects and
the use of contractors to supplement technology and development staff. We
expect technology and development expenses to increase for the foreseeable
future as we hire additional personnel and incur consulting costs to enhance
and upgrade our technology infrastructure.
General and Administrative
General and administrative expenses consist primarily of salaries,
recruiting and related costs for general corporate functions including
executive, accounting and administrative personnel, lease expenses,
professional fees including legal expenses, facilities costs and other
miscellaneous general corporate expenses. General and administrative expenses
increased in each quarter from $498,000 for the quarter ended March 31, 1999 to
$1.8 million for the quarter ended December 31, 1999. Increases in general and
administrative expenses were attributable to the increase in administrative
personnel from three on December 31, 1998 to 25 on December 31, 1999, and
higher office occupancy costs associated with our new lease. We expect to incur
higher general and administrative expenses as we hire additional personnel and
incur additional costs to support our growth and our obligations as a public
company.
Noncash Stock-based Compensation
Noncash stock-based compensation was $431,000 in the quarter ended March 31,
1999, $759,000 in the quarter ended June 30, 1999, $524,000 in the quarter
ended September 30, 1999 and $8.7 million in the quarter ended December 31,
1999. Noncash stock-based compensation resulted from the issuance of options
and non-vested common stock to employees and non-employees. Additionally, based
on the options granted through December 31, 1999, we expect to record
additional noncash stock-based compensation expense after December 31, 1999.
Other Income (Expense), Net
Other income (expense), net consists of interest income earned on average
cash balances, offset by interest expense on outstanding convertible notes,
subordinated debt and fixed asset financing. Other income (expense), net
increased from ($75,000) for the quarter ended March 31, 1999 to ($216,000) for
the quarter ended December 31, 1999. This net increase was attributable to
higher outstanding amounts on convertible notes, subordinated debt and
equipment loans. Total debt, including the current portion of long-term debt,
increased from $344,000 on December 31, 1998 to $9.7 million on December 31,
1999.
Years Ended December 31, 1998 and 1999
Revenue
Revenue increased from $1.0 million for the year ended December 31, 1998 to
$27.2 million for the year ended December 31, 1999. Growth in revenue was
attributable to increased product sales to new and existing customers.
Cost of Goods Sold
Cost of goods sold increased from $1.1 million for the year ended December
31, 1998 to $31.6 million for the year ended December 31, 1999. The increase in
cost of goods sold was attributable to the corresponding increase in revenue
during the respective periods.
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Sales and Marketing
Sales and marketing expenses increased from $206,000 for the year ended
December 31, 1998 to $16.3 million for the year ended December 31, 1999, due to
higher advertising expenses associated with the launch of a major advertising
campaign, the initiation of numerous co-branding relationships and increases in
advertising and marketing personnel.
Technology and Development
Technology and development expenses increased from $192,000 for the year
ended December 31, 1998 to $7.4 million for the year ended December 31, 1999.
This increase was due to consulting expenses associated with the implementation
of several engineering projects and to increases in technology and development
personnel.
General and Administrative
General and administrative expenses increased from $225,000 for the year
ended December 31, 1998 to $4.2 million for the year ended December 31, 1999.
This increase in general and administrative expenses was attributable to the
increase in administrative personnel and higher office occupancy expenses
related to the relocation to our new corporate offices.
Noncash Stock-based Compensation
We had no amortization of noncash stock-based compensation for the year
ended December 31, 1998 and amortization of noncash stock-based compensation of
$10.5 million for the year ended December 31, 1999. This increase was due to
the issuance of options and non-vested common stock to our employees and non-
employee advisors, and to the acceleration of vesting of options and nonvested
common stock of our non-employee advisors.
Other Income (Expense), Net
Other income (expense), net increased from $(4,000) for the year ended
December 31, 1998 to $(541,000) for the year ended December 31, 1999. This net
increase was attributable to higher outstanding amounts on convertible notes,
subordinated debt and equipment loans.
Provision for Income Taxes
Our net loss increased from $672,000 in 1998 to $43.4 million in 1999. In
addition to sustaining a 1999 gross margin loss of $4.4 million, operating
expenses increased to $38.4 million, including $10.5 million in noncash stock-
based compensation. Our operating expenses increased as we hired our staff,
built our brand, expanded our customer base and improved our operations and
technological infrastructure.
We incurred net operating losses from inception through December 31, 1999,
and therefore have not recorded a provision for income taxes. We have recorded
a valuation allowance for the full amount of our net deferred tax assets, as
the future realization of the tax benefit is not currently likely. As of
December 31, 1999, we had net operating loss carryforwards of $33.4 million.
These loss carryforwards are available to reduce future taxable income and
expire at various dates beginning in 2017 through 2019. Under the provisions of
the Internal Revenue Code, certain substantial changes in our ownership may
limit the amount of net operating loss carryforwards that could be utilized
annually in the future to offset taxable income.
Inception to December 31, 1997 and Year Ended December 31, 1998
Revenue
Revenue increased from $62,000 in 1997 to $1.0 million in 1998. Growth in
revenue was attributable to increased sales of products to new and existing
customers.
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Cost of Goods Sold
Cost of goods sold increased from $47,000 in 1997 to $1.1 million in 1998.
The increase in cost of goods sold was attributable to an increase in product
sales during the respective periods.
Sales and Marketing
Sales and marketing expenses increased from $41,000 in 1997 to $206,000 in
1998. This increase was due to the hiring of additional sales and marketing
personnel.
Technology and Development
Technology and development expenses increased from $13,000 in 1997 to
$192,000 in 1998. This increase was attributable to the hiring of technology
and development personnel.
General and Administrative
General and administrative expenses increased from $92,000 in 1997 to
$225,000 in 1998. This increase in general and administrative expenses was
attributable to the increase in administrative personnel and general corporate
expenses.
Other Income (Expense), Net
We had no other income (expense), net in 1997 and other income (expense),
net of $(4,000) in 1998. The increase was due to the issuance of convertible
notes in 1998.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through the
issuance of equity and debt securities. Through December 31, 1999, equity
issuances have yielded gross proceeds of $59.4 million. Additionally, we have
issued subordinated notes and have entered into capital equipment term loans to
finance our operations. As of December 31, 1999, we had $38.5 million of cash
and cash equivalents on hand and $9.7 million outstanding under existing
subordinated debt and equipment loans. See note 4 of the notes to our
consolidated financial statements for more information on outstanding long-term
debt.
Net cash used in operating activities totaled $23.4 million for the year
ended December 31, 1999 and approximately $276,000 for the year ended December
31, 1998. Net cash provided by operating activities totaled approximately
$6,000 in 1997. Net cash used in operating activities for the year ended
December 31, 1999 was attributable to net operating losses, increases in
inventory, prepaid expenses and other current assets, offset by noncash charges
and increases in accounts payable and accrued expenses. Net cash used in
operating activities in 1998 was attributable to net operating losses partially
offset by increases in accounts payable and accrued expenses. Net cash provided
by operating activities in 1997 was attributable to net operating losses offset
by increases in accrued expenses.
Net cash used in investing activities totaled $6.5 million for the year
ended December 31, 1999 and approximately $23,000 for the year ended December
31, 1998. We did not use or generate any funds from investing activities in
1997. Net cash used in investment activities for the year ended December 31,
1999 and 1998 related to the acquisition of computer hardware and software and
other equipment.
Net cash provided by financing activities totaled $68.3 million for the year
ended December 31, 1999 and approximately $344,000 for the year ended December
31, 1998. Net cash provided by financing activities for the year ended December
31, 1999 was attributable to the sale of equity securities and proceeds from
long-term borrowings. Net cash provided by financing activities in 1998 was
attributable to proceeds from the issuance of convertible debt. We generated
insignificant cash in 1997 from the sale of common stock.
26
<PAGE>
In December 1999, we signed a lease agreement for new corporate office
facilities. Monthly lease payments range from $61,625 to $173,188 over the
eight year term of the lease. Future minimum lease payments required on all
non-cancelable operating leases for the next five years range from $1,970,928
to $2,519,475.
Our future liquidity and capital requirements will depend on numerous
factors. For example, our pace of expansion will affect our future capital
requirements, as will our decision to acquire or invest in complementary
businesses and technologies. However, we believe that the net proceeds from
this offering, together with existing cash and cash equivalents, will be
sufficient to satisfy our cash requirements for at least the next 12 months.
Depending on our growth rate and cash requirements, we may require additional
equity or debt financing to meet future working capital needs, which may have a
dilutive effect on our then current stockholders. We cannot assure you that
additional financing will be available or, if available, that such financing
can be obtained on satisfactory terms.
Quantitative and Qualitative Disclosures About Market Risk
Due to the operations of our wholly-owned subsidiary in Canada, our results
of operations, financial position and cash flows can be materially affected by
changes in the relative values of the Canadian dollar to the U.S. dollar.
However, due to the relative stability of these two currencies in relation to
one another, our past results of operations have not been materially affected
by fluctuations in exchange rates. We do not use derivative financial
instruments to limit our foreign currency risk exposure.
Our investments are classified as cash and cash equivalents with original
maturities of three months or less. As of December 31, 1999, we consider the
reported amounts of these investments to be reasonable approximations of their
fair values. Therefore, changes in the market interest rates will not have a
material impact on our financial position. Through December 31, our interest
expense was not sensitive to the general level of U.S. interest rates because
all of our debt arrangements were based on fixed interest rates.
Recent Accounting Pronouncements
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 and hedging activities. SFAS
No. 133, which will be effective for us for the fiscal years and quarters
beginning after June 15, 2000, requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. We do not expect the
potential effect of adopting the provisions of SFAS No. 133 to have a
significant impact on our financial position, results of operations and cash
flows.
Impact of Year 2000
Many computers, software and other equipment are coded to accept or
recognize only two-digit entries in the date code field and thus can not
distinguish 21st century dates from 20th century dates. Due to this design
decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. As a
result, many companies' software and computer systems may need to be upgraded
or replaced to comply with Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities. We are
exposed to the risk that the systems on which we depend, plus those of our
suppliers, customers and the Internet as a whole, are not Year 2000 compliant.
Assessment
The Year 2000 problem may affect the network infrastructure, computers,
software and other equipment that we use, operate or maintain for our
operations. The key milestones to our Year 2000 program have been internal and
external assessment and testing. We have completed both our internal and
external Year 2000 compliance assessment. We believe that we have identified
and reviewed all of the internally and externally
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developed software that supports the development and delivery of our services
and products or is necessary to maintain our normal operating functions. We
have completed our assessment of this software and have made the changes we
consider necessary. We also assessed the potential effect and costs of
remediating the Year 2000 problem on our office equipment and facilities and
have not become aware of any significant operational Year 2000 issues or costs
associated with our non-information technology systems. However, despite our
testing, assurances from vendors, and the lack of any Year 2000 issues to date
resulting from the date rollover, we cannot be certain that our systems do not
contain undetected errors associated with Year 2000.
Costs to Address Year 2000 Issues
We have not incurred any material costs directly associated with Year 2000
compliance efforts. The limited costs to address Year 2000 issues have
consisted of internal labor costs for certain employees who have dedicated time
to our assessment of Year 2000 compliance and associated remedies. We do not
expect to incur additional material costs associated with Year 2000 compliance.
However, in the event that we have not identified and corrected any significant
Year 2000 compliance issues, we could be subject to unexpected material costs
in the future.
Most Reasonably Likely Worst Case Scenarios
A business disruption caused by the Year 2000 problem could interrupt our
operations and damage our relationships with our customers. An internal
disruption unique to us could give our competitors a comparative advantage.
Failure of our internal systems to be Year 2000 ready could delay order
processing as well as hinder the functionality of our web site and could
require us to devote significant resources to correcting such problems.
Further, our customers' purchasing plans could be affected by Year 2000
preparation and remediation of the need to expend significant resources to fix
their existing systems.
Based on the activities described above, we do not believe that the Year
2000 problem will significantly harm our business, without taking into account
our efforts to avoid or fix such problems. In addition, we have not deferred
any material information technology projects, nor equipment purchases, as a
result of our Year 2000 problem activities.
Contingency Plans
We have not developed contingency plans for the Year 2000 compliance risks
previously discussed, either because our assessments have not detected material
issues or because we have not determined cost effective solutions in light of
our assessment of the risks. In the event that we encounter significant Year
2000 compliance issues for which we have not developed contingency plans, our
business and financial condition could be materially harmed.
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BUSINESS
Overview
We are the leading business-to-business emarketplace for small business
buyers and sellers. By aggregating a large audience of small businesses, we
provide a new and powerful sales channel for small and large vendors that serve
the highly fragmented small business community. Our emarketplace also helps
small businesses succeed by providing a single online destination where they
can buy services and products, access and exchange valuable information, such
as news and advice, and obtain productivity tools, such as business plan
checklists. These mutual benefits reinforce a network effect that we believe
draws participants to our emarketplace and therefore increases its value. Our
emarketplace has experienced significant growth since it was introduced, and,
as of December 31, 1999, we had attracted eleven service suppliers over nine
service categories, and over 1,100 product vendors. In addition, our small
business services trading hub, which allows customers to submit requests for
quotes from a network of service suppliers, had over 18,000 service suppliers
at December 31, 1999.
Industry Background
The Growth of Business-to-Business E-commerce
The Internet is fundamentally changing the way businesses interact with
other businesses. According to International Data Corporation, or IDC, by 2003
Internet users are expected to reach 510 million users, up from 159 million
users at the end of 1998. To capitalize on this potential opportunity,
companies of all sizes have adopted Internet strategies to drive revenue,
increase efficiencies and reduce costs. Forrester Research estimates that the
U.S.-based business-to-business e-commerce market, which encompasses the
conduct of electronic transactions over Internet protocols between businesses
and their partners and suppliers, is expected to account for more than 90% of
the dollar value of e-commerce in the United States by 2003, growing to
$1.3 trillion from $109 billion in 1999.
The growth in business-to-business e-commerce is being fueled in large part
by the recurring nature of business needs and transactions, which offers
businesses the opportunity to create loyal and valuable long-term relationships
with other businesses. Business-to-business e-commerce solutions provide buyers
and suppliers with opportunities to increase revenue by reaching a broader
customer base and realize operating efficiencies by reducing the costs of
accessing information and streamlining complex purchasing and distribution
processes. These benefits have spurred the creation of electronic marketplaces,
or emarketplaces, that aggregate buyers and sellers in a centralized trading
hub. Emarketplaces are most well-suited for large, highly fragmented markets
where buyers and sellers have limited access to information and high
procurement costs.
The Growth of Small Business E-commerce
The small-business market, which we define as businesses with fewer than 100
employees and income-generating home offices, is large and rapidly growing. IDC
estimates that by 2002, the North American small business market will grow to
38.5 million businesses from 29.6 million today. Small businesses are
increasingly relying on the Internet to access information, communicate and
transact commerce. According to Access Media International, by the end of 2002,
75% of small businesses will use the Internet, as compared to 52% at the end of
1999. In addition, IDC estimates that small businesses will account for about
$106.8 billion in e-commerce in 2002, increasing from $6.2 billion at the end
of 1998.
The Need for Small Business Emarketplaces
Several factors are driving the growth in business-to-business e-commerce in
the small business market. Currently, small businesses have difficulty in cost-
effectively reaching a large percentage of their potential customers through
traditional marketing channels, since most small businesses are located outside
of major metropolitan areas and possess limited resources. As a result, small
businesses are using the Internet to expand significantly their market reach,
procure services and products and become more competitive. Additionally,
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small businesses often have limited time, resources and access to expertise.
The Internet addresses these constraints by allowing small businesses to access
and exchange information quickly and inexpensively among trading partners.
Despite the significant growth of small business Internet use, existing
Internet-based and software-based offerings targeting this market have not
provided a comprehensive solution that addresses the e-commerce and
informational needs of small businesses. Web sites that aggregate small
business news and information, for example, often have limited e-commerce
service and product offerings. Similarly, companies with web sites that focus
on e-commerce often have limited or inconsistent content offerings. As a
result, small businesses are forced to use multiple, distinct web sites to
conduct commerce, interact with other businesses and suppliers and obtain
targeted, business-specific news and content.
The Onvia.com Solution
Our emarketplace is designed to help small businesses succeed by providing a
single online destination where small businesses can buy and sell services and
products, exchange valuable information and access productivity tools. Our
emarketplace provides numerous benefits to small business buyers and sellers.
Sellers are able to expand cost-effectively their reach and customer base,
without incurring the significant sales and marketing costs typically
associated with traditional efforts. Because our services and products are
dedicated exclusively to small businesses, our emarketplace provides sellers
targeted access to the small business market. Ultimately, as we continue to
collect information on buyer purchasing patterns, we expect to be able to offer
sellers the ability to personalize and target further their service and product
offerings.
Buyers benefit from access to a single source for service, product and price
comparisons, helping to drive greater efficiency in the procurement process.
Because we offer multiple vendors in most service and product categories, we
provide context and choice for small business purchasing decisions.
Complementing our broad service and product offerings, we provide small
businesses with information, news and business tools to enhance business
operations. With our seller ratings system, which we currently intend to
introduce by June 2000, buyers will also be able to discover which sellers have
garnered the highest ratings for service and availability. Our news, expert
advice and other content also provides resource-constrained small businesses
with timely and valuable information and expertise.
Key elements of our solution include:
. Comprehensive array of pre-selected services and products and
interactive purchasing tools. Our emarketplace offers more than 37,000
products from more than 1,100 manufacturers. In addition, we offer nine
critical business services, including Internet access,
telecommunications plans, business credit cards and payroll processing.
We also offer 100 services in our request for quote, or RFQ, network. We
have selected these services and products based on their ability to meet
the specific needs of small businesses. Our interactive purchasing
tools, which facilitate real-time service and product comparisons, also
help small businesses make more informed purchasing decisions. By
providing access to numerous suppliers as well as valuable information,
our emarketplace helps small businesses lower their procurement costs
and affords greater choice and convenience.
. Complete on-site transaction processing capabilities. Our emarketplace
provides all necessary transaction processing capabilities to allow
small businesses to purchase and sell services and products without ever
leaving our web site. This feature enables small businesses to
accomplish all of their purchasing needs from a single location and to
rely on a single source for service- and product-related order tracking
and customer support. We also offer multiple transaction processing
capabilities. For example, small businesses may purchase commodity
services and products based on published selling prices or request
quotes for more complex services and products from more than 18,000
companies that sell to small businesses. Because we allow customers to
establish personalized accounts, they do not need to enter shipping and
billing information each time they transact
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commerce through our emarketplace. We have implemented these
personalized accounts to help maximize our customer retention efforts.
. Integrated product and service fulfillment. We source products from
multiple service providers, such as AT&T Wireless, Qwest, and Verio, and
suppliers, such as Ingram Micro, Merisel and Tech Data. Our order
processing systems are integrated with those of our service providers
and suppliers. This integration allows us to provide our customers with
information on service plans and pricing. In addition, we are able to
verify product pricing and availability at each of our suppliers'
warehouses before forwarding an order for fulfillment, which helps
facilitate the timely delivery of products.
. Efficient small business seller channel. We have designed our
emarketplace to aggregate small businesses into a single Internet
destination. As a result, our emarketplace provides an efficient
distribution channel to help sellers to small businesses reach a very
targeted audience. In addition to selling existing services or products
through this channel, sellers can use our emarketplace to test market
new services and products targeted to small business. As we continue to
aggregate buyer information in our emarketplace, we expect to be able to
enable sellers to personalize their offerings using our chaperoned
access program.
. Proprietary value-added information and business tools and relationships
with leading content providers. In addition to our broad service and
product offerings, our emarketplace provides small businesses with
proprietary information, news and business tools that enhance the
utility of our emarketplace. Our staff of journalists, working in
Seattle and Washington, D.C., publishes daily stories and two
newsletters tailored to the interests of small businesses. We also offer
"how-to" advice and business tools designed to help small businesses
enhance their operations. In addition to the content that we develop
internally, we provide small businesses additional content from third
parties, such as Business 2.0, Business Week, Fast Company and Reuters
News Service.
. Comprehensive customer service and support. We maintain a trained
customer service staff, including vendor-certified professionals, that
provides multiple levels of customer service, ranging from site usage to
post-sales technical support. This provides our customers with a single
source for support, allowing them to avoid having to deal individually
with the many suppliers from which they purchase services and products.
In addition, by providing customer service in-house we maintain a direct
relationship with our customers. These services help us maintain high
levels of customer satisfaction, foster customer loyalty and tailor our
offerings to meet customer needs and preferences.
Strategy
We intend to continue to enhance our position as the leading business-to-
business emarketplace for small businesses. Key elements of our strategy
include to:
. Increase brand awareness and credibility. We believe that we are the
first provider of a comprehensive emarketplace providing content,
commerce and community for small businesses, and we intend to capitalize
on this position. We are committed to becoming the best known and most
trusted brand for small businesses on the Internet by investing
aggressively using traditional and innovative methods of advertising and
promotions, such as business journals, magazines, radio, television, web
advertising and outdoor billboards. We also intend to continue to align
ourselves with well-known, respected brands and enter into only those
relationships that are consistent with the Onvia.com brand image. For
example, we have developed a co-branding relationship with DowJones.com
where we are the exclusive provider of small business services and
products on the DowJones.com web site.
. Aggressively pursue customer acquisition and retention strategies. We
seek to drive customer acquisition through a combination of marketing
initiatives, continued focus on customer service and the provision of
services, products and information that meet our customers' business
needs. For example, we intend to continue to establish strategic
relationships with major online portals and develop joint marketing
arrangements with additional small business associations. In addition,
we
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intend to increase our customer base through direct advertising
campaigns, co-branding initiatives with leading web sites that cater to
small businesses and viral-marketing programs. By continuously enhancing
and syndicating our service, product and information offerings, we seek
to expand our customer base and encourage repeat use of our
emarketplace.
. Become a single source for all small business needs. We intend to become
a single source for all small business needs by continuing to expand our
service, product and information offerings and the functionality of our
web site. We also intend to introduce additional methods of conducting
e-commerce transactions and develop additional tools that will allow
small businesses to reach new customers, become more competitive and
improve operating efficiencies. We believe these expanded offerings will
attract more small businesses to our emarketplace, creating additional
value and marketing opportunities for our sellers. This will help
attract a growing number and greater diversity of sellers which, in
turn, will attract more buyers, creating a network effect in which the
value of our emarketplace increases with the addition of each
participant.
. Maintain our commitment to customer service. We maintain a strong
commitment to providing the highest level of customer service. We will
continue to invest significant resources in delivering high-quality
customer service to maintain our high levels of customer satisfaction
and to drive customer retention. For example, we have developed an in-
bound sales force, which fields calls from customers to answer specific
service and product inquiries, which continues to augment our multi-
tiered customer service processes and expand our training programs to
provide additional levels of support for our service and product
offerings.
. Enable more effective direct marketing to small businesses. By tracking
the demographic and purchasing data on our small business customers, we
intend to become an intelligent electronic-marketing channel to help
sellers cost-effectively reach small businesses. Our large and growing
customer base positions our emarketplace as a gateway for communicating
with the small business community. For example, we intend to facilitate
targeted marketing through which sellers can communicate special
promotions and sales to a select audience. We do not now, and do not
intend to, share attributed customer information with third parties
absent the explicit permission of our small business customers. We
intend all facilitated marketing to be permission-based.
. Pursue strategic alliances and acquisitions. We intend to pursue
aggressively strategic alliances and acquisitions designed to increase
our customer base, broaden our offerings and expand our technology
platform. We also intend to use alliances and acquisitions to facilitate
our entry into new domestic and international markets. By aggressively
pursuing strategic relationships and acquisitions, we believe we can
significantly enhance our core business and secure and extend our
position as the leading small business emarketplace.
The Onvia.com Emarketplace
Our emarketplace provides a single online destination where small
businesses can buy and sell services and products and exchange valuable
information and productivity tools.
The Onvia.com emarketplace includes:
. our small business services trading hub, which currently consists of
more than 18,000 businesses that act as suppliers across 100 services in
our RFQ network;
. our broad array of more than 37,000 products, ranging from office
supplies to computer systems, and nine business services selected for
the particular needs of small businesses that can be purchased quickly
and conveniently through our "Purchase Now" system; and
. our content and business tools selections, which provide timely news,
information, editorial content and business tools designed to help small
businesses enhance their operations.
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Our limited operating history and rapid growth make it difficult to assess
the seasonal factors in our business. Nevertheless, we expect there to be
seasonal fluctuations in our business, reflecting a combination of seasonal
trends for the services and products we offer, seasonal trends in the buying
habits of our target small business customers and seasonal trends reflecting
Internet usage. For example, Internet use generally declines during the summer
months.
The Onvia.com Small Business Services Trading Hub
We have established relationships with more than 18,000 businesses that
function as suppliers within our small business services trading hub. Currently
our primary trading mechanism is our RFQ network, which we launched in November
1999. Our emarketplace enables small business customers to specify their needs
across 100 services through an electronic questionnaire that is formulated into
a request for quote, or RFQ. The RFQ is then filtered and routed to qualified
suppliers of the desired service. Suppliers within our network can evaluate the
RFQ, respond to requests with specific pricing and fulfillment information and
establish relationships with qualified buyers.
We believe that our RFQ network provides numerous benefits to sellers,
including:
. enhanced revenue opportunities by providing access to new customers and
new markets;
. the ability to reach efficiently their target market without incurring
the marketing and sales costs traditionally associated with broader
advertising campaigns, particularly for providers of niche or
specialized services and products; and
. a greater understanding of the dynamics involved in purchasing
decisions.
We believe that our RFQ network also provides numerous benefits to buyers,
including:
. the ability to reach efficiently and cost-effectively multiple service
providers, particularly for time-sensitive requests and for services
that might not otherwise be available in the buyer's geographic area;
. the ability to compare competitive quotes and pricing; and
. the ability to make more informed buying decisions with immediate
information about the marketplace.
We believe that our RFQ services form the basis of a small business trading
community that we intend to expand significantly. We intend to grow this
trading community by providing additional transactional processing capabilities
and by using our knowledge of our customers to create sub-communities based
upon, for example, vertical industry specialization, regionalization and job
specifications.
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We categorize our RFQ services into "business centers" for convenient
presentation to the buyer. We currently provide RFQ services in the following
business centers:
<TABLE>
<C> <S>
Business Center Features
- ------------------------------------------------------------------------------
Accounting Payroll, merchant processing, general accounting,
tax accounting and collection services
- ------------------------------------------------------------------------------
Finance Business loans, business plan services and
financial consulting
- ------------------------------------------------------------------------------
Hospitality Convention services and facilities and event
planning
- ------------------------------------------------------------------------------
Human Resources 401(k) plans, recruiting services, temporary
staffing, administrative staffing and human
resources and personnel consulting
- ------------------------------------------------------------------------------
Insurance Health insurance and property and casualty
insurance
- ------------------------------------------------------------------------------
Internet Services Internet access, web site hosting and web design
- ------------------------------------------------------------------------------
Legal Services Legal services relating to general business law,
tax law and incorporation
- ------------------------------------------------------------------------------
Marketing Market research, public relations, corporate
gifts, banner advertisement design and placement,
prospect lists, promotional products,
telemarketing services, e-mail marketing and
advertising and direct mail service
- ------------------------------------------------------------------------------
Office Services Security systems and storage
- ------------------------------------------------------------------------------
Printing Printing of marketing materials, business cards,
stationery and signs
- ------------------------------------------------------------------------------
Shipping and Logistics Freight forwarding and customs brokerage services
- ------------------------------------------------------------------------------
Support Software technical support, hardware technical
support, cable installation and PC hardware
installation
- ------------------------------------------------------------------------------
Telecommunications Telephone systems and conference calling services
- ------------------------------------------------------------------------------
Training Computer training and technical certification
</TABLE>
"Purchase Now" Services and Products--Overview
Our emarketplace offers a broad range of nine services and 37,000 products
selected specifically to meet the needs of small businesses. Our emarketplace
enables the customer to effectively screen services and products and contains
interactive tools designed to help small businesses make more informed service
and product selections.
Information. We provide detailed information about most of the services and
products we feature in our emarketplace. This information, together with full-
color photographs of most of our offered products, allows our customers to
compare features among different services and products and helps them make
informed buying decisions.
Search capabilities. Our web site features sophisticated but easy-to-use
search tools. This allows customers to find quickly and easily specific
products. The search function is directly accessible on most pages of our web
site.
Companion products. Our web site highlights optional companion products to
complement products selected by the customer.
Selection wizards. Our emarketplace features numerous selection wizards, or
guides, which allow customers to directly compare and contrast competing
services in a specific category without having to move back and forth between
multiple pages of our web site.
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Making a purchase. By clicking the "Purchase Now!" or "Add" buttons located
next to our service and product descriptions, customers can add a service or
product to their shopping cart. Customers can continue browsing and adding
services and products for as long as they wish before heading to a convenient
checkout process.
Security and privacy. We designed our systems to maintain the
confidentiality and security of our customers' personal and financial
information. We use powerful encryption technology to prevent information
piracy or theft. When customers establish accounts with us, they are assigned a
confidential password that only they can use to gain information about their
account. As an added protection, customers returning to our web site who use
the same billing information are not asked to provide credit card numbers a
second time. We do not now, and do not intend to, share attributed customer
information with third parties absent the explicit permission of our small
business customers. We intend all facilitated marketing to be permission-based.
"Purchase Now" Services
Our emarketplace offers a wide variety of common business services typically
used by small businesses, including long distance telephone service, payroll
service and merchant credit card processing. Our goal is to aggregate the most
common business services and offer the most competitive rates among a variety
of alternatives. Our selection wizard technology is designed to ease the
service-selection process by helping small businesses choose the provider that
best suits their individual needs.
We group our services into "business centers" organized around specific
functional tasks. We currently provide the following business centers:
<TABLE>
<C> <S>
Business Center Features
- ------------------------------------------------------------------------------
Accounting Web-based payroll services
- ------------------------------------------------------------------------------
Finance Business credit cards
- ------------------------------------------------------------------------------
Internet Services Dial-up, DSL, T1 line and T3 line Internet access
and web-hosting services provided by Verio and
EarthLink
- ------------------------------------------------------------------------------
Support 1-800 phone support from DecisionOne, which
provides telephone-based tech support for a
variety of computer hardware, software and
network problems
- ------------------------------------------------------------------------------
Telecommunications Long distance telephone service, wireless phone
service, and paging service through service
providers such as Qwest, Cable & Wireless USA,
TTI National, AT&T Wireless and SkyTel Paging
</TABLE>
"Purchase Now" Products
We offer a wide range of competitively priced products selected to meet the
needs of small businesses. Our team of product managers works closely with
manufacturers and suppliers to select quality brands and products to feature on
our emarketplace. We have selected the products that appear on our emarketplace
based upon their utility to small businesses, and we supplement our selections
on an ongoing basis based upon customer feedback.
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We organize our products into the following categories:
<TABLE>
<C> <S>
Product Category Description
- ------------------------------------------------------------------------------
Computer Hardware . We offer more than 8,000 computers and
related accessories from leading
manufacturers, such as IBM, Compaq, Hewlett
Packard and Toshiba
. Product offerings include: complete computer
systems, notebook computers, handheld
computers, printers, monitors, memory
upgrades, storage devices and a wide variety
of accessories such as cables, modems and
system components
- ------------------------------------------------------------------------------
Computer Software . We offer more than 3,500 software titles
conveniently categorized by function from
leading software developers, such as
Microsoft, IBM, Intuit and Lotus
. Product offerings include: general business,
operating systems, development tools and
databases
- ------------------------------------------------------------------------------
Network Products . We offer more than 2,500 network products
from leading vendors, such as 3Com, Cisco and
Nortel Networks
. Product offerings include: complete network
systems as well as individual components such
as adapters, hubs, switches and routers
- ------------------------------------------------------------------------------
Office Furniture . We offer more than 3,000 pieces of office
furniture from leading manufacturers, such as
Hon, Global and Superior Chaircraft
. Product offerings include: desks, chairs,
tables, printer stands, file cabinets, desk
lamps and bookcases, as well as a full line
of accessories, including chair mats, foot
rests and coat racks
- ------------------------------------------------------------------------------
Office Supplies . We offer more than 15,000 office supply
products from leading manufacturers, such as
Pentel, Epson, 3M and Universal Office
Products
. Product offerings include: paper products,
toner cartridges, writing instruments, file
folders, staplers and paper fasteners and a
broad array of office supplies, including
calendars, personal organizers, business
forms, break-room supplies and janitorial
supplies
- ------------------------------------------------------------------------------
Business Machines . We offer more than 2,000 business machines
from leading manufacturers, such as Fellowes,
Brother and Ibico
. Product offerings include: copiers, fax
machines, shredders, calculators and
typewriters
- ------------------------------------------------------------------------------
Phone Systems . We offer more than 500 phone systems and
components from leading manufacturers, such
as AT&T, Plantronics, Nortel and Polycom
. Product offerings include: phone systems,
individual phones, multi-line systems and
related equipment and accessories including
answering machines and accessories
</TABLE>
Information and Business Tools
We provide a broad offering of editorial content targeting small business
owners. Our journalistic staff publishes editorial content that is developed
from multiple sources, including items that are created in-house, contracted to
freelancers, picked up from wire services or provided by regular columnists and
contributors. We also offer Small Business Today and Washington Wire, which are
focused newsletters that deliver actionable
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<PAGE>
small business news. Our reporters also write daily features, case studies,
trend stories, personality profiles, brief capsules of news and other relevant
information and industry-specific or regional information. We supplement our
own coverage with news and feature stories from Business Week, Business 2.0,
FastCompany and Reuters News Service.
We also offer a variety of how-to advice and business tools designed to help
small business owners grow their businesses. We have exclusive rights in the
small business field to Successful Entrepreneur's interactive road map and
toolkit, a step-by-step guide to starting, marketing, growing and selling a
small business. This exclusive license prevents Successful Entrepreneur from
licensing this content to any other company targeting small businesses. We pay
a fixed fee for this exclusive license which expires in September 2000. Our
business tools are designed to enable small businesses to benchmark themselves
against other companies in their industry based on key metrics, such as
profitability, customer base and cost structure.
In addition, we offer information regarding local, state and federal rules
and regulations applicable to small businesses, as well as contacts and content
relating to various small business associations and groups of interest to small
business owners. We intend to add community and opinion components to our
editorial offering, including political and economic commentary, bulletin
boards and chat rooms.
Strategic Relationships
We pursue strategic relationships to increase our reach to small businesses,
increase traffic to our web site and improve the content and functionality of
our emarketplace. Our principal strategic relationships include the following:
Small business trade associations. We have established and seek additional
strategic relationships with several vertical and horizontal industry
associations representing small businesses. These relationships are a key
component of our brand-building and customer acquisition strategies. These
strategic relationships take numerous forms, but in general they:
. provide us with grassroots marketing access to large, targeted small
business audiences;
. give us a "seal of approval" through our relationships with them that
helps us market our services, products and information and business
tools to the associations' members in a trusted manner and establish
long-term customer loyalty;
. provide us with new resources by leveraging marketing dollars spent by
the association; and
. allow us to penetrate and market to specific industries and market
niches.
Working closely with these associations, we develop marketing campaigns
targeted to each association's members, which may include the following
elements:
. direct mail, telemarketing, newsletters, conferences, e-mail, broadcast
fax, advertisements, editorial placement, speaking opportunities and
additional communications vehicles; and
. link placement on the associations' web sites, which link to a co-
branded purchasing center using our emarketplace technologies.
We have established relationships with a broad range of business and special
interest associations, including American Business Women's Association,
American Management Association International, California Small Business
Association, National Small Business United, Society of American Florists,
Small Business Legislative Council, Home Based Business Owners Association and
American Subcontractors Association. These associations have a combined
membership of approximately 420,000 small businesses.
We have established a strategic relationship with the Service Corps of
Retired Executives, or SCORE, which is funded by the U.S. Small Business
Administration and provided more than 350,000 individuals with business
37
<PAGE>
advice, counseling, mentoring and workshop sessions in 1998. We are featured on
the SCORE web site and in numerous SCORE publications and press releases.
Co-branding relationships. We host co-branded web site pages with a number
of different Internet sites targeted toward entrepreneurs and small business
owners. These co-branded pages look and operate similar to Onvia.com web pages
except they may have a banner advertisement at the top of each screen featuring
the logos of both companies. We currently have approximately 20 co-branding
relationships with terms generally ranging from three to 12 months. In 1999, we
paid an aggregate of $1,970,359 in fees under these agreements. Some of our
relationships include:
. Dow Jones & Company. We have a relationship with Dow Jones & Company to
integrate our business-focused service and products solutions into the
DowJones.com web site. Onvia.com is featured as an e-commerce provider
to DowJones.com users, and DowJones.com users have access to our
emarketplace.
. Bloomberg.com. We have a relationship with Bloomberg.com to provide
Bloomberg.com users access to business-focused service and products
solutions. Our small business-related advice and articles are also
featured prominently on the Bloomberg Small Business Center site.
. Business Week. We have a relationship with Business Week to provide
Business Week Online users with a co-branded site offering business-
focused service and products solutions. The Business Week
Online/Onvia.com co-branded site is accessible from the Business Week
Online web site.
. VerticalNet. We have a relationship with VerticalNet to be a premier
seller of products in each of VerticalNet's approximately 55 online
business-to-business communities. In addition, VerticalNet will provide
a link that connects these 55 online trade communities to our
emarketplace.
Media and content relationships. We syndicate our proprietary content to
businesses, such as Bloomberg, that desire to offer their users a broader
content offering. In addition, we have relationships with various parties that
provide media and other content to our web site, including Business Week, Fast
Company and Business 2.0. We currently have approximately 11 relationships with
media and content providers with terms generally ranging from between one and
two years. The arrangements generally provide that we have the non-exclusive
right to use and display the content provided. The payment structure in these
arrangements takes a variety of forms, including fixed monthly fees, fees
charged per article provided and fees based on advertising revenue sharing
formulas.
Sponsorship relationships. For a fee, a business may sponsor one of our
specific services or products. These sponsors are able to target their
marketing efforts by placing their respective logos on web pages they believe
their customers are likely to visit.
Sales and Marketing
We have designed our marketing strategy to build brand awareness, increase
traffic to our web site, build our customer base, encourage repeat business and
develop opportunities to cross-sell our services and products. We target the
small business owner who wants to save time and money by using the Internet to
conduct routine transactions as well as special purchases.
Advertising. We have traditionally used highly focused advertising programs
to reach our target audience, including leveraging our relationships with small
business trade associations to reach their members through special promotions
or newsletters. We use traditional media to build brand loyalty among our very
targeted market. We also use niche media to reach the small business audience.
We anticipate using both traditional and targeted media in the future to reach
our core audience.
Online marketing relationships. We have established online marketing
relationships with leading web sites which feature an integrated link to our
web site. These links allow users of these web sites to access our
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emarketplace. We currently have online marketing relationships with ZDNet, USA
Today, Infospace and About.com.
OnviaFlash. Every week we send out "OnviaFlash," an e-mail newsletter
alerting our customers of discounts, special offerings, editorial content on
our web site and other items of interest to our customers. Our customers
voluntarily subscribe to OnviaFlash and may unsubscribe at any time.
Promotions and contests. We use an array of promotions to drive traffic and
transactions. In the past, these have included free shipping, coupons, free RFQ
trial periods and special pricing on key items.
We also periodically conduct contests which offer entrants the opportunity
to win free products or other prizes. These contests are typically advertised
on co-branded web sites or through other means and are designed to attract the
awareness and attention of potential customers. Contest entrants are required
to submit data such as their name, e-mail address, job title and number of
employees. This information is retained in our customer database.
Customer Service
We believe that a high level of customer service is critical to retaining
and expanding our customer base. Our customer service representatives,
including vendor-certified professionals, are available to respond to any
customer inquiry via phone or e-mail. Our customer service representatives help
customers with issues such as the use of our web site, product availability,
order status and billing questions. If needed, our customer service
representatives can direct product-specific questions directly to our product
managers for assistance.
We offer all of our customers a "Satisfaction Guarantee" that allows them to
return any product within 30 days of purchase for any reason for a full refund.
Our web site features a Returns Policies & Procedures page that makes it easy
for a customer to arrange for a return and refund.
Distribution and Order Fulfillment
Integrated product distribution. We have established order fulfillment
relationships with several of the largest suppliers in the telecommunications,
computer hardware and software and business products industries. This allows us
to verify product pricing and availability at each of our suppliers' warehouses
before forwarding an order for fulfillment. The supplier drop-ships the product
with Onvia.com packaging directly to the customer via UPS, FedEx or other
common carrier. We bill the customer's credit card when the order is placed on
our web site, and our suppliers invoice us under standard negotiated payment
terms. Orders are initiated directly from our customers through our web site.
We take title to products from shipment until receipt by the customer and
assume the economic risk related to collections, customer service and returns.
We do not typically maintain physical inventory but may do so for scarce
resources or when otherwise appropriate. Our relationships with our suppliers
are in the form of standard agreements. We do not have minimum commitments or
guaranteed pricing with any of our suppliers. Individual transactions become
contracts by way of our issuing purchase orders. Our agreements with our
suppliers are cancellable at any time by either party.
We currently source all of our product orders from multiple suppliers. Our
primary supplier in the computer hardware and software, networking products and
phone systems categories is Ingram Micro. If Ingram Micro does not carry or is
out of stock of a particular item, the order is automatically directed to one
of our two current secondary suppliers, TechData and Merisel. Most product
orders in the office supplies, office furniture and business machines
categories are fulfilled by United Stationers. For the year ended December 31,
1999, approximately 78% of our revenue was derived from sales of products
supplied by Ingram Micro.
Fulfillment of orders for business services. All of the business services we
feature are provided by third-party service providers. Each service we offer
has its own unique order process, but in general customers fill out a custom
application form directly on our web site. We then electronically submit the
application to the service provider for fulfillment.
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Technology
We support our emarketplace using an advanced technology platform designed
to serve a large and rapidly increasing volume of web traffic and customer
transactions in a reliable and efficient manner without critical failures. We
designed and programmed our own proprietary core systems for customer
interaction, order processing, order fulfillment and back-end systems. Our
systems have been designed to:
. provide fast, secure and uninterrupted visitor access to our web site;
. validate and process customer orders promptly and accurately;
. provide accurate order placement with vendors to allow prompt
fulfillment of customer orders;
. store large amounts of historical data;
. provide timely, comprehensive and accurate management-reporting
capabilities easily;
. update products, prices and other information on our web site;
. accommodate upgrades to tools and features on our web site;
. scale to accommodate growth in our operations; and
. provide redundancy in case of component system failures.
Our systems use a combination of our own proprietary technologies and
commercially available licensed technologies. The backbone of our technology
infrastructure consists of database servers running on an Oracle database with
Sun hardware. The front end consists of multiple redundant web servers which
are expandable as our operations grow. These systems interact with our own
proprietary system for customer interaction, order processing, order
fulfillment and other assorted functions. Our web servers use Verisign digital
certificates to help ensure secure transactions and communications over the
Internet. We designed the system to scale easily to support rapid growth, as
well as to sustain multiple failures by various components without down-time.
Our web servers, database servers, transaction-processing servers and other
core systems that conduct our essential business operations are physically
housed at Exodus Communications in Seattle. Exodus provides professional
housing and hosting services along with 24-hour monitoring and engineering
support in a climate-controlled and physically secure environment. Exodus
provides redundant communications lines from multiple Internet connectivity
providers and has its own generator and other emergency backup systems. We
house all non-critical systems such as development servers, quality assurance
servers, and internal network servers at our headquarters in Seattle. We also
maintain redundant backup equipment and systems in our office headquarters in
the event of a failure of our systems at Exodus.
In addition to maintaining responsibility for the technical architecture,
security and up-time of our emarketplace, our technology department works
closely with our sales and marketing department to ensure that customer
feedback for new technology features is incorporated into our emarketplace
offerings.
In 1999 and 1998, our technology and development expense was $7.4 million
and $192,000, respectively.
Competition
The e-commerce market is new, rapidly evolving and intensely competitive.
The e-commerce market targeting small business customers is still undeveloped
and fragmented. The industry is characterized by minimal barriers to entry,
and new competitors can launch, at relatively low cost, a competitive web site
offering service and products targeted to the small business market. We
believe that several other e-commerce competitors are developing business
strategies similar to ours targeting the small business market.
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We compete with both Internet-based as well as traditional providers of
business services and products. Our current and potential competitors include:
. Internet sites that target the small business market including
AllBusiness.com, BizBuyer.com, Digitalwork.com and Works.com;
. Internet sites targeting the consumer market that also sell to small
business customers, including Beyond.com, Buy.com and Onsale.com;
. companies such as Microsoft, America Online and Yahoo! that offer a
broad array of Internet-related services and either offer business-to-
business e-commerce services presently or have announced plans to
introduce such services in the future; and
. traditional non-Internet-based retailers that sell or resell business
service and products such as AT&T Wireless, Circuit City and CompUSA.
Many of our current and potential competitors have longer operating
histories, greater brand recognition, larger market presence and greater
financial, marketing and other resources than we do. Our competition may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements. Competitive pressures could reduce our market share or
require us to reduce the price of our services or products, any of which could
harm our business.
We compete on the basis of several factors, including:
. brand recognition and loyalty;
. mix and depth of products, services, information and interactive
business tools;
. reliability and speed of order fulfillment;
. quality of customer service;
. timeliness and relevance of news, editorials and advice offerings;
. web site performance; and
. pricing.
We believe that we currently compete favorably with respect to each of these
factors. However, our market is still rapidly evolving, and we may not be able
to compete successfully against current and potential competitors.
Intellectual Property Rights
Our future success depends in part on our proprietary rights and technology.
We rely on a combination of copyright, trademark and trade secret laws,
employee and third-party nondisclosure agreements and other methods to protect
our proprietary rights. We seek to protect our internally developed products,
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 emarketplace 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 license and will continue to license certain products integral to our
services and products from third parties, including products which are
integrated with internally developed products and used jointly to provide key
content and services. These third-party product licenses may not continue to be
available to us on commercially reasonable terms and we may not be able to
successfully integrate such third-party products into our solutions.
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We presently have no issued U.S. patents or U.S. patent applications
pending. We have no current intention to file any U.S. patent applications. It
is possible that we may not develop proprietary products or technologies that
are patentable and that the patents of others will seriously harm our ability
to do business.
OnviaMail, Work. Wisely. and OnviaFlash are registered as trademarks in the
United States. We have filed trademark applications in the United States for
chaperoned access, CheckPoint, the Onvia checkmark logo, Onvia and Onvia.com.
In addition, we have filed trademarks applications for Onvia and Onvia.com in
one or more foreign countries. The trademark applications mentioned above are
subject to review by the applicable governmental authority, may be opposed by
private parties, and may not issue.
Employees
As of December 31, 1999 we had 203 full-time employees. Of the total, 54
were in sales and marketing, 47 were in customer support, 77 were in technology
and development and 25 were in finance and administration. Of these, 37 were
employees of our Canadian subsidiary, including 15 in sales and marketing, 14
in customer support, one in technology and development and seven in finance and
administration. None of our employees is represented by a union or collective
bargaining agreement, and we have never had a work stoppage. We consider our
relations with our employees to be good.
Facilities
Our headquarters are located in Seattle, Washington, where we lease three
locations totaling approximately 95,000 square feet of office space under three
leases. These leases expire between 2001 and 2008. Our Canadian subsidiary
company in Vancouver, British Columbia also leases two locations totaling
approximately 6,900 square feet of office space under leases which expire in
2001. One of the leases is renewable at our option for up to three periods of
three years each. The leases generally require us to pay insurance, utilities,
real estate taxes and repair and maintenance expenses. Our payments under all
of these leases will be approximately $1,970,928 in 2000. We believe that these
leased facilities will be sufficient to meet our growth for the forseeable
future.
Legal Proceedings
The Company is subject to various legal proceedings that arise in the
ordinary course of its business. While the outcome of these proceedings cannot
be predicted with certainty, the Company provides for any anticipated losses at
the time an estimate can be made. The Company and its legal counsel believe the
disposition of these matters will not have a material adverse effect on the
financial position of the Company.
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MANAGEMENT
Executive Officers, Directors and Key Employee
Our executive officers, directors and other key employee and their ages as
of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Glenn S. Ballman........ 28 President, Chief Executive Officer and Director
Mark T. Calvert......... 41 Vice President, Chief Financial Officer and Secretary
Kristen M. Hamilton..... 29 Vice President and Chief Strategy Officer
Douglas H. Kellam....... 41 Vice President of Marketing
Mark A. Pawlosky........ 42 Vice President and Editor-in-Chief
Arthur R. Paul.......... 30 Vice President and Chief Technology Officer
Clayton W. Lewis........ 40 Vice President of Business Affiliations
Louis T. Mickler........ 53 Vice President of IT Operations
Robert D. Ayer.......... 34 Vice President of Products and Services
James R. Bridges........ 53 Vice President of Customer Service
J. Gary Meehan.......... 41 President of Onvia.com Canada
Michael D. Pickett...... 52 Chairman and Director
Jeffrey C. Ballowe
(1)(2)................. 44 Director
William W. Ericson...... 41 Director
Kenneth A. Fox (1)(2)... 29 Director
Nancy J. Schoendorf
(1)(2)................. 45 Director
Steven D. Smith......... 41 Director
</TABLE>
- --------
(1) Member of our Compensation Committee
(2) Member of our Audit Committee
Glenn S. Ballman founded Onvia.com and has served as our President and Chief
Executive Officer since February 1997. Mr. Ballman has also served as a
director of Onvia.com since February 1999. Mr. Ballman served as Chief
Executive Officer at SunCommerce Corporation, an e-commerce consulting firm to
small and medium sized businesses, from March 1997 to November 1997. From
February 1996 to October 1996, Mr. Ballman was Project Director for e-commerce
applications deployment at Axion Internet Communications, an electronic
commerce solutions provider. Mr. Ballman holds an Honors Bachelor of Arts in
Business Administration from the University of Western Ontario.
Mark T. Calvert was a consultant to Onvia.com from July 1998 to February
1999 and has been our Vice President, Chief Financial Officer and Secretary
since February 1999. Prior to joining Onvia.com, Mr. Calvert was Executive Vice
President, Chief Financial Officer, Secretary and Treasurer at Treasure Bay
Gaming and Resorts, Inc., an emerging market gaming corporation, from 1994 to
1997. From 1990 to 1994, Mr. Calvert served as Managing Director at Alexander
Hutton Advisors Inc. Prior to Alexander Hutton Advisors Inc., Mr. Calvert was
employed by Ernst & Young in the Entrepreneurial Division from 1982 to 1990.
Mr. Calvert holds a Bachelor of Arts in Business Administration from the
University of Washington. Mr. Calvert is a CPA and a CTP.
Kristen M. Hamilton has served as our Vice President and Chief Strategy
Officer since December 1999. From June 1998 to December 1999, Ms. Hamilton
served as our Vice President of Business Development. Prior to joining
Onvia.com, Ms. Hamilton was co-founder of Technology Solutions Network, a
provider of vertical technology solutions to small businesses, from July 1997
to May 1998. From February 1998 to May 1998, Ms. Hamilton also served as an
independent consultant to various clients. Prior to working at Technology
Solutions Network, Ms. Hamilton was Director of Consulting at MSI Consulting
Group, a technology marketing consulting firm, from August 1994 to June 1997.
Ms. Hamilton holds an Honors Bachelor of Arts in Business Administration from
the University of Western Ontario.
Douglas H. Kellam has served as our Vice President of Marketing since August
1999. Prior to joining Onvia.com, Mr. Kellam was Vice President of Marketing
and General Manager at First Alert Inc., a manufacturer of home safety
products, from March 1997 to February 1999. Prior to working at First Alert
Inc.,
43
<PAGE>
Mr. Kellam was a Vice President of Sales and Marketing at Austin Nichols, a
Division of Pernod Ricard Group, a beverage company, from June 1995 to February
1997. From January 1988 to June 1995, Mr. Kellam held various positions at
Pepsi Cola Company, including Field Marketing Manager, Director of Marketing
and General Manager. Mr. Kellam holds a Bachelor of Science in Business
Administration from the University of Minnesota and a Master of Business
Administration from Northwestern University's Kellogg School.
Mark A. Pawlosky has served as our Vice President and Editor-in-Chief since
August 1999. Prior to joining Onvia.com, Mr. Pawlosky was an Executive Producer
of MSNBC on the Internet, an Internet news site, from July 1996 to August 1999.
Prior to working at MSNBC, Mr. Pawlosky was Senior and Chief Editor for MSN
News, the online news service for Microsoft and forerunner to MSNBC.com, from
September 1995 to July 1996. Prior to working at MSN News, Mr. Pawlosky was a
reporter for the Wall Street Journal, from April 1995 to September 1995. Prior
to working at the Wall Street Journal, Mr. Pawlosky was Editor-in-Chief of Biz
Magazine, a small business magazine published by Dow Jones and American City
Business Journals, from September 1993 to February 1995. Mr. Pawlosky holds a
Bachelor of Journalism from the University of Missouri.
Arthur R. Paul has served as our Vice President and Chief Technology Officer
since January 2000. From October 1997 to January 2000, Mr. Paul served as our
Vice President of Engineering. Prior to joining Onvia.com, Mr. Paul was
Application Development Manager at Internet Stock Market, a real-time web-based
financial and market information site, from May 1997 to October 1997. Prior to
working at Internet Stock Market, Mr. Paul was Lead Engineer at MultiActive
Education Inc., an online interactive education web site, from January 1997 to
May 1997. Prior to working at MultiActive Education Inc., Mr. Paul was Lead
Engineer at Axion Internet Communications, an e-commerce solutions provider,
from April 1996 to January 1997. Mr. Paul holds an Associate Degree in
Information Technology from Kwantlen College.
Clayton W. Lewis joined Onvia.com in March 1999 and has served as our Vice
President of Business Affiliations since July 1999. Prior to joining Onvia.com,
Mr. Lewis was an independent consultant for e-commerce start-ups from April
1998 to February 1999. Prior to being an independent consultant, Mr. Lewis was
Executive Vice President of ETC, a subsidiary of Tele-Communications, Inc.,
from October 1995 to March 1998. Prior to working at ETC, Mr. Lewis was senior
Vice President of Business Development at RXL Pulitzer, the multimedia arm of
Pulitzer Publishing Company, from January 1990 to September 1995. Mr. Lewis
holds a Bachelor of Arts in Business Administration from the University of
Washington.
Louis T. Mickler has served as our Vice President of IT Operations since
August 1999. Prior to joining Onvia.com, Mr. Mickler was Vice President of IS
Systems Operations at Bear Creek Corporation, a direct marketer via catalog,
stores and the Internet, from January 1996 to August 1999. Prior to working at
Bear Creek Corporation, Mr. Mickler was Director of IS Operations at Eddie
Bauer, another direct marketing company with channels via catalog, stores and
the Internet, from August 1994 to January 1996. Mr. Mickler holds a Bachelor of
Science from Jones College.
Robert D. Ayer has served as our Vice President of Products and Services
since February 1997. Prior to joining Onvia.com, Mr. Ayer was Vice President of
Sales and Marketing at Axion Internet Communications, an e-commerce solutions
provider, from March 1995 to February 1997. Prior to working at Axion Internet
Communications, Mr. Ayer was a shipping and logistics specialist for Pitney
Bowes Inc. from September 1991 to September 1994. Mr. Ayer holds a Bachelor of
Arts in Economics from the University of Waterloo.
James R. Bridges has served as our Vice President of Customer Service since
January 2000. From October 1999 to January 2000, Mr. Bridges served as our
Director of Sales and Customer Service. Prior to joining Onvia.com, Mr. Bridges
was Director of Operations for Brigadoon.com, a Seattle based Internet Service
Provider, from July 1999 to October 1999. From February 1998 to July 1998 Mr.
Bridges was an independent consultant in the direct mail industry and a
principal in ACOBA Technologies, Ltd., a start-up technology company. From
January 1997 to February 1998, Mr. Bridges served as Vice President of
Operations for e-Merchant Group, an Internet retailer. From February 1995 to
November 1996, Mr. Bridges was Vice President of Customer Service for Helly
Hansen, a manufacturer and wholesaler of high quality outerwear. From September
1979 to February 1995, Mr. Bridges held a number of positions with Eddie Bauer
Co., including
44
<PAGE>
Director of Direct Sales. Mr. Bridges holds a Bachelor of Arts in Business
Administration from the University of Washington.
J. Gary Meehan has served as an officer of Onvia.com Canada since June 1998
and was appointed as President of Onvia.com Canada in December 1999. Prior to
joining Onvia.com Canada, Mr. Meehan served in a variety of positions at
Doppler Industries, Inc., a reseller of computer equipment, from 1992 to 1998,
most recently as Vice President of Inventory. Prior to that, Mr. Meehan worked
at Safety Supply Canada where he served in a variety of positions including
Operations Manager. Mr. Meehan received a Business Administration Certificate
from the British Columbia Institute of Technology.
Michael D. Pickett has served as our Chairman and as a director of Onvia.com
since February 1999. Since August 1999, Mr. Pickett has served as Chief
Executive Officer of Hardware.com, Inc., an online retailer. From July 1997 to
March 1999, Mr. Pickett was Chairman and Chief Executive Officer of Technology
Solutions Network, LLC. From October 1983 to February 1996, Mr. Pickett served
in a variety of positions and most recently as Chairman, Chief Executive
Officer and President of Merisel, Inc., wholesale distributor of computer
products. Mr. Pickett has served as a director of many companies, including
Digital Archeology and Optimum Yield Inc. Mr. Pickett holds a Bachelor of Arts
in Business Administration from the University of Southern California.
Jeffrey C. Ballowe has served as a director of Onvia.com since December
1999. In August 1999, Mr. Ballowe became Chairman of deja.com where he had been
a member of the board of directors since March 1998. Since 1997, Mr. Ballowe
has been self-employed. From 1986 until 1997, Mr. Ballowe held various
management positions at Ziff-Davis, an international media company, including
President of the Interactive Media and Development Group. Mr. Ballowe also
serves as a director of Drkoop.com, GiveMeTalk.com, Jupiter Communications,
VerticalNet, NBCi, and ZDTV, and on the advisory board of Internet Capital
Group. Mr. Ballowe holds a Bachelor of Arts from Lawrence University, a Master
of Arts in French from the University of Wisconsin and a Master of Business
Administration from the University of Chicago.
William W. Ericson has served as a director of Onvia.com since September
1999. Since August 1995, Mr. Ericson has been an attorney at Venture Law Group,
A Professional Corporation, a law firm specializing in the representation of
technology companies. Mr. Ericson is the managing director and founder of
Venture Law Group's Pacific Northwest Office located in Kirkland, Washington.
Prior to joining Venture Law Group, Mr. Ericson was an associate in the Palo
Alto, California office of the law firm of Brobeck, Phleger and Harrison, LLP
from October 1992 through August 1995. Mr. Ericson holds a Bachelor of Science
in Foreign Service from Georgetown University and a Juris Doctor from the
Northwestern University School of Law.
Kenneth A. Fox has served as a director of Onvia.com since February 1999. In
1996, Mr. Fox co-founded Internet Capital Group, an Internet company primarily
engaged in managing and operating a network of business-to-business e-commerce
companies. Mr. Fox has served as one of Internet Capital Group's Managing
Directors since its inception in March 1996. Mr. Fox has also served as a
director of Internet Capital Group since February 1999. Prior to forming
Internet Capital Group, Mr. Fox was the Director of West Coast Operations for
Safeguard Scientifics, Inc. and Technology Leaders II, LP, a venture capital
partnership, from 1994 to 1996. Mr. Fox serves as a director of deja.com and
several privately held companies. Mr. Fox holds a Bachelor of Science in
Economics from Pennsylvania State University.
Nancy J. Schoendorf has served as a director of Onvia.com since February
1999. Ms. Schoendorf has been a general partner of Mohr, Davidow Ventures, a
venture capital firm, since 1993, and Managing Partner since 1997. Prior to
joining Mohr, Davidow, Ms. Schoendorf spent seventeen years in the computer
industry including management positions with Hewlett-Packard, Software
Publishing Corporation and Sun Microsystems, Inc. Ms. Schoendorf currently
serves as a director of Actuate Corporation, Agile Software Corporation,
Broadbase Software, Inc. and several privately held companies. Ms. Schoendorf
holds a Bachelor of Science in Computer Science from Iowa State University and
a Master of Business Administration from Santa Clara University.
Steven D. Smith has served as a director of Onvia.com since January 2000.
Since March 1997, Mr. Smith has served as Managing Director of GE Equity, a
subsidiary of GE Capital. From August 1990 to February
45
<PAGE>
1997, Mr. Smith served in a variety of positions at GE Capital, most recently
as Managing Director, Ventures. Mr. Smith holds a Bachelor of Business
Administration from Southern Methodist University and a Master of Business
Administration from The Wharton School of Business.
Board Composition
Our bylaws currently provide for a board of directors consisting of seven
members. Ms. Schoendorf and Mr. Fox were elected to the board of directors
pursuant to a voting agreement among Onvia.com and some of its principal
stockholders. This voting agreement will terminate upon completion of this
offering. Each of our current directors will continue to serve on the board of
directors upon completion of this offering.
Upon consummation of this offering, our certificate of incorporation will
provide for a classified board of directors consisting of three classes of
directors, each serving staggered three-year terms. As a result, a portion of
our board of directors will be elected each year. To implement the classified
structure, prior to the consummation of the offering, two of the nominees to
the board will be elected to one-year terms, two will be elected to two-year
terms and three will be elected to a three-year term. After that, directors
will be elected for three-year terms. Mr. Fox and Mr. Smith have been
designated Class I directors whose term expires at the 2001 annual meeting of
stockholders. Mr. Pickett and Ms. Schoendorf have been designated Class II
directors whose term expires at the 2002 annual meeting of stockholders. Mr.
Ballman, Mr. Ballowe and Mr. Ericson have been designated Class III directors
whose term expires at the 2003 annual meeting of stockholders. See "Description
of Capital Stock--Anti-Takeover Provisions."
Executive officers are appointed by the board of directors and serve until
their successors have been duly elected and qualified. There are no family
relationships among any of our directors, officers or key employees.
Board Compensation
We do not currently compensate our directors, but they are reimbursed for
out-of-pocket expenses incurred in connection with activities as directors,
including attendance at meetings of the board of directors or its committees.
Our directors are generally eligible to participate in our 1999 stock option
plan and, if a director is an employee of Onvia.com, to participate in our 2000
employee stock purchase plan. Directors who are not employees will also receive
periodic stock option grants under our 2000 directors' stock option plan.
The 2000 directors' stock option plan provides for an initial grant of an
option to purchase 40,000 shares of common stock to each non-employee director
on the effective date of this offering and to each person who first becomes a
non-employee director after that. These options become exercisable in four
equal installments on the first, second, third and fourth anniversaries of the
grant. On the date of each annual stockholders' meeting, each non-employee
director who has served on our board of directors for at least six months will
be granted an additional option to purchase 10,000 shares of common stock,
which will become exercisable in full on the day before the first anniversary
of the date of grant. The exercise price of all stock options granted under the
directors' stock option plan will be equal to the fair market value of a share
of our common stock on the date of grant of an option. See "Benefit Plans--2000
Directors' Stock Option Plan."
Board Committees
The compensation committee currently consists of Mr. Ballowe, Mr. Fox and
Ms. Schoendorf. The compensation committee:
. reviews and makes recommendations to the board regarding all forms of
compensation and benefits provided to our officers; and
. establishes and reviews general policies relating to the compensation
and benefits of all of our employees.
46
<PAGE>
The audit committee currently consists of Mr. Ballowe, Mr. Fox and Ms.
Schoendorf. The audit committee:
. reviews and monitors our internal accounting procedures, corporate
financial reporting, external and internal audits, the results and scope
of the annual audit and other services provided by our independent
accountants; and
. makes recommendations to the board of directors regarding the selection
of independent auditors.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of our board of directors are
currently Mr. Ballowe, Mr. Fox and Ms. Schoendorf. Mr. Pickett, our Chairman of
the Board, served on our Compensation Committee until December 1999. None of
Mr. Ballowe, Mr. Fox or Ms. Schoendorf has at any time been an officer or
employee of Onvia.com. No executive officer of Onvia.com serves as a member of
the board of directors or compensation committee of an entity that has one or
more executive officers serving on our board of directors or compensation
committee. See "Related Party Transactions."
Executive Compensation
Summary Compensation. The following table sets forth the compensation
received for the years ended December 31, 1998 and December 31, 1999 by our
Chief Executive Officer and our four other highest-paid executive officers who
were paid at least $100,000 during the fiscal year ended December 31, 1999,
whom we collectively refer to as the named executive officers:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual
Compensation Securities
---------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
--------------------------- ---- ------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Glenn S. Ballman 1999 $ 75,117 $20,000 600,000 $13,000
President and Chief Executive 1998 47,807 -- -- --
Officer(1)....................
Mark T. Calvert 1999 137,500 -- 971,120 --
Vice President, Chief 1998 -- -- -- --
Financial Officer and
Secretary(2)..................
Kristen M. Hamilton 1999 74,417 45,000 1,600,000 1,850
Vice President and Chief 1998 13,000 -- -- --
Strategy Officer(3)...........
Douglas H. Kellam 1999 57,320 -- 500,000 53,950
Vice President of 1998 -- -- -- --
Marketing(4)..................
Robert D. Ayer 1999 78,333 25,000 -- 7,000
Vice President of Products and 1998 14,400 -- -- --
Services(5)...................
</TABLE>
- --------
(1) Mr. Ballman's salary includes $18,407 paid to Mr. Ballman by our Canadian
subsidiary prior to the purchase of its outstanding shares by us from Mr.
Ballman. This amount assumes an average exchange rate of one U.S. dollar
for each 0.680222 Canadian dollar over the period this Canadian income was
earned. Mr. Ballman's other compensation consists of $13,000 representing
the fair market value of common stock issued in exchange for services.
(2) Mr. Calvert commenced employment with us in February 1999. Mr. Calvert's
salary on an annualized basis is $150,000.
(3) Ms. Hamilton commenced employment with us in June 1998 as our Vice
President of Business Development. In December 1999, Ms. Hamilton became
our Vice President and Chief Strategy Officer.
47
<PAGE>
Ms. Hamilton's salary on an annualized basis is $80,000. Her other
compensation consists of $1,850 representing the fair market value of common
stock issued in exchange for services.
(4) Mr. Kellam commenced employment with us in August 1999. Mr. Kellam's
salary on an annualized basis is $170,000. Mr. Kellam's other compensation
consists of $50,000 in relocation expenses and $3,950 in transportation
expenses related to his relocation.
(5) Mr. Ayer's other compensation consists of $7,000 representing the fair
market value of common stock issued in exchange for services.
Option Grants in Last Fiscal Year
No stock options were granted to the named executive officers during the
year ended December 31, 1998.
The following table describes certain information regarding stock options
granted to each of the named executive officers in the fiscal year ended
December 31, 1999, including the potential realizable value over the ten-year
term of the options, based on assumed rates of stock appreciation of 5% and
10%, compounded annually. These assumed rates of appreciation comply with the
rules of the Securities and Exchange Commission and do not represent our
estimate of future stock price. Actual gains, if any, on stock option exercises
will be dependent on the future performance of our common stock. In addition,
the deemed value for the date of grant was determined after the date of grant
solely for financial accounting purposes. No stock appreciation rights were
granted to these individuals during the year.
In the fiscal year ended December 31, 1999, we granted options to purchase
up to an aggregate of 11,466,032 shares to employees, directors and
consultants. All options were granted under our 1999 stock option plan at
exercise prices at the fair market value of our common stock on the date of
grant, as determined in good faith by the board of directors. All options have
a term of ten years. Optionees may pay the exercise price by cash, check,
promissory note or delivery of already-owned shares of our common stock. All
options are exercisable as determined by the plan administrator.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------- Value at Assumed
% of Total Annual Rates
Number of Options of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term
Options in Last Price Expiration ---------------------
Name Granted Fiscal Year Per Share Date 5% 10%
---- ---------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Glenn S. Ballman........ 600,000 5.2% $ 6.17 12/19/2009 $2,328,168 $5,900,035
Mark T. Calvert......... 140,000 1.2 0.0625 3/23/2009 5,503 13,945
286,000 2.5 0.0625 3/23/2009 11,241 28,488
545,120 4.8 0.125 4/21/2009 42,853 108,598
Kristen M. Hamilton..... 1,600,000 14.0 0.0625 3/23/2009 117,918 298,827
Douglas H. Kellam....... 500,000 4.4 0.375 8/30/2009 62,889 159,374
Robert D. Ayer.......... -- -- -- -- -- --
</TABLE>
48
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
No options were exercised by the named executive officers during the year
ended December 31, 1998, nor did any named executive officer hold any options
as of December 31, 1998.
The following table describes for the named executive officers their option
exercises for the fiscal year ended December 31, 1999 and exercisable and
unexercisable options held by them as of December 31, 1999.
The value of unexercised in-the-money options at fiscal year end set forth
below is based on an assumed initial offering price of $12.00 per share, less
the per share exercise price, multiplied by the number of shares issued upon
exercise of the option. All options were granted under our 1999 stock option
plan.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options at Fiscal Options at Fiscal
Shares Year End Year End
Acquired Value ---------------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark T. Calvert......... 971,120 $ 904,635 -- -- -- --
Kristen M. Hamilton..... 1,600,000 1,500,001 -- -- -- --
Douglas H. Kellam....... 400,000 350,000 100,000 -- $1,162,500 --
</TABLE>
Benefit Plans
1999 Stock Option Plan
Our 1999 stock option plan provides for the grant of incentive stock options
to employees and nonstatutory stock options to employees, directors and
consultants to acquire shares of our common stock. The purposes of the 1999
stock option plan are to attract and retain the best available personnel,
provide additional incentives to our employees and consultants and promote the
success of our business. Our board of directors originally adopted the 1999
stock option plan in February 1999 and our stockholders approved the plan in
August 1999. There were 18,000,000 total shares of common stock reserved for
issuance under our 1999 stock option plan at December 31, 1999. Our 1999 stock
option plan was amended in December 1999 to provide for an automatic annual
increase on the first day of each of our fiscal years beginning in 2001 and
ending in 2009 equal to the lesser of 3,200,000 shares, 4% of our outstanding
common stock on the last day of the immediately preceding fiscal year or a
lesser number of shares as the board of directors determines. The 1999 stock
option plan will terminate in February 2009 unless the board of directors
terminates it earlier. As of December 31, 1999, options to purchase 5,875,382
shares of common stock were outstanding at a weighted average exercise price of
$1.60 per share, 6,326,206 shares had been issued upon exercise of outstanding
options or pursuant to stock purchase agreements and 5,678,412 shares remained
available for future grant.
The administrator of the 1999 stock option plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1999 stock option plan, including the number of
shares subject to the option, exercise price, term and exercisability. In no
event, however, may an individual employee receive option grants for more than
2,000,000 shares under the stock plan in any fiscal year. Incentive stock
options granted under the 1999 stock option plan must have an exercise price of
at least 100% of the fair market value of the common stock on the date of grant
and at least 110% of the fair market value in the case of an optionee who holds
more then 10% of the total voting power of all classes of our stock.
Nonstatutory stock options granted under the 1999 stock option plan must have
an exercise price of at least 110% of the fair market value in the case of an
optionee who holds more than 10% of the total voting power of all classes of
our stock. Payment of the exercise price may be made in cash or other
consideration as determined by the administrator.
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<PAGE>
The administrator determines the term of options, which may not exceed ten
years, except in the case of an incentive stock option granted to a holder of
more than 10% of the total voting power of all classes of our stock for which
the term may not exceed five years. No option may be transferred by the
optionee other than by will or the laws of descent or distribution. Each option
may be exercised during the lifetime of the optionee only by the optionee or a
permitted transferee. The administrator determines when options become
exercisable. Options granted under the 1999 stock option plan generally must be
exercised:
. no later than three months after the termination of the optionee's
status as an employee, director or consultant of Onvia.com;
. within six months if the termination is due to the death of the
optionee;
. within 12 months if the termination is due to the total disability of
the optionee; and
. within six months if the termination is due to the less than total and
permanent disability of the employee.
In no event may an option be exercised later than the expiration of the
option's term.
In the event of our merger with or into another corporation, the successor
corporation may assume each option or may substitute an equivalent option. To
the extent the outstanding option is not assumed by the successor corporation,
the vesting of the option shall automatically be accelerated so that 25% of the
unvested shares covered by the option shall be fully vested upon the
consummation of the merger. Each outstanding option held by an optionee who is
an executive officer will be accelerated completely so that 100% of the
unvested shares covered by the option are fully vested if within 12 months of
the change of control, the executive officer is terminated other than for cause
or by the optionee for good reason. The board of directors has the authority to
amend or terminate the 1999 Stock option plan, except that the board may not
take any action that impairs the rights of any holder of an outstanding option
without the holder's consent.
50
<PAGE>
2000 Directors' Stock Option Plan
We have reserved a total of 600,000 shares of common stock for issuance
under our 2000 directors' stock option plan. The directors' plan provides for
the grant of nonstatutory stock options to non-employee directors of Onvia.com.
The directors' plan is designed to work automatically without administration;
however, to the extent administration is necessary, it will be performed by the
board of directors. To the extent that conflicts of interest arise, it is
expected that conflicts will be addressed by having any interested director
abstain from both deliberations and voting regarding matters in which the
director has a personal interest. Unless terminated earlier, the directors'
plan will terminate ten years after effectiveness of this offering.
The directors' plan provides that each person who is or becomes a non-
employee director of Onvia.com will be granted a nonstatutory stock option to
purchase 40,000 shares of common stock on the later of the date on which he or
she first becomes a non-employee director of Onvia.com or the date of the
effectiveness of this offering. After that, on the date of our annual
stockholders' meeting each year, each non-employee director of Onvia.com will
be granted an additional option to purchase 10,000 shares of common stock if,
on that date, he or she has served on our board of directors for at least six
months. The initial option grant under the directors' plan becomes exercisable
in installments of 25% of the total number of shares subject to the option on
the first, second, third and fourth anniversaries of the date of grant. The
annual grants become exercisable in full on the day before the first
anniversary of the date of grant. No option granted under the directors' plan
is transferable by the option holder other than by will or the laws of descent
or distribution or under a domestic relations order, and each option will be
exercisable during the lifetime of the option holder only by that option
holder. The exercise price of all stock options granted under the directors'
plan is set equal to the fair market value of a share of Onvia.com common stock
on the date of grant of the option. Options granted under the directors' plan
have a term of ten years. However, unvested options terminate when the optionee
ceases to serve as a directors and vested options terminate if they are not
exercised within 12 months after the director's death or disability or within
90 days after the director ceases to serve as a director for any other reason.
In the event of a merger or acquisition of Onvia.com in which there is not
greater than 50% change in ownership, each option outstanding under the
directors' plan will be assumed or equivalent options will be substituted by
our acquiror, unless our acquiror does not agree to such assumption or
substitution, in which case the options will terminate to the extent not
previously exercised. In the event of a merger or acquisition of Onvia.com in
which there is greater than 50% change in ownership, each director holding
options under the directors' plan will have the right to exercise his or her
options immediately before the consummation of the merger or acquisition as to
all shares underlying the options, including previously unvested shares. Our
board of directors will be able to amend or terminate the 2000 directors'
option plan as long as the amendment does not adversely affect any outstanding
option and we obtain stockholder approval to the extent required by law.
2000 Employee Stock Purchase Plan
We have reserved a total of 600,000 shares of common stock for issuance
under the 2000 employee stock purchase plan. The number of shares reserved for
issuance under the 2000 employee stock purchase plan is subject to an automatic
annual increase on the first day of each of our fiscal years beginning in 2001
and ending in 2010 equal to the lesser of 600,000 shares, 1% of our outstanding
common stock on the last day of the immediately preceding fiscal year or such
lesser number of shares as the board of directors determines. The employee
stock purchase plan becomes effective upon the date of this offering. Unless
terminated earlier by the board of directors, the 2000 employee stock purchase
plan will terminate ten years after the effectiveness of this offering.
The 2000 employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is implemented by a series of
overlapping offering periods of approximately 24 months' duration, with new
offering periods, other than the first offering period, commencing on May 1 and
November 1 of each year. Each offering period generally consists of four
consecutive purchase periods of six months' duration, at the end of which an
automatic purchase will be made for participants. The initial offering
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<PAGE>
period is expected to commence on the date of this offering and end on April
30, 2002. The initial purchase period is expected to begin on the date of this
offering and end on October 31, 2000, with subsequent purchase periods ending
on April 30, 2001, October 31, 2001 and April 30, 2002. The 2000 employee stock
purchase plan is administered by the board of directors or by a committee
appointed by the board. Our employees, including officers and employee
directors, or of a subsidiary designated by the board, are eligible to
participate in the 2000 employee stock purchase plan if they are employed by us
or the designated subsidiary for at least 20 hours per week and more than five
months per year. The 2000 employee stock purchase plan permits eligible
employees to purchase common stock through payroll deductions, which may not
exceed 15% of an employee's base salary. The purchase price is equal to the
lower of 85% of the fair market value of the common stock at the beginning of
each offering period or at the end of each purchase period, subject to
adjustments as provided in the plan. Employees are able to end their
participation in the 2000 employee purchase plan at any time during an offering
period, and participation will end automatically on termination of employment.
An employee will not be granted an option under the 2000 employee stock
purchase plan if immediately after the grant the employee would own stock
and/or hold outstanding options to purchase stock equaling 5% or more of the
total voting power or value of all classes of our stock or stock of our
subsidiaries, or if the option would permit an employee's rights to purchase
stock under the 2000 employee stock purchase plan at a rate that exceeds
$25,000 of fair market value of such stock for each calendar year in which the
option is outstanding. In addition, no employee is allowed to purchase more
than 2,000 shares of common stock under the 2000 employee stock purchase plan
in any one purchase period. If the fair market value of the common stock on a
purchase date is less than the fair market value at the beginning of the
offering period, each participant in that offering period will automatically be
withdrawn from the offering period as of the end of the purchase date and re-
enrolled in the new 24-month offering period beginning on the first business
day following the purchase date.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the 2000
employee stock purchase plan will be assumed or an equivalent right substituted
by our acquiror. If our acquiror does not agree to assume or substitute stock
purchase rights, any offering period and purchase period then in progress will
be shortened and a new exercise date occurring prior to the closing of the
transaction will be set. Our board of directors will have the power to amend or
terminate the 2000 employee stock purchase plan and to change or terminate
offering periods as long as this action does not adversely affect any
outstanding rights to purchase stock under the plan. However, the board of
directors will be able to amend or terminate the 2000 employee stock purchase
plan or an offering period even if it would adversely affect outstanding
options to avoid our incurring adverse accounting charges.
Limitations on Directors' Liability and Indemnification
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of the director's fiduciary duties 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;
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. for any transaction from which a director derives an improper personal
benefit.
Our bylaws provide that we shall indemnify our directors and executive
officers and may indemnify our other officers and employees and other agents to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified
52
<PAGE>
parties. Our bylaws also permit us to obtain insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in his or her capacity, regardless of whether the bylaws would
permit indemnification.
In addition to the indemnification provided for in our articles of
incorporation and bylaws, we have entered into indemnification agreements with
some of our directors and officers. These agreements provide for
indemnification of our directors and officers for specified expenses, including
attorneys' fees, judgments, fines and settlement amounts incurred by any of
these people in any action or proceeding arising out of their services as a
director or officer of Onvia.com, any subsidiary of Onvia.com or any other
company or enterprise to which the person provides services at the request of
Onvia.com. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and officers. We also expect
to obtain directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Onvia.com where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.
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<PAGE>
RELATED PARTY TRANSACTIONS
Benefits to Related Parties in Private Placement Transactions
Since our inception in March 1997, we have issued and sold shares of our
capital stock and warrants to purchase our capital stock, not including
warrants issued to our creditors, in private placement transactions as follows:
. 22,958,136 shares of restricted common stock at a price of $0.00125 per
share in January 1999;
. 1,026,224 shares of restricted common stock at a price of $0.0125 per
share in April 1999;
. 120,000 shares of restricted common stock at a price of $1.25 per share
in December 1999;
. 20,219,496 shares of Series A preferred stock at a price of $0.58 per
share in February 1999;
. warrants to purchase up to 833,352 shares of common stock at an exercise
price of $0.0025 per share in connection with the sale of notes
convertible into shares of Series A preferred stock from September 1998
through February 1999;
. 14,544,170 shares of Series B preferred stock at a price of $1.72 per
share in September 1999; and
. 3,379,402 shares of Series C preferred stock at a price of $6.86 per
share in December 1999.
All shares of our preferred stock will convert into common stock on a 1-for-
1 basis upon the closing of this offering. The following table summarizes the
shares of capital stock purchased by executive officers, directors and 5%
stockholders and their affiliates in these private placement transactions,
although this table does not necessarily reflect the currently outstanding
securities:
<TABLE>
<CAPTION>
Series A Series B Series C
Investor Common Stock Preferred Stock Preferred Stock Preferred Stock
-------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Entities Affiliated with
Mohr,
Davidow Ventures....... -- 9,322,956 4,654,128 541,060
Internet Capital Group,
Inc.................... -- 8,552,972 5,235,966 729,266
GE Capital Equity
Investments............ -- -- 4,072,370 216,630
Glenn S. Ballman........ 10,000,000 9,568 -- --
Robert D. Ayer.......... 5,600,000 -- -- --
Kristen M. Hamilton..... 1,480,000 -- -- --
Arthur R. Paul.......... 1,200,000 -- -- --
Michael D. Pickett...... 1,026,224 85,532 -- --
VLG Investments 1999.... 513,896 42,764 -- 7,294
Wendy L. Ayer........... 240,000 -- -- --
William W. Ericson...... 187,204 17,108 -- 3,646
Mark T. Calvert......... 64,104 42,764 -- 14,586
Jeffrey C. Ballowe...... 120,000 -- -- --
</TABLE>
Affiliate Relationships
Ms. Schoendorf, one of our directors, is a member of Mohr, Davidow Venture
Partners. Mr. Fox, one of our directors, is a managing director of Internet
Capital Group, Inc. Mr. Ballowe, one of our directors, is on the advisory board
of Internet Capital Group, Inc. Wendy L. Ayer is married to Robert D. Ayer, our
Vice President of Products and Services. Mr. Ericson, one of our directors, is
a director at Venture Law Group, our principal legal counsel. VLG Investments
1999 is an investment partnership affiliated with Venture Law Group. The shares
of Series C preferred stock attributed to Mark T. Calvert in the above table
are held of record by Mark and Norma Calvert, the parents of Mr. Calvert.
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<PAGE>
Debt Financing
Between October 1998 and February 1999, we issued and sold convertible
promissory notes to the following executive officers, directors and 5%
stockholders and persons and entities associated with them, in the amounts set
forth opposite each of these parties' names. The promissory notes were
cancelled and converted into shares of our Series A preferred stock at $0.58
per share on February 25, 1999.
<TABLE>
<CAPTION>
Annual Amount of
Stockholder Interest Rate Promissory Note Date Issued
----------- ------------- --------------- -----------
<S> <C> <C> <C>
Mark T. Calvert................. 8% $25,000 October 26, 1998
Michael D. Pickett.............. 6% $50,000 February 12, 1999
VLG Investments 1999............ 6% $25,000 February 17, 1999
William W. Ericson.............. 6% $10,000 February 17, 1999
Glenn S. Ballman................ 6% $ 5,593 February 17, 1999
</TABLE>
We issued Mark T. Calvert, along with other investors who bought convertible
notes in 1998, a warrant to purchase 64,104 shares of common stock at an
exercise price of $0.0025 per share. Mr. Calvert exercised his warrant to
purchase 64,104 shares of common stock in October 1999.
Loans to Officers
In October 1999, we loaned Mr. Ballman, our President and Chief Executive
Officer, $350,000 at 6% annual interest. Mr. Ballman pledged his Onvia.com
common stock as security for the note. The note is due on the earlier of the
following:
. October 2004;
. after a public offering of Onvia.com's common stock in which Mr. Ballman
is a selling stockholder; and
. the expiration of any lock-up period imposed by contract or the
securities laws following an acquisition of Onvia.com.
In addition, in December 1999, our board of directors authorized loans to
our senior executives in an aggregate amount of up to $1,000,000,
collateralized by shares of our common stock held by them. When issued, the
loans will bear interest at 6% per annum and will be due on similar terms as
the loan to Mr. Ballman.
In connection with the $1,000,000 in approved loans, Douglas H. Kellam
issued us a promissory note in the amount of $150,000 at 6% annual interest in
December 1999 for a loan issued in connection with exercise of Mr. Kellam's
options. Mr. Kellam pledged his exercised shares of common stock as security
for the note. The note is due on the earlier of the following:
. December 2005;
. after a public offering of Onvia.com's common stock in which Mr. Kellam
is a selling stockholder; and
. the expiration of any lock-up period imposed by contract or the
securities laws following an acquisition of Onvia.com.
Option Plan Acceleration for Executive Officers Upon a Change of Control
Our 1999 stock option plan provides that each outstanding option held by an
executive officer will be accelerated completely so that 100% of the unvested
shares covered by the option are fully vested if, within 12 months of a change
of control, the employment of the executive officer is terminated other than
for cause or by the executive officer for good reason.
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<PAGE>
Indemnification Agreements
We have entered into indemnification agreements with some of our officers
and directors containing provisions requiring us to indemnify them against
liabilities that may arise by reason of their status or service as officers or
directors, and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. These indemnification
agreements do not cover liabilities arising from willful misconduct of a
culpable nature.
Employment Agreements
The following executive officers are individually parties to offer letter
agreements with Onvia.com that provide for at-will employment, standard medical
and dental benefits, and salary as listed below:
<TABLE>
<CAPTION>
Shares
Date of Letter Annual Potential Underlying
Officer Agreement Salary Bonus Options Other
------- ---------------- -------- --------- ---------- ------------------------
<C> <C> <C> <C> <C> <S>
Mark T. Calvert......... March 25, 1999 $150,000 -- 545,120 Severance equal to
twelve months of full
salary and benefits
upon termination for
any reason
Douglas H. Kellam....... August 25, 1999 170,000 $42,500 500,000 Up to $50,000 in moving
expenses and 24
roundtrip air tickets
from Seattle to Chicago
Louis T. Mickler........ July 27, 1999 110,000 20,000 70,000 Relocation expenses from
Oregon to Seattle
Mark A. Pawlosky........ July 23, 1999 130,000 30,000 100,000 --
Clayton W. Lewis........ March 15, 1999 80,000 10,000 100,000 --
James R. Bridges........ October 14, 1999 99,900 15,000 15,000 --
</TABLE>
Some of these officers have been granted options in addition to those set
forth in the offer letters. In addition, our board of directors has granted to
each of our executive officers six months salary and six months COBRA benefits
as severance upon termination of employment with us for any reason or no
reason.
Other Related Party Transactions
We have paid SunCommerce Corporation approximately $221,000 from March 25,
1997 (inception) through December 31, 1999 for software development, consulting
and other services. In addition, we entered into a lease agreement with
SunCommerce Corporation in July 1999 under which we sublease office space in
Seattle, Washington to SunCommerce Corporation. The lease calls for monthly
payments of $2,212 and expires in May 2001. We are a guarantor of the primary
lease and will be liable if SunCommerce Corporation fails to meet its
obligations under the sublease. Mr. Ballman is a majority stockholder of
SunCommerce Corporation.
We entered into an agreement with Broadbase Software, Inc., in September
1999 pursuant to which we purchased software for our management information
system. We have paid Broadbase Software, Inc. approximately $347,000 under this
agreement through December 31 1999. Mohr, Davidow Ventures, one of our
principal stockholders, is an investor in Broadbase Software, Inc. Ms.
Schoendorf, one of our directors, is a partner of Mohr, Davidow Ventures. See
"Principal Stockholders."
Our Canadian subsidiary was incorporated as M-Depot Internet Superstore,
Inc. in British Columbia, Canada in June 1997 and was wholly owned by Glenn
Ballman, our founder, President and Chief Executive Officer. In January 1999,
we issued 800 shares of our common stock to Mr. Ballman in exchange for all of
the outstanding shares of M-Depot Internet Superstore, Inc, which subsequently
changed its name to Onvia.com, Inc.
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<PAGE>
We entered into a marketing agreement with ZDNet in March 1999. We have
incurred costs of approximately $167,000 under this agreement as of December
31, 1999. Mr. Ballowe, one of our directors, served as the President,
Interactive Media and Development Group, of Ziff-Davis until December 1997 and
is a director of ZDTV. Ziff-Davis and ZDTV are affiliates of ZDNet.
Mr. Ballowe, one of our directors, is on the advisory board of Internet
Capital Group, Inc. Mr. Fox, also one of our directors, has served as a
Managing Director of Internet Capital Group, Inc. since March 1996.
In December 1999, we accelerated the vesting of and eliminated our
repurchase option with respect to the unvested portion of the 513,896 shares of
common stock held by VLG Investments 1999.
We have granted options to purchase common stock to our executive officers,
and, in December 1999, we allowed these officers to exercise the previously
unvested portion of these options, subject to a repurchase option by us which
lapses as the shares vest. The aggregate number of these previously unvested
options was 2,671,554.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of December 31, 1999, giving effect to the
appointment of new directors, assuming conversion of all outstanding shares of
preferred stock into common stock and as adjusted to reflect the sale of
8,000,000 shares of common stock offered by Onvia.com in this offering, as to:
. each person or entity (or group of affiliated persons or entities) known
by us to own beneficially more than 5% of our common stock;
. each of our directors;
. the executive officers named in the summary compensation table; and
. all of our directors and executive officers as a group.
Except as indicated in the footnotes to this table and under applicable
community property laws, to our knowledge, the persons named in the table have
sole voting power and investment power with respect to all shares of common
stock. As of December 31, 1999, there were 67,475,618 shares of common stock
outstanding on an as converted basis, and 75,475,618 shares of common stock
outstanding after this offering. For the purposes of calculating percent
ownership, for any individual who beneficially owns shares represented by
exercisable options, these shares are counted in the denominator for that
person, but not for any other person. Options held by our executive officers
were made immediately exercisable by our board of directors in December 1999
and are reflected as outstanding in this table. These shares are subject to a
repurchase option by us which lapses as the shares vest. Unless otherwise
indicated, the address of each of the individuals named below is:
c/o Onvia.com, Inc., 1000 Dexter Avenue North, Suite 400, Seattle, Washington
98109.
<TABLE>
<CAPTION>
Percentage of Ownership
Shares ------------------------
Beneficially Prior to This After This
Owned Offering Offering
------------ ------------- ----------
Name and Address of Beneficial Owner
- ------------------------------------
<S> <C> <C> <C>
Entities affiliated with Mohr, Davidow
Ventures (1)........................... 14,518,144 21.5% 19.2%
2775 Sand Hill Road, Suite 240
Menlo Park, California 94025
Internet Capital Group, Inc. (2)........ 14,518,144 21.5 19.2
44 Montgomery Street, Suite 3705
San Francisco, California 94014
GE Capital Equity Investments (3)....... 4,289,000 6.4 5.7
c/o Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
Glenn S. Ballman........................ 10,609,568 15.6 13.9
Robert D. Ayer (4)...................... 5,730,000 8.5 7.6
Kristen M. Hamilton (5)................. 3,080,000 4.6 4.1
Mark T. Calvert (6)..................... 1,012,574 1.5 1.3
Douglas H. Kellam....................... 500,000 * *
Nancy J. Schoendorf (1)................. 14,518,144 21.5 19.2
c/o Mohr, Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, California 94025
Kenneth A. Fox (2)...................... 14,518,144 21.5 19.2
c/o Internet Capital Group, Inc.
44 Montgomery Street, Suite 3705
San Francisco, California 94014
(3).................. 4,289,000 6.4 5.7
c/o Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Percentage of Ownership
Shares ------------------------
Beneficially Prior to This After This
Owned Offering Offering
------------ ------------- ----------
Name and Address of Beneficial Owner
- ------------------------------------
<S> <C> <C> <C>
Michael D. Pickett...................... 1,111,756 1.6% 1.5%
4640 Admiralty Way, Fifth Floor
Marina Del Ray, California 90292
William W. Ericson (7).................. 771,912 1.1 1.0
c/o Venture Law Group
4750 Carillon Point
Kirkland, Washington 98033
Jeffrey C. Ballowe...................... 120,000 * *
85 Estrada Calabasa
Santa Fe, New Mexico 87501
All directors and officers as a group
(16 persons) (8)....................... 58,674,298 85.1% 76.2%
</TABLE>
- --------
* Less than 1% of the outstanding shares of common stock
(1) Consists of 10,022,970 shares held by Mohr, Davidow Ventures V, L.P.,
3,781,480 shares held by Mohr, Davidow Ventures V-L, L.P. and 713,694
shares held by Mohr, Davidow Ventures V, L.P. as nominee for Mohr, Davidow
Ventures Entrepreneurs' Network Fund II (A), L.P. and Mohr, Davidow
Ventures Entrepreneurs' Network Fund II (B), L.P. Ms. Schoendorf is a
director of Onvia.com and a member of Mohr, Davidow Ventures, the general
partner of Mohr, Davidow Ventures V, L.P. Ms. Schoendorf disclaims
beneficial ownership of shares held by these entities except to the extent
of her pecuniary interest in them.
(2) Mr. Fox is a director of Onvia.com and managing director of Internet
Capital Group, Inc. Mr. Fox disclaims beneficial ownership of those shares
except to the extent of his pecuniary interest in them.
(3) Mr. is a director of Onvia.com and Senior Vice President of GE
Equity, a subsidiary of GE Capital. Mr. disclaims beneficial
ownership of those shares except to the extent of his pecuniary interest
in them.
(4) Consists of 5,490,000 shares held by Mr. Ayer and 240,000 shares held by
his spouse Wendy Ayer.
(5) Includes 30,000 shares held by Christian McLaughlin, as trustee of the
Hamilton Family Trust dated 11/22/99 and 24,000 shares held by Christian
McLaughlin, as trustee of the Kristen Hamilton Trust dated 12/17/99.
(6) Includes 14,586 shares held by Mark and Norma Calvert, the parents of Mr.
Calvert, and an aggregate of 60,000 shares held for the benefit of various
family members. Mr. Calvert disclaims beneficial ownership of those shares
except to the extent of his pecuniary interest in them.
(7) Consists of 207,958 shares held by Mr. Ericson and 563,954 shares held by
VLG Investments 1999. Mr. Ericson is a director of Onvia.com and a
director of Venture Law Group. VLG Investments 1999 is an investment
partnership affiliated with Venture Law Group. Mr. Ericson disclaims
beneficial ownership of the shares held by VLG Investments 1999 except to
the extent of his pecuniary interest in them.
(8) Includes an aggregate of 1,480,000 shares subject to options outstanding
as of December 31, 1999 that were made immediately exercisable by our
board in December 1999 subject to a repurchase option by us which lapses
as the shares vest. Also includes shares of which the applicable officer
or director may disclaim beneficial ownership.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of the closing of this offering, our authorized capital stock will
consist of 250,000,000 shares of common stock, par value $0.0001 per share, and
15,000,000 shares of preferred stock, par value $0.0001 per share.
Common Stock
As of December 31, 1999, there were 68,180,762 shares of common stock
outstanding, assuming the conversion of all outstanding shares of preferred
stock into common stock and the exercise of warrants to purchase 705,144 shares
of our common stock that will expire if not exercised prior to the offering.
The holders of common stock are entitled to one vote per share on all
matters to be voted on by the stockholders. There are no cumulative voting
rights. Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of common stock are entitled to receive dividends,
if any, as may be declared by the board of directors out of funds legally
available for dividends. In the event of a liquidation, dissolution or winding
up of Onvia.com, the holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior rights of
preferred stock, if any, then outstanding. The common stock has no preemptive
or conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable.
Preferred Stock
We are authorized to issue 15,000,000 shares of undesignated preferred
stock. The board of directors has the authority, without vote or action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. It is not possible
to state the actual effect of the issuance of any shares of preferred stock
upon the rights of holders of the common stock until the board of directors
determines the specific rights of the holders of the preferred stock. However,
the effects might include restricting dividends on the common stock, diluting
the voting power of the common stock, impairing the liquidation rights of the
common stock and delaying or preventing a change in control of Onvia.com
without further action by the stockholders and may adversely affect the rights
of the holders of common stock. We are considering using a portion of these
shares of preferred stock in connection with the potential adoption of a
preferred shares rights agreement as more fully described below under
"Antitakeover Provisions." We have no other present plans to issue any shares
of preferred stock.
Warrants
As of December 31, 1999, warrants were outstanding to purchase an aggregate
of 1,967,782 shares of common stock with exercise prices ranging between
$0.0025 and $1.24 per share. Of these, warrants to purchase 705,144 shares of
common stock with an exercise price of $0.0025 per share issued as
consideration in connection with purchase of the notes convertible into shares
of Series A preferred stock in 1998, will automatically expire if not exercised
upon completion of this offering. Of the warrants to purchase 1,262,638 shares
of common stock still outstanding after close of this offering, a warrant to
purchase 97,328 shares of common stock at an exercise price of $1.24 per share
expires on the fourth anniversary of the closing of this offering and warrants
to purchase 1,165,310 shares of common stock at an exercise price of $0.90 per
share expire on the fifth anniversary of the closing of this offering.
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<PAGE>
Registration Rights
As of December 31, 1999, the holders of approximately 68,180,762 shares of
common stock, including shares of common stock issuable upon exercise of
warrants are entitled to certain rights with respect to registration of these
shares under the Securities Act. We refer to these shares as the "registrable
securities," although some of these shares that are held by holders of shares
of our common stock are only considered to be registrable securities for
purposes of participation in registrations undertaken by us. These rights are
provided under the terms of an agreement between us and the holders of these
securities. Under these registration rights, beginning on the earlier of
February 24, 2003 or six months after the effective date of this offering,
holders of at least a majority of the then-outstanding registrable securities
may require by a written request that we register their shares for public
resale provided that the value of the securities to be registered is at least
$10,000,000, net of underwriting discounts and commissions. We are obligated to
effect no more than two of these registrations requested by the holders of
registrable securities. In addition, any holder or holders of then-outstanding
registrable securities may require that we register their shares for public
resale on Form S-3 or similar short-form registration, provided we are eligible
to use Form S-3 or similar short-form registration statement and that the value
of the securities to be registered is at least $5,000,000. In the event
Onvia.com elects to register any of its shares of common stock in a public
offering, the holders of registrable securities are entitled to include their
shares of common stock in the registration, subject to the right of the
underwriters of the offering to reduce the number of shares proposed to be
registered in view of market conditions. We are required to pay all expenses in
connection with any of these registrations other than underwriting discounts
and commissions. All registration rights will terminate five years after the
date of this offering or, with respect to each holder of registrable
securities, at the time as the holder is entitled to sell all of its shares in
any three-month period under Rule 144 of the Securities Act.
Anti-Takeover Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute 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 that the person became
an interested stockholder unless, with some exceptions, the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale or other transaction
resulting in a financial benefit to the stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's outstanding
voting stock. This provision may have the effect of delaying, deferring or
preventing a change in control of Onvia.com without further action by the
stockholders.
In addition, upon completion of this offering, we will have in place the
following provisions which may have the effect of delaying or preventing
changes in control of Onvia.com:
. we will have a classified board of directors where only approximately
one-third of our directors will be up for election by the stockholders
each year;
. we will have provisions in our charter documents that will limit the
ability of our stockholders to call meetings of the stockholders;
. we will eliminate the ability of our stockholders to take action by
written consent; and
. we will have authorized 15,000,000 shares of preferred stock that,
without further vote or action by the stockholders, may be issued by the
board of directors to impede the success of any attempt to change
control of Onvia.com. We are considering using a portion of these shares
of preferred stock as part of a preferred shares rights agreement.
61
<PAGE>
Our stock option plan, employee stock purchase plan and directors' stock
option plan generally provide for assumption of these plans or substitution of
an equivalent option of a successor corporation or, alternatively, at the
discretion of the Board of Directors, exercise of some or all of the options
stock, including non-vested shares, or acceleration of vesting of shares issued
pursuant to stock grants, upon a change of control or similar event.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is U.S. Stock Transfer
Corporation.
Listing
We have applied for approval for quotation on the Nasdaq Stock Market's
National Market under the symbol "ONVI" for our common stock.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect its market price and impair our ability to raise equity
capital in the future. Only a limited number of shares will be available for
sale shortly after this offering because of contractual and legal restrictions
on resale as described below; however, after these restrictions lapse, sales of
substantial amounts of our common stock in the public market are possible.
Upon completion of the offering, we will have outstanding 76,180,762 shares
of common stock. Of these shares, the shares sold in the offering, plus any
shares issued upon exercise of the underwriters' over-allotment option, will be
freely tradable without restriction under the Securities Act, unless purchased
by our "affiliates" as that term is defined in Rule 144 under the Securities
Act. Affiliates are generally our officers, directors and 10% stockholders.
The remaining 68,180,762 shares outstanding are "restricted securities"
within the meaning of Rule 144 under the Securities Act. Restricted shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 under the Securities
Act, which are summarized below. Sales of the restricted shares in the public
market or the availability of these shares for sale could adversely affect the
market price of the common stock.
Our directors, officers and securityholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or convertible
into our common stock owned by them for a period of 180 days after the date of
this prospectus without the prior written consent of Credit Suisse First Boston
Corporation, the representative of the underwriters. Taking into account the
lock-up agreements, and assuming Credit Suisse First Boston Corporation does
not release stockholders from these agreements, the following shares will be
eligible for sale in the public market at the following times:
. Beginning on the effective date of this prospectus, only the shares sold
in the offering will be immediately available for sale in the public
market.
. Beginning 180 days after the effective date, approximately 49,487,942
shares will be eligible for sale pursuant to Rule 701 and Rule 144,
assuming no exercise of options. In addition, warrants to purchase an
aggregate of 1,262,638 shares will be outstanding after this offering,
which, if exercised pursuant to net-exercise provisions, may be sold
beginning 180 days after the effective date.
. An additional 14,544,170 shares will be eligible for sale pursuant to
Rule 144 after September 2000, an additional 64,104 shares will be
eligible for sale pursuant to Rule 144 after October 2000, an additional
3,379,402 shares will be eligible for sale pursuant to Rule 144 after
December 2000, and an additional 705,144 shares will be eligible for
sale pursuant to Rule 144 after February 2001.
Under Rule 144, the number of shares that may be sold by our affiliates are
subject to volume restrictions. In general, under Rule 144, and beginning after
the expiration of the lock-up agreements 180 days after the date of this
prospectus, a person who has beneficially owned restricted securities for at
least one year would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of the following:
. one percent of the number of shares of common stock then outstanding
(which will equal approximately 761,808 shares immediately after the
offering);
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been our
affiliate at any time during the three months preceding a sale and who has
beneficially owned the
63
<PAGE>
shares proposed to be sold for at least two years, is entitled to sell these
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with some of its restrictions, including the
holding period requirement. Any of our employees, officers, directors or
consultants who purchased shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 144. Rule 701
permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirement of Rule 144. Rule 701 further
provides that non-affiliates may sell these shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. In addition, we intend to file one
or more registration statements under the Securities Act promptly after the
effective date to register shares to be issued pursuant to our employee benefit
plans. As a result, any options exercised under the 1999 stock option plan, the
2000 employee stock purchase plan, the 2000 directors' stock option plan or any
other benefit plan after the effectiveness of a registration statement will
also be freely tradable in the public market, except that shares held by
affiliates will still be subject to the volume limitation, manner of sale,
notice and public information requirements of Rule 144. As of December 31,
1999, there were outstanding options for the purchase of 5,875,382 shares of
our common stock under the 1999 stock option plan. No shares have been issued
to date under the 2000 employee stock purchase plan or the 2000 directors'
stock option plan.
64
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement dated , 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Chase Securities
Inc., FleetBoston Robertson Stephens Inc., E*OFFERING Corp. and William Blair &
Company, L.L.C. are acting as representatives, the following respective number
of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
FleetBoston Robertson Stephens Inc. ...............................
Chase Securities Inc. .............................................
E*OFFERING Corp. ..................................................
William Blair & Company, L.L.C. ...................................
---------
Total............................................................
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of common stock in the offering if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or the offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and the selling group members may allow a discount of $
per share on sales to other broker/dealers. After the initial public offering,
the public offering price and concession and discount to dealers may be changed
by the representatives.
The following table summarizes the compensation and expenses we will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-Allotment Over-Allotment Over-Allotment Over-Allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We and our officers and directors and all of our stockholders have agreed
that we and they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act relating to any
additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except,
in our case, issuances pursuant to the exercise of employee stock options
outstanding on the date hereof.
At our request, the underwriters have reserved up to 5% shares of common
stock offered hereby for sale at the initial public offering price to our
customers, consultants and others with whom we do business, existing
stockholders and friends of Onvia.com. As a result, the number of shares
available for sale to the general public
65
<PAGE>
will be reduced to the extent that persons purchase these reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares of common stock offered
hereby.
E*OFFERING Corp., one of the underwriters, will allocate for distribution by
E*TRADE Securities, Inc. a portion of the shares that E*OFFERING is
underwriting in this offering. Copies of the prospectus in electronic format
will be made available on Internet websites maintained by E*OFFERING Corp. and
E*TRADE Securities, Inc. Customers of E*TRADE Securities, Inc. who complete and
pass an online eligibility profile may place conditional offers to purchase
shares in this offering through E*TRADE's Internet website.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in respect to those liabilities.
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "ONVI."
In December 1999, we sold shares of our Series C preferred stock in a
private placement at a purchase price of $6.86 per share. In this private
placement, Credit Suisse First Boston Corporation purchased 145,854 shares,
FleetBoston Robertson Stephens Inc. purchased 72,926 shares, Chase Securities
Inc. purchased 72,926 shares and William Blair & Company, L.L.C. purchased
72,926 shares. These organizations purchased theses shares of Series C
preferred stock on the same terms as the other investors in the private
placement.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include the following:
. the information set forth in this prospectus and otherwise available to
the representatives;
. market conditions for initial public offerings;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for future earnings;
. the present state of our development and our current financial
condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing transaction or a
syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
66
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under these securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent; and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action Applicable to Ontario Purchasers
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not
be possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be
in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
67
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Onvia.com by Venture Law Group, A Professional Corporation, Kirkland,
Washington. An investment partnership affiliated with Venture Law Group owns an
aggregate of 563,954 shares of our common stock, Mr. Ericson, a director of
Onvia.com and a director of Venture Law Group, owns 207,958 shares of our
common stock, and other attorneys at Venture Law Group own an aggregate of
64,728 shares of our common stock. The underwriters have been represented by
Wilson Sonsini Goodrich & Rosati, Palo Alto, California.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for the period from March 25, 1997 (inception) through December 31, 1997, for
the years ended December 31, 1998 and 1999 included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing in this prospectus, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
WHERE TO FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
shares of common stock offered hereby. This prospectus does not contain all the
information set forth in the registration statement or in the exhibits and
schedules to the registration statement. For more information about us and the
common stock we are offering, you should review the registration statement and
the exhibits and schedules filed with the registration statement. Statements
contained in this prospectus regarding the contents of any contract or other
document to which reference is made are not necessarily complete, and in each
instance you should review the copy of such contract or other document filed as
an exhibit to the registration statement. A copy of the registration statement
may be inspected by anyone without charge at the Public Reference Section of
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. You may also obtain copies of all or any portion of the registration
statement from that office at prescribed rates. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the operation
of the public reference room. The SEC maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including us, that file electronically
with the SEC.
68
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Changes in Stockholders' (Deficit) Equity...... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
"Board of Directors and Stockholders of
Onvia.com, Inc.
Seattle, Washington
We have audited the accompanying consolidated balance sheets of Onvia.com,
Inc. and subsidiary (the Company) as of December 31, 1998 and 1999, and the
related consolidated statements of operations, changes in stockholders'
(deficit) equity, and cash flows for the period from March 25, 1997 (inception)
through December 31, 1997, for the years ended December 31, 1998, and 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1999, and the results of their operations and their cash flows for the
period from March 25, 1997 (inception) through December 31, 1997, for the years
ended December 31, 1998, and 1999, in conformity with generally accepted
accounting principles.
Seattle, Washington
February 2, 2000"
The accompanying consolidated financial statements reflect an increase in
the number of common shares authorized to 150,000,000, an increase in the
number of preferred shares authorized to 46,000,000, a change in the par value
of common stock to $.0001 and in the par value of the preferred stock to
$.0001, a two-for-one split of common and preferred stock, and a
reincorporation in the state of Delaware, which are to be effected prior to the
effective date of the Prospectus. The following opinion is in the form that
will be signed by Deloitte & Touche LLP upon consummation of the above events,
which are described in Notes 9 and 13 of the Notes to Consolidated Financial
Statements, and assuming that, from February 2, 2000 to the date of such event,
no other events have occurred that would affect the accompanying consolidated
financial statements and notes thereto.
/s/ Deloitte & Touche LLP
Seattle, Washington
February 2, 2000
F-2
<PAGE>
ONVIA.COM, INC.
Consolidated Balance Sheets
December 31, 1998 and 1999
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, December 31, Equity at
1998 1999 December 31, 1999
------------ ------------ -----------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents....... $ 44,659 $ 38,517,985
Accounts receivable............. 47,072 509,555
Inventory....................... 65,204 1,359,926
Prepaid expenses and other
current assets................. 2,212 1,064,097
Note receivable from related
party.......................... 350,000
--------- ------------
Total current assets.......... 159,147 41,801,563
Property and equipment, net....... 20,925 6,176,791
Other assets, net................. 2,300,478
--------- ------------
Total assets.................. $ 180,072 $ 50,278,832
========= ============
Liabilities and Stockholders' (Deficit) Equity
Current liabilities:
Accounts payable................ $ 219,852 $ 6,719,074
Accrued expenses................ 365,820 6,633,430
Unearned revenue................ 42,425 659,665
Convertible notes............... 344,407
Current portion of long-term
debt........................... 4,481,903
--------- ------------
Total current liabilities..... 972,504 18,494,072
Long-term debt.................... 5,171,417
--------- ------------
Total liabilities............. 972,504 23,665,489
--------- ------------
Commitments and contingencies
(Note 7)
Stockholders' (deficit) equity:
Convertible preferred stock;
$.0001 par value:
Series A; 24,000,000 shares
authorized; 20,219,496 shares
issued and outstanding;
($11,819,991 liquidation
preference).................. 12,740,551
Series B; 16,000,000 shares
authorized; 14,544,170 shares
issued and outstanding;
($25,000,000 liquidation
preference).................. 24,969,851
Series C; 6,000,000 shares
authorized; 3,379,402 shares
issued and outstanding;
($23,165,801 liquidation
preference).................. 36,522,042
Common stock; $.0001 par value:
150,000,000 shares authorized;
8,000,800 and 29,332,550 shares
issued and outstanding......... 800 2,933 $ 6,747
Additional paid in capital...... 9,270 24,904,116 99,132,746
Notes receivable from
stockholders................... (155,593) (155,593)
Unearned stock compensation..... (14,194,664) (14,194,664)
Accumulated deficit............. (802,502) (58,175,893) (58,175,893)
--------- ------------ ------------
Total stockholders' (deficit)
equity....................... (792,432) 26,613,343 $ 26,613,343
--------- ------------ ============
Total liabilities and
stockholders' (deficit)
equity......................... $ 180,072 $ 50,278,832
========= ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
ONVIA.COM, INC.
Consolidated Statements of Operations
Period from March 25, 1997 (inception) through December 31, 1997 and
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
March 25, 1997
(inception) to Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
-------------- ------------ ------------
<S> <C> <C> <C>
Revenue............................. $ 62,174 $1,037,271 $ 27,177,082
Cost of goods sold.................. 46,894 1,082,448 31,574,214
---------- ---------- ------------
Gross margin........................ 15,280 (45,177) (4,397,132)
Operating expenses:
Sales and marketing............... 41,321 206,436 16,285,970
Technology and development........ 12,707 191,968 7,443,881
General and administrative........ 91,624 224,941 4,235,091
Noncash stock-based compensation.. 10,462,762
---------- ---------- ------------
Total operating expenses........ 145,652 623,345 38,427,704
---------- ---------- ------------
Loss from operations................ (130,372) (668,522) (42,824,836)
Other income (expense):
Interest income................... 534,299
Interest expense.................. (3,608) (1,075,233)
---------- ---------- ------------
Net loss............................ (130,372) (672,130) (43,365,770)
Beneficial conversion feature on
convertible preferred stock........ (14,007,621)
---------- ---------- ------------
Net loss attributable to common
stockholders....................... $ (130,372) $ (672,130) $(57,373,391)
========== ========== ============
Basic and diluted net loss per
common share....................... $ (0.02) $ (0.08) $ (4.59)
========== ========== ============
Pro forma net loss per common share
(unaudited)........................ $ (1.72)
============
Basic and diluted weighted average
shares outstanding................. 8,000,800 8,000,800 12,507,500
========== ========== ============
Pro forma weighted average shares
outstanding (unaudited)............ 33,420,375
============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
ONVIA.COM, INC.
Consolidated Statements of Changes in Stockholders' (Deficit) Equity
Period from March 25, 1997 (inception) through December 31, 1997 and
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
Additional
Series A Series B Series C preferred Onvia.com, Inc. paid in
preferred stock preferred stock stock common stock capital
---------------------- ---------------------- --------------------- ------------------ -----------
Shares Amount Shares Amount Shares Amount Shares Amount Amount
---------- ----------- ---------- ----------- --------- ----------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, March
25, 1997
(inception)..... -- $ -- -- $ -- -- $ -- 8,000,000 $ 800 $ 9,200
Issuance of
common stock....
Net loss........
---------- ----------- ---------- ----------- --------- ----------- ---------- ------ -----------
BALANCE,
December 31,
1997............ 8,000,000 800 9,200
Exchange of
Onvia.com, Inc.
(Subsidiary)
common stock for
Onvia.com, Inc.
common stock.... 800 70
Net loss........
---------- ----------- ---------- ----------- --------- ----------- ---------- ------ -----------
BALANCE,
December 31,
1998............ 8,000,800 800 9,270
Cancellation of
inception
shares.......... (8,000,800) (800) 800
Issuance of
nonvested common
stock........... 24,104,360 2,410 2,015,159
Conversion of
notes payable
into Series A
preferred
stock........... 2,258,036 1,319,997
Issuance of
Series A
preferred stock,
net of offering
costs of
$232,580........ 17,961,460 10,267,411
Issuance of
Series B
preferred stock,
net of offering
costs of
$30,149......... 14,544,170 24,969,851
Issuance of
Series C
preferred stock,
net of offering
costs of
$651,380........ 3,379,402 22,514,421
Beneficial
conversion
feature related
to convertible
preferred
stock........... 14,007,621
Payment received
on subscription
receivable......
Issuance of
common stock
warrants........ 241,853
Issuance of
Series A
preferred
warrants........ 1,153,143
Exercise of
stock options
and warrants.... 5,428,190 543 725,732
Repurchase of
nonvested common
stock and
acceleration of
stock-based
compensation.... (200,000) (20) 905,020
Unearned
compensation
relating to
issuance of
stock options... 14,933,826
Change in
unearned
compensation for
non-employees... 6,072,456
Amortization of
unearned
compensation on
nonvested common
stock...........
Amortization of
unearned
compensation on
stock options...
Acceleration of
nonvested common
stock...........
Acceleration on
stock options to
consultants.....
Net loss........
---------- ----------- ---------- ----------- --------- ----------- ---------- ------ -----------
BALANCE,
December 31,
1999............ 20,219,496 $12,740,551 14,544,170 $24,969,851 3,379,402 $36,522,042 29,332,550 $2,933 $24,904,116
========== =========== ========== =========== ========= =========== ========== ====== ===========
<CAPTION>
Onvia.com,
Inc.
(Subsidiary) Notes
common stock receivable
-------------- from Unearned Accumulated
Shares Amount stockholders compensation deficit Total
------ ------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March
25, 1997
(inception)..... -- $ -- $ -- $ -- $ -- $ 10,000
Issuance of
common stock.... 800 70 70
Net loss........ (130,372) (130,372)
------ ------- ------------ ------------- ------------- ------------
BALANCE,
December 31,
1997............ 800 70 (130,372) (120,302)
Exchange of
Onvia.com, Inc.
(Subsidiary)
common stock for
Onvia.com, Inc.
common stock.... (800) (70)
Net loss........ (672,130) (672,130)
------ ------- ------------ ------------- ------------- ------------
BALANCE,
December 31,
1998............ (802,502) (792,432)
Cancellation of
inception
shares..........
Issuance of
nonvested common
stock........... (1,646,144) 371,425
Conversion of
notes payable
into Series A
preferred
stock........... 1,319,997
Issuance of
Series A
preferred stock,
net of offering
costs of
$232,580........ (15,593) 10,251,818
Issuance of
Series B
preferred stock,
net of offering
costs of
$30,149......... 24,969,851
Issuance of
Series C
preferred stock,
net of offering
costs of
$651,380........ 22,514,421
Beneficial
conversion
feature related
to convertible
preferred
stock........... (14,007,621)
Payment received
on subscription
receivable...... 10,000 10,000
Issuance of
common stock
warrants........ 241,853
Issuance of
Series A
preferred
warrants........ 1,153,143
Exercise of
stock options
and warrants.... (150,000) 576,275
Repurchase of
nonvested common
stock and
acceleration of
stock-based
compensation.... 905,000
Unearned
compensation
relating to
issuance of
stock options... (14,933,826)
Change in
unearned
compensation for
non-employees... (6,072,456)
Amortization of
unearned
compensation on
nonvested common
stock........... 654,689 654,689
Amortization of
unearned
compensation on
stock options... 2,916,060 2,916,060
Acceleration of
nonvested common
stock........... 1,503,136 1,503,136
Acceleration on
stock options to
consultants..... 3,383,877 3,383,877
Net loss........ (43,365,770) (43,365,770)
------ ------- ------------ ------------- ------------- ------------
BALANCE,
December 31,
1999............ -- $ -- $(155,593) $(14,194,664) $(58,175,893) $26,613,343
====== ======= ============ ============= ============= ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
ONVIA.COM, INC.
Consolidated Statements of Cash Flows
Period from March 25, 1997 (inception) through December 31, 1997 and
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
March 25, 1997
(inception) to Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
-------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................... $(130,372) $(672,130) $(43,365,770)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization...... 10,000 2,158 1,154,388
Loss on disposal of assets......... 448,658
Noncash stock-based compensation... 10,462,762
Amortization of debt discount...... 271,419
Noncash interest expense related to
issuance of common stock
warrants.......................... 241,853
Change in certain assets and
liabilities:
Accounts receivable.............. (48,268) (456,875)
Inventory........................ (2,873) (64,116) (1,289,496)
Prepaid expenses and other
current assets.................. (3,631) 1,177 (1,008,782)
Other assets..................... (2,299,748)
Accounts payable................. 9,130 216,784 6,471,237
Accrued expenses................. 121,871 246,798 5,360,331
Unearned revenue................. 2,148 41,644 613,557
--------- --------- ------------
Net cash provided (used) by
operating activities.............. 6,273 (275,953) (23,396,466)
Cash flows from investing activities:
Additions to property and
equipment......................... (23,083) (6,495,931)
Cash flows from financing activities:
Proceeds from convertible debt..... 344,407 975,590
Proceeds from issuance of long-term
debt.............................. 9,939,177
Repayments on long-term debt....... (1,062,747)
Proceeds from issuance of nonvested
common stock...................... 70 162,828
Proceeds from exercise of stock
options and warrants.............. 576,275
Proceeds from issuance of Series A
preferred stock, net.............. 10,261,818
Proceeds from issuance of Series B
preferred stock, net.............. 24,969,851
Proceeds from issuance of Series C
preferred stock, net.............. 22,514,421
--------- --------- ------------
Net cash provided by financing
activities........................ 70 344,407 68,337,213
Effect of exchange rate changes on
cash................................ (736) (6,319) 28,510
--------- --------- ------------
Net increase in cash and cash
equivalents......................... 5,607 39,052 38,473,326
Cash and cash equivalents, beginning
of year............................. 5,607 44,659
--------- --------- ------------
Cash and cash equivalents, end of
year................................ $ 5,607 $ 44,659 $ 38,517,985
========= ========= ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
Note 1: Summary of Significant Accounting Policies
Description of business
Onvia.com, Inc., formerly known as MegaDepot.com, Inc., (the "Company") was
incorporated on March 25, 1997 as MegaDepot, Inc. in the State of Washington.
M-Depot Internet Superstore, Inc., a company owned by the majority stockholder
of the Company, was incorporated in British Columbia, Canada on June 6, 1997.
In June 1998, the Company moved its headquarters from Vancouver, B.C. to
Seattle, Washington. On December 28, 1998, MegaDepot, Inc. exchanged shares of
its common stock for all of the outstanding common stock of M-Depot Internet
Superstore, Inc. (the "Subsidiary"). In February 1999, the Company changed its
name from MegaDepot, Inc. to MegaDepot.com, Inc., and in May 1999, changed its
name from MegaDepot.com, Inc. to Onvia.com, Inc. In December 1999, the
Subsidiary changed its name to Onvia.com, Inc.
The Company is an online supplier of goods and services to the small
business market. Through its web site customers can order a wide variety of
products commonly used by small businesses, such as computer hardware and
software, office supplies, office machines, office furniture and phone systems.
In addition, customers can order a variety of services commonly used by small
businesses, such as long distance phone service, cellular phone service, credit
card processing and payroll service. The Company also provides an online
business exchange service which connects small business buyers and sellers.
Basis of consolidation
The financial statements include the accounts of the Company and its wholly
owned subsidiary. As the companies were under common control from inception of
the Company, the financial statements are presented on a consolidated or
combined basis for all periods presented. All significant intercompany accounts
and transactions have been eliminated.
Fair value of financial instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, prepaid expenses, other assets, accounts payable, accrued
liabilities, convertible notes and long-term debt. Except for long-term debt
and convertible notes, the carrying amounts of financial instruments
approximate fair value due to their short maturities. The fair values of long-
term debt and convertible notes are not materially different from their
carrying amounts, based on interest rates available to the Company for similar
types of arrangements.
Significant vendors
Approximately 78% of inventory purchases were from one supplier for the year
ended December 31, 1999. Three suppliers comprised 41%, 29% and 25%,
respectively, of total inventory purchases for the year ended December 31,
1998. Two suppliers comprised 69% and 31%, respectively, of total inventory
purchases for the period from March 25, 1997 (inception) to December 31, 1997.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-7
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market. Inventory represents
product shipped by the Company's suppliers, which has not been received by
customers. The Company does not stock its own inventory or maintain warehouse
locations, however, the Company does take ownership at the time of shipment
from the supplier until the product is received by the customer. In addition,
the Company assumes economic risk related to returned or damaged products.
Property and equipment
Equipment is stated at cost. Depreciation expense is recorded using the
straight-line method over estimated useful lives ranging from three to five
years. Leasehold improvements are depreciated over the lesser of the useful
lives or term of the lease.
Revenue recognition
Revenue from product sales is recognized upon receipt of product by the
customer. The Company acts as principal in those transactions, as orders are
initiated directly on the Company's web site, the Company takes title to the
goods during shipment, and has economic risk related to collection, customer
service and returns. Unearned revenue consists of payments received from
customers for product in transit to the customer. Revenue from exchange
services is recognized when the transaction occurs, ratably over the duration
of the placement, or over the term of the agreement, as applicable, and is
insignificant for all periods presented.
Income taxes
The Company accounts for income taxes using the asset and liability method
under which deferred tax assets, including the tax benefit from net operating
loss carryforwards and liabilities are determined based on temporary
differences between the book and tax bases of assets and liabilities. A
valuation allowance has been established for the full amount of the deferred
tax assets.
Valuation of long-lived assets
The Company periodically evaluates the carrying value of its long-lived
assets, including, but not limited to, property and equipment and other assets.
The carrying value of a long-lived asset is considered impaired when the
undiscounted net cash flow from such asset is estimated to be less than its
carrying value. Management does not believe that there were any long-lived
assets, which were subject to impairment at December 31, 1999.
Detachable stock purchase warrants
Proceeds from debt issued with detachable stock purchase warrants are
allocated between the debt and the warrants based on their relative fair
values. The value ascribed to the warrants is recorded as a debt discount and
amortized to interest expense over the term of the related debt using the
effective interest method.
F-8
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
Stock-based compensation
The Company's stock option plan is subject to the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Under the provisions of this standard, employee and
director stock-based compensation expense is measured using either the
intrinsic-value method as prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), or the fair value
method described in SFAS 123. Companies choosing the intrinsic-value method are
required to disclose the pro forma impact of the fair value method on net
income. The Company has elected to account for its employee and director stock-
based awards under the provisions of APB 25. Under APB 25, compensation cost
for stock options is measured as the excess, if any, of the fair value of the
underlying common stock on the date of grant over the exercise price of the
stock option. The Company is required to implement the provisions of SFAS 123
for stock-based awards to those other than employees and directors. Stock-based
compensation expense for all equity instruments is recognized on an accelerated
basis based on the related vesting periods.
Advertising costs and co-branding fees
The Company expenses advertising costs as incurred. Advertising expense,
excluding amounts for co-branding agreements, for the years ended December 31,
1999 and 1998 was $9,932,761 and $22,560, respectively. There was no
advertising expense for the period from March 25, 1997 (inception) to
December 31, 1997. Fees on co-branding agreements are recorded as services are
performed (see Note 7).
Comprehensive income
The Company has adopted the provisions of Statements of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130") effective
January 1, 1998. SFAS No. 130 requires the presentation of comprehensive income
and its components. Comprehensive income is the change in equity from
transactions and other events and circumstances other than those resulting from
investments by owners and distributions to owners. For the years ended December
31, 1999 and 1998, the components of other comprehensive income were
insignificant.
Foreign currency adjustment
The functional currency of the Subsidiary is the Canadian dollar. Realized
foreign currency transaction gains and losses are primarily related to the
purchase of products from U.S. suppliers and are included in cost of sales.
Assets and liabilities of the Subsidiary have been translated to U.S. dollars
at year-end exchange rates. Revenues and expenses have been translated at
average monthly exchange rates.
Commitments and contingencies
The Company is subject to various legal proceedings that arise in the
ordinary course of business. While the outcome of these proceedings cannot be
predicted with certainty, the Company provides for any anticipated losses at
the time an estimate can be made. The Company and its legal counsel believe the
disposition of these matters will not have a material adverse effect on the
financial position of the Company.
Net loss per share
Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the period, including
contingently issuable shares for which all necessary conditions have been
satisfied. Diluted net loss per share is computed by dividing net loss by the
weighted average
F-9
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
number of common shares and dilutive potential common shares outstanding during
the period. For the years ended December 31, 1999 and 1998, 52,355,046 and
589,152 shares respectively, have been excluded from the computation of diluted
net loss per share as their effects would be antidilutive. There were no
dilutive common stock equivalents for the period from March 25, 1997
(inception) through December 31, 1997.
Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's convertible preferred stock into shares of the
Company's common stock effective upon the closing of the Company's initial
public offering as if such conversion occurred on the date the shares were
originally issued (see Note 9).
Unaudited pro forma stockholders' equity
The Company's Board of Directors has authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed initial public offering (the "IPO").
If the IPO is consummated under the terms presently anticipated, all of the
outstanding shares of convertible preferred stock as of December 31, 1999 will
be converted into 38,143,068 shares of common stock upon the closing of the
IPO. The effect of the conversion of the preferred stock outstanding at
December 31, 1999 has been reflected in the unaudited pro forma balance sheet.
Internally developed software
Effective for fiscal years beginning after December 15, 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." SOP 98-1 requires all costs related to
the development of internal use software other than those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the estimated useful life of the software. The Company adopted SOP 98-1 on
January 1, 1999 and capitalized $828,853 in internally developed software costs
during the year ended December 31, 1999. Capitalized software costs are
amortized on a straight-line basis over a useful life ranging from one to three
years. Amortization related to the capitalized software was $135,738 for the
year ended December 31, 1999.
Start-up costs
In April 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"),
"Reporting on the Costs of Start-Up Activities." This statement requires
companies to expense the costs of start-up activities and organization costs as
incurred. The Company adopted SOP 98-5 on January 1, 1999, and there was no
material impact on the accompanying financial statements.
New accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting
and reporting standards for derivative instruments and hedging activities.
SFAS No. 133, which will be effective for the Company for the fiscal year and
quarters beginning after June 15, 2000, requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
F-10
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
financial position and measure those instruments at fair value. The Company
does not expect the effect of adopting the provisions of SFAS No. 133 to have a
significant impact on the Company's financial position, results of operations
and cash flows.
Reclassifications
Certain reclassifications of balances have been made for consistent
presentation.
Note 2: Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Computer equipment................................. $ 17,921 $3,635,813
Software........................................... 558 2,512,037
Furniture and fixtures............................. 4,604 797,013
Leasehold improvements............................. 373,961
-------- ----------
23,083 7,318,824
Less: Accumulated depreciation..................... (2,158) (1,142,033)
-------- ----------
$ 20,925 $6,176,791
======== ==========
</TABLE>
Note 3: Convertible Notes
During 1998, the Company issued convertible promissory notes in the amount
of $344,407, which accrued interest at 8% and matured one year from issuance.
In connection with these notes, the Company issued warrants to the noteholders
to purchase up to 833,352 shares of common stock at $0.0025 per share upon the
closing of the Company's Series A preferred financing on February 25, 1999.
Interest expense of $241,853 was recorded upon issuance of the warrants.
In February 1999, the Company issued additional convertible promissory notes
in the amount of $975,590 to new and existing noteholders. The notes bore
interest at 6% and matured one year from issuance.
On February 25, 1999, the outstanding principal on the convertible notes of
$1,319,997 was converted into 2,258,036 shares of the Company's Series A
preferred stock in conjunction with the Series A preferred financing described
in Note 9.
Note 4: Long-term Debt
In August 1999, the Company obtained financing for the purchase of software
and post-contract software support in the amount of $1,658,614. The debt bears
interest at 13.8% per annum and matures in September 2000. Payments of
$110,278, including principal and interest, are to be made monthly through
September 2000.
In August 1999, the Company also entered into a subordinated debt
arrangement with two lenders to provide financing in the amount of $7,000,000.
The obligation bears interest at a coupon interest rate of 13.2% with an
effective rate of 24.2% per annum and matures in February 2002. Monthly
principal payments of $259,259 are scheduled beginning December 1999 through
February 2002. The debt is collateralized by all
F-11
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
assets of the Company. In conjunction with the debt financing, the Company
issued warrants to purchase 1,165,310 shares of Series A preferred stock at
$0.90 per share. The exercise price on these warrants may be reduced based upon
certain future events. The debt and warrants were recorded at their fair values
of $5,905,770 and $1,094,230, respectively.
In June 1999, the Company obtained an equipment loan financing in the
aggregate amount of up to $3,000,000 for the acquisition of capital equipment.
The Company received proceeds of $2,163,888 from its initial drawdown under
this line. The loan bears interest at an average rate of 8.5% with an effective
rate of 19.6% per annum and matures on August 1, 2002. The principal amount is
payable in 36 monthly payments; the first 35 payments of $68,514 and the last
payment of $393,097, which is due in August 2002. In December 1999, the Company
obtained an additional $775,289 on the equipment line which bears coupon
interest at an average rate of 8.91% and an effective interest rate of 18.1%
per annum. The loan matures in December 2002. Principal and interest are
payable in 36 monthly payments; the first 35 payments of $24,667 and the last
payment of $140,960. The loans are secured by the equipment of the Company. In
conjunction with the original loan, the Company issued warrants to purchase
97,328 shares of Series A preferred stock at $1.24 per share. The original debt
and warrants were recorded at their fair values of $2,106,045 and $57,843,
respectively. As of December 31, 1999, the Company has $274,300 available to
borrow on the equipment financing agreement.
Debt consists of the following at December 31, 1999:
<TABLE>
<S> <C>
Note payable.................................................... $ 920,625
Subordinated debt obligation.................................... 6,888,887
Equipment term loan............................................. 2,725,700
-----------
10,535,212
Less: Unamortized debt discount................................. (881,892)
-----------
$ 9,653,320
===========
</TABLE>
Maturities of long-term debt at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
2000............................................................ $ 5,094,152
2001............................................................ 4,109,690
2002............................................................ 1,331,370
-----------
10,535,212
Less: Unamortized debt discount................................. (881,892)
-----------
9,653,320
Less: Current portion, net of discount.......................... (4,481,903)
-----------
$ 5,171,417
===========
</TABLE>
Note 5: Income Taxes
At December 31, 1999 and 1998, the Company had net operating loss
carryforwards of $33,372,573 and $552,154, respectively, which may be used to
offset future taxable income. These carryforwards expire at various dates
beginning in 2017 through 2019. Should certain changes in the Company's
ownership occur, there could be a limitation on the utilization of its net
operating losses.
F-12
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
The effective rate differs from the federal statutory rate as follows:
<TABLE>
<CAPTION>
Period from
March 25, 1997
through Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
-------------- ------------ ------------
<S> <C> <C> <C>
Tax benefit at statutory rate..... (34.0)% (34.0)% (34.0)%
Stock-based compensation.......... 29.4 4.4 8.1
Other............................. 0.6 0.2 0.1
Change in valuation allowance..... 4.0 29.4 25.8
----- ----- -----
0.0 % 0.0 % 0.0 %
===== ===== =====
</TABLE>
The Company's net deferred tax assets consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Net operating loss carryforwards................ $ 187,732 $ 11,346,675
Prepaid expenses and other assets currently
deductible..................................... (488,777)
Accrued expenses not currently deductible....... 484 559,994
Depreciation different for tax purposes......... 14,920 (46,939)
--------- ------------
Net deferred tax assets......................... 203,136 11,370,953
Less: Valuation allowance....................... (203,136) (11,370,953)
--------- ------------
Net deferred tax asset.......................... $ -- $ --
========= ============
</TABLE>
The Company has recorded a 100% valuation allowance equal to the net
deferred tax asset balance based upon management's determination that the
recognition criteria for realization have not been met.
Note 6: Employee Retirement Plan
In December 1999, the Board of Directors approved the Onvia.com Savings and
Retirement Plan (the "Retirement Plan") which will cover all eligible
employees. The Retirement Plan, which will be effective on March 1, 2000, is a
qualified salary reduction plan in which all eligible employees may elect to
have a percentage of their pre-tax compensation contributed to the Retirement
Plan, subject to certain guidelines issued by the Internal Revenue Service.
Contributions by the Company are at the discretion of the Board of Directors.
Note 7: Commitments and Contingencies
Operating leases: The Company is committed under non-cancellable operating
leases for its current and former office space. During 1999, the Company
subleased certain office space for amounts equal to the rental obligation,
which expire in 2001. Future minimum sublease rental receipts are approximately
$65,000.
In December 1999, the Company signed a lease agreement for new corporate
office facilities. Monthly lease payments range from $61,625 to $173,188
through the expiration of the agreement in February 2008. Total lease
obligations under this agreement aggregate to $14,598,750 over the eight year
lease period.
F-13
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
Total rent expense was $294,307 and $20,330 for the years ended December 31,
1999 and 1998, respectively. Future minimum lease payments required on non-
cancelable operating leases are approximately as follows:
<TABLE>
<CAPTION>
For the years ending December 31,
---------------------------------
<S> <C>
2000........................................................ $ 1,970,928
2001........................................................ 2,263,491
2002........................................................ 2,302,894
2003........................................................ 2,479,269
2004........................................................ 2,519,475
Thereafter.................................................... 5,935,124
-----------
$17,471,181
===========
</TABLE>
Lease deposit: The Company's leasing arrangement for its existing corporate
facilities requires a letter of credit of $650,000 to be issued to the
landlord. This letter of credit is secured by a deposit of $650,000, which is
recorded in other assets. The letter of credit expires in May 2000; however,
the letter of credit is required to be renewed for consecutive one-year periods
for the term of the leasing arrangement.
The Company's leasing arrangement for its new corporate facilities requires
a letter of credit of $2,000,000 to be issued to the landlord through February
2008. This letter of credit was obtained in January 2000, is secured by a
deposit of $2,000,000 and expires in January 2001. This letter of credit is
automatically renewed for consecutive one-year periods through January 2003.
Upon the earlier of six months after the effective date of the lease or the
date the tenant delivers its notice to commence certain tenant improvements,
the $2,000,000 will be increased to $2,500,000.
Advertising agreement: In 1998, the Subsidiary entered into an agreement to
pay 4% of its revenues to a third party in exchange for advertising services
performed in Canadian markets. The agreement is cancellable by either party
with 30 days notice. Advertising expenses of $259,500 and $22,560 were incurred
under this agreement for the years ended December 31, 1999 and 1998,
respectively.
In December 1999, the Company entered into an agreement with a third party
for certain clickthrough and other advertising services. The term of the
agreement is for one year starting January 1, 2000 and is cancellable by either
party after six months with 30 days notice. Minimum guaranteed payments are
$200,000 per month for the first six months and $250,000 per month thereafter.
Co-branding agreements: During 1999, the Company entered into approximately
20 co-branding agreements. These agreements require monthly license fees, and
certain agreements require payments based on sales generated on the co-branded
site. These agreements typically lapse over a period of three to twelve months
or upon 30 days notice by either party to the agreement. The monthly license
fees are expensed as incurred and the related co-branding royalties are
expensed in the month the associated sales are generated. The Company recorded
$1,970,359 in co-branding fees for the year ended December 31, 1999.
Note 8: Stock Options
In February 1999, the Company adopted a combined stock option plan (the
"1999 Plan") which provides for the issuance of incentive and nonstatutory
common stock options to employees, directors and consultants of the Company.
The Board of Directors reserved 10,400,000 shares of common stock to be issued
in conjunction
F-14
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
with the 1999 Plan. In conjunction with the Series B preferred financing
discussed in Note 9, the Board of Directors reserved an additional 2,908,830
shares of common stock for issuance under the 1999 Plan. In December 1999, the
Board of Directors amended the 1999 Plan to increase the number of shares
reserved for issuance to a total of 18,000,000 shares. Pursuant to common stock
purchase agreements described in Note 9, 1,146,224 shares were issued from the
1999 Plan option pool. There were 5,678,412 shares available for issuance under
the 1999 Plan as of December 31, 1999.
Stock options are granted at exercise prices and vesting schedules
determined by the Board of Directors. All options granted to employees have
been approved by the Board of Directors, generally with four year vesting
schedules. Options granted to consultants of the Company have been approved by
the Board of Directors with varying vesting schedules of up to four years.
Stock options expire ten years after the date of grant.
The following table summarizes stock option activity for the year ended
December 31, 1999:
<TABLE>
<CAPTION>
Weighted-
average
Options exercise
outstanding price
----------- ---------
<S> <C> <C>
Options granted..................................... 11,466,032 $0.89
Options exercised................................... (5,299,982) $0.14
Options forfeited................................... (290,668) $0.35
----------
Outstanding at December 31, 1999.................... 5,875,382 $1.60
==========
Options exercisable at December 31, 1999............ 271,874 $0.09
==========
</TABLE>
The weighted average fair value of options granted during 1999 was $1.52 per
share. During the year ended December 31, 1999, the Company recorded
compensation expense of $999,061 related to the issuance of stock options for
services provided by consultants, exclusive of the compensation expense from
the acceleration of vesting described below, and $1,928,208 on stock options
issued to employees. The Company did not issue any stock options during the
year ended December 31, 1998 or the period from March 25, 1997 (inception) to
December 31, 1997.
In December 1999, the Board of Directors approved the acceleration of
vesting on all outstanding unvested stock options issued to non-employees. The
stock options had vesting periods ranging from one to four years from the date
of issuance. The Company recognized $3,383,877 in compensation expense in
conjunction with this transaction. Further, options to purchase 2,396,554
shares of common stock issued to certain employees were converted to common
stock which are subject to a repurchase option at a purchase price equal to the
original exercise price of the underlying options upon termination of
employment. Individuals paid $324,569 in cash to exercise their options. The
repurchase options expire over the remaining vesting period of the original
stock option grants. No compensation expense was recognized in conjunction with
the conversion.
F-15
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period
from March 25, 1997 (inception) through December 31, 1997
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Options outstanding
--------------------------------------------------------------------------------
Weighted-
average
Range of remaining
exercise Number contractual Options
prices of options life exercisable
-------- ---------- ----------- -----------
<S> <C> <C> <C>
$0.06 726,668 8.84 160,000
$0.13 1,850,382 9.00 108,542
$0.25 63,332 9.45 3,332
$0.38 809,000 9.59
$0.50 212,000 9.70
$1.00 422,000 9.80
$1.25 567,000 9.86
$6.17 1,225,000 9.96
--------- -------
5,875,382 271,874
========= =======
</TABLE>
In accordance with SFAS 123, the fair value of each employee option grant is
estimated on the date of grant using the minimum value option-pricing model
assuming the following weighted average assumptions: average risk free interest
rate of 5.50%; volatility of 0%; dividends of $0; and an expected life of four
years. Had the Company determined compensation expense based on the fair value
of the option at the grant date for all stock options issued to employees, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
Year ended
December 31,
1999
------------
<S> <C>
Net loss:
As reported................................................ $(57,373,391)
Pro forma.................................................. $(57,626,582)
Net loss per share:
As reported-basic and diluted.............................. $ (4.59)
Pro forma-basic and diluted................................ $ (4.61)
</TABLE>
In December 1999, the Board of Directors approved the 2000 Directors' Stock
Option Plan (the "Directors' Plan"). The Directors' Plan shall commence on the
effective date of the Company's initial public offering. The Directors' Plan
authorizes the grant of 600,000 shares of non-qualified stock options to non-
employee directors. Initially, 40,000 shares will be granted to all non-
employee directors upon the closing of an initial public offering and,
thereafter, to each eligible non-employee director on the date such person is
first elected or appointed as a non-employee director. Annually, each non-
employee director will be granted an additional option to purchase 10,000
shares of common stock, provided such person has been a non-employee director
of the Company for at least the prior six months. The initial option grant
under the Directors' Plan is exercisable 25% each year for four years on the
anniversary of the date of grant. The annual grants are exercisable in full on
the day before the first anniversary of the date of grant. The options have a
term of ten years and terminate when the non-employee director no longer
continues to serve as a director of the Company.
F-16
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period
from March 25, 1997 (inception) through December 31, 1997
In December 1999, the Board of Directors approved the 2000 Employee Stock
Purchase Plan (the "ESPP"). The ESPP shall commence on the effective date of
the Company's initial public offering. The ESPP allows all full-time employees
to participate by purchasing the Company's common stock at a discount allowed
under guidelines issued by the Internal Revenue Service. A total of 600,000
shares of the Company's common stock has been reserved for issuance under the
ESPP. Each year, the number of shares reserved for issuance under the purchase
plan will automatically be increased by 1% of the total number of shares of
common stock then outstanding or, if less, by 600,000 shares or such lesser
number of shares as the Board of Directors determines.
Note 9: Stockholders' (Deficit) Equity
Authorized shares
On September 29, 1999, the Articles of Incorporation were amended to
increase the number of authorized shares of common stock from 100,000,000 to
124,000,000 and increase the number of authorized shares of preferred stock
from 24,000,000 to 40,000,000, of which 24,000,000 are designated as Series A
preferred stock and 16,000,000 are designated as Series B preferred stock. On
December 20, 1999, the Articles of Incorporation were amended to increase the
number of authorized shares of common stock to 150,000,000 and increase the
number of authorized shares of preferred stock to 46,000,000.
Common stock splits
On February 16, 1999, the Board of Directors amended the Company's Articles
of Incorporation and authorized a two-for-one common stock split. The number of
authorized shares of common stock was increased from 20,000,000 shares to
40,000,000 shares. On July 29, 1999, the Board of Directors approved an
additional two-for-one common and preferred stock split. The stock splits were
effected in the form of a stock dividend. These stock splits have been
presented retroactively in the accompanying financial statements.
Convertible preferred stock
On February 25, 1999, the Company issued 17,961,460 shares of Series A
convertible voting preferred stock at $.58 per share resulting in proceeds of
$10,251,818, net of issuance costs of $232,580 and stock subscription
receivables of $15,593. The Company received a $10,000 payment on this
receivable in October 1999. A consulting firm was issued 119,744 shares as a
part of this financing round in consideration for past services provided to the
Company. Expense of $70,050 was recorded in conjunction with this transaction.
The $344,407 of convertible promissory notes outstanding as of December 31,
1998 were converted into 589,152 shares of Series A preferred stock as part of
this transaction. In addition, convertible promissory notes for $975,590 issued
in February 1999 were converted into 1,668,884 shares of Series A preferred
stock.
On September 30, 1999, the Company issued 14,544,170 shares of its Series B
preferred stock at $1.72 per share resulting in proceeds of $24,969,851, net of
issuance costs of $30,149.
On December 20, 1999, the company issued 3,379,402 shares of Series C
preferred stock at $6.86 per share resulting in proceeds of $22,514,421, net of
issuance costs of $651,380. The Company recorded, immediately upon issuance, a
preferred stock dividend of $14,007,621 representing the value of the
beneficial conversion feature on the issuance of Series C preferred stock in
December 1999. The beneficial conversion
F-17
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period
from March 25, 1997 (inception) through December 31, 1997
feature was calculated at the issuance date of the Series C preferred stock
based on the difference between the conversion price of $6.86 per share and the
estimated fair value of the common stock at that date.
Each share of Series A, Series B and Series C preferred stock is convertible
on a one for one basis to common stock at the option of the holder or
automatically upon registration of the Company's common stock pursuant to a
public offering under the Securities Act of 1933 ("an Offering"). The Series A
and Series B preferred stock would be converted upon an Offering at a price of
not less than $3.45 per share with aggregate proceeds of not less than
$30,000,000, or by the written consent of the holders of seventy-five percent
of the outstanding shares of Series B preferred stock. The Series C preferred
stock would be converted upon an Offering at a price of not less than $10.29
per share with aggregate proceeds of not less than $30,000,000, or upon any
transaction or series of related transactions in which there is more than a
fifty percent change in control. The conversion price is subject to adjustment
in certain instances including stock splits and dividends, reverse stock splits
and issuances of additional capital stock below the conversion price then in
effect. In the event of the latter, the conversion price in effect is decreased
by a formula, which reduces the dilutive effect to the preferred stockholders.
The holder of each share of preferred stock has the right to one vote for
each share of common stock into which such preferred stock can be converted.
Preferred stockholders have the same voting rights and powers as common
stockholders. Holders of the Company's preferred stock and warrants have no
registration rights.
Dividends are based on a rate of $0.05, $0.16 and $0.62 per share per annum
on each outstanding share of Series A, Series B and Series C preferred stock,
respectively, or, if greater, an amount equal to any dividend paid on any other
outstanding shares of the Company. Dividends are not cumulative and are payable
when and if declared by the Board of Directors.
In the event of a liquidation of the Company, the holders of Series C
preferred stock will receive a liquidation preference of up to $6.86 per share
over the holders of Series A, Series B and common stock. Upon satisfaction of
Series C preferences, distributions will be made to Series B preferred
stockholders in an amount up to $1.74 per share. Upon satisfaction of Series B
preferences, distributions will be made to Series A preferred stockholders in
an amount up to $0.58 per share. Upon completion of preference distributions to
Series A, Series B and Series C preferred stockholders, any remaining amounts
will be distributed among the common stockholders on a pro rata basis.
Dividend Policy
The Company has never declared or paid dividends on its capital stock. The
Company's existing borrowing agreements prohibit the payment of dividends.
Issuance and cancellation of common stock
On March 25, 1997, the Company issued 8,000,000 shares of common stock to
the founder in exchange for certain assets with a fair value of $10,000.
On January 18, 1999, the Company cancelled all 8,000,800 outstanding shares
of the Company's common stock, pursuant to the issuance of 22,958,136 shares of
nonvested common stock to employees and other outside parties.
F-18
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period from
March 25, 1997 (inception) through December 31, 1997
Nonvested common stock
Prior to December 31, 1998 the Company entered into agreements with certain
employees and other outside parties to perform services, which would be settled
in cash or equity securities, at the Company's discretion. The Company recorded
a liability for the cost of these agreements as of December 31, 1998.
In January 1999, the Company issued 22,958,136 shares of nonvested common
stock to employees and other outside parties for services performed. These
shares are subject to a repurchase option, which allows the Company the right
to repurchase the shares at the original purchase price upon termination of
employment. The repurchase option on the nonvested common stock expires ratably
over four years from date of hire or commencement of services on a monthly
basis. The expiration of the repurchase option may accelerate upon certain
change of control transactions. Noncash stock-based compensation expense of
$458,475, $86,084 and $122,673 was recognized for the issuance of these shares
during the years ended December 31, 1999 and 1998 and the period from March 25,
1997 (inception) through December 31, 1997, respectively.
In April 1999, the Company issued 1,026,224 shares of nonvested common stock
under the 1999 Plan to the chairman of the Board of Directors in exchange for
$12,828. The issued shares had a fair value of $0.40 per share as of the grant
date. These shares are subject to a repurchase option which allows the Company
the right to repurchase the shares at the original purchase price upon
termination of employment or consulting services provided. The repurchase
option expires over four years with a 25% cliff after the first year and
ratably thereafter on a monthly basis, and may accelerate upon certain change
of control transactions. Compensation expense in the amount of $196,213 was
recognized for these shares for the year ended December 31, 1999.
In October 1999, the Company exercised its option to repurchase 200,000
shares of nonvested common stock from a former employee and removed any
remaining restrictions on the 200,000 shares still held by the individual. In
conjunction with this transaction, the Company recognized $905,000 of
compensation expense.
In December 1999, the Company issued 120,000 shares of nonvested common
stock under the 1999 Plan to a member of the Board of Directors in exchange for
$150,000. The shares had a fair value of $11.00 per share as of the grant date.
These shares are subject to a repurchase option which allows the Company the
right to repurchase the shares at the original purchase price upon termination
of service as a member of the Board of Directors. The repurchase option expires
over four years with a 25% cliff after the first year and ratably thereafter on
a monthly basis, and may accelerate upon certain change of control
transactions. Unearned stock-based compensation in the amount of $1,170,000 was
recorded at the date of issue.
In December 1999, the Company waived its repurchase option on the nonvested
common shares issued to non-employees. The Company recognized an additional
$1,503,136 in compensation expense in connection with this transaction.
Warrants to purchase Series A preferred stock
During 1999, the Company issued warrants to purchase up to 1,165,310 shares
of its Series A preferred stock at $0.90 per share in conjunction with its
subordinated debt financing. These warrants are exercisable immediately upon
grant and expire through the later of ten years after date of grant or five
years after the closing of an Offering. The exercise price of the warrants is
subject to adjustment upon the occurrence of certain corporate events or the
Company meeting specified operating criteria. The Series A preferred stock
purchase warrants automatically convert into common stock purchase warrants
upon the effectiveness of an Offering.
F-19
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period
from March 25, 1997 (inception) through December 31, 1997
The Company also issued warrants to purchase up to 97,328 shares of its
Series A preferred stock at $1.24 per share in conjunction with its equipment
loan financing. These warrants are exercisable immediately upon grant and
expire through the later of nine years after date of grant or four years after
the closing of an Offering. The warrants automatically convert into common
stock purchase warrants upon the effectiveness of an Offering.
Warrants to purchase common stock
In February 1999, the Company issued warrants to purchase up to 833,352
shares of its common stock in conjunction with its convertible debt financing
in 1998. The warrants are exercisable at $0.0025 per share and vest immediately
upon issuance. The warrants expire on the earliest of five years from the date
of issuance; upon a change of control, as defined; or upon the closing of an
initial public offering. In 1999, warrant holders exercised their warrants to
purchase 128,208 shares of common stock.
Note 10: Related Party Transactions
The Company paid a company owned by the majority stockholder of the Company
$119,441, $83,761 and $17,497 for the years ended December 31, 1999 and 1998
and the period from March 25, 1997 (inception) through December 31, 1997,
respectively, for certain services, including wages, benefits, management fees,
office expenses and other miscellaneous expenses. As of December 31, 1999, 1998
and 1997, the Company owed $0, $10,880 and $17,497 to this affiliated entity
for services performed during the respective periods. For the years ended
December 31, 1999 and 1998 and the period from March 25, 1997 (inception)
through December 31, 1997, respectively, the Company had sales of $51,723, $0
and $15,132 to this affiliated entity. In February 1999, the Company entered
into an agreement with this affiliated entity to pay $3,300 per month for
certain shared costs. This agreement was terminated in August 1999. In August
1999, the Company sub-leased its former office space to this affiliated entity.
The lease expires in May 2001 with monthly payments of $2,279. The Company is a
guarantor of the primary lease in the event that the affiliated entity fails to
meet its obligations under the sublease.
A director and stockholder provided legal and professional services to the
Company in the amount of $505,892 during the year ended December 31, 1999.
Additionally, as of December 31, 1998, the Company owed certain employees
$44,407 under convertible debt agreements. The Company purchased software for
approximately $347,000 from a vendor who has a common stockholder with the
Company.
In October 1999, the Company received a promissory note from a principal
stockholder in the amount of $350,000, collateralized by 350,000 shares of the
Company's common stock. The note bears interest at 6% per annum. The principal
and interest are payable upon demand at the earlier of October 2004 or the
expiration of any lock-up period after an Offering. The note becomes due if
certain change of control events take place.
In December 1999, the Board of Directors authorized the issuance of
promissory notes to senior executives in an aggregate amount of up to
$1,000,000, collateralized by shares of the Company's common stock held by
them. When issued, the notes will bear interest at 6% per annum. The principal
and interest are payable upon demand at the earlier of four years from the date
of issuance or the expiration of any lock-up period following a public
offering. The notes become due if certain change of control events takes place.
In December 1999, the Company received a promissory note from an employee in
the amount of $150,000, collateralized by 150,000 shares of the Company's
common stock. The note bears interest at 6% per annum. The principal and
interest are payable upon demand at the earlier of December 2004 or the
expiration of any lock-up period after an Offering. The note becomes due if
certain change of control events take place.
F-20
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 and Period
from March 25, 1997 (inception) through December 31, 1997
Note 11: Segment Information
Statement of Financial Accounting Standards No. 131 (SFAS No. 131")
"Disclosures about Segments of an Enterprise and Related Information"
establishes reporting and disclosure standards for an enterprise's operating
segments. The Company uses identical principles to account for segment
information as used in the accompanying financial statements. Operating
segments are defined as components of an enterprise for which separate
financial information is available and regularly reviewed by management.
Management operates its business based upon geographic area. Intercompany
transactions are insignificant and have been recorded at cost as part of the
parent's investment in its Subsidiary. Operating results by business segment
are as follows:
<TABLE>
<CAPTION>
US Canada Totals
------------ ----------- ------------
<S> <C> <C> <C>
Period from March 25, 1997
(inception) to December 31, 1997:
Net revenue......................... $ -- $ 62,174 $ 62,174
Net loss............................ (112,518) (17,854) (130,372)
Total assets........................ 193 11,717 11,910
Year ended December 31, 1998:
Net revenue......................... $ 153,356 $ 883,915 $ 1,037,271
Net loss............................ (406,795) (265,335) (672,130)
Total assets........................ 67,402 112,670 180,072
Property and equipment.............. 17,319 3,606 20,925
Depreciation and amortization....... 1,288 870 2,158
Interest expense.................... 3,608 3,608
Additions to property and
equipment.......................... 19,477 3,606 23,083
Year ended December 31, 1999:
Net revenue......................... $ 21,994,442 $ 5,182,640 $ 27,177,082
Net loss............................ (41,141,420) (2,224,350) (43,365,770)
Total assets........................ 48,889,980 1,388,852 50,278,832
Property and equipment.............. 5,914,305 262,486 6,176,791
Other assets........................ 2,274,386 26,092 2,300,478
Depreciation and amortization....... 1,097,997 56,391 1,154,388
Interest income..................... 534,299 534,299
Interest expense.................... 1,075,233 1,075,233
Noncash compensation expense........ 10,281,324 181,438 10,462,762
Additions to property and
equipment.......................... 7,443,642 307,800 7,751,442
Additions to other assets........... 2,274,386 26,092 2,300,478
</TABLE>
Note 12: Supplemental Cash Flow Information
Noncash investing and financing activities are as follows:
On March 25, 1997, the Company issued 8,000,000 shares of common stock
to the founder in exchange for certain assets with a fair value of $10,000.
On February 25, 1999, the Company issued warrants to purchase its common
stock at $.0025 per share. The noncash value allocated to these warrants
was $241,853.
On February 25, 1999, the outstanding convertible debt of the Company in
the amount of $1,319,997 was converted into shares of its Series A
preferred stock.
F-21
<PAGE>
ONVIA.COM, INC.
Notes to Consolidated Financial Statements--(Continued)
Years Ended December 31, 1999 and 1998 (unaudited) and 1999,
Year Ended December 31, 1998
and Period from March 25, 1997 (inception) through December 31, 1997
On June 15, 1999 and August 5, 1999, the Company issued warrants to
purchase its Preferred A stock in conjunction with its debt financings on
these dates. The value allocated to the warrants was $1,153,143.
On August 13, 1999, the Company purchased software of $1,255,511 and
post-contract support of $403,103 in exchange for a promissory note.
On December 20, 1999, a senior executive exercised stock options in
exchange for a note of $150,000.
Supplemental cash flow information:
Cash paid for interest during the year ended December 31, 1999 was $736,605.
The Company paid no cash for interest in the year ended December 31, 1998 or
the period from March 25, 1997 (inception) to December 31, 1997.
Note 13: Subsequent Events
On January 27, 2000, the Board of Directors authorized the Company's
reincorporation in the State of Delaware and authorized an amendment to the
Delaware Certificate of Incorporation to issue 265,000,000 shares, each with a
par value of $0.0001 per share. 250,000,000 shares would be common stock and
15,000,000 shares would be undesignated preferred stock.
The Board of Directors also amended the Company's Articles of Incorporation
and authorized a two-for-one common and preferred stock split to be implemented
in connection with the Company's reincorporation in the State of Delaware.
Common and preferred stock issued and stock option information in these
financial statements have been restated to reflect this split.
F-22
<PAGE>
[LOGO OF ONVIA.COM]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Onvia.com in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
SEC registration fee............................................. $ 31,575
NASD filing fee.................................................. 12,460
Nasdaq National Market listing fee............................... 95,000
Printing and engraving expenses.................................. 275,000
Legal fees and expenses.......................................... 550,000
Accounting fees and expenses..................................... 350,000
Blue Sky qualification fees and expenses......................... 3,000
Transfer Agent and Registrar fees................................ 10,000
Miscellaneous fees and expenses.................................. 22,965
----------
Total........................................................ $1,350,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporations's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification under
specific circumstances for liabilities including reimbursement for expenses
incurred arising under the Securities Act. Onvia.com's Certificate of
Incorporation and Bylaws will provide for indemnification of Onvia.com's
directors, officers, employees and other agents to the maximum extent permitted
by Delaware law. In addition, Onvia.com has entered into indemnification
agreements (Exhibit 10.1) with some of its officers and directors. The
Underwriting Agreement (Exhibit 1.1) also provides for cross-indemnification
among Onvia.com and the Underwriters with respect to certain matters, including
matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
(a) Since inception in March 1997, Onvia.com has issued and sold (without
payment of any selling commission to any person) the following unregistered
securities:
(1) In March 1997 Onvia.com issued and sold 8,000,000 shares of its common
stock at a price of $0.00125 per share for an aggregate purchase price of
$10,000 to Glenn Ballman. The issuance of these securities was deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act as a transaction by an issuer not involving any public
offering. Based on information supplied by Onvia.com to Mr. Ballman and the
relationship between Onvia.com and Mr. Ballman, Mr. Ballman had adequate access
to information about Onvia.com. Onvia.com did not make any offer to sell the
securities by means of any general solicitation or general advertising within
the meaning of Rule 502 of Regulation D under the Securities Act.
(2) In January 1999, Onvia.com issued and sold 800 shares of its common
stock to Glenn Ballman in consideration for all of the outstanding shares of M-
Depot Internet Superstore, Inc., which in December 1999 changed its name to
Onvia.com, Inc., a Canadian federal corporation. The issuance of these
securities was deemed to be exempt from registration under the Securities Act
in reliance on Section 4(2) of the Securities Act as a transaction by an issuer
not involving any public offering. Based on information supplied by
II-1
<PAGE>
Onvia.com to Mr. Ballman and the relationship between Onvia.com and Mr.
Ballman, Mr. Ballman had adequate access to information about Onvia.com. Mr.
Ballman represented his intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof and an appropriate legend was affixed to the securities. Onvia.com did
not make any offer to sell the securities by means of any general solicitation
or general advertising within the meaning of Rule 502 of Regulation D under the
Securities Act.
(3) In January 1999, Onvia.com issued and sold 22,958,136 shares of its
common stock at a price of $0.00125 per share for an aggregate purchase price
of $28,698 to 20 individuals. The issuance of these securities was deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act as a transaction by an issuer not involving any public
offering. Based on representations made to Onvia.com by the investors,
information supplied by Onvia.com to the investors and the relationship between
Onvia.com and the investors, all investors had adequate access to information
about Onvia.com. In addition, based on representations made to Onvia.com by the
investors, the investors were able to bear the financial risk of their
investment. The investors represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
securities. Onvia.com did not make any offer to sell the securities by means of
any general solicitation or general advertising within the meaning of Rule 502
of Regulation D of the Securities Act.
(4) In February 1999, Onvia.com issued 20,219,496 shares of Series A
preferred stock to a total of 35 investors for an aggregate purchase price of
$11,819,991. 2,258,036 of these shares of Series A preferred stock were issued
pursuant to conversion of convertible notes sold by Onvia.com between September
1998 and February 1999. The remaining 17,961,460 of these shares were sold for
cash. In February 1999 Onvia.com also issued warrants to purchase up to an
aggregate of 833,352 shares of common stock at an exercise price of $0.0025 per
share to six investors who had bought convertible notes between September and
December 1998. The issuance of these securities was deemed to be exempt from
registration under the Securities Act pursuant to Rule 506 under Regulation D.
Based on representations made to Onvia.com by the investors, information
supplied by Onvia.com to the investors and the relationship between Onvia.com
and the investors, all investors had adequate access to information about
Onvia.com. Based on representations made to Onvia.com by the investors, the
investors were all accredited investors within the meaning of Rule 501 of
Regulation D under the Securities Act and were able to bear the financial risk
of their investment. The investors represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
securities. Onvia.com did not make any offer to sell the securities by means of
any general solicitation or general advertising within the meaning of Rule 502
of Regulation D of the Securities Act.
(5) In June 1999, in connection with a loan and security agreement between
Onvia.com and Dominion Venture Finance L.L.C., Onvia.com issued a warrant to
purchase up to 97,328 shares of Series A Preferred Stock at an exercise price
of $1.235 per share. The issuance of this security was deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as a transaction by an issuer not involving any public offering.
The investor was a lending institution. Based on representations made to
Onvia.com by the investor, information supplied by Onvia.com to the investor
and the relationship between Onvia.com and the investor, the investor had
adequate access to information about Onvia.com The investor represented its
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the securities. Onvia.com did not make any offer to sell the
securities by means of any general solicitation or general advertising within
the meaning of Rule 502 of Regulation D of the Securities Act.
(6) In August 1999, in connection with a loan and security agreement among
Onvia.com, MMC/GATX Partnership No. 1 and Comdisco, Inc., Onvia.com issued a
warrant to purchase up to 499,418 shares of Series A preferred stock at an
exercise price of $0.90 per share to MMC/GATX Partnership No. 1 and a warrant
to purchase up to 665,892 shares of Series A Preferred Stock at an exercise
price of $0.90 per share to Comdisco, Inc. The issuance of these securities was
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act as a transaction by an issuer not involving
II-2
<PAGE>
any public offering. The investors were lending institutions. Based on
representations made to Onvia.com by the investors, information supplied by
Onvia.com to the investors and the relationship between Onvia.com and the
investors, the investors had adequate access to information about Onvia.com.
Based on representations made to Onvia.com by the investors, the investors were
accredited investors within the meaning of Rule 501 of Regulation D under the
Securities Act and were able to bear the financial risk of their investment.
The investors represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the securities.
Onvia.com did not make any offer to sell the securities by means of any general
solicitation or general advertising within the meaning of Rule 502 of
Regulation D of the Securities Act.
(7) In September 1999, Onvia.com issued and sold 14,544,170 shares of
Series B preferred stock to a total of 6 investors for an aggregate purchase
price of $25,000,000. The issuance of these securities was deemed to be exempt
from registration under the Securities Act pursuant to Rule 506 under
Regulation D. Based on representations made to Onvia.com by the investors,
information supplied by Onvia.com to the investors and the relationship between
Onvia.com and the investors, all investors had adequate access to information
bout Onvia.com. Based on representations made to Onvia.com by the investors,
the investors were all accredited investors within the meaning of Rule 501 of
Regulation D under the Securities Act and were able to bear the financial risk
of their investment. The investors represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
securities. Onvia.com did not make any offer to sell the securities by means of
any general solicitation or general advertising within the meaning of Rule 502
of Regulation D of the Securities Act.
(8) In December 1999, Onvia.com issued and sold a total of 3,379,402 shares
of Series C preferred stock to 32 private investors for an aggregate purchase
price of $23,165,800. The issuance of these securities was deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as a transaction by an issuer not involving any public offering.
These investors were sophisticated venture capital or other funds, corporations
and sophisticated individuals. The actual number of investment decisionmakers
is smaller than the number of investors due to the splitting out of the
allocated investment by the venture capital funds among affiliated entities and
individuals. Based on representations made to Onvia.com by the investors,
information supplied by Onvia.com to the investors and the relationship between
Onvia.com and the investors, all investors had adequate access to information
bout Onvia.com. The investors represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
securities. Onvia.com did not make any offer to sell the securities by means of
any general solicitation or general advertising within the meaning of Rule 502
of Regulation D of the Securities Act.
(9) Onvia.com has issued an aggregate of 11,466,032 options to purchase its
common stock to 247 of its employees, directors and consultants with exercise
prices ranging from $0.0625 to $9.50 per share and has issued and sold
29,332,550 shares its common stock, net of repurchases, pursuant to the
exercise of such options or pursuant to stock purchase agreements. These
issuances were made in reliance upon Rule 701 promulgated under the Securities
Act in that they were sold either pursuant to written compensatory benefit
plans or pursuant to a written contract relating to compensation.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of Onvia.com.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
3.2 Certificate of Incorporation and related Certificate of Correction
(proposed, post reincorporation into Delaware, pre offering).
3.3* Bylaws of Onvia.com, as amended and restated.
3.4 Bylaws (proposed, post reincorporation into Delaware and post
offering).
3.5 Amended and Restated Certificate of Incorporation (proposed, post
offering).
4.1** Form of Onvia.com's common stock certificate.
4.2 Amended and Restated Investors' Rights Agreement dated December 20,
1999.
4.3 Form of Common Stock Purchase Warrant issued in connection with the
Series A Preferred Stock financing on February 25, 1999.
4.4* Warrant to Purchase Shares of Series A Preferred Stock issued by
Onvia.com to Dominion Capital Management L.L.C. as of June 15, 1999.
4.5** Warrant to Purchase Shares of Series A Preferred Stock issued by
Onvia.com to Comdisco, Inc. as of August 5, 1999.
4.6** Warrant to Purchase Shares of Series A Preferred Stock issued by
Onvia.com to Meier Mitchell & Company as of August 5, 1999.
5.1 Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement between Onvia.com and each of its
officers and directors.
10.2 Series A Preferred Stock Purchase Agreement dated February 25, 1999.
10.3 Series B Preferred Stock Purchase Agreement dated September 30, 1999.
10.4 Series C Preferred Stock Purchase Agreement dated December 20, 1999.
10.5** Loan and Security Agreement between Onvia.com and Dominion Venture
Finance L.L.C. dated as of June 15, 1999.
10.6* Loan and Security Agreement among MMC/GATX Partnership No. 1,
Comdisco, Inc. and Onvia.com dated as of August 5, 1999.
10.7 Office Lease between Firdex Associates and MegaDepot.com, Inc. dated
as of April 1999.
10.8** Office Lease among Stratton Properties, Inc., Glenn S. Ballman and
MegaDepot.com, Inc. dated as of May 9, 1998.
10.9 Lease between Onvia.com and No. 150 Cathedral Ventures Ltd. dated as
of June 1, 1999.
10.10 1999 Stock Option Plan.
10.11 Secured Promissory Note issued by Glenn S. Ballman to Onvia.com dated
as of October 14, 1999.
10.12** Offer Letter dated March 25, 1999 with Mark T. Calvert.
10.13* Offer Letter dated August 25, 1999 with Douglas H. Kellam.
10.14* Offer Letter dated July 27, 1999 with Louis T. Mickler.
10.15* Offer Letter dated July 23, 1999 with Mark A. Pawlosky.
10.16** Offer Letter dated March 15, 1999 with Clayton W. Lewis.
10.17 Common Stock Purchase Agreement with Glenn S. Ballman dated as of
January 9, 1999.
10.18 Common Stock Purchase Agreement with Glenn S. Ballman dated as of
January 18, 1999.
10.19 Common Stock Purchase Agreement with Robert D. Ayer dated as of
January 18, 1999.
10.20 Common Stock Purchase Agreement with Kristen M. Hamilton dated as of
January 18, 1999.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.21 Common Stock Purchase Agreement with William W. Ericson dated as of
January 18, 1999.
10.22 Common Stock Purchase Agreement with Michael D. Pickett dated as of
April 9, 1999.
10.23 Common Stock Purchase Agreement with Jeffrey C. Ballowe dated as of
December 8, 1999.
10.24 Mercer Yale Building Office Lease Agreement between Onvia.com and
Blume Yale Limited Partnership dated as of December 9, 1999.
10.25** 2000 Employee Stock Purchase Plan.
10.26** 2000 Directors' Stock Option Plan.
21.1* List of Subsidiaries.
23.1** Consent of Deloitte & Touche LLP.
23.2 Consent of Venture Law Group, A Professional Corporation (see
Exhibit 5.1).
24.1* Power of Attorney (included in signature page to Registration
Statement).
27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
(b) Financial Statement Schedules
All financial statement schedules are omitted because they are inapplicable
or the requested information is shown in the financial statements of the
registrant or the related notes to the financial statements.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4), or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and this
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on February 3, 2000.
Onvia.com, Inc.
By:
*
----------------------------------
Glenn S. Ballman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive February 3, 2000
____________________________________ Officer and Director
Glenn S. Ballman (Principal Executive
Officer)
/s/ Mark T. Calvert Vice President and Chief February 3, 2000
____________________________________ Financial Officer
Mark T. Calvert (Principal Financial and
Accounting Officer)
* Director February 3, 2000
____________________________________
Kenneth A. Fox
* Director February 3, 2000
____________________________________
Michael D. Pickett
* Director February 3, 2000
____________________________________
Nancy J. Schoendorf
* Director February 3, 2000
____________________________________
William W. Ericson
Director
____________________________________
Steven D. Smith
/s/ Jeffrey C. Ballowe Director February 3, 2000
____________________________________
Jeffrey C. Ballowe
/s/ Mark T. Calvert
*By: _______________________________
Mark T. Calvert
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of Onvia.com.
3.2 Certificate of Incorporation and related Certificate of Correction
(proposed, post reincorporation into Delaware, pre offering).
3.3* Bylaws of Onvia.com, as amended and restated.
3.4 Bylaws (proposed, post reincorporation into Delaware and post
offering).
3.5 Amended and Restated Certificate of Incorporation (proposed, post
offering).
4.1** Form of Onvia.com's common stock certificate.
4.2 Amended and Restated Investors' Rights Agreement dated December 20,
1999.
4.3 Form of Common Stock Purchase Warrant issued in connection with the
Series A Preferred Stock financing on February 25, 1999.
4.4* Warrant to Purchase Shares of Series A Preferred Stock issued by
Onvia.com to Dominion Capital Management L.L.C. as of June 15, 1999.
4.5** Warrant to Purchase Shares of Series A Preferred Stock issued by
Onvia.com to Comdisco, Inc. as of August 5, 1999.
4.6** Warrant to Purchase Shares of Series A Preferred Stock issued by
Onvia.com to Meier Mitchell & Company as of August 5, 1999.
5.1 Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement between Onvia.com and each of its
officers and directors.
10.2 Series A Preferred Stock Purchase Agreement dated February 25, 1999.
10.3 Series B Preferred Stock Purchase Agreement dated September 30, 1999.
10.4 Series C Preferred Stock Purchase Agreement dated December 20, 1999.
10.5** Loan and Security Agreement between Onvia.com and Dominion Venture
Finance L.L.C. dated as of June 15, 1999.
10.6* Loan and Security Agreement among MMC/GATX Partnership No. 1,
Comdisco, Inc. and Onvia.com dated as of August 5, 1999.
10.7 Office Lease between Firdex Associates and MegaDepot.com, Inc. dated
as of April 1999.
10.8** Office Lease among Stratton Properties, Inc., Glenn S. Ballman and
MegaDepot.com, Inc. dated as of May 9, 1998.
10.9 Lease between Onvia.com and No. 150 Cathedral Ventures Ltd. dated as
of October 1, 1999.
10.10 Amended and Restated 1999 Stock Option Plan.
10.11 Secured Promissory Note issued by Glenn S. Ballman to Onvia.com dated
as of October 14, 1999.
10.12** Offer Letter dated March 25, 1999 with Mark T. Calvert.
10.13* Offer Letter dated August 25, 1999 with Douglas H. Kellam.
10.14* Offer Letter dated July 27, 1999 with Louis T. Mickler.
10.15* Offer Letter dated July 23, 1999 with Mark A. Pawlosky.
10.16** Offer Letter dated March 15, 1999 with Clayton W. Lewis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.17 Common Stock Purchase Agreement with Glenn S. Ballman dated as of
January 9, 1999.
10.18 Common Stock Purchase Agreement with Glenn S. Ballman dated as of
January 18, 1999.
10.19 Common Stock Purchase Agreement with Robert D. Ayer dated as of
January 18, 1999.
10.20 Common Stock Purchase Agreement with Kristen M. Hamilton dated as of
January 18, 1999.
10.21 Common Stock Purchase Agreement with William W. Ericson dated as of
January 18, 1999.
10.22 Common Stock Purchase Agreement with Michael D. Pickett dated as of
April 9, 1999.
10.23 Common Stock Purchase Agreement with Jeffrey C. Ballowe dated as of
December 8, 1999.
10.24 Mercer Yale Building Office Lease Agreement between Onvia.com and
Blume Yale Limited Partnership dated as of December 9, 1999.
10.25** 2000 Employee Stock Purchase Plan.
10.26** 2000 Directors' Stock Option Plan.
21.1* List of Subsidiaries.
23.1** Consent of Deloitte & Touche LLP.
23.2 Consent of Venture Law Group, A Professional Corporation (see
Exhibit 5.1).
24.1* Power of Attorney (included in signature page to Registration
Statement).
27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
<PAGE>
Exhibit 3.1
THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ONVIA.COM, INC.
Pursuant to RCW 23B.10.070 of the Washington Business Corporation Act, the
following Third Amended and Restated Articles of Incorporation of Onvia.com,
Inc. (the "Corporation") are hereby submitted for filing:
-----------
ARTICLE I
The name of this corporation is Onvia.com, Inc. (the "Corporation").
-----------
ARTICLE II
(A) Authorized Capital. The Corporation is authorized to issue two classes
------------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
------------ ---------------
The total number of shares which the Corporation is authorized to issue is
ninety-eight million (98,000,000) shares, without par value. Seventy-five
million (75,000,000) shares shall be Common Stock and twenty-three million
(23,000,000) shares shall be Preferred Stock.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Preferred
-------------------------------------------------------
Stock authorized by these Third Amended and Restated Articles of Incorporation
may be issued from time to time in one or more series. The first series of
Preferred Stock shall be designated "Series A Preferred Stock" and shall consist
------------------------
of twelve million (12,000,000) shares. The second series of Preferred Stock
shall be designated "Series B Preferred Stock" and shall consist of eight
------------------------
million (8,000,000) shares. The third series of Preferred Stocks shall be
designated "Series C Preferred Stock" and shall consist of three million
------------------------
(3,000,000) shares. The rights, preferences, privileges and restrictions
granted to and imposed on the Series A Preferred Stock, the Series B Preferred
Stock and the Series C Preferred Stock are as set forth below in this Article
II(B). The Corporation's board of directors ( the "Board of Directors") is
------------------
hereby authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon additional series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or of any of them. Subject to compliance with applicable protective
voting rights which have been or may be granted to the Preferred Stock or series
thereof in certificates of determination or the Corporation's articles of
incorporation ("Protective Provisions"), but notwithstanding any other rights of
---------------------
the Preferred Stock or any series thereof, the rights, privileges, preferences
and restrictions of any such additional series may be subordinated to, pari
----
passu with (including, without limitation, inclusion in provisions with respect
- -----
to liquidation and acquisition preferences, redemption and/or approval of
matters by vote or written consent), or senior to any of those of any present or
future class or series of Preferred Stock or Common Stock. Subject to
compliance with applicable Protective Provisions, the Board of Directors is also
authorized to increase or decrease the number of shares of any series (other
than the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock), prior or subsequent to the issue of that series, but not below
the number of shares of such series then outstanding. In case the number of
shares of any series shall be so decreased, the shares
<PAGE>
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
1. Dividend Provisions.
-------------------
(a) Subject to the rights of series of Preferred Stock which may from
time to time come into existence, the holders of shares of Series A Preferred
Stock, the holders of Series B Preferred Stock and the holders of Series C
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of the Corporation) on the
Common Stock of the Corporation, at the rate of (i) Ten and One-Half Cents
($0.105) per share per annum on each outstanding share of Series A Preferred
Stock, (ii) Thirty-One Cents ($0.31) per share per annum on each outstanding
share of Series B Preferred Stock and (iiv) One Dollar and Twenty-Three Cents
($1.23) per annum on each outstanding share of Series C Preferred Stock, or, in
each case if greater (as determined on a per annum basis and on an as-converted
basis), an amount equal to any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) paid on any other outstanding shares of the Corporation, payable
annually when, as and if declared by the Board of Directors. Such dividends
shall not be cumulative.
2. Liquidation.
-----------
(a) In the event of any liquidation, dissolution or winding up (the
occurrence of which is subject to the provisions of Article II (B)(6) below) of
the Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of the Series C Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Series B Preferred Stock, Series A Preferred Stock or Common Stock by
reason of their ownership thereof, an amount per share equal to Thirteen Dollars
and Seventy-One Cents ($13.71) per share (the "Series C Purchase Price") for
-----------------------
each share of Series C Preferred Stock then held by such holders, plus declared
but unpaid dividends thereon, if any. If, upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series C
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series C Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
(b) Preference. Upon the completion of the distributions required by
----------
section 2(a) above and any other distribution that may be required with respect
to series of Preferred Stock that may from time to time come into existence, the
holders of the Series B Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Series A Preferred Stock or Common Stock by reason of their ownership
thereof, an amount per share equal to Three Dollars and Forty-Three
-2-
<PAGE>
and Seventy-Eight One Hundredths Cents ($3.4378) per share (the "Series B
--------
Purchase Price") for each share of Series B Preferred Stock then held by such
- --------------
holders, plus declared but unpaid dividends thereon, if any. If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series B Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(c) Upon the completion of the distributions required by Section 2(b)
above and any other distribution that may be required with respect to series of
Preferred Stock that may from time to time come into existence, the holders of
the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to One Dollar and Sixteen and Nine Thousand One Hundred Fifty-Five
Ten Thousandths Cents ($1.169155) per share (the "Series A Purchase Price") for
-----------------------
each share of Series A Preferred Stock then held by such holders, plus declared
but unpaid dividends thereon, if any. If, upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
(d) Remaining Assets. Upon the completion of the distributions
----------------
required by Section 2(a) (c) above and any other distribution that may be
required with respect to series of Preferred Stock that may from time to time
come into existence, the remaining assets of the Corporation available for
distribution to shareholders, if any, shall be distributed among the holders of
the Common Stock.
(e) Certain Acquisitions.
--------------------
(i) Deemed Liquidation. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to
occur if the Corporation shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Corporation is
disposed of; provided, however, that this Section 2(e)(i) shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the
Corporation.
(ii) Valuation of Consideration. In the event of a deemed
--------------------------
liquidation as described in Section 2(e)(i) above, if the consideration received
by the Corporation is other than cash, its value will be deemed to be its fair
market value. Unless otherwise set forth
-3-
<PAGE>
in a definitive merger agreement, reorganization agreement, stock purchase
agreement, asset purchase agreement or the like relating to such transaction,
any securities shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability:
(1) If traded on a securities exchange or The
Nasdaq Stock Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 2(e)(ii)(A) to reflect the approximate fair
market value thereof, as mutually determined by the Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
(iii) Notice of Transaction. The Corporation shall give
---------------------
each holder of record of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock written notice of such impending transaction not later
than ten (10) days prior to the shareholders' meeting called to approve such
transaction, or ten (10) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than ten (10) days after the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Preferred
Stock that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of such Preferred Stock.
(iv) Effect of Noncompliance. In the event the requirements
-----------------------
of this Section 2(e) are not complied with, the Corporation shall forthwith
either cause the closing of the transaction to be postponed until such time as
the requirements of this Section 2 have been complied with, or cancel such
transaction, in which event the rights, preferences and privileges of
-4-
<PAGE>
the holders of the Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock, as applicable, shall revert to and be the same as such
rights, preferences and privileges existing immediately prior to the date of the
first notice referred to in Section 2(e)(iii) hereof.
3. Redemption. Neither the Series A Preferred Stock nor the Series B
----------
Preferred Stock nor the Series C Preferred Stock is redeemable.
4. Conversion. The holders of the Series A Preferred Stock, the
----------
holders of the Series B Preferred Stock and the holders of the Series C
Preferred Stock shall have conversion rights as follows (the "Conversion
----------
Rights"):
- ------
(a) Right to Convert. Subject to Section 4(c), each share of
----------------
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the Series A Purchase Price by the
Series A Conversion Price, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion in the case of the Series A
Preferred Stock, (ii) the Series B Purchase Price by the Series B Conversion
Price, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion in the case of the Series B Preferred Stock and
(iii) the Series C Purchase Price by the Series C Conversion Price, determined
as hereafter provided, in effect on the date the certificate is surrendered for
conversion in the case of the Series C Preferred Stock. The initial Series A
Conversion Price per share shall be One Dollar Sixteen and Nine Thousand One
Hundred and Fifty-Five Ten Thousandths Cents ($1.169155). The initial Series B
Conversion Price per share shall be Three Dollars and Forty-Three and Seventy-
Eight One Hundredths Cents ($3.4378). The initial Series C Conversion Price per
share shall be Thirteen Dollars and Seventy-One Cents ($13.71). Such initial
Series A Conversion Price, initial Series B Conversion Price and initial Series
C Conversion Price shall be subject to adjustment as set forth in Section 4(d)
below.
(b) Automatic Conversion. Each share of Series A Preferred Stock,
--------------------
Series B Preferred Stock and Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the Series A Conversion Price, Series B
Conversion Price, or Series C Conversion Price as applicable, at the time in
effect for such share immediately upon the earlier of (i) except as provided
below in Section 4(c), the Corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
--------------
offering price of which is not less than Twenty Dollars and Fifty-Seven Cents
($20.57) per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and which results in aggregate gross cash
proceeds to the Corporation of Thirty Million Dollars ($30,000,000) or (ii) the
date specified by written consent or agreement of the holders of eighty percent
(80%) of the then outstanding shares of Series B Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he or she shall
surrender the certificate or certificates
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<PAGE>
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for such Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock as applicable, and shall give written notice to the Corporation
at its principal corporate office of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
as applicable, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of such Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as applicable, to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act
the conversion may, at the option of any holder tendering such Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as
applicable, for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive Common Stock upon conversion of such Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock as
applicable, shall not be deemed to have converted such Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, as applicable, until
immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
- -------------------------------------------
A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) Issuance of Additional Stock below Purchase Price . If the
--------------------------------------------------
Corporation shall issue, after the date upon which any shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock were
first issued (the "Purchase Date" with respect to such series), any Additional
-------------
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for such series in effect immediately prior to
the issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically be adjusted
as set forth in this Section 4(d)(i), unless otherwise provided in this Section
4(d)(i).
(A) Adjustment Formula. Whenever the Conversion Price is
------------------
adjusted pursuant to this Section (4)(d)(i), the new Conversion Price shall be
determined by multiplying the Conversion Price then in effect by a fraction, (x)
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (the "Outstanding Common") plus the number of
------------------
shares of Common Stock that the aggregate consideration received by the
Corporation for such issuance would purchase at such Conversion Price; and (y)
the denominator of which shall be the number of shares of Outstanding Common
plus the number of shares of such Additional Stock. For purposes of the
foregoing calculation,
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<PAGE>
the term "Outstanding Common" shall include shares of Common Stock deemed issued
pursuant to Section 4(d)(i)(E) below.
(B) Definition of "Additional Stock". For purposes of this
--------------------------------
Section 4(d)(i), "Additional Stock" shall mean any shares of Common Stock or
----------------
securities convertible into shares of Common Stock issued (or deemed to have
been issued pursuant to Section 4(d)(i)(E)) by the Corporation after the
Purchase Date) other than
(1) Common Stock issued pursuant to a transaction described
in Section 4(d)(ii) hereof;
(2) Shares of Common Stock issuable or issued to employees,
consultants or directors of the Corporation directly or pursuant to a stock
option plan or restricted stock plan unanimously approved by the Board of
Directors;
(3) Capital stock, or options or warrants to purchase capital
stock, issued to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings or similar transactions;
(4) Shares of Common Stock or Preferred Stock issuable upon
exercise of warrants outstanding as of the date of these Third Amended and
Restated Articles of Incorporation;
(5) Capital stock or warrants or options to purchase capital
stock issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors;
(6) Shares of Common Stock issued or issuable upon conversion
of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock.
(7) Shares of Common Stock issued or issuable in a public
offering prior to or in connection with which all outstanding shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock will be
converted to Common Stock; and
(8) Shares of Common Stock issued or issuable with the
affirmative vote of at least eighty percent (80%) of the then outstanding shares
of Preferred Stock, voting together as a class.
(C) No Fractional Adjustments. No adjustment of the Conversion
-------------------------
Price for the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock shall be made in an amount less than One Cent ($0.01) per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
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<PAGE>
the end of three years from the date of the event giving rise to the adjustment
being carried forward.
(D) Determination of Consideration. In the case of the issuance of
------------------------------
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any underwriting
or otherwise in connection with the issuance and sale thereof. In the case of
the issuance of the Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors irrespective of any
accounting treatment.
(E) Deemed Issuances of Common Stock. In the case of the issuance
--------------------------------
(whether before, on or after the applicable Purchase Date) of options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 4(d)(i):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
4(d)(i)(D)), if any, received by the Corporation upon the issuance of such
options or rights plus the minimum exercise price provided in such options or
rights (without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in Section 4(d)(i)(D).
(3) In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the Corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or
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<PAGE>
exchangeable securities, including, but not limited to, a change resulting from
the antidilution provisions thereof, the Conversion Price of each of the Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price of each of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to Sections 4(d)(i)(E)(1) and
4(d)(i)(E)(2) shall be appropriately adjusted to reflect any change, termination
or expiration of the type described in either Section 4(d)(i)(E)(3) or
4(d)(i)(E)(4).
(F) No Increased Conversion Price. Notwithstanding any other
-----------------------------
provisions of this Section (4)(d)(i), except to the limited extent provided for
in Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of the Conversion
Price pursuant to this Section 4(d)(i) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect immediately prior to such
adjustment.
(ii) Stock Splits and Dividends. In the event the Corporation should
--------------------------
at any time or from time to time after the Purchase Date fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
------------------------
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of each of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents with the number of shares issuable with respect to
Common Stock Equivalents determined from time to time.
-9-
<PAGE>
(iii) Reverse Stock Splits. If the number of shares of Common Stock
--------------------
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(e) Other Distributions. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 4(d)(ii), then, in each such case
for the purpose of this Section 4(e), the holders of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Series A Preferred Stock, and the holders of the Series B Preferred Stock and
the holders of the Series C Preferred Stock shall thereafter be entitled to
receive upon conversion of such Preferred Stock the number of shares of stock or
other securities or property of the Corporation or otherwise, to which a holder
of Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of such Preferred Stock after the recapitalization to the end that
the provisions of this Section 4 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of such
Preferred Stock) shall be applicable after that event and be as nearly
equivalent as practicable.
(g) No Impairment. The Corporation will not, by amendment of these
-------------
Third Amended and Restated Articles of Incorporation (except in accordance with
Section 6 hereof and applicable law) or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the conversion of any
share or shares of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred
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<PAGE>
Stock, and the number of shares of Common Stock to be issued shall be rounded to
the nearest whole share. The number of shares issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock pursuant to this Section 4, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of such Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price for such series
of Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock, at least ten (10) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation shall
---------------------------------------------
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, the Series B Preferred Stock and
Series C Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of such series of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of such series of Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to these articles.
(k) Notices. Any notice required by the provisions of this Section 4 to
-------
be given to the holders of shares of Series A Preferred Stock, the Series B
Preferred Stock or the Series C Preferred Stock shall be deemed given if
deposited in the United States mail, postage
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<PAGE>
prepaid, and addressed to each holder of record at his address appearing on the
books of the Corporation.
5. Voting Rights. The holders of each share of Series A Preferred
-------------
Stock, Series B Preferred Stock and Series C Preferred Stock shall have the
right to one (1) vote for each share of Common Stock into which such Preferred
Stock could then be converted, and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any shareholders' meeting in accordance with the bylaws of
the Corporation (the "Bylaws"), and shall be entitled to vote, together with
------
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote. Fractional votes shall not, however, be
permitted and any fractional voting rights available on an as-converted basis
(after aggregating all shares into which shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
6. Protective Provisions.
---------------------
(a) So long as at least one million (1,000,000) shares of Series A
Preferred Stock, at least one million (1,000,000) shares of Series B Preferred
Stock are outstanding and at least one million (1,000,000) shares of Series C
Preferred Stock are outstanding (in each case as adjusted for stock splits,
stock dividends or recapitalizations), the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of (i)
the holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, voting together as a class and (ii) the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock and Series C
Preferred Stock, voting together as a combined class:
(i) effect a transaction described in Section 2(e)(i) above;
(ii) increase or decrease (other than by repurchase by the
Corporation or conversion) the total number of authorized shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series A Preferred Stock, the Series B Preferred Stock or
Series C Preferred Stock with respect to voting, dividends, conversion or upon
liquidation;
(iv) pay any dividend to holders of the Common Stock;
(v) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock or Series B Preferred Stock so as to
affect adversely the shares of such series;
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<PAGE>
(vi) increase the number of authorized directors comprising
the Board of Directors to greater than seven (7); or
(vii) issue more than one million seven hundred eighty-
seven thousand four hundred four (1,787,404) shares of Series C Preferred Stock
without approval of at least six (6) members of the Board of Directors.
(b) The provisions of this Section 6 are specifically intended to
reduce the voting requirements otherwise prescribed under RCW 23B.10.030,
23B.11.030, and 23B.12.020, in accordance with RCW 23B.07.270.
7. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled and shall not be issuable by the Corporation. These Third
Amended and Restated Articles of Incorporation of the Corporation shall be
appropriately amended to effect the corresponding reduction in the Corporation's
authorized capital stock.
(C) Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends and
subject to Section 6(a)(v) of this Article II, the holders of the Common Stock
shall be entitled to receive, when and as declared by the Board of Directors,
out of any assets of the Corporation legally available therefor, such dividends
as may be declared from time to time by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Article II(B).
3. Redemption. The Common Stock is not redeemable; provided,
----------
however, that the Company's repurchase of shares of its capital stock pursuant
to agreements approved by the Board of Directors shall not be deemed
"redemptions" and shall be allowed.
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE III. PREEMPTIVE RIGHTS
No preemptive rights shall exist with respect to shares of stock or
securities convertible into shares of stock of this Corporation.
ARTICLE IV. CUMULATIVE VOTING
The right to cumulate votes in the election of directors shall not exist
with respect to shares of stock of this Corporation.
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<PAGE>
ARTICLE V. ACTION BY MAJORITY VOTE
To the maximum extent permitted under RCW Ch. 23B, this Corporation's
shareholders may take action by the affirmative vote of a simple majority of all
shareholders of this Corporation entitled to vote on an action. This Article V
is specifically intended to reduce the voting requirements otherwise prescribed
under RCW 23B.10.030, 23B.11.030, and 23B.12.020, in accordance with RCW
23B.07.270.
ARTICLE VI. DIRECTORS
The number of directors of this Corporation shall be determined in the
manner provided by the Bylaws and, subject to Section 6(a)(vi) of Article II,
may be increased or decreased from time to time in the manner provided therein.
ARTICLE VII. BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws of this Corporation, subject to the power of the shareholders to amend or
repeal such Bylaws. The shareholders shall also have the power to amend or
repeal the Bylaws and to adopt new Bylaws.
ARTICLE VIII. AMENDMENTS TO ARTICLES OF INCORPORATION
Subject to Article II(B)(6) above this Corporation reserves the right to
amend or repeal any of the provisions contained in these Articles of
Incorporation in any manner now or hereafter permitted by law, and the rights of
the shareholders of this Corporation are granted subject to this reservation.
ARTICLE IX. ACTION BY SHAREHOLDERS WITHOUT A MEETING
To the maximum extent permitted under RCW Ch. 23B, any action required or
permitted to be taken at any meeting of this Corporation's shareholders may be
taken without a meeting or a vote if either:
(a) the action is taken by all of this Corporation's shareholders entitled
to vote on the action; or
(b) so long as this Corporation is not a public company, the action is
taken by this Corporation's shareholders holding of record, or otherwise
entitled to vote, in the aggregate no less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote on the action were present and voted.
To the extent prior notice is required by law, any advance notice required
by statute to be given to nonconsenting shareholders of this Corporation shall
be made at least one business day prior to the effectiveness of the action, or
such longer period as required by law. The form of this notice shall be
sufficient to appraise the nonconsenting shareholders of this Corporation of the
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<PAGE>
nature of the action to be effected, in a manner approved by the Board of
Directors or by the committee or officers to whom the Board of Directors has
delegated that responsibility.
ARTICLE X. LIMITATION OF DIRECTOR LIABILITY
A director of this Corporation shall not be personally liable to this
Corporation or its shareholders for monetary damages for conduct as a director,
except for:
(a) Acts or omissions involving intentional misconduct by the director or
a knowing violation of law by the director;
(b) Conduct violating RCW 23B.08.310 (which involves certain distributions
by this Corporation);
(c) Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not
legally entitled.
If the Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Washington Business
Corporation Act, as so amended. Any repeal or modification of the foregoing
paragraph by the shareholders of this Corporation shall not adversely affect any
right or protection of a director of this Corporation with respect to any acts
or omissions of such director occurring prior to such repeal or modification.
ARTICLE XI. INDEMNIFICATION OF DIRECTORS
This Corporation shall indemnify its directors to the full extent permitted
by the Washington Business Corporation Act now or hereafter in force. However,
such indemnity shall not apply on account of:
(a) Acts or omissions of the director finally adjudged to be intentional
misconduct or a knowing violation of law;
(b) Conduct of the director finally adjudged to be in violation of RCW
23B.08.310; or
(c) Any transaction with respect to which it was finally adjudged that
such director personally received a benefit in money, property, or
services to which the director was not legally entitled.
This Corporation shall advance expenses for such persons pursuant to the
terms set forth in the Bylaws, or in a separate directors' resolution or
contract. The Board of Directors may take such action as is necessary to carry
out these indemnification and expense advancement provisions. It is expressly
empowered to adopt, approve, and amend from time to time such Bylaws,
resolutions, contracts, or further indemnification and expense advancement
arrangements as may be permitted by law, implementing these provisions. Such
Bylaws,
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<PAGE>
resolutions, contracts or further arrangements shall include but not be limited
to implementing the manner in which determinations as to any indemnity or
advancement of expenses shall be made. No amendment or repeal of this Article
shall apply to or have any effect on any right to indemnification provided
hereunder with respect to acts or omissions occurring prior to such amendment or
repeal.
[Signature page follows]
-16-
<PAGE>
The undersigned, as President and Chief Executive Officer of Onvia.com,
Inc., executes these Third Amended and Restated Articles of Incorporation this
17th day of December 1999.
ONVIA.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
------------------------------------
Glenn Ballman
President and Chief Executive Officer
<PAGE>
CERTIFICATE OF OFFICER
OF
ONVIA.COM, INC.
Pursuant to the provisions of RCW 23B.10.070, the Third Amended and
Restated Articles of Incorporation of Onvia.com, Inc., a Washington corporation
(the "Corporation"), are hereby submitted for filing.
-----------
1. The name of record of the Corporation is Onvia.com, Inc.
2. The Second Amended and Restated Articles of Incorporation of the
Corporation are amended and restated in their entirety and replaced with the
Third Amended and Restated Articles of Incorporation of Onvia.com, Inc. (the
"Restated Articles") in the form attached hereto as Exhibit A .
- ------------------ ---------
3. The Restated Articles were approved by the Board of Directors on
December 15, 1999 and by the shareholders of the Corporation on December 16,
1999.
IN WITNESS WHEREOF, the undersigned certifies that he is the President
and Chief Executive Officer of the Corporation and has executed these Third
Amended and Restated Articles of Incorporation of Onvia.com, Inc. this 17th day
of December 1999.
ONVIA.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
----------------------------------------
Glenn Ballman
President and Chief Executive Officer
<PAGE>
Exhibit 3.2
CERTIFICATE OF INCORPORATION
OF
ONVIA.COM, INC.
ARTICLE I
The name of this corporation is Onvia.com, Inc. (the "Corporation").
-----------
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle. The name
of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE VI
(A) Authorized Capital. The Corporation is authorized to issue two classes
------------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
------------ ---------------
The total number of shares which the Corporation is authorized to issue is One
Hundred Ninety-Six Million (196,000,000) shares, par value $0.0001 per share.
One Hundred Fifty Million (150,000,000) shares shall be Common Stock and Forty-
Six Million (46,000,000) shares shall be Preferred Stock.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Preferred
-------------------------------------------------------
Stock authorized by this Certificate of Incorporation may be issued from time to
time in one or more series. The first series of Preferred Stock shall be
designated "Series A Preferred Stock" and shall consist of Twenty-Four Million
------------------------
(24,000,000) shares. The second series of Preferred Stock shall be designated
"Series B Preferred Stock" and shall consist of Sixteen Million (16,000,000)
- -------------------------
shares. The third series of Preferred Stocks shall be designated "Series C
--------
Preferred Stock" and shall consist of Six Million (6,000,000) shares. The
- ---------------
rights, preferences, privileges and restrictions granted to and imposed on the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock are as set forth below in this Article IV(B). The Corporation's
board of directors ( the "Board of Directors") is hereby authorized to fix or
------------------
alter the rights, preferences, privileges and restrictions granted to or imposed
upon additional series of Preferred Stock, and the number of shares constituting
any such series and the designation thereof, or of any of them. Subject to
compliance with applicable protective voting rights which have been or may be
granted to the Preferred Stock or series thereof in certificates of
determination or the Corporation's articles of incorporation ("Protective
----------
Provisions"), but notwithstanding any other rights of the Preferred Stock or any
- ----------
series thereof, the rights, privileges, preferences and restrictions of any such
additional series may be subordinated to, pari passu with (including, without
---- -----
limitation, inclusion in provisions with respect to liquidation and acquisition
preferences,
<PAGE>
redemption and/or approval of matters by vote or written consent),
or senior to any of those of any present or future class or series of Preferred
Stock or Common Stock. Subject to compliance with applicable Protective
Provisions, the Board of Directors is also authorized to increase or decrease
the number of shares of any series (other than the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock), prior or subsequent
to the issue of that series, but not below the number of shares of such series
then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status that
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
1. Dividend Provisions.
-------------------
(a) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, the holders of shares of Series A
Preferred Stock, the holders of Series B Preferred Stock and the holders of
Series C Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of the Corporation) on the
Common Stock of the Corporation, at the rate of (i) Five and One-Quarter Cents
($0.525) per share per annum on each outstanding share of Series A Preferred
Stock, (ii) Fifteen and One-Half Cents ($0.155) per share per annum on each
outstanding share of Series B Preferred Stock and (iiv) Sixty-One and One-Half
Cents ($0.615) per annum on each outstanding share of Series C Preferred Stock,
or, in each case if greater (as determined on a per annum basis and on an as-
converted basis), an amount equal to any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock of
the Corporation) paid on any other outstanding shares of the Corporation,
payable annually when, as and if declared by the Board of Directors. Such
dividends shall not be cumulative.
2. Liquidation.
-----------
(a) In the event of any liquidation, dissolution or winding up
(the occurrence of which is subject to the provisions of Article IV (B)(6)
below) of the Corporation, either voluntary or involuntary, subject to the
rights of series of Preferred Stock that may from time to time come into
existence, the holders of the Series C Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Series B Preferred Stock, Series A Preferred Stock
or Common Stock by reason of their ownership thereof, an amount per share equal
to Six Dollars and Eighty-Five and One-Half Cents ($6.855) per share (the
"Series C Purchase Price") for each share of Series C Preferred Stock then held
------ ----------------
by such holders, plus declared but unpaid dividends thereon, if any. If, upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series C Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series C Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
-2-
<PAGE>
(b) Preference. Upon the completion of the distributions required by
----------
section 2(a) above and any other distribution that may be required with respect
to series of Preferred Stock that may from time to time come into existence, the
holders of the Series B Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Series A Preferred Stock or Common Stock by reason of their ownership
thereof, an amount per share equal to One Dollar and Seventy-One and Eighty-Nine
One Hundredths Cents ($1.7189) per share (the "Series B Purchase Price") for
-----------------------
each share of Series B Preferred Stock then held by such holders, plus declared
but unpaid dividends thereon, if any. If, upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series B
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series B Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
(c) Upon the completion of the distributions required by Sections 2(a)
and 2(b) above and any other distribution that may be required with respect to
series of Preferred Stock that may from time to time come into existence, the
holders of the Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to Fifty-Eight and Four Thousand Five Hundred Seventy-Seven Ten
Thousandths Cents ($0.584577) per share (the "Series A Purchase Price") for each
-----------------------
share of Series A Preferred Stock then held by such holders, plus declared but
unpaid dividends thereon, if any. If, upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then, subject to the rights of series of
Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
(d) Remaining Assets. Upon the completion of the distributions
----------------
required by Sections 2(a), 2(b) and 2(c) above and any other distribution that
may be required with respect to series of Preferred Stock that may from time to
time come into existence, the remaining assets of the Corporation available for
distribution to stockholders, if any, shall be distributed among the holders of
the Common Stock.
(e) Certain Acquisitions.
--------------------
(i) Deemed Liquidation. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to
occur if the Corporation shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Corporation is
disposed of; provided, however, that this Section 2(e)(i) shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the
Corporation.
-3-
<PAGE>
(ii) Valuation of Consideration. In the event of a deemed liquidation
--------------------------
as described in Section 2(e)(i) above, if the consideration received by the
Corporation is other than cash, its value will be deemed to be its fair market
value. Unless otherwise set forth in a definitive merger agreement,
reorganization agreement, stock purchase agreement, asset purchase agreement or
the like relating to such transaction, any securities shall be valued as
follows:
(A) Securities not subject to investment letter or other similar
restrictions on free marketability:
(1) If traded on a securities exchange or The Nasdaq Stock
Market, the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the thirty-day period ending three (3) days
prior to the closing;
(2) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty (30) day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(B) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in Section 2(e)(ii)(A) to reflect the approximate fair
market value thereof, as mutually determined by the Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
(iii) Notice of Transaction. The Corporation shall give each holder
---------------------
of record of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock written notice of such impending transaction not later than ten
(10) days prior to the stockholders' meeting called to approve such transaction,
or ten (10) days prior to the closing of such transaction, whichever is earlier,
and shall also notify such holders in writing of the final approval of such
transaction. The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of this Section 2,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than ten
(10) days after the Corporation has given the first notice provided for herein
or sooner than ten (10) days after the Corporation has given notice of any
material changes provided for herein; provided, however, that such periods may
be shortened upon the written consent of the holders of Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
(iv) Effect of Noncompliance. In the event the requirements of this
-----------------------
Section 2(e) are not complied with, the Corporation shall forthwith either cause
the closing of the transaction to be postponed until such time as the
requirements of this Section 2 have been
-4-
<PAGE>
complied with, or cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, as applicable, shall
revert to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in Section
2(e)(iii) hereof.
3. Redemption. Neither the Series A Preferred Stock nor the Series B
----------
Preferred Stock nor the Series C Preferred Stock is redeemable.
4. Conversion. The holders of the Series A Preferred Stock, the
----------
holders of the Series B Preferred Stock and the holders of the Series C
Preferred Stock shall have conversion rights as follows (the "Conversion
----------
Rights"):
- ------
(a) Right to Convert. Subject to Section 4(c), each share of
----------------
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the Series A Purchase Price by the
Series A Conversion Price, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion in the case of the Series A
Preferred Stock, (ii) the Series B Purchase Price by the Series B Conversion
Price, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion in the case of the Series B Preferred Stock and
(iii) the Series C Purchase Price by the Series C Conversion Price, determined
as hereafter provided, in effect on the date the certificate is surrendered for
conversion in the case of the Series C Preferred Stock. The initial Series A
Conversion Price per share shall be Fifty-Eight and Four Thousand Five Hundred
Seventy-Seven Ten Thousandths Cents ($0.584577). The initial Series B Conversion
Price per share shall be One Dollar and Seventy-One and Eighty-Nine One
Hundredths Cents ($1.7189). The initial Series C Conversion Price per share
shall be Six Dollars and Eighty-Five and One-Half Cents ($6.855). Such initial
Series A Conversion Price, initial Series B Conversion Price and initial Series
C Conversion Price shall be subject to adjustment as set forth in Section 4(d)
below.
(b) Automatic Conversion. Each share of Series A Preferred Stock,
--------------------
Series B Preferred Stock and Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the Series A Conversion Price, Series B
Conversion Price, or Series C Conversion Price as applicable, at the time in
effect for such share immediately upon the earlier of (i) except as provided
below in Section 4(c), the Corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
--------------
offering price of which is not less than Ten Dollars and Twenty-Eight Cents
($10.28) per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and which results in aggregate gross cash
proceeds to the Corporation of at least Thirty Million Dollars ($30,000,000) or
(ii) the date specified by written consent or agreement of the holders of eighty
percent (80%) of the then outstanding shares of Series B Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he or she shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for such Series A
-5-
<PAGE>
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock as
applicable, and shall give written notice to the Corporation at its principal
corporate office of the election to convert the same and shall state therein the
name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as
applicable, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of such Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as applicable, to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act
the conversion may, at the option of any holder tendering such Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as
applicable, for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive Common Stock upon conversion of such Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock as
applicable, shall not be deemed to have converted such Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, as applicable, until
immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
- -------------------------------------------
A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) Issuance of Additional Stock below Purchase Price. If
-------------------------------------------------
the Corporation shall issue, after the date upon which any shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock were first
issued (the "Purchase Date" with respect to such series), any Additional
-------------
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for such series in effect immediately prior to
the issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically be adjusted
as set forth in this Section 4(d)(i), unless otherwise provided in this Section
4(d)(i).
(A) Adjustment Formula. Whenever the Conversion Price is
------------------
adjusted pursuant to this Section (4)(d)(i), the new Conversion Price shall be
determined by multiplying the Conversion Price then in effect by a fraction, (x)
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (the "Outstanding Common") plus the number of
------------------
shares of Common Stock that the aggregate consideration received by the
Corporation for such issuance would purchase at such Conversion Price; and (y)
the denominator of which shall be the number of shares of Outstanding Common
plus the number of shares of such Additional Stock. For purposes of the
foregoing calculation, the term "Outstanding Common" shall include shares of
Common Stock deemed issued pursuant to Section 4(d)(i)(E) below.
-6-
<PAGE>
(B) Definition of "Additional Stock". For purposes of this Section
--------------------------------
4(d)(i), "Additional Stock" shall mean any shares of Common Stock or securities
----------------
convertible into shares of Common Stock issued (or deemed to have been issued
pursuant to Section 4(d)(i)(E)) by the Corporation after the Purchase Date)
other than
(1) Common Stock issued pursuant to a transaction described in
Section 4(d)(ii) hereof;
(2) Shares of Common Stock issuable or issued to employees,
consultants or directors of the Corporation directly or pursuant to a stock
option plan or restricted stock plan unanimously approved by the Board of
Directors;
(3) Capital stock, or options or warrants to purchase capital
stock, issued to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings or similar transactions;
(4) Shares of Common Stock or Preferred Stock issuable upon
exercise of warrants outstanding as of the date of this Certificate of
Incorporation;
(5) Capital stock or warrants or options to purchase capital stock
issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors;
(6) Shares of Common Stock issued or issuable upon conversion of
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock.
(7) Shares of Common Stock issued or issuable in a public offering
prior to or in connection with which all outstanding shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock will be
converted to Common Stock; and
(8) Shares of Common Stock issued or issuable with the affirmative
vote of at least eighty percent (80%) of the then outstanding shares of
Preferred Stock, voting together as a class.
(C) No Fractional Adjustments. No adjustment of the Conversion Price
-------------------------
for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock shall be made in an amount less than One Cent ($0.01) per share, provided
that any adjustments which are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into account in any
subsequent adjustment made prior to three (3) years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of three years from the date of the event giving rise to the adjustment being
carried forward.
(D) Determination of Consideration. In the case of the issuance of
------------------------------
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any underwriting
or otherwise in connection
-7-
<PAGE>
with the issuance and sale thereof. In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(E) Deemed Issuances of Common Stock. In the case of the issuance
--------------------------------
(whether before, on or after the applicable Purchase Date) of options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 4(d)(i):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
4(d)(i)(D)), if any, received by the Corporation upon the issuance of such
options or rights plus the minimum exercise price provided in such options or
rights (without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in Section 4(d)(i)(D).
(3) In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the Corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion Price of each
of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, to the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
-8-
<PAGE>
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price of each of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to Sections 4(d)(i)(E)(1) and
4(d)(i)(E)(2) shall be appropriately adjusted to reflect any change, termination
or expiration of the type described in either Section 4(d)(i)(E)(3) or
4(d)(i)(E)(4).
(F) No Increased Conversion Price. Notwithstanding any other
-----------------------------
provisions of this Section (4)(d)(i), except to the limited extent provided for
in Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of the Conversion
Price pursuant to this Section 4(d)(i) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect immediately prior to such
adjustment.
(ii) Stock Splits and Dividends. In the event the Corporation should
--------------------------
at any time or from time to time after the Purchase Date fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
------------------------
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of each of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents with the number of shares issuable with respect to
Common Stock Equivalents determined from time to time.
(iii) Reverse Stock Splits. If the number of shares of Common Stock
--------------------
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
e) Other Distributions. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the
-9-
<PAGE>
Corporation or other persons, assets (excluding cash dividends) or options or
rights not referred to in Section 4(d)(ii), then, in each such case for the
purpose of this Section 4(e), the holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Series A Preferred Stock, and the holders of the Series B Preferred Stock and
the holders of the Series C Preferred Stock shall thereafter be entitled to
receive upon conversion of such Preferred Stock the number of shares of stock or
other securities or property of the Corporation or otherwise, to which a holder
of Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of such Preferred Stock after the recapitalization to the end that
the provisions of this Section 4 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of such
Preferred Stock) shall be applicable after that event and be as nearly
equivalent as practicable.
(g) No Impairment. The Corporation will not, by amendment of this
-------------
Certificate of Incorporation (except in accordance with Section 6 hereof and
applicable law) or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of
Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the conversion of any
share or shares of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share. The number of shares issuable upon
such conversion shall be determined on the basis of the total number of shares
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock the holder is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock pursuant to this Section 4, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of such Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock,
-10-
<PAGE>
Series B Preferred Stock and Series C Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price for such series of Preferred Stock at
the time in effect, and (C) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of a share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock, at least ten (10) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, the Series B Preferred Stock and
Series C Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of such series of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of such series of Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to these articles.
(k) Notices. Any notice required by the provisions of this Section 4
-------
to be given to the holders of shares of Series A Preferred Stock, the Series B
Preferred Stock or the Series C Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
5. Voting Rights. The holders of each share of Series A Preferred
-------------
Stock, Series B Preferred Stock and Series C Preferred Stock shall have the
right to one (1) vote for each share of Common Stock into which such Preferred
Stock could then be converted, and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the bylaws of
the Corporation (the "Bylaws"), and shall be entitled to vote, together with
------
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote. Fractional votes shall not, however, be
permitted and any fractional voting rights available on an as-converted basis
(after aggregating all shares into which shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
-11-
<PAGE>
6. Protective Provisions.
---------------------
(a) So long as at least Two Million (2,000,000) shares of Series A
Preferred Stock, at least Two Million (2,000,000) shares of Series B Preferred
Stock are outstanding and at least Two Million (2,000,000) shares of Series C
Preferred Stock are outstanding (in each case as adjusted for stock splits,
stock dividends or recapitalizations), the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of (i)
the holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, voting together as a class and (ii) the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock and Series C
Preferred Stock, voting together as a combined class:
(i) effect a transaction described in Section 2(e)(i)
above;
(ii) increase or decrease (other than by repurchase by the
Corporation or conversion) the total number of authorized shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series A Preferred Stock, the Series B Preferred Stock or
Series C Preferred Stock with respect to voting, dividends, conversion or upon
liquidation;
(iv) pay any dividend to holders of the Common Stock;
(v) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock, or Series B Preferred Stock, or
Series C Preferred Stock so as to affect adversely the shares of such series;
(vi) increase the number of authorized directors comprising
the Board of Directors to greater than seven (7); or
(vii) issue more than Three Million Five Hundred Seventy-
Four Thousand Eight Hundred Eight (3,574,808) shares of Series C Preferred Stock
without approval of at least six (6) members of the Board of Directors.
7. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled and shall not be issuable by the Corporation. This
Certificate of Incorporation of the Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
(C) Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends and
subject to Section 6(a)(v) of this Article IV, the holders of the Common Stock
shall be entitled to receive, when and as
-12-
<PAGE>
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Article IV(B).
3. Redemption. The Common Stock is not redeemable; provided,
----------
however, that the Company's repurchase of shares of its capital stock pursuant
to agreements approved by the Board of Directors shall not be deemed
"redemptions" and shall be allowed.
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(B) The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
The name and mailing address of the incorporator are as follows:
-13-
<PAGE>
Wendy Milanese
Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
-14-
<PAGE>
The undersigned, as Incorporator of Onvia.com, Inc., executes this
Certificate of Incorporation this 13th day of January 2000.
By: /s/ Wendy Milanese
-----------------------------
Wendy Milanese
Incorporator
<PAGE>
CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF INCORPORATION
OF ONVIA.COM, INC.
Onvia.com, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Onvia.com, Inc.
2. That the Certificate of Incorporation of Onvia.com, Inc. was filed
by the Secretary of State of Delaware on January ___, 2000 and that said
Certificate requires correction as permitted by Section 103 of the General
Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate of Incorporation of
Onvia.com, Inc. to be corrected is as follows: The holders of the Series A
Preferred Stock shall be entitled to receive dividends of Five and One-Quarter
Cents ($0.0525) per annum on each outstanding share, if and when declared by the
Board of Directors of the corporation. The numerical correspondent for the
written out portion of said number in the Certificate is missing a zero after
the decimal point. The reason for the error is typographical error.
4. Article IV(B)(1) of the Certificate of Incorporation of Onvia.com,
Inc. shall be amended and restated to read in full as follows:
"(a) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, the holders of shares of Series A
Preferred Stock, the holders of Series B Preferred Stock and the holders
of Series C Preferred Stock shall be entitled to receive dividends, out of
any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock
or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common
Stock of the Corporation) on the Common Stock of the Corporation, at the
rate of (i) Five and One-Quarter Cents ($0.0525) per share per annum on
each outstanding share of Series A Preferred Stock, (ii) Fifteen and One-
Half Cents ($0.155) per share per annum on each outstanding share of Series
B Preferred Stock and (iiv) Sixty-One and One-Half Cents ($0.615) per annum
on each outstanding share of Series C Preferred Stock, or, in each case if
greater (as determined on a per annum basis and on an as-converted basis),
an amount equal to any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common
Stock of the Corporation) paid on any other outstanding shares of the
Corporation, payable annually when, as and if declared by the Board of
Directors. Such dividends shall not be cumulative."
<PAGE>
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Glenn Ballman, its President and Secretary, this _____ day of
February, 2000.
ONVIA.COM, INC.
By:
--------------------------------------
Glenn Ballman, President and Secretary
-3-
<PAGE>
Exhibit 3.4
BYLAWS
OF
ONVIA.COM
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I - CORPORATE OFFICES.......................................... 1
1.1 REGISTERED OFFICE............................................ 1
1.2 OTHER OFFICES................................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................. 1
2.1 PLACE OF MEETINGS............................................ 1
2.2 ANNUAL MEETING............................................... 1
2.3 SPECIAL MEETING.............................................. 2
2.4 NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE........ 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND OTHER
STOCKHOLDER PROPOSALS........................................ 2
2.6 QUORUM....................................................... 3
2.7 ADJOURNED MEETING; NOTICE.................................... 4
2.8 CONDUCT OF BUSINESS.......................................... 4
2.9 VOTING....................................................... 4
2.10 WAIVER OF NOTICE............................................. 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING................... 5
2.12 PROXIES...................................................... 5
ARTICLE III - DIRECTORS................................................ 5
3.1 POWERS....................................................... 5
3.2 NUMBER OF DIRECTORS.......................................... 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...... 6
3.4 RESIGNATION AND VACANCIES.................................... 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..................... 7
3.6 REGULAR MEETINGS............................................. 7
3.7 SPECIAL MEETINGS; NOTICE..................................... 7
3.8 QUORUM....................................................... 8
3.9 WAIVER OF NOTICE............................................. 8
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............ 8
3.11 FEES AND COMPENSATION OF DIRECTORS........................... 8
3.12 APPROVAL OF LOANS TO OFFICERS................................ 9
3.13 REMOVAL OF DIRECTORS......................................... 9
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS........................... 9
ARTICLE IV - COMMITTEES................................................ 9
4.1 COMMITTEES OF DIRECTORS...................................... 9
4.2 COMMITTEE MINUTES............................................10
4.3 MEETINGS AND ACTION OF COMMITTEES............................10
ARTICLE V - OFFICERS...................................................11
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
5.1 OFFICERS.....................................................11
5.2 APPOINTMENT OF OFFICERS......................................11
5.3 SUBORDINATE OFFICERS.........................................11
5.4 REMOVAL AND RESIGNATION OF OFFICERS..........................11
5.5 VACANCIES IN OFFICES.........................................11
5.6 CHIEF EXECUTIVE OFFICER......................................11
5.7 PRESIDENT....................................................12
5.8 VICE PRESIDENTS..............................................12
5.9 SECRETARY....................................................12
5.10 CHIEF FINANCIAL OFFICER......................................13
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...............13
5.12 AUTHORITY AND DUTIES OF OFFICERS.............................13
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS.......................................................13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS....................13
6.2 INDEMNIFICATION OF OTHERS....................................14
6.3 PAYMENT OF EXPENSES IN ADVANCE...............................14
6.4 INDEMNITY NOT EXCLUSIVE......................................14
6.5 INSURANCE....................................................14
6.6 CONFLICTS....................................................15
ARTICLE VII - RECORDS AND REPORTS......................................15
7.1 MAINTENANCE AND INSPECTION OF RECORDS........................15
7.2 INSPECTION BY DIRECTORS......................................15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.............................16
ARTICLE VIII - GENERAL MATTERS.........................................16
8.1 CHECKS.......................................................16
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.............16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.......................16
8.4 SPECIAL DESIGNATION ON CERTIFICATES..........................17
8.5 LOST CERTIFICATES............................................17
8.6 CONSTRUCTION; DEFINITIONS....................................17
8.7 DIVIDENDS....................................................18
8.8 FISCAL YEAR..................................................18
8.9 SEAL.........................................................18
8.10 TRANSFER OF STOCK............................................18
8.11 STOCK TRANSFER AGREEMENTS....................................18
8.12 REGISTERED STOCKHOLDERS......................................18
ARTICLE IX.............................................................19
</TABLE>
-ii-
<PAGE>
BYLAWS
OF
ONVIA.COM, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE.
-----------------
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
1.2 OTHER OFFICES.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS.
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the Corporation.
2.2 ANNUAL MEETING.
--------------
(a) The annual meeting of stockholders shall be held each year on a
date and at a time designated by resolution of the Board of Directors. At the
meeting, directors shall be elected and any other proper business may be
transacted.
(b) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be transacted by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 2.2, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this Section 2.2.
(c) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (b) of
this Section 2.2, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation,
<PAGE>
as provided in Section 2.5, and such business must be a proper matter for
stockholder action under the General Corporation Law of Delaware.
(d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in these Bylaws. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.
(e) Nothing in this Section 2.2 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.3 SPECIAL MEETING.
---------------
(a) A special meeting of the stockholders may be called at any time by
the Board of Directors, or by the chairman of the board, or by the president.
(b) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to such notice of meeting (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in Section
2.5, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in Section 2.5.
2.4 NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE.
-----------------------------------------------------
All notices of meetings of stockholders shall be in writing and shall
be sent or otherwise given in accordance with this Section 2.4 of these Bylaws
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting (or such longer or shorter time as
is required by Section 2.5 of these Bylaws, if applicable). The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. Written
notice of any meeting of stockholders, if mailed, is given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation. An affidavit of the secretary
or an assistant secretary or of the transfer agent of the Corporation that the
notice has been given shall, in the absence of fraud, be prima facie evidence of
the facts stated therein.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND OTHER STOCKHOLDER
------------------------------------------------------------
PROPOSALS.
- ---------
Only persons who are nominated in accordance with the procedures set forth
in this Section 2.5 shall be eligible for election as directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made at
a meeting of stockholders by or at the
-2-
<PAGE>
direction of the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 2.5. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the secretary of the Corporation.
Stockholders may bring other business before the annual meeting, provided that
timely notice is provided to the secretary of the Corporation in accordance with
this section, and provided further that such business is a proper matter for
stockholder action under the General Corporation Law of Delaware. To be timely,
a stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 90 days nor more
than 120 days prior to the anniversary date of the prior year's meeting;
provided, however, that in the event that (i) the date of the annual meeting is
more than 30 days prior to or more than 60 days after such anniversary date, and
(ii) less than 60 days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. For purposes of this Section 2.5, "public
disclosure" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or a comparable national news service. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a directors, (i) the name,
age, business address and residence address of such person, (ii) the principal
occuption or employment of such person, (iii) the class and number of shares of
the Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934
(including, without limitation, such person's written consent to being name in
the proxy statement as a nominee and to serving as a director if elected); (b)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of such business, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the proposal is made (i) the name and address of the
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
of record by such stockholder and beneficially by such beneficial owner. At the
request of the Board of Directors any person nominated by the Board of Directors
for election as a director shall furnish to the secretary of the Corporation
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 2.5. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if he
or she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
2.6 QUORUM.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the
-3-
<PAGE>
stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum is not
present or represented at any meeting of the stockholders, then either (a) the
chairman of the meeting or (b) the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.9 VOTING.
-------
(a) The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.11 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at,
-4-
<PAGE>
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
------------------------------------------
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If the Board of Directors does not
so fix a record date:
(a) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES.
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
Corporation, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, electronic or telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
ARTICLE III
DIRECTORS
---------
3.1 POWERS.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the Certificate of Incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the Corporation shall be
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managed and all corporate powers shall be exercised by or under the direction of
the Board of Directors.
3.2 NUMBER OF DIRECTORS.
-------------------
The number of directors constituting the entire Board of Directors
shall be seven.
Thereafter, this number may be changed by a resolution of the Board of
Directors or of the stockholders, subject to Section 3.4 of these Bylaws. No
reduction of the authorized number of directors shall have the effect of
removing any director before such director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
Certificate of Incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
3.4 RESIGNATION AND VACANCIES.
-------------------------
Any director may resign at any time upon written notice to the
attention of the secretary of the Corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
A vacancy created by the removal of a director by the vote of the stockholders
or by court order may be filled only by the affirmative vote of a majority of
the shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a majority of the
quorum. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
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If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole Board of Directors (as constituted immediately prior to any such
increase), then the Court of Chancery may, upon application of any stockholder
or stockholders holding at least 10% of the total number of the shares at the
time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
----------------------------------------
The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or outside the State of Delaware. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
3.6 REGULAR MEETINGS.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
3.7 SPECIAL MEETINGS; NOTICE.
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the Corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone, telecopy, telegram, telex, email or other similar means of
communication, it shall be delivered at least twenty-four (24) hours before the
time of the holding of the meeting, or on such shorter notice as the person or
persons calling such meeting may deem necessary and appropriate in the
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circumstances. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
-------------------------------------------------
Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board of Directors 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 of Directors or committee. Written consents
representing actions taken by the board or committee may be executed by telex,
telecopy or other facsimile transmission, and such facsimile shall be valid and
binding to the same extent as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
----------------------------------
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Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
3.12 APPROVAL OF LOANS TO OFFICERS.
-----------------------------
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiary, including any officer or employee who is a director of the
Corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Section 3.2 contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
--------------------
Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the Corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
----------------------------------
The Corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board of Directors who shall not be considered an
officer of the Corporation.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS.
-----------------------
The Board of Directors may, by resolution passed by a majority of the whole
Board of Directors, designate one or more committees, with each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or
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not such member or members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the Corporation, 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 that may require it; but
no such committee shall have the power or authority to (a) amend the Certificate
of Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series),(b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, (d) recommend to
the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or (e) amend the Bylaws of the Corporation; and, unless the board
resolution establishing the committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
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OFFICERS
--------
5.1 OFFICERS.
--------
The officers of the Corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The Corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS.
-----------------------
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the Corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the Board of Directors or, except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such power of removal
may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the secretary of the Corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
--------------------
Any vacancy occurring in any office of the Corporation shall be filled
by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
-----------------------
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Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the Corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the Corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.7 PRESIDENT.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the Corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
---------------
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 SECRETARY.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the Corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board Of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. He or
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she shall keep the seal of the Corporation, if one be adopted, in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by these Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the Corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
----------------------------------------------
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this Corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this Corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this Corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by the person having such
authority.
5.12 AUTHORITY AND DUTIES OF OFFICERS.
--------------------------------
In addition to the foregoing authority and duties, all officers of the
Corporation shall respectively have such authority and perform such duties in
the management of the business of the Corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
-------------------------------------------------------------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------
The Corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually
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and reasonably incurred in connection with any proceeding, arising by reason of
the fact that such person is or was an agent of the Corporation. For purposes of
this Section 6.1, a "director" or "officer" of the Corporation includes any
person (a) who is or was a director or officer of the Corporation, (b) who is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
(c) who was a director or officer of a Corporation which was a predecessor
corporation of the Corporation or of another enterprise at the request of such
predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS.
-------------------------
The Corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the Corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the Corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the Corporation, (b) who is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the Corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may been
titled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Certificate of
Incorporation.
6.5 INSURANCE.
---------
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her
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and incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to indemnify
him or her against such liability under the provisions of the General
Corporation Law of Delaware.
6.6 CONFLICTS.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the Certificate
of Incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
-------------------------------------
The Corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
-----------------------
Any director shall have the right to examine the Corporation's
stockledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily
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order the Corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
--------------------------------
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the Corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
--------------------------------------
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the Corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or vice-
president, and by the chief financial officer or an assistant treasurer, or the
secretary or an assistant secretary of the Corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is
-16-
<PAGE>
issued, it may be issued by the Corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
The Corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
Corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
Corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
-----------------------------------
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the Corporation shall issue to represent
such class or series of stock a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and canceled at the same time. The Corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
-17-
<PAGE>
8.7 DIVIDENDS.
---------
The directors of the Corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the Certificate
of Incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock.
The directors of the Corporation may set apart out of any of the funds
of the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
8.8 FISCAL YEAR.
-----------
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL.
----
The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
-----------------
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
-------------------------
The Corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the Corporation to restrict the transfer of shares of stock of the Corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
-----------------------
The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
-18-
<PAGE>
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the Corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the Corporation may,
in its Certificate of Incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
-19-
<PAGE>
Exhibit 3.5
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ONVIA.COM, INC.
The undersigned, Glenn S. Ballman and Mark T. Calvert, hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of Onvia.com, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 13, 2000 under the name
of Onvia.com, Inc.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
"ARTICLE I
The name of this corporation is Onvia.com, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle. The name
of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is 265,000,000 shares,
each with a par value of $0.0001 per share. 250,000,000 shares shall be Common
Stock and 15,000,000 shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate
pursuant to the applicable law of the state of Delaware and within the
limitations and restrictions stated in this Certificate of Incorporation, to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and the number
of shares constituting any such series and the designation thereof, or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares
<PAGE>
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
On or prior to the date on which the Corporation first provides notice of
an annual meeting of the stockholders, the Board of Directors of the Corporation
shall divide the directors into three classes, as nearly equal in number as
reasonably possible, designated Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders or any special meeting in lieu thereof, the terms of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders or any special
meeting in lieu thereof, the terms of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the
third annual meeting of stockholders or any special meeting in lieu thereof, the
terms of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders or special meeting in lieu thereof, directors elected to succeed
the directors of the class whose terms expire at such meeting shall be elected
for a full term of three years.
Notwithstanding the foregoing provisions of this Article VI, each director
shall serve until his or her successor is duly elected and qualified or until
his or her death, resignation, or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal, or other causes shall be filled by either (i) the
affirmative vote of the holders of a majority of the voting power of the then-
outstanding shares of voting stock of the Corporation entitled to vote generally
in the election of directors (the "Voting Stock") voting together as a single
class; or (ii) by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors.
Subject to the rights of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the number of directors
shall, unless the Board of Directors determines by resolution that any such
newly created directorship shall be filled by the stockholders, be filled only
by the affirmative vote of the directors then in office, even though less than a
quorum of the Board of Directors, or by a sole remaining director. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. Any director, or the entire
Board of Directors, may be removed from office, with or without cause, by the
holders of a majority of the Voting Stock.
-2-
<PAGE>
ARTICLE VII
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each share
held. No stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE VIII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Bylaws of the Corporation (the "Bylaws"),
and no action shall be taken by the stockholders by written consent.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE X
(A) Except as otherwise provided in the Bylaws, the Bylaws may be altered
or amended or new Bylaws adopted by the affirmative vote of at least 66 2/3% of
the voting power of all of the then-outstanding shares of the voting stock of
the Corporation entitled to vote. The Board of Directors of the Corporation is
expressly authorized to adopt, amend or repeal Bylaws.
(B) The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
(C) Advance notice of stockholder nominations for the election of directors
or of business to be brought by the stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
Bylaws.
ARTICLE XI
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
ARTICLE XII
The Corporation shall have perpetual existence.
ARTICLE XIII
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally
-3-
<PAGE>
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. If the General Corporation Law of Delaware is
hereafter amended to authorize, with the approval of a corporation's
stockholders, further reductions in the liability of a corporation's directors
for breach of fiduciary duty, then a director of the Corporation shall not be
liable for any such breach to the fullest extent permitted by the General
Corporation Law of Delaware, as so amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XIII shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XIV
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the Corporation
to provide indemnification) through Bylaw provisions, agreements with such
agents or other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the General Corporation Law of Delaware, subject only to
limits created by applicable Delaware law (statutory or non-statutory), with
respect to actions for breach of duty to a corporation, its stockholders, and
others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XIV shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification."
* * *
-4-
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Seattle, Washington, on the ____ day of ___________, 2000.
--------------------------------
Glenn S. Ballman, President
--------------------------------
Mark T. Calvert, Secretary
-5-
<PAGE>
EXHIBIT 4.2
ONVIA.COM, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
December 20, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. REGISTRATION RIGHTS................................ 2
1.1 Definitions..................................... 2
1.2 Request for Registration........................ 3
1.3 Company Registration............................ 4
1.4 Form S-3 Registration........................... 5
1.5 Obligations of the Company...................... 5
1.6 Furnish Information............................. 7
1.7 Expenses of Registration........................ 7
1.8 Underwriting Requirements....................... 8
1.9 Delay of Registration........................... 8
1.10 Indemnification................................. 9
1.11 Reports Under Securities Exchange Act of 1934... 11
1.12 Assignment of Registration Rights............... 11
1.13 Limitations on Subsequent Registration Rights... 12
1.14 Market Stand-Off Agreement...................... 12
1.15 Termination of Registration Rights.............. 13
2. COVENANTS OF THE COMPANY........................... 13
2.1 Delivery of Financial Statements................ 13
2.2 Right of First Offer............................ 14
2.3 Board Observer Seat............................. 15
2.4 Use of Proceeds................................. 15
2.5 Termination of Covenants........................ 15
3. MISCELLANEOUS...................................... 16
3.1 Successors and Assigns.......................... 16
3.2 Amendments and Waivers.......................... 16
3.3 Notices......................................... 16
3.4 Severability.................................... 17
3.5 Governing Law................................... 17
3.6 Counterparts.................................... 17
3.7 Titles and Subtitles............................ 17
3.8 Aggregation of Stock............................ 17
3.9 Waiver of Jury Trial............................ 17
3.10 Amendment and Restatement....................... 18
3.11 Attorney's Fees................................. 18
</TABLE>
i
<PAGE>
Exhibit 4.2
ONVIA.COM, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
-------------------------------------------------------
This Onvia.com, Inc. Second Amended and Restated Investors' Rights
Agreement (this "Agreement") is made as of the 20th day of December 1999, by and
---------
among Onvia.com, Inc., a Washington corporation (the "Company"), the investors
-------
listed on Exhibit A hereto (each, an "Investor," and collectively, the
--------- --------
"Investors") and the holders of the Company's common stock (the "Common Stock")
- ---------- ------------
listed on Exhibit B hereto (each, a "Common Holder," and together, the "Common
--------- -------------- ------
Holders").
- -------
RECITALS
--------
A. Certain of the Investors hold shares of the Company's Series A
Preferred Stock (the "Series A Preferred Stock"), the Company's Series B
------------------------
Preferred Stock (the "Series B Preferred Stock") and/or shares of the Company's
------------------------
Common Stock issued upon conversion thereof and possess registration rights,
information rights and other rights pursuant to that certain Onvia.com, Inc.,
Investors' Rights Agreement dated as of September 30, 1999 by and among the
Company and such certain Investors (the "Old Investors' Rights Agreement").
-------------------------------
B. The Company and certain of the Investors have entered into that certain
Onvia.com, Inc. Series C Preferred Stock Purchase Agreement (the "Series C
--------
Purchase Agreement") of even date herewith pursuant to which the Company desires
- ------------------
to sell to such certain Investors, and such certain Investors desire to purchase
from the Company, shares of the Company's Series C Preferred Stock (the "Series
------
C Preferred Stock").
- -----------------
C. A condition to such certain Investors' obligations under the Purchase
Agreement is that the Company, the Common Holders and the Investors enter into
this Agreement in order to provide the Investors with, among other things, (1)
certain rights to register shares of the Company's Common Stock issuable upon
conversion of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock held by the Investors, (2) certain rights to receive or
inspect information pertaining to the Company and (3) a right of first offer
with respect to certain issuances by the Company of its securities, all
according to the terms and conditions, but subject to the limitations, set forth
in this Agreement.
D. The Company, the Investors and the Common Holders desire (1) to induce
certain Investors to purchase shares of Series C Preferred Stock pursuant to the
Purchase Agreement and (2) to terminate the Old Investors' Rights Agreement and
to accept the rights and obligations set forth in this Agreement, by agreeing to
the terms and conditions set forth below.
AGREEMENT
---------
In consideration of the foregoing recitals and the mutual promises set
forth in this Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
<PAGE>
1. Registration Rights. The Company, the Investors and the Common Holders
-------------------
hereby covenant and agree as follows:
1.1 Definitions. For purposes of this Section 1:
------------
(a) The terms "register," "registered," and "registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
--------------
registration statement or document;
(b) The term "Registrable Securities" means (i) the shares of
----------------------
Common Stock issuable or issued upon conversion of the Series A Preferred Stock,
the Series B Preferred Stock and the Series C Preferred Stock, (ii) the shares
of Common Stock issued to the Common Holders (the "Common Holders' Stock");
----------------------
provided, however, that for the purposes of Section 1.2, 1.4 or 1.13 the Common
Holders' Stock shall not be deemed Registrable Securities and the Common Holders
shall not be deemed Holders, (iii) any other shares of Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares listed in
(i) and (ii) and (iv) the shares of Common Stock issued or issuable upon
conversion or exercise of securities purchased by Holders pursuant to any right
of first offer, right of first refusal or co-sale right set forth in the
Agreements; provided, however, that the foregoing definition shall exclude in
all cases any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned. Notwithstanding the
foregoing, Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then
---------------------------
outstanding" shall be determined by the number of shares of Common Stock
- -----------
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having the
------
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 of this Agreement;
(e) The term "Form S-3" means such form under the Securities Act
--------
as in effect on the date hereof or any successor form under the Securities Act;
(f) The term "SEC" means the Securities and Exchange Commission;
---
and
<PAGE>
(g) The term "Qualified IPO" means a firm commitment underwritten
-------------
public offering by the Company of shares of its Common Stock pursuant to a
registration statement under the Securities Act, the public offering price of
which is not less than Twenty Dollars and Fifty-Seven Cents ($20.57) per share
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and which results in aggregate cash proceeds to the
Corporation of Thirty Million Dollars ($30,000,000) (net of underwriting
discounts and commissions).
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
February 24, 2003, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or an SEC Rule 145 transaction), a written request from the Holders of a
majority of the Registrable Securities then outstanding that the Company file a
registration statement under the Securities Act covering the registration of the
Registrable Securities having an aggregate public offering price not less than
Ten Million Dollars ($10,000,000) (net of underwriting discounts and
commissions). Then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), use its commercially reasonable best
efforts to effect as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, the registration under the Securities Act
of all Registrable Securities which the Holders request to be registered within
twenty (20) days of the mailing of such notice by the Company in accordance with
Section 3.3.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
------------------
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to
<PAGE>
be included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the board of directors of the Company (the "Board of
--------
Directors") it would be seriously detrimental to the Company and its
- ---------
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than one hundred
twenty (120) days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more than once in
any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations pursuant
to this Section 1.2 and such registrations have been declared or ordered
effective;
(ii) During the period starting with the date sixty (60) days prior
to the Company's good faith estimate of the date of filing of, and ending on a
date one hundred eighty (180) days after the effective date of, a registration
subject to Section 1.3 hereof; provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective; or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.4 below.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock under the Securities Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Securities Act, a registration in which the only
stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or any registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.3, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
1.4 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders a written request or requests that the Company effect a
registration on
<PAGE>
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4: (i) if
Form S-3 is not available for such offering by the Holders, (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than Five Million Dollars
($5,000,000), (iii) if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors, it would be seriously detrimental to the Company and
its stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred twenty (120)
days after receipt of the request of the Holder or Holders under this Section
1.4; provided, however, that the Company shall not utilize this right more than
once in any twelve month period, (iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected a registration
on Form S-3 for the Holders pursuant to this Section 1.4, (v) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance or (vi) during the period ending one
hundred eighty (180) days after the effective date of a registration statement
subject to Section 1.3.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. Registrations effected pursuant to this Section 1.4 shall not
be counted as demands for registration or registrations effected pursuant to
Sections 1.2.
1.5 Obligations of the Company. Whenever required under this
--------------------------
Section 1 to effect the registration of any Registrable Securities, the Company
shall use commercially reasonable best efforts to:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its commercially reasonable best
efforts to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up
<PAGE>
to one hundred twenty (120) days. The Company shall not be required to file,
cause to become effective or maintain the effectiveness of any registration
statement that contemplates a distribution of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for up to one hundred twenty (120) days.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when (i) a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days, or (ii)
there is any stop order issued by the SEC suspending the effectiveness of such
registration statement or the initiation of any proceedings for that purpose and
the receipt by the Company of any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threatening of such procedure.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
<PAGE>
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.6 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of the application of the preceding sentence, the number of
shares or the anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the number of shares
or the anticipated aggregate offering price specified in subsection 1.2(a) or
subsection 1.4(b)(2), whichever is applicable.
1.7 Expenses of Registration.
------------------------
(a) Demand Registration. All expenses (other than underwriting
-------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2), including without limitation, all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them with the
approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2.
(b) Company Registration and Registration on Form S-3. All
-------------------------------------------------
expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications of Registrable
Securities pursuant to Section 1.3 and Section 1.4 for each Holder (which right
may be assigned as provided in Section 1.12), including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees,
<PAGE>
fees and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holder or Holders selected by them
with the approval of the Company, which approval shall not be unreasonably
withheld, shall be borne by the Company.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall (i) any shares being sold by
a stockholder exercising a demand registration right similar to that granted in
Section 1.2 be excluded from such offering, (ii) the amount of securities of the
selling Holders included in the offering be reduced below thirty percent (30%)
of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities, in which
case, except as provided in (i) the selling stockholders may be excluded if the
underwriters make the determination described above and no other stockholder's
securities are included or (iii) any securities held by a Common Holder be
included if any securities held by any selling Holder are excluded. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder," and any pro-rata reduction with
-------------------
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to
---------------------
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the
<PAGE>
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), against any losses, claims, damages, or liabilities (joint or several) to
- ---
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
---------
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will pay to each such Holder, underwriter
or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable to any Holder,
underwriter or controlling person for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, severally and not jointly, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided
further, however, that in no event shall any indemnity under this subsection
1.10(b) exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying
<PAGE>
party under this Section 1.10, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the reasonable fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, however, that in no event shall any contribution by a
Holder under this Subsection 1.10(d) exceed the net proceeds from the offering
received by such Holder. 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.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
<PAGE>
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the effective date of
the first registration statement filed by the Company for the offering of its
securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least two hundred fifty thousand (250,000) shares of such
securities; provided, however, the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided further, however, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. The foregoing notwithstanding, any
Investor may assign its rights and obligations pursuant to this Section 1 to an
affiliate or successor so long as such affiliate or successor agrees to be bound
by the terms of this Agreement. For the purposes of determining the number of
shares of Registrable Securities held by a transferee or assignee, the holdings
of transferees and assignees of a partnership who are partners or retired
partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under Section 1.
1.13 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder
<PAGE>
or prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to include such securities in any registration
filed under Section 1.2 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
reduce the amount of the Registrable Securities of the Holders which is included
or (b) to make a demand registration which could result in such registration
statement being declared effective prior to the earlier of either of the dates
set forth in subsection 1.2(a) or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to Section 1.2.
1.14 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period (up to, but not exceeding, one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Securities Act, it shall not, to the extent requested by
the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except (i) Common Stock included in such registration,
(ii) securities acquired pursuant to such registration statement, or (iii)
securities acquired on the open market; provided, however, that:
(a) such agreement shall be applicable only the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company, all one-percent
securityholders, and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements;
(c) such ag reement shall be on customary terms.
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period, and each Holder agrees that, if so
requested, such Holder will execute an agreement in the form provided by the
underwriter containing terms which are essentially consistent with the
provisions of this Section 1.14.
Notwithstanding the foregoing, the obligations described in this Section
1.14 shall not apply to a registration relating solely to employee benefit plans
on Form S-1 or Form S-8 or similar forms which may be promulgated in the future,
or a registration relating solely to an SEC Rule 145 transaction on Form S-4 or
similar forms which may be promulgated in the future.
1.15 Termination of Registration Rights. No Holder shall be
----------------------------------
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) five (5) years following the consummation of a Qualified IPO or (ii) such
time as Rule 144 or another similar exemption
<PAGE>
under the Securities Act is available for the sale of all of such Holder's
shares during a three (3)-month period without registration.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Holder of at least two hundred fifty thousand (250,000) shares of
Registrable Securities (other than a Holder reasonably deemed by the Company to
be a competitor of the Company):
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
----
and certified by an independent public accounting firm of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within thirty (30) days
after the end of each of the first three (3) quarters of each fiscal year of the
Company, an unaudited income statement, a statement of cash flows for such
fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter;
(c) within thirty (30) days of the end of each month, an unaudited
income statement and a statement of cash flows and balance sheet for and as of
the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days prior to
the end of each fiscal year, a budget and business plan as approved by the board
of directors for the next fiscal year, prepared on a monthly basis, and, as soon
as prepared, any other budgets or revised budgets prepared by the Company;
(e) as soon as practicable after the Closing of the transactions
contemplated in the Purchase Agreement and related Agreements, a written plan
setting forth the Company's proposed use of the proceeds to be obtained from its
sale of the Series C Preferred Stock; and
(f) with respect to the financial statements called for in subsections
(b) and (c) of this Section 2.1, an instrument executed by the Chief Financial
Officer or President of the Company and certifying that such financials were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by GAAP)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment,
provided that the foregoing shall not restrict the right of the Company to
change its accounting principles consistent with GAAP, if the Board of Directors
determines that it is in the best interests of the Company to do so.
<PAGE>
2.2 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.2, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this
Section 2.2, a "Major Investor" shall mean any person who holds at least two
--------------
hundred fifty thousand (250,000) shares of the Series A Preferred Stock, Series
B Preferred Stock or Series C Preferred Stock (or the Common Stock issued or
issuable upon conversion thereof) issued pursuant to the Purchase Agreement.
For purposes of this Section 2.2, Major Investor includes any general partners
and affiliates of a Major Investor. A Major Investor who chooses to exercise
the right of first offer may designate as purchasers under such right itself or
its partners or affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
------
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice") to
------
the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within fifteen (15) calendar days after delivery of the Notice,
the Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Major Investor that purchases all the shares available to it (each,
a "Fully-Exercising Investor") of any other Major Investor's failure to do
-------------------------
likewise. During the ten (10)-day period commencing after receipt of such
information, each Fully-Exercising Investor shall be entitled to obtain that
portion of the Shares for which Major Investors were entitled to subscribe but
which were not subscribed for by the Major Investors that is equal to the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Fully-Exercising Investor bears to the total
number of shares of Common Stock then outstanding and held by the Fully-
Exercising Investors (assuming full conversion and exercise of all convertible
or exercisable securities).
(c) The Company may, during the 45-day period following the expiration
of the period provided in subsection 2.2(b) hereof, offer the remaining
unsubscribed portion of the Shares to any person or persons at a price not less
than, and upon terms no more favorable to the offeree than those specified in
the Notice. If the Company does not enter into an agreement for the sale of the
Shares within such period, or if such agreement is not consummated within sixty
(60) days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such Shares shall not be offered unless first reoffered to the
Major Investors in accordance herewith.
<PAGE>
(d) The right of first offer in this paragraph 2.2 shall not be
applicable (i) to the issuance or sale of Common Stock (or options therefor) to
employees, consultants and directors, pursuant to plans or agreements approved
by the Board of Directors for the primary purpose of soliciting or retaining
their services, (ii) to or after consummation of a Qualified IPO, (iii) to the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities, (iv) to the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise, (v) to
the issuance of securities to financial institutions, lessors or vendors in
connection with commercial credit arrangements, equipment financings, or similar
transactions, (vi) to the issuance or sale of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock or (vii) to the issuance of
securities that, with unanimous approval of the Board of Directors, are not
offered to any existing stockholder of the Company.
2.3 Board Observer Seat. For any meeting of the Board of
-------------------
Directors, the Company shall allow one representative of GE Capital Equity
Investments, Inc. ("GE") (the "Representative") designated from time to time by
-- --------------
GE to attend all meetings of the Board (and all committees thereof) in a non-
voting observer capacity; reimburse GE for the Representatives's out-of-pocket
expenses in connection with attending such meetings; provide to the
Representative copies of all notices, minutes, consents and other materials that
the Company provides to its directors in connection with meetings of the Board
(or any committee thereof, as the case may be) at the same time such is given to
its directors; and allow the Representative to participate in discussions of
matters brought to the Board. The rights in this Section 2.3 are personal to GE
and its affiliates and therefore may only be transferred or assigned with the
prior consent of the Company, which consent will not be unreasonably withheld.
2.4 Use of Proceeds. The Company will use the proceeds of its
---------------
Series C Preferred Stock financing for expansion of the Company sales efforts,
marketing efforts, general working capital purposes and retirement of debt.
2.5 Termination of Covenants.
------------------------
(a) The covenants set forth in Sections 2.1, 2.2, 2.3 and 2.4
shall terminate as to each Holder and be of no further force or effect (i) as of
the closing date of a Qualified IPO or (ii) when the Company shall sell, convey,
or otherwise dispose of or encumber all or substantially all of its property or
business or merge into or consolidate with any other corporation (other than a
wholly-owned subsidiary corporation) or effect any other transaction or series
of related transactions in which more than fifty percent (50%) of the voting
power of the Company is disposed of, provided that this subsection (ii) shall
not apply to a merger effected exclusively for the purpose of changing the
domicile of the Corporation.
(b) The covenants set forth in Sections 2.1, 2.2, 2.3 and 2.4
shall terminate as to each Holder and be of no further force or effect when the
Company first becomes subject to the periodic reporting requirements of Sections
13 or 15(d) of the Exchange Act, if this occurs earlier than the events
described in Section 2.5(a) above.
3. Miscellaneous.
-------------
<PAGE>
3.1 Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties (including transferees of any of the Series A Preferred Stock, Series B
Preferred Stock, or Series C Preferred Stock or any Common Stock issued upon
conversion thereof). Any Investor may assign its rights and obligations under
this Agreement to any of its affiliates or successors so long as such affiliate
or successor agrees to be bound by the terms of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of (a) the Company, (b) the
holders of a majority of the Company's Series A Preferred Stock then
outstanding, (c) the holders of a majority of the Company's Series B Preferred
Stock and (d) the holders of a majority of the Company's Series C Preferred
Stock, not including the Common Holders' Stock; provided, however, that if such
amendment has the effect of affecting the Common Holders' Stock (i) in a manner
different than securities issued to the Investors and (ii) in a manner adverse
to the interests of the holders of the Common Holders' Stock, then such
amendment shall require the consent of the holder or holders of a majority of
the Common Holders' Stock. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities, and the
Company.
3.3 Notices. Unless otherwise provided, any notice required or
-------
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or one hundred twenty (120) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address or fax number as set forth
on the signature page on Exhibit A hereto or as subsequently modified by written
---------
notice.
3.4 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
3.5 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Delaware, without giving effect to principles of
conflicts of laws.
3.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
3.7 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.8 Aggregation of Stock. All shares of the Preferred Stock held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.9 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ITS
--------------------
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE AGREEMENTS, THE STOCK OR THE COMMON STOCK, OR THE SUBJECT MATTER
HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS SECTION 3.9 HAS BEEN FULLY DISCUSSED BY EACH OF THE
PARTIES HERETO AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS.
EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
(WITHOUT A JURY) BY THE COURT.
3.10 Amendment and Restatement. Effective upon the closing of the
-------------------------
sale and issuance of the Series C Preferred Stock pursuant to the Purchase
Agreement, all provisions of, rights granted and covenants made in the Old
Investors' Rights Agreement are hereby waived, released and terminated in their
entirety and shall have no further force or effect whatsoever. The rights and
covenants contained in this agreement set forth the sole and entire agreement
among the Company, the investors, and the common holders on the subject matter
hereof and supersede any and all rights granted or covenants made under any
prior agreement with respect to the subject matter hereof including the Old
Investors' Rights Agreement. Notwithstanding the foregoing, this Amendment does
not supersede, and is subject to, any notice and waiver of notice of
registration rights executed by a party hereto before, on or after the date of
this Agreement.
3.11 Attorneys' Fees. If any action at law or in equity is
---------------
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
<PAGE>
[Signature Page Follows]
<PAGE>
The parties have executed this Onvia.com, Inc. Second Amended and Restated
Investors' Rights Agreement as of the date first above written.
COMPANY:
ONVIA.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
-----------------
Name: Glenn Ballman
-------------
(print)
Title: President
---------
Address: 1000 Dexter Avenue
Suite 400
Seattle, WA 98104
[COUNTERPART SIGNATURE PAGE TO ONVIA.COM, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INVESTORS:
MOHR, DAVIDOW VENTURES V, L.P.
By: Fifth MDV Partners, LLC
Its General Partner
By:
---------------------------------
Member
MOHR, DAVIDOW VENTURES V, L.P. as nominee
for MDV Entrepreneurs' Network Fund II (A),
L.P. and MDV Entrepreneurs' Network Fund II
(B), L.P.
By: Fifth MDV Partners, LLC
Its General Partner
By:
---------------------------------
Member
[COUNTERPART SIGNATURE PAGE TO ONVIA.COM, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INVESTORS:
INTERNET CAPITAL GROUP, INC.
By:
--------------------------------------
Kenneth A. Fox, Managing Director
GE CAPITAL EQUITY
INVESTMENTS, INC.
By:
--------------------------------------
Its:
--------------------------------------
RIT VENTURES I LLC
By:
--------------------------------------
Its:
--------------------------------------
[COUNTERPART SIGNATURE PAGE TO ONVIA.COM, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SERIES A INVESTORS:
----------------------------------
(Print Name of Purchaser)
By:
-------------------------------
Name:
----------------------------
(Print Name)
Title:
----------------------------
Address:
----------------------------
----------------------------
----------------------------
<PAGE>
INVESTORS:
--------------------------------
(Print Name of Purchaser)
--------------------------------
By:
-----------------------------
Name:
---------------------------
(Print Name)
Title:
--------------------------
Address:
--------------------------
--------------------------
--------------------------
Fax:
--------------------------
[COUNTERPART SIGNATURE PAGE TO ONVIA.COM, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
COMMON HOLDERS:
-----------------------------
(Print Name of Common Holder)
By:
--------------------------
Signature
Address:
--------------------------
--------------------------
--------------------------
[COUNTERPART SIGNATURE PAGE TO ONVIA.COM, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
---------
INVESTORS
---------
Mohr, Davidow Ventures V, L.P.
2775 Sand Hill Road
Suite 240
Menlo Park, CA 94025
Mohr, Davidow Ventures V, L.P.
as nominee for MDV Entrepreneurs'
Network Fund II (A), L.P. and MDV
Entrepreneurs' Network Fund II (B), L.P.
Stanford University
Attn: Carol Gilmer
Stanford, CA 94305
Internet Capital Group, Inc.
44 Montgomery Street
Suite 3705
San Francisco, CA 94104
GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, CT 06927
Allen & Co.
711 5th Avenue
New York, NY 10022
Riverside Holdings II, L.P.
One Atlantic Street, 4th Floor
Stamford, CT 06901
Gary Meehan
Suite 212 - 1008 Hower Street
Vancouver, B.C.
V6B 2X1
Jayson Carmichael
P. O. Box 38088
King Edward Mall
Vancouver, BC
V5Z 4L9
Mark Calvert
Suite 302 - 209 1/2 1st Avenue
Seattle, WA 98104
Brian Hilgendorf
15412 29th Avenue, S.E.
Mill Creek, WA 98012
Arnold Blinn
9401 N.E. 27th Street
Bellevue, WA 98004
Will Poole
4050 134th Avenue N.E.
Bellevue, WA 98005
David Bell
Warburg Dillon & Read
677 Washington Blvd.
Stamford, CT 06901
Allan Adler
c/o MSI Consulting Group
4700 42nd Avenue SW, Suite 400
Seattle, WA 98116
George Baker
c/o Ovation Communications
Nicholson House
Nicholson Walk
Maidenhead
Berkshire SL61RQ
United Kingdom
Anson Brooks
2009 Broadmoor Drive East
Seattle, WA 98112
Tim Buckley
c/o Visio
520 Pike Street, Ste. 1800
Seattle, WA 98101
C&H Associates
Clinton T. Mead, Manager
P.O. Box 3946
Bellevue, WA 98009
Thomas Cable
9623 S.E. 16th
Bellevue, WA 98004
Jeff Canin
9604 11th Avenue N.E.
Kirkland, WA 98033
<PAGE>
David W. Chase
6309 N.E. 138th Place
Kirkland, WA 98034
Charles deLaChappelle
3206 Home Drive
Yakima, WA 98902
Rowland Hanson
15127 N.E. 24th, Suite 111
Redmond, WA 98052
Peter Joers
8819 N.E. 14th
Clyde Hill, WA 98004
Madrona Investment Group
c/o Tom Alberg
1000 2nd Avenue, Ste. 3700
Seattle, WA 98104
Oki Enterprises, LLC
10838 Main Street
Bellevue, WA 98004
Mike Pickett
4640 Admiralty Way, 5th Fl
Marina del Rey, CA 90292
Scott Sandell
Park Hyatt, S.F.
c/o NEA
33 Batley Street
San Francisco, CA 94111
Martin Tobias
c/o Encoding.com
3406 Union E.
Seattle, WA 98122
Grosvenor Select LP
c/o C. Bowdoin Train
1717 Pennsylvania Ave., Ste. 225
Washington D.C. 20006
Wally Walker
c/o Seattle Sonics
490 Fifth Avenue, North
Seattle, WA 98109
VLGI 1999
2800 Sand Hill Road
Menlo Park, CA
Cascadia Capital
5350 Carillon Point
Kirkland, WA 98033
William W. Ericson
4750 Carillon Point
Kirkland, WA 98033
Christopher J. Hurley
4750 Carillon Point
Kirkland, WA 98033
Glenn Ballman
209 1/2 1st Avenue, Ste. 302
Seattle, WA 98104
Internet Capital Group
435 Devon Park Drive
800 Safeguard Bldg.
Wayne, PA 19087
Van Wagoner Funds
345 California Street, Ste. 2450
San Francisco, CA 94104
Amerindo Technology Growth Fund II
(c/o Amerindo Investments Advisors, Inc.)
43 Upper Grosvenor Street
London W1X 9PG UK
Emeric McDonald
One Embarcadero, #2300
San Francisco, CA 94104
Aman Ventures
10539 Bellagio Road
Los Angeles, CA 90077
Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Attn: Jill Hanses
Credit Suisse First Boston Venture Fund I, L.P.
2400 Hanover Street
Palo Alto, CA 94304
William Blair & Company
222 W. Adams
Chicago, IL 60606
Vertex Capital II LLC
150 W. Lake Street
Wayzata, MN 55391
<PAGE>
Access Technology Partners, L.P.
One Bush Street, 12th Floor
San Francisco, CA 94104
Bayview 99 I, L.P.
555 California Street, Ste. 2600
San Francisco, CA 94104
Attn: Jennifer Sherrill
Bayview 99 II, L.P.
555 California Street, Ste. 2600
San Francisco, CA 94104
Attn: Jennifer Sherrill
RIT Ventures, L.L.C.
1 Atomic Street, 4th Floor
Stamford, CT 06901
Matthew O. Fitzmaurice
150 W. Lake Street
Wayzata, MN 55391
J. Makr and Norma Calvert
13208-136th Avenue NE
Kirkland, WA 98034
Mark J. Handfelt
4750 Carillon Point
Kirkland, WA 98033
Hambrecht & Quist California
One Bush Street, 12th Floor
San Francisco, CA 94104
Van Wagoner Capital Partners
345 California Street, Ste. 2450
San Francisco, CA 94104
Anthony Cuilla
1080 Sunshine Circle
Danville, CA 94506
James Stableford
(c/o Amerindo Investments Advisors, Inc.)
43 Upper Grosvenor Street
London W1X 9PG UK
H&Q EemployeeVenture Fund 2000, L.P.
One Bush Street, 12th Floor
San Francisco, CA 94104
Joaquin Garcia-Larrieu
William S. Slattery
Gordon Empey
4750 Carillon Point
Kirkland, WA 98033
Access Technology Partners Brokers Fund, L.P.
One Bush Street, 12th Floor
San Francisco, CA 94104
Ivan Gaviria
4750 Carillon Point
Kirkland, WA 98033
<PAGE>
EXHIBIT B
---------
COMMON HOLDERS
--------------
Glenn Ballman
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Rob Ayer
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Kent Patterson
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Ross Paul
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Eden Clark
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Kristen Hamilton
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Darren Popoff
c/o Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Andy Fedak
209 1/2 1st Avenue
Suite 302
Seattle, WA 98104
Gary Meehan
1008 Homer Street
Suite 205
Vancouver, BC V6B 2X1
Jill Popoff
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Ben Richardson
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Trevor Orr
1008 Homer Street
Suite 205
Vancouver, BC V6B 2X1
Linda Collings
1008 Homer Street
Suite 205
Vancouver, BC V6B 2X1
Esko Heikkila
1008 Homer Street
Suite 205
Vancouver, BC V6B 2X1
Bliss Mott
1008 Homer Street
Suite 205
Vancouver, BC V6B 2X1
VLG Investments 1999
2800 Sand Hill Road
Menlo Park, CA
William W. Ericson
4750 Carillon Point
Kirkland, WA 98033
Scott Lees
1000 South Road, Unit 5
Belmont, CA 94002
Wendy Ayer
1000 Dexter Avenue, Suite 400
Seattle, WA 98104
Erica Lechner
1008 Homer Street
Suite 205
Vancouver, BC V6B 2X1
<PAGE>
Exhibit 4.3
THE SECURITIES REPRESENTED BY THIS COMMON STOCK PURCHASE WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
- --------------------------------------------------------------------------------
Warrant No. __ Number of Shares: _______
Date of Issuance: February 25, 1999 (subject to adjustment)
MEGADEPOT.COM, INC.
Common Stock Purchase Warrant
-----------------------------
MegaDepot.com, Inc., a Washington corporation (the "Company"), for value
-------
received, hereby certifies that __________________________, or his registered
assigns (the "Registered Holder"), is entitled, subject to the terms set forth
-----------------
below, to purchase from the Company, at any time after the date hereof and on or
before the Expiration Date (as defined in Section 5 below), up to _________
shares (as adjusted from time to time pursuant to the provisions of this
Warrant) of Common Stock of the Company, at a purchase price of One Cent ($0.01)
per share. The shares purchasable upon exercise of this Warrant and the
purchase price per share, as adjusted from time to time pursuant to the
provisions of this Warrant, are sometimes hereinafter referred to as the
"Warrant Stock" and the "Purchase Price," respectively.
------------- --------------
1. Exercise.
--------
(a) Manner of Exercise. This Warrant may be exercised by the
------------------
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit A duly executed by such Registered
---------
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon such exercise.
The Purchase Price may be paid by cash, check, wire transfer or by the surrender
of promissory notes or other instruments representing indebtedness of the
Company to the Registered Holder.
(b) Effective Time of Exercise. Each exercise of this Warrant shall
--------------------------
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(c) Net Issue Exercise.
------------------
<PAGE>
(i) In lieu of exercising this Warrant in the manner provided above
in Section 1(a), the Registered Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being canceled) by surrender of
this Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to holder a number of shares of
Common Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value of one
share of Common Stock on the date of calculation shall mean:
(A) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share of
Common Stock shall be the initial "Price to Public" specified in the final
prospectus with respect to the offering;
(B) the fair market value shall be at the highest price per share
which the Company could obtain on the date of calculation from a willing buyer
(not a current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of Directors, unless the Company is at such time subject to an acquisition
as described in Section 5(b) below, in which case the fair market value per
share of Common Stock shall be deemed to be the value of the consideration per
share received by the holders of such stock pursuant to such acquisition.
(d) Delivery to Holder. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of Warrant
Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the
<PAGE>
number of shares of Warrant Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this Warrant
minus the number of such shares purchased by the Registered Holder upon such
exercise as provided in Section 1(a) above.
2. Adjustments.
-----------
(a) Stock Splits and Dividends. If outstanding shares of the
--------------------------
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) Reclassification, Etc. In case of any reclassification or change
----------------------
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
(c) Adjustment Certificate. When any adjustment is required to be
----------------------
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.
<PAGE>
3. Transfers.
---------
(a) Unregistered Security. Each holder of this Warrant acknowledges
---------------------
that this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and agrees not to
--------------
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an
effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.
(b) Transferability. Subject to the provisions of Section 3(a) hereof
---------------
this Warrant and all rights hereunder are transferable, in whole or in part,
upon surrender of the Warrant with a properly executed assignment (in the form
of Exhibit B hereto) at the principal office of the Company.
---------
(c) Warrant Register. The Company will maintain a register
----------------
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. No Impairment. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
5. Termination. This Warrant (and the right to purchase securities upon
-----------
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) February 25, 2004, (b) the sale, conveyance,
---------------
disposal, or encumbrance of all or substantially all of the Company's property
or business or the Company's merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary corporation) or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of; provided, however that
this Section 5(b) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company, or (c) the closing of a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act.
<PAGE>
5. Notices of Certain Transactions. In case:
-------------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation or winding-up) are to be determined.
Such notice shall be mailed at least ten (10) days prior to the record date or
effective date for the event specified in such notice.
6. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
7. Exchange of Warrants. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
8. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required)
<PAGE>
in an amount reasonably satisfactory to the Company, or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company will
issue, in lieu thereof, a new Warrant of like tenor.
9. Notices. Any notice required or permitted by this Warrant shall be in
-------
writing and shall be deemed sufficient upon receipt, when delivered personally
or by courier, overnight delivery service or confirmed facsimile, or forty-eight
(48) hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, addressed (a) if to
the Registered Holder, to the address of the Registered Holder most recently
furnished in writing to the Company and (b) if to the Company, to the address
set forth below or subsequently modified by written notice to the Registered
Holder.
10. No Rights as Shareholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
11. No Fractional Shares. No fractional shares of Common Stock will be
--------------------
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
12. Amendment or Waiver. Any term of this Warrant may be amended or
-------------------
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
13. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
14. Governing Law. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
MEGADEPOT.COM, INC.,
a Washington corporation
By:
---------------------------------------
Glenn Ballman, President
Address: Suite 302 - 209 1/2 1St Avenue
Seattle, Washington 98104
Fax Number: (206) 583-8918
<PAGE>
EXHIBIT A
---------
PURCHASE FORM
-------------
To: MegaDepot.com, Inc. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. ___, hereby irrevocably elects to purchase _______ shares of the
Common Stock covered by such Warrant and herewith makes payment of $_________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature:
--------------------------
Name (print):
-----------------------
Title (if applic.)
------------------
Company (if applic.):
---------------
<PAGE>
EXHIBIT B
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Common Stock covered thereby set
forth below, to:
Name of Assignee Address/Fax Number No. of Shares
---------------- ------------------ -------------
Dated:_________________ Signature:
------------------------
------------------------
Witness:
------------------------
<PAGE>
EXHIBIT 5.1
February 2, 2000
Onvia.com, Inc.
1000 Dexter Avenue, Suite 400
Seattle, Washington 98109
Registration Statement on Form S-1 (File No. 333-93273)
-------------------------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No. 333-
93273) (the "Registration Statement") filed by you, Onvia.com, Inc., with the
Securities and Exchange Commission on December 21, 1999, as amended by Amendment
No. 1 to the Registration Statement, in connection with the registration under
the Securities Act of 1933, as amended, of shares of your Common Stock (the
"Shares"). As your legal counsel in connection with this transaction, we have
examined the proceedings taken and we are familiar with the proceedings proposed
to be taken by you in connection with the sale and issuance of the Shares.
It is our opinion that the Shares, when issued and sold in the manner
described in the Registration Statement, will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and in any amendment to it.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
/s/ Venture Law Group
MJH
<PAGE>
Exhibit 10.2
MEGADEPOT.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
February 25, 1999
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1. PURCHASE AND SALE OF PREFERRED STOCK........................................................................1
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK............................................................1
1.2 CLOSING; DELIVERY........................................................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................................2
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION............................................................2
2.2 CAPITALIZATION...........................................................................................2
2.3 SUBSIDIARIES.............................................................................................3
2.4 AUTHORIZATION............................................................................................3
2.5 VALID ISSUANCE OF SECURITIES.............................................................................3
2.6 GOVERNMENTAL CONSENTS....................................................................................3
2.7 LITIGATION...............................................................................................4
2.8 INTELLECTUAL PROPERTY....................................................................................4
2.9 COMPLIANCE WITH OTHER INSTRUMENTS........................................................................4
2.10 AGREEMENTS; ACTION....................................................................................5
2.11 DISCLOSURE............................................................................................5
2.12 NO CONFLICT OF INTEREST...............................................................................6
2.13 RIGHTS OF REGISTRATION AND VOTING RIGHTS..............................................................6
2.14 TITLE TO PROPERTY AND ASSETS..........................................................................6
2.15 EMPLOYEE BENEFIT PLANS................................................................................6
2.16 TAX RETURNS AND PAYMENTS..............................................................................7
2.17 INSURANCE.............................................................................................7
2.18 LABOR AGREEMENTS AND ACTIONS..........................................................................7
2.19 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS..........................................7
2.20 PERMITS...............................................................................................7
2.21 CORPORATE DOCUMENTS...................................................................................7
2.22 QUALIFIED SMALL BUSINESS STOCK........................................................................7
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................................................9
3.1 AUTHORIZATION............................................................................................9
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT........................................................................9
3.3 DISCLOSURE OF INFORMATION................................................................................9
3.4 RESTRICTED SECURITIES...................................................................................10
3.5 NO PUBLIC MARKET........................................................................................10
3.6 LEGENDS.................................................................................................10
3.7 ACCREDITED INVESTOR.....................................................................................10
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING....................................................11
4.1 REPRESENTATIONS AND WARRANTIES..........................................................................11
4.2 PERFORMANCE.............................................................................................11
4.3 COMPLIANCE CERTIFICATE..................................................................................11
4.4 QUALIFICATIONS..........................................................................................11
4.5 OPINION OF COMPANY COUNSEL..............................................................................11
4.6 BOARD OF DIRECTORS......................................................................................11
4.7 INVESTORS' RIGHTS AGREEMENT.............................................................................11
4.8 CO-SALE AGREEMENT.......................................................................................11
4.9 VOTING AGREEMENT........................................................................................11
4.10 RESTATED ARTICLES....................................................................................11
4.11 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT..........................................12
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.........................................................12
5.1 REPRESENTATIONS AND WARRANTIES..........................................................................12
5.2 PERFORMANCE.............................................................................................12
5.3 QUALIFICATIONS..........................................................................................12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6. MISCELLANEOUS..............................................................................................12
6.1 SURVIVAL OF WARRANTIES..................................................................................12
6.2 TRANSFER; SUCCESSORS AND ASSIGNS........................................................................12
6.3 GOVERNING LAW...........................................................................................12
6.4 COUNTERPARTS............................................................................................12
6.5 TITLES AND SUBTITLES....................................................................................13
6.6 NOTICES.................................................................................................13
6.7 FINDER'S FEE............................................................................................13
6.8 FEES AND EXPENSES.......................................................................................13
6.9 ATTORNEYS' FEES.........................................................................................13
6.10 AMENDMENTS AND WAIVERS...............................................................................13
6.11 SEVERABILITY.........................................................................................13
6.12 DELAYS OR OMISSIONS..................................................................................14
6.13 ENTIRE AGREEMENT.....................................................................................14
6.14 CONFIDENTIALITY......................................................................................14
6.15 EXCULPATION AMONG PURCHASERS.........................................................................14
6.16 WAIVER OF CONFLICTS..................................................................................14
</TABLE>
<PAGE>
MEGADEPOT.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This MegaDepot.com, Inc. Series A Preferred Stock Purchase Agreement (this
"Agreement") is made as of the 25th day of February 1999, by and between
---------
MegaDepot.com, Inc., a Washington corporation (the "Company"), and the investors
-------
listed on Exhibit A attached hereto (each a "Purchaser" and together the
--------- ---------
"Purchasers").
-----------
For the mutual covenants set forth below and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
------------------------------------
1.1 Sale and Issuance of Series A Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State of
the State of Washington on or before the Closing (as defined below) the Amended
and Restated Articles of Incorporation of the Company in the form attached
hereto as Exhibit B (the "Restated Articles").
--------- -----------------
(b) Subject to the terms and conditions of this Agreement, each
Purchaser severally agrees to purchase at the Closing, and the Company agrees to
sell and issue to each Purchaser at the Closing, that number of shares of Series
A Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
---------
attached hereto at a purchase price of Two Dollars and Thirty-Three and Eight
Hundred and Thirty-One One Thousandths Cents ($2.33831) per share. The shares of
Series A Preferred Stock issued to the Purchaser pursuant to this Agreement
shall be hereinafter referred to as the "Stock."
-----
1.2 Closing; Delivery.
-----------------
(a) The purchase and sale of the Stock shall take place at the
offices of Venture Law Group, 4750 Carillon Point, Kirkland, Washington, at
11:00 a.m., on February 25, 1999, or at such other time and place as the Company
and the Purchasers mutually agree upon, orally or in writing (which time and
place are designated as the "Closing").
-------
(b) At the Closing, the Company shall deliver to each Purchaser a
certificate representing the Stock being purchased thereby against payment of
the purchase price therefor by check payable to the Company, wire transfer to
the Company's bank account, cancellation of indebtedness, or such other form of
payment as shall be mutually agreed upon by such Purchaser and the Company. In
the event that payment by a Purchaser is made, in whole or in part, by
cancellation of indebtedness, then such Purchaser shall surrender to the Company
for cancellation at the Closing any evidence of such indebtedness or shall
execute an instrument of cancellation in form and substance acceptable to the
Company. In addition, the Company at the Closing shall deliver to any Purchaser
choosing to pay any part of the purchase price of the Stock
-1-
<PAGE>
by cancellation of indebtedness a check in the amount of any interest accrued on
such indebtedness through the Closing.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C, which exceptions shall be
---------
deemed to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington and has all requisite corporate power and authority
to carry on its business. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company consists, or
--------------
will consist, immediately prior to the Closing, of:
(a) Six million (6,000,000) shares of Preferred Stock, of which
five million two hundred thousand (5,200,000) shares have been designated Series
A Preferred Stock, none of which are issued and outstanding immediately prior to
the Closing. The rights, privileges and preferences of the Preferred Stock are
as set forth in the Restated Articles.
(b) Twenty-five million (25,000,000) shares of Common Stock, five
million seven hundred forty-three thousand five hundred thirty-four (5,743,534)
shares of which are issued and outstanding immediately prior to the Closing. All
of the outstanding shares of Common Stock have been duly authorized, fully paid
and are nonassessable and issued in compliance with all applicable federal and
state securities laws.
(c) The outstanding shares of Common Stock are owned by the
shareholders and in the numbers set forth in Section 2.2(c) of the Schedule of
Exceptions.
(d) The Company has reserved two million six hundred thousand
(2,600,000) shares of Common Stock for issuance to officers, directors,
employees and consultants of the Company pursuant to its 1999 Stock Option Plan
duly adopted by the Company's board of directors (the "Board of Directors") and
------------------
approved by the Company's shareholders (the "Shareholders") (the "Stock Plan").
------------ ----------
Of such reserved shares of Common Stock, no shares have been issued pursuant to
restricted stock purchase agreements, options to purchase no shares have been
granted and are currently outstanding, and two million six hundred thousand
(2,600,000) shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to the Stock Plan.
(e) Except for outstanding options issued pursuant to the Stock
Plan and warrants to purchase two hundred eight thousand three hundred
thirty-eight (208,338) shares of Common Stock identified in Section 2.2(d) of
the Schedule of Exceptions, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of
-2-
<PAGE>
first refusal or similar rights) or agreements, orally or in writing, for the
purchase or acquisition from the Company of any shares of its capital stock.
2.3 Subsidiaries. Except for M-Depot Internet Superstore Inc., a
------------
corporation organized under the laws of British Columbia and a wholly-owned
subsidiary of the Company, the Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association or
other business entity.
2.4 Authorization. All corporate action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement, in the form
attached hereto as Exhibit D (the "Investors' Rights Agreement"), the Right of
--------- ---------------------------
First Refusal and Co-Sale Agreement in the form attached hereto as Exhibit E
---------
(the "Co-Sale Agreement"), and the Voting Agreement in the form attached hereto
-----------------
as Exhibit F (the "Voting Agreement," and together with this Agreement, the
--------- ----------------
Investors' Rights Agreement and the Co-Sale Agreement, the "Agreements"), the
----------
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance and delivery of the Stock and the Common Stock issuable
upon conversion of the Stock (together, the "Securities") has been taken or will
----------
be taken prior to the Closing, and the Agreements, when executed and delivered
by the Company, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies or (b) to the extent the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 Valid Issuance of Securities. The Stock that is being issued to the
----------------------------
Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer set forth in this Agreement, the Investors' Rights
Agreement and applicable state and federal securities laws. Based in part upon
the representations of the Purchasers in this Agreement and subject to the
provisions of Section 2.6 below, the Stock will be issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Stock has been duly and validly reserved for issuance, and
upon issuance in accordance with the terms of the Restated Articles, shall be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable federal and state securities laws and
will be issued in compliance with all applicable federal and state securities
laws.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated in
this Agreement, except for filings pursuant to applicable state securities laws
and Regulation D of the Securities Act of 1933, as amended (the "Securities
----------
Act").
- ---
-3-
<PAGE>
2.7 Litigation. There is no action, suit, proceeding or investigation
----------
pending or, to the Company's knowledge, currently threatened against the Company
or any of its subsidiaries that questions the validity of the Agreements or the
right of the Company to enter into them, or to consummate the transactions
contemplated herein or therein, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition or
affairs of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or, to the Company's knowledge,
currently threatened involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Neither the Company nor any of its subsidiaries is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company or any of its subsidiaries currently pending or
which the Company or any of its subsidiaries intends to initiate.
2.8 Intellectual Property. To its knowledge, the Company owns or
---------------------
possesses sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes necessary for its business without any conflict with, or
infringement of, the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity, except, in either case, for standard end-user, object
code, internal-use software license and support/maintenance agreements. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, trade secrets or other
proprietary rights or processes of any other person or entity. The Company is
not aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interest of the Company or that would conflict with the Company's business.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant or instrument under which any such
employee is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions of
the Restated Articles, its bylaws (the "Bylaws") or of any instrument, judgment,
------
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of
-4-
<PAGE>
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of the Agreements and the consummation of
the transactions contemplated herein or therein will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.
(b) To its knowledge, the Company has avoided every condition, and
has not performed any act, the occurrence of which would result in the Company's
loss of any right granted under any license, distribution agreement or other
agreement.
2.10 Agreements; Action.
------------------
(a) There are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates, or any
affiliate thereof.
(b) Except for agreements explicitly contemplated in the Agreements,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company or any of its subsidiaries is a party or by
which it is bound that involve (i) obligations (contingent or otherwise) of, or
payments to, the Company or any of its subsidiaries in excess of, Twenty-Five
Thousand Dollars ($25,000), (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company or any of its
subsidiaries or (iii) the grant of rights to manufacture, produce, assemble,
license, market or sell its products to any other person or affect the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
(c) Neither the Company nor any of its subsidiaries has (i) declared
or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock, (ii) except in connection
with the transactions contemplated in this Agreement, incurred any indebtedness
for money borrowed or incurred any other liabilities individually in excess of
Twenty-Five Thousand Dollars ($25,000) or in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(d) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any representative of any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company would be disposed of or
(iii) regarding any other form of liquidation, dissolution or winding up of the
Company.
2.11 Disclosure. The Company has fully provided the Purchasers with all
----------
the information that the Purchasers have requested for deciding whether to
acquire the Stock and all
-5-
<PAGE>
information that the Company believes is reasonably necessary to enable the
Purchasers to make such a decision, including certain of the Company's
projections describing its proposed business (collectively, the "Business
--------
Plan"). To the Company's knowledge, no representation or warranty of the Company
- ----
contained in this Agreement and the exhibits attached hereto, any certificate
furnished or to be furnished to Purchasers at the Closing, or the Business Plan
(when read together) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made. To the extent the Business Plan was prepared by management of the
Company, the Business Plan and the financial and other projections contained in
the Business Plan were prepared in good faith; however, the Company does not
warrant that it will achieve such projections.
2.12 No Conflict of Interest. The Company is not indebted, directly or
-----------------------
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. To the Company's knowledge, none of the Company's
officers or directors, or any members of their immediate families, are, directly
or indirectly, indebted to the Company (other than in connection with purchases
of the Company's Common Stock) or have any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or with which
the Company has a business relationship, or any firm or corporation which
competes with the Company except that officers, directors and/or shareholders of
the Company may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded company that may compete with the Company.
To the Company's knowledge, none of the Company's officers or directors or any
members of their immediate families are, directly or indirectly, interested in
any material contract with the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
2.13 Rights of Registration and Voting Rights. Except as contemplated in
----------------------------------------
the Investors' Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity. To
the Company's knowledge, except as contemplated in the Voting Agreement, no
shareholder of the Company has entered into any agreements with respect to the
voting of capital shares of the Company.
2.14 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.15 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
-6-
<PAGE>
2.16 Tax Returns and Payments. The Company has filed all tax returns and
------------------------
reports as required by law. These returns and reports are true and correct in
all material respects. The Company has paid all taxes and other assessments due.
2.17 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.18 Labor Agreements and Actions. The Company is not bound by or subject
----------------------------
to (and none of its assets or properties is bound by or subject to) any written
or oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the knowledge of the Company, has
sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company. To
its knowledge, the Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment.
2.19 Confidential Information and Invention Assignment Agreements. Each
------------------------------------------------------------
employee, consultant and officer of the Company has executed an agreement with
the Company regarding confidentiality and proprietary information substantially
in the form or forms delivered to the counsel for the Purchasers. The Company is
not aware that any of its employees or consultants is in violation thereof, and
the Company will use its best efforts to prevent any such violation.
2.20 Permits. The Company and each of its subsidiaries has all
-------
franchises, permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could materially and adversely affect
the business, properties, prospects or financial condition of the Company. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.21 Corporate Documents. The Restated Articles and the Bylaws are in the
-------------------
form provided to counsel for the Purchasers. The copy of the minute books of the
Company provided to the Purchasers' counsel contains minutes of all meetings of
the Board of Directors and the Shareholders and all actions by written consent
without a meeting by the Board of Directors and the Shareholders since the date
of incorporation and reflects accurately in all material respects all actions by
the Board of Directors (and any committee of Board of Directors) and the
Shareholders with respect to all transactions referred to in such minutes.
2.22 Qualified Small Business Stock. The Company represents and warrants
------------------------------
to the Purchasers that, to its knowledge, the Stock should qualify as "Qualified
---------
Small Business Stock" as defined in Section 1202(c) of the Internal Revenue Code
- --------------------
of 1986, as amended as of the date hereof.
-7-
<PAGE>
2.23 Financial Statements. The Company has made available to each
--------------------
Purchaser its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of December 31, 1998 (collectively,
the "Financial Statements"). The Financial Statements have been prepared in
--------------------
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except that the unaudited Financial
Statements may not contain all footnotes required by generally accepted
accounting principles. The Financial Statements fairly present in all material
respects the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (a) liabilities
incurred in the ordinary course of business subsequent to December 31, 1998 and
(b) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate are not material to the financial condition or operating
results of the Company.
2.24 Changes. Since December 31, 1998, there has not been:
-------
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company;
(c) any waiver or compromise by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects or
financial condition of the Company;
(e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer or
key employee of the Company; and the Company, is not aware of any impending
resignation or termination of employment of any such officer or key employee;
-8-
<PAGE>
(i) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(k) any declaration, setting aside or payment or other distribution
in respect to any of the Company's capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by the Company;
(l) to the Company's knowledge, any other event or condition of any
character that might materially and adversely affect the business, properties,
prospects or financial condition of the Company; or
(m) any arrangement or commitment by the Company to do any of the
things described in this Section 2.24.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby
------------------------------------------------
represents and warrants to the Company that:
3.1 Authorization. Such Purchaser has full power and authority to enter
-------------
into this Agreement. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and any other laws of general application affecting
enforcement of creditors' rights generally, and as limited by laws relating to
the availability of a specific performance, injunctive relief or other equitable
remedies and (b) to the extent the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
---------------------------------
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement, the Purchaser hereby confirms,
that the Stock to be acquired by the Purchaser will be acquired for investment
for the Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Stock. The Purchaser has not been formed for the specific purpose of acquiring
the Stock.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
-------------------------
discuss the Company's business, management, financial affairs and the terms and
conditions of
-9-
<PAGE>
the offering of the Stock with the Company's management and has had an
opportunity to review the Company's facilities. The Purchaser understands that
such discussions, as well as the Business Plan and any other written information
delivered by the Company to the Purchaser, were intended to describe the aspects
of the Company's business which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the Stock has
---------------------
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the shares of Stock are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the shares of Stock indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the Company has no
obligation to register or qualify the Stock for resale except as set forth in
the Investors' Rights Agreement. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Stock, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under no obligation and may not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no public market
----------------
now exists for any of the Stock issued by the Company, and that the Company has
made no assurances that a public market will ever exist for the Stock.
3.6 Legends. The Purchaser understands that the Stock, and any
-------
securities issued in respect of or exchange for the Stock, may bear one or all
of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED."
(b) Any legend set forth in the other Agreements.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
-10-
<PAGE>
4. Conditions of the Purchasers' Obligations at Closing. The obligations
----------------------------------------------------
Agreement are subject to the fulfillment, on or before the Closing, of each of
the following conditions, unless otherwise waived:
4.1 Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied in all
-----------
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall deliver
----------------------
to the Purchasers at the Closing a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received from
--------------------------
Venture Law Group, counsel for the Company, an opinion, dated as of the Closing,
in substantially the form of Exhibit G.
---------
4.6 Board of Directors. As of the Closing, the Board shall be comprised
------------------
of Glenn Ballman, Nancy Schoendorf, Ken Fox and Mike Pickett and one vacancy to
be filled as soon as practicable after the Closing.
4.7 Investors' Rights Agreement. The Company, each Purchaser and the
---------------------------
Shareholders shall have executed and delivered the Investors' Rights Agreement
in substantially the form attached as Exhibit D.
---------
4.8 Co-Sale Agreement. The Company, each Purchaser and certain of the
-----------------
Shareholders named in the Co-Sale Agreement shall have executed and delivered
the Co-Sale Agreement in substantially the form attached as Exhibit E.
---------
4.9 Voting Agreement. The Company, each Purchaser and the Shareholders
----------------
shall have executed and delivered the Voting Agreement in substantially the form
attached as Exhibit F.
---------
4.10 Restated Articles. The Company shall have filed the Restated
-----------------
Articles with the Secretary of State of Washington on or prior to the Closing
Date, which shall continue to be in full force and effect as of the Closing
Date.
-11-
<PAGE>
4.11 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each of its employees shall have entered into the Company's standard
form Confidential Information and Invention Assignment Agreement, in
substantially the form provided to the Purchasers.
5. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties. The representations and warranties
------------------------------
of each Purchaser contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
6. Miscellaneous.
-------------
6.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
6.2 Transfer; Successors and Assigns. The terms and conditions of this
--------------------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
-12-
<PAGE>
6.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth on the signature page or Exhibit A hereto, or as
---------
subsequently modified by written notice, and (a) if to the Company, with a copy
to Venture Law Group, 4750 Carillon Point, Kirkland, Washington 98033, Attention
Bill Ericson or (b) if to the Purchasers, with a copy to Gunderson, Dettmer,
Stough, Velleneuve, Franklin & Hachigian, LLP, 155 Constitution Drive, Menlo
Park, California 94025, Attention Dan O'Connor.
6.7 Finder's Fee. Except with respect to Broadmark and Cascadia Capital
------------
(the "Permitted Finder's Fees"), each party represents that it neither is nor
-----------------------
will be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee other than the Permitted Finder's Fees (and the costs and expenses
of defending against such liability or asserted liability) for which each
Purchaser or any of its officers, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Purchaser from any
liability for any commission or compensation in the nature of a finder's fee
other than the Permitted Finder's Fees (and the costs and expenses of defending
against such liability or asserted liability) for which the Company or any of
its officers, employees or representatives is responsible.
6.8 Fees and Expenses. The Company shall pay the reasonable fees and
-----------------
expenses of Gunderson Dettmer Stough Villeneuvue Franklin & Hachigian, LLP, the
counsel for the Purchasers, incurred with respect to this Agreement, the
documents referred to herein and the transactions contemplated herein and
therein; provided, however, that such fees and expenses do not exceed Twelve
Thousand Five Hundred Dollars ($12,500).
6.9 Attorneys' Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.10 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the Company and the holders of at
least a majority of the Common Stock issued or issuable upon conversion of the
Stock. Any amendment or waiver effected in accordance with this Section 6.10
shall be binding upon the Purchasers and each transferee of the Stock (or the
Common Stock issued or issuable upon conversion thereof), each future holder of
all such securities, and the Company.
6.11 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith.
-13-
<PAGE>
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be excluded from
this Agreement, (b) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.
6.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
6.13 Entire Agreement. This Agreement, and the documents referred to
----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
6.14 Confidentiality. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. The provisions of this Section 6.15
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated herein.
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
----------------------------
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the Stock.
6.16 Waiver of Conflicts. Each party to this Agreement acknowledges
-------------------
that Venture Law Group, counsel for the Company, has in the past performed and
may continue to perform legal services for certain of the Purchasers in matters
unrelated to the transactions described in this Agreement, including the
representation of such Purchasers in venture capital financings and other
matters. Accordingly, each party to this Agreement hereby
-14-
<PAGE>
(a) acknowledges that they have had an opportunity to ask for information
relevant to this disclosure and (b) gives its informed consent to Venture Law
Group's representation of certain of the Purchasers in such unrelated matters
and to Venture Law Group's representation of the Company in connection with this
Agreement and the transactions contemplated herein.
-15-
<PAGE>
The parties have executed this MegaDepot.com, Inc. Series A Preferred
Stock Purchase Agreement as of the date first written above.
COMPANY:
MEGADEPOT.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
----------------------------------------
Name:
--------------------------------------
(print)
Title:
-------------------------------------
Address:
[COUNTERPART SIGNATURE PAGE FOR MEGADEPOT.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
PURCHASERS:
MOHR, DAVIDOW VENTURES V, L.P.
By: Fifth MDV Partners, LLC
Its General Partner
By:
---------------------------------------
Member
MOHR, DAVIDOW VENTURES V, L.P.
as nominee for MDV Entrepreneurs'
Network Fund II (A), L.P. and MDV
Entrepreneurs' Network Fund II (B), L.P.
By: Fifth MDV Partners, LLC
Its General Partner
By:
---------------------------------------
Member
STANFORD UNIVERSITY
By:
---------------------------------------
Its:
--------------------------------------
[COUNTERPART SIGNATURE PAGE FOR MEGADEPOT.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
PURCHASERS:
INTERNET CAPITAL GROUP, INC.
By:
-------------------------------------
Kenneth A. Fox, Managing Partner
[COUNTERPART SIGNATURE PAGE FOR MEGADEPOT.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
PURCHASERS:
---------------------------------------------
(Print Name of Purchaser)
By:
------------------------------------------
Name:
----------------------------------------
(Print Name)
Title:
---------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
[COUNTERPART SIGNATURE PAGE FOR MEGADEPOT.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBITS
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Amended and Restated Articles of Incorporation
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Investors' Rights Agreement
Exhibit E - Form of Right of First Refusal and Co-Sale Agreement
Exhibit F - Form of Voting Agreement
Exhibit G - Form of Legal Opinion of Venture Law Group
-1-
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
SCHEDULE OF PURCHASERS
Purchaser Number of Shares Purchase Price
--------- ---------------- --------------
<S> <C> <C> <C>
1. Mohr, Davidow Ventures V, L.P. 2,167,587 $ 5,068,490.36
2. Mohr, Davidow Ventures V, L.P. as nominee for MDV 163,152 $ 381,499.95
Entrepreneurs' Network Fund II (A), L.P. and MDV
Entrepreneurs' Network Fund II (B), L.P.
3. Stanford University 21,383 $ 50,000.08
4. Internet Capital Group, Inc. 2,138,243 $ 4,999,874.99
5. Convertible Note Holders - Fall 1998
Gary Meehan 8,300 $19,407.00
Jayson Carmichael 10,691 $25,000.00
Mark Calvert 10,691 $25,000.00
Brian Hilgendorf 21,383 $50,000.00
Arnold Blinn 10,691 $25,000.00
Will Poole 21,383 $50,000.00
David Bell 42,766 $100,000.00
Allan Adler 21,383 $50,000.00
6. Convertible Note Holders - Winter 1999
George Baker 21,383 $50,000.00
Anson Brooks 10,691 $25,000.00
Tim Buckley 21,383 $50,000.00
C&H Associates 21,383 $50,000.00
Thomas Cable 21,383 $50,000.00
Jeff Canin 10,691 $25,000.00
David W. Chase 21,383 $50,000.00
Charles deLa Chappelle 21,383 $50,000.00
Rowland Hanson 21,383 $50,000.00
Peter Joers 21,383 $50,000.00
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Madrona Investment Group 21,383 $50,000.00
Oki Enterprises 21,383 $50,000.00
Mike Pickett 21,383 $50,000.00
Scott Sandell 2,138 $5,000.00
Martin Tobias 21,383 $50,000.00
Grosvenor Select LP 42,766 $100,000.00
Wally Walker 21,383 $50,000.00
Will Poole 21,383 $50,000.00
VLG Investments 1999 10,691 $25,000.00
Jumpstart Group 29,936 $70,000.00
William W. Ericson 4,277 $10,000.00
Christopher J. Hurley 4,277 $10,000.00
Glenn Ballman 2,392 $5,593.00
===== =========
TOTAL 5,054,874 $11,819,862.42
</TABLE>
<PAGE>
EXHIBIT B
---------
FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS TO
REPRESENTATIONS AND WARRANTIES
<PAGE>
EXHIBIT D
---------
FORM OF INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
---------
FORM OF RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE>
EXHIBIT F
---------
FORM OF VOTING AGREEMENT
<PAGE>
EXHIBIT G
---------
FORM OF LEGAL OPINION
OF
VENTURE LAW GROUP
<PAGE>
Exhibit 10.3
ONVIA.COM, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
September 30, 1999
<PAGE>
<TABLE>
<S> <C> <C>
1. PURCHASE AND SALE OF PREFERRED STOCK........................................................................1
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK............................................................1
1.2 CLOSING; DELIVERY........................................................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................................1
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION............................................................2
2.2 CAPITALIZATION...........................................................................................2
2.3 SUBSIDIARIES.............................................................................................3
2.4 AUTHORIZATION............................................................................................3
2.5 VALID ISSUANCE OF SECURITIES.............................................................................4
2.6 GOVERNMENTAL CONSENTS....................................................................................4
2.7 LITIGATION...............................................................................................4
2.8 INTELLECTUAL PROPERTY....................................................................................5
2.9 COMPLIANCE WITH OTHER INSTRUMENTS........................................................................5
2.10 AGREEMENTS; ACTION....................................................................................6
2.11 NO CONFLICT OF INTEREST...............................................................................7
2.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS..............................................................7
2.13 TITLE TO PROPERTY AND ASSETS..........................................................................7
2.14 EMPLOYEE BENEFIT PLANS................................................................................7
2.15 TAX RETURNS AND PAYMENTS..............................................................................7
2.16 INSURANCE.............................................................................................8
2.17 LABOR AGREEMENTS AND ACTIONS..........................................................................8
2.18 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS..........................................8
2.19 PERMITS...............................................................................................9
2.20 CORPORATE DOCUMENTS...................................................................................9
2.21 FINANCIAL STATEMENTS..................................................................................9
2.22 CHANGES...............................................................................................9
2.23 DISCLOSURE...........................................................................................11
2.24 YEAR 2000............................................................................................11
2.25 OPERATIONS OF THE COMPANY............................................................................12
2.26 ENVIRONMENTAL MATTERS................................................................................12
2.27 ABSENCE OF UNDISCLOSED LIABILITIES...................................................................13
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................................................13
3.1 AUTHORIZATION...........................................................................................13
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.......................................................................13
3.3 DISCLOSURE OF INFORMATION...............................................................................14
3.4 RESTRICTED SECURITIES...................................................................................14
3.5 NO PUBLIC MARKET........................................................................................14
3.6 LEGENDS.................................................................................................14
3.7 ACCREDITED INVESTOR.....................................................................................15
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING....................................................15
4.1 REPRESENTATIONS AND WARRANTIES..........................................................................15
4.2 PERFORMANCE.............................................................................................15
4.3 COMPLIANCE CERTIFICATE..................................................................................15
4.4 QUALIFICATIONS..........................................................................................15
4.5 OPINION OF COMPANY COUNSEL..............................................................................15
4.6 BOARD OF DIRECTORS......................................................................................15
4.7 INVESTORS' RIGHTS AGREEMENT.............................................................................16
4.8 CO-SALE AGREEMENT.......................................................................................16
4.9 VOTING AGREEMENT........................................................................................16
4.10 RESTATED ARTICLES....................................................................................16
4.11 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT..........................................16
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.........................................................16
5.1 REPRESENTATIONS AND WARRANTIES..........................................................................16
5.2 PERFORMANCE.............................................................................................16
5.3 QUALIFICATIONS..........................................................................................16
6. COVENANTS OF THE COMPANY...................................................................................17
6.1 RESERVE FOR COMMON SHARES...............................................................................17
6.2 DIRECTORS AND OFFICERS LIABILITY INSURANCE..............................................................17
7. MISCELLANEOUS..............................................................................................17
7.1 SURVIVAL OF WARRANTIES..................................................................................17
7.2 TRANSFER; SUCCESSORS AND ASSIGNS........................................................................17
7.3 GOVERNING LAW...........................................................................................17
7.4 COUNTERPARTS............................................................................................18
7.5 TITLES AND SUBTITLES....................................................................................18
7.6 NOTICES.................................................................................................18
7.7 FINDER'S FEE............................................................................................18
7.8 FEES AND EXPENSES.......................................................................................18
7.9 ATTORNEYS' FEES.........................................................................................18
7.10 AMENDMENTS AND WAIVERS...............................................................................18
7.11 SEVERABILITY.........................................................................................19
7.12 DELAYS OR OMISSIONS..................................................................................19
7.13 ENTIRE AGREEMENT.....................................................................................19
7.14 CONFIDENTIALITY......................................................................................19
7.15 EXCULPATION AMONG PURCHASERS.........................................................................19
7.16 WAIVER OF CONFLICTS..................................................................................20
7.17 WAIVER OF JURY TRIAL.................................................................................20
7.18 NO PRESS RELEASES....................................................................................20
-----------------
PURCHASER.........................................................................................................2
NUMBER OF SHARES..................................................................................................2
PURCHASE PRICE....................................................................................................2
</TABLE>
<PAGE>
ONVIA.COM, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Onvia.com, Inc. Series B Preferred Stock Purchase Agreement (this
"Agreement") is made as of the 30th day of September, 1999, by and
---------
between Onvia.com, Inc., a Washington corporation, formerly known as
MegaDepot.com, Inc. (the "Company"), and the investors listed on Exhibit
------- -------
A attached hereto (each a "Purchaser" and together the "Purchasers").
- - --------- ----------
For the mutual covenants set forth below and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
------------------------------------
1.1 Sale and Issuance of Series A Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State of
the State of Washington on or before the Closing (as defined below) the Second
Amended and Restated Articles of Incorporation of the Company in the form
attached hereto as Exhibit B (the "Restated Articles").
--------- -----------------
(b) Subject to the terms and conditions of this Agreement, each
Purchaser severally agrees to purchase at the Closing, and the Company agrees to
sell and issue to each Purchaser at the Closing, that number of shares of Series
B Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
---------
attached hereto at a purchase price of Three Dollars and Forty-Three and
Seventy-Eight One Hundredths Cents ($3.4378) per share. The shares of Series B
Preferred Stock issued to the Purchaser pursuant to this Agreement shall be
hereinafter referred to as the "Stock."
-----
1.2 Closing; Delivery.
-----------------
(a) The purchase and sale of the Stock shall take place at the
offices of Venture Law Group, 4750 Carillon Point, Kirkland, Washington, at
11:00 a.m., on September 30, 1999, or at such other time and place as the
Company and the Purchasers mutually agree upon, orally or in writing (which time
and place are designated as the "Closing").
-------
(b) At the Closing, the Company shall deliver to each Purchaser a
certificate representing the Stock being purchased thereby against payment of
the purchase price therefor by check payable to the Company, wire transfer to
the Company's bank account or cancellation of indebtedness.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C (the "Schedule of
--------- -----------
Exceptions"), which exceptions shall be deemed to be representations and
- ----------
warranties as if made hereunder:
-1-
<PAGE>
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted as set
forth in written materials provided to Purchasers by the Company. The Subsidiary
(as defined below) is a corporation duly organized, validly existing and in good
standing under the laws of the province of British Columbia and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted as set forth in written materials
provided to Purchasers by the Company. The Company and the Subsidiary is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business or properties.
2.2 Capitalization. The authorized capital of the Company consists, or
--------------
will consist, immediately prior to the Closing, of:
(a) Twenty million (20,000,000) shares of Preferred Stock, of which
(i) twelve million (12,000,000) shares have been designated Series A Preferred
Stock, ten million one hundred nine thousand seven hundred forty-eight
(10,109,748) of which are issued and outstanding immediately prior to the
Closing and (ii) eight million (8,000,000) shares have been designated Series B
Preferred Stock, none of which are issued and outstanding prior to the Closing.
The rights, privileges and preferences of the Preferred Stock are as set forth
in the Restated Articles. The Series A Preferred Stock was issued in compliance
with all applicable state and federal laws concerning the offer, sale and
issuance of securities.
(b) Sixty-two million (62,000,000) shares of Common Stock, eleven
million nine hundred ninety-two thousand one hundred eighty (11,992,180) shares
of which are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws.
(c) The outstanding shares of Common Stock are owned by the
shareholders and in the numbers set forth in Section 2.2(c) of the Schedule of
Exceptions.
(d) The Company has reserved six million five hundred thirty-three
thousand nine hundred forty-four (6,533,944) shares of Common Stock for issuance
to officers, directors, employees and consultants of the Company pursuant to its
1999 Stock Option Plan duly adopted by the Company's board of directors (the
"Board of Directors") and approved by the Company's shareholders (the
------------------
"Shareholders") (the "Stock Plan"). Of such reserved shares of Common Stock,
------------ ----------
five hundred thirteen thousand one hundred twelve (513,112) shares have been
issued pursuant to restricted stock purchase agreements, options to purchase
four million four hundred fifty-three thousand five hundred sixteen (4,453,516)
shares have been granted and are currently outstanding, and one million three
hundred thirty-three thousand nine hundred thirty-four (1,333,934) shares of
Common Stock remain available for issuance to officers, directors, employees and
consultants pursuant to the Stock Plan.
-2-
<PAGE>
(e) Except for outstanding options issued pursuant to the Stock Plan
and warrants identified in Section 2.2(e) of the Schedule of Exceptions, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or agreements, orally or
in writing, for the purchase or acquisition from the Company of any shares of
its capital stock or the capital stock of the Subsidiary.
(f) Neither the offer nor the issuance or sale of the Stock
constitutes or will constitute an event, under any capital stock or convertible
security or any anti-dilution or similar provision of any agreement or
instrument to which the Company or the Subsidiary is a party or by which it is
bound or affected, which shall either increase the number of shares or units of
capital stock issuable upon conversion of any securities or upon exercise of any
warrant or right to subscribe to or purchase any stock or similar security, or
decrease the consideration per share or unit of capital stock to be received by
the Company upon such conversion or exercise.
(g) The capitalization of the Subsidiary is set forth in Section
2.2(g) of the Schedule of Exceptions.
2.3 Subsidiaries. Except for M-Depot Internet Superstore Inc., a
------------
corporation organized under the laws of British Columbia and a wholly-owned
subsidiary of the Company (the "Subsidiary"), the Company does not currently own
or control, directly or indirectly, any interest in any other corporation,
association or other business entity. The Company is not a participant in any
joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company (and
-------------
the Subsidiary, if any), its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement, the Amended and
Restated Investors' Rights Agreement of even date herewith, in the form attached
hereto as Exhibit D (the "Investors' Rights Agreement"), the Amended and
--------- ---------------------------
Restated Right of First Refusal and Co-Sale Agreement of even date herewith, in
the form attached hereto as Exhibit E (the "Co-Sale Agreement"), and the Amended
--------- -----------------
and Restated Voting Agreement of even date herewith, in the form attached hereto
as Exhibit F (the "Voting Agreement," and together with this Agreement, the
--------- ----------------
Investors' Rights Agreement and the Co-Sale Agreement, the "Agreements"), the
----------
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance and delivery of the Stock and the Common Stock issuable
upon conversion of the Stock (together, the "Securities") has been taken or will
----------
be taken prior to the Closing, and the Agreements, when executed and delivered
by the Company, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies or (b) to the extent the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 Valid Issuance of Securities. The Stock that is being issued to the
----------------------------
Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable
-3-
<PAGE>
and free of restrictions on transfer other than restrictions on transfer set
forth in this Agreement, the Investors' Rights Agreement and applicable state
and federal securities laws and will have the rights, preferences and privileges
described in the Restated Articles. Based in part upon the representations of
the Purchasers in this Agreement and subject to the provisions of Section 2.6
below, the Stock will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Stock
has been duly and validly reserved for issuance, and upon issuance in accordance
with the terms of the Restated Articles, shall be duly and validly issued, fully
paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights Agreement
and applicable federal and state securities laws and will be issued in
compliance with all applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or authorization of,
---------------------
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company or the
Subsidiary is required in connection with the consummation of the transactions
contemplated in this Agreement, except for filings pursuant to applicable state
securities laws and Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), which filings will be affected in accordance with such state
--------------
securities laws and the Securities Act, as applicable.
2.7 Litigation. There is no action, suit, proceeding or investigation
----------
pending or, to the Company's knowledge, currently threatened against the Company
or the Subsidiary that questions the validity of the Agreements or the right of
the Company to enter into them, or to consummate the transactions contemplated
herein or therein, or that might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition or affairs
of the Company, financially or otherwise, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis for
the foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or, to the Company's knowledge, currently
threatened involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. Neither the Company nor
any of its subsidiaries is a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or the Subsidiary currently pending or which the Company or any of its
subsidiaries intends to initiate.
2.8 Intellectual Property. To its knowledge, the Company and the
---------------------
Subsidiary owns or possesses sufficient legal rights to all patents, trademarks,
service marks, tradenames, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for its business as now conducted and
proposed to be conducted as set forth in written materials provided to
Purchasers by the Company without any conflict with, or infringement of, the
rights of others. There are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company (or the Subsidiary) bound
by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and
-4-
<PAGE>
processes of any other person or entity, except, in either case, for standard
end-user, object code, internal-use software license and support/maintenance
agreements. Neither the Company nor the Subsidiary has received any
communications alleging that the Company or the Subsidiary has violated or, by
conducting its business, would violate any of the patents, trademarks, service
marks, tradenames, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity. Neither the Company nor the Subsidiary
is aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or the Subsidiary or that would conflict with the
Company's business. Neither the execution or delivery of the Agreements, nor the
carrying on of the Company's or the Subsidiary's business by the employees of
the Company, nor the conduct of the Company's or the Subsidiary's business as
presently proposed, will, to the Company's knowledge, conflict with or result in
a breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such employee is now
obligated. Neither the Company nor the Subsidiary believes it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company or the
Subsidiary, as applicable.
2.9 Compliance with Other Instruments.
---------------------------------
(a) Neither the Company nor the Subsidiary is not in violation or
default of any provisions of the Restated Articles, its bylaws (the "Bylaws") or
------
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound or of any provision of any federal or state
statute, rule or regulation applicable to the Company or the Subsidiary or the
conduct of its business which violation or default would result in a material
adverse effect on the assets of the Company or the Subsidiary. The execution,
delivery and performance of the Agreements and the consummation of the
transactions contemplated herein or therein will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the Subsidiary.
(b) Each of the Company and the Subsidiary has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's or the Subsidiary's loss of any material right granted under
any license, distribution agreement or other agreement.
(c) The Company is not in violation of any provision of the Foreign
Corrupt Practices Act.
2.10 Agreements; Action.
------------------
(a) There are no agreements, understandings or proposed transactions
between the Company or the Subsidiary and any of its officers, directors,
affiliates or any affiliate thereof.
-5-
<PAGE>
(b) Except for agreements explicitly contemplated in the Agreements,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company or the Subsidiary is a party or by which it is
bound that involve (i) obligations (contingent or otherwise) of, or payments to,
the Company or any of its subsidiaries in excess of, One Hundred Thousand
Dollars ($100,000), (ii) the license of any patent, copyright, trade secret or
other proprietary right to or from the Company or the Subsidiary or any of its
subsidiaries or (iii) the grant of rights to manufacture, produce, assemble,
license, market or sell its products to any other person or affect the Company's
or the Subsidiary's exclusive right to develop, manufacture, assemble,
distribute, market or sell its products.
(c) Neither the Company nor the Subsidiary has (i) declared or paid
any dividends, or authorized or made any distribution upon or with respect to
any class or series of its capital stock, (ii) except in connection with the
transactions contemplated in this Agreement, incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of One Hundred
Thousand Dollars ($100,000) or in excess of Two Hundred Thousand Dollars
($200,000) in the aggregate, (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business. (d) Neither the Company nor the
Subsidiary has engaged in the past three (3) months in any discussion (i) with
any representative of any corporation or corporations regarding the merger of
the Company with or into any such corporation or corporations, (ii) with any
representative of any corporation, partnership, association or other business
entity or any individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Company or the Subsidiary or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company or the Subsidiary would be disposed of
or (iii) regarding any other form of liquidation, dissolution or winding up of
the Company or the Subsidiary.
(e) Neither the Company nor the Subsidiary is a party to and is not
bound by any contract, agreement or instrument or subject to any restriction
under its charter documents, which materially adversely affects its business as
now conducted or as proposed to be conducted as set forth in written materials
provided to the Purchasers by the Company, its properties or its financial
condition.
2.11 No Conflict of Interest. Neither the Company nor the Subsidiary is
-----------------------
indebted, directly or indirectly, to any of its officers or directors or to
their respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. To the Company's and the
Subsidiary's knowledge, none of the Company's or the Subsidiary's officers or
directors, or any members of their immediate families, are, directly or
indirectly, indebted to the Company or the Subsidiary (other than in connection
with purchases of the Company's Common Stock) or have any direct or indirect
ownership interest in any firm or corporation with which the Company or the
-6-
<PAGE>
Subsidiary is affiliated or with which the Company or the Subsidiary has a
business relationship, or any firm or corporation which competes with the
Company or the Subsidiary except that officers, directors and/or shareholders of
the Company or the Subsidiary may own stock in (but not exceeding two percent of
the outstanding capital stock of) any publicly traded company that may compete
with the Company or the Subsidiary. To the Company's or the Subsidiary's
knowledge, none of the Company's or the Subsidiary's officers or directors or
any members of their immediate families are, directly or indirectly, interested
in any material contract with the Company or the Subsidiary. Neither the Company
nor the Subsidiary is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.12 Rights of Registration and Voting Rights. Except as contemplated in
----------------------------------------
the Investors' Rights Agreement, neither the Company nor the Subsidiary has
granted or agreed to grant any registration rights, including piggyback rights
or any preemptive rights or rights of first refusal, to any person or entity. To
the Company's and the Subsidiary's knowledge, except as contemplated in the
Voting Agreement, no shareholder of the Company or the Subsidiary has entered
into any agreements with respect to the voting of capital shares of the Company
or the Subsidiary.
2.13 Title to Property and Assets. Each of the Company and the
----------------------------
Subsidiary owns its property and assets free and clear of all mortgages, liens,
loans and encumbrances, except such encumbrances and liens which arise in the
ordinary course of business and do not materially impair the Company's or the
Subsidiary's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company and the Subsidiary is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any liens, claims or encumbrances.
2.14 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.15 Tax Returns and Payments. Each of the Company and the Subsidiary
------------------------
has filed all tax returns and reports as required by law. These returns and
reports are true and correct in all material respects. Each of the Company and
the Subsidiary has paid all taxes and other assessments due. Each of the Company
and the Subsidiary is currently in compliance in all material respects with all
state and local sales and use tax laws.
2.16 Insurance. Each of the Company and the Subsidiary has in full force
---------
and effect fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed subject to the terms
and conditions of such policies. Neither the Company nor the Subsidiary has been
refused insurance courage sought or applied for, and neither the Company nor the
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when the same shall expire upon terms at
least as favorable as those presently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company or the
Subsidiary.
2.17 Labor Agreements and Actions. Neither the Company nor the
----------------------------
Subsidiary is bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor
-7-
<PAGE>
union, and no labor union has requested or, to the knowledge of the Company and
the Subsidiary, has sought to represent any of the employees, representatives or
agents of the Company or the Subsidiary. There is no strike or other labor
dispute involving the Company or the Subsidiary pending, or to the knowledge of
the Company and the Subsidiary threatened, which could have a material adverse
effect on the assets, properties, financial condition, operating results or
business of the Company or the Subsidiary, nor is the Company or the Subsidiary
aware of any labor organization activity involving its employees. Neither the
Company nor the Subsidiary has a present intention to terminate the employment
of any officer or key employee. The employment of each officer and employee of
the Company is terminable at the will of the Company or the Subsidiary. No
employee has any agreement or contract regarding his employment or providing for
any material compensation following termination of employment with the Company
or the Subsidiary. To the Company's or the Subsidiary's knowledge, no employee
or consultant of the Company or the Subsidiary is in violation of any term of
employment, employment contract or any other contract or agreement relating to
the relationship of such person to the Company or the Subsidiary because of the
nature of the business conducted or to be conducted by the Company or the
Subsidiary. The employment of each officer and employee of the Company or the
Subsidiary is terminable at the will of the Company or the Subsidiary, as
applicable. To its knowledge, the Company and the Subsidiary have complied in
all material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment.
2.18 Confidential Information and Invention Assignment Agreements. Each
------------------------------------------------------------
employee, consultant and officer of the Company and the Subsidiary has executed
an agreement with the Company and the Subsidiary, as applicable, regarding
confidentiality and proprietary information substantially in the form or forms
delivered to the counsel for the Purchasers. Neither the Company nor the
Subsidiary is aware that any of its employees or consultants is in violation
thereof, and the Company and the Subsidiary will use its respective best efforts
to prevent any such violation.
2.19 Permits. Each of the Company and the Subsidiary has all franchises,
-------
permits, licenses and any similar authority necessary for the conduct of its
business, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and the Subsidiary.
Neither the Company nor the Subsidiary is in default in any material respect
under any of such franchises, permits, licenses or other similar authority, and
reasonably believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
2.20 Corporate Documents. The Restated Articles and the Bylaws are in
-------------------
the form provided to counsel for the Purchasers. The copy of the minute books of
the Company provided to the Purchasers' counsel contains minutes of all meetings
of the Board of Directors and the Shareholders and all actions by written
consent without a meeting by the Board of Directors and the Shareholders since
the date of incorporation and reflects accurately in all material respects all
actions by the Board of Directors (and any committee of Board of Directors) and
the Shareholders with respect to all transactions referred to in such minutes.
-8-
<PAGE>
2.21 Financial Statements. The Company has made available to each
--------------------
Purchaser its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of August 31, 1999 (collectively, the
"Financial Statements"). The Financial Statements are complete and correct in
--------------------
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except that the unaudited Financial Statements may not
contain all footnotes required by generally accepted accounting principles. The
Financial Statements fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments. Except
as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (a) liabilities incurred in the
ordinary course of business subsequent to August 31, 1999 and (b) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the aggregate
are not material to the financial condition or operating results of the Company.
2.22 Changes. Since August 31, 1999, there has not been:
-------
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company;
(c) any waiver or compromise by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects or
financial condition of the Company;
(e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets, service marks, tradenames, licenses, domain names,
information or other proprietary rights or other intangible assets;
(h) any resignation or termination of employment of any officer or
key employee of the Company, and the Company is not aware of any impending
resignation or termination of employment of any such officer, key employee or
any group of key employees;
-9-
<PAGE>
(i) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(k) any declaration, setting aside or payment or other distribution
in respect to any of the Company's capital stock or assets, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company;
(l) to the Company's knowledge, any other event or condition of any
character that materially and adversely affected the business, properties,
prospects or financial condition of the Company;
(m) any change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty or any assurance of
performance or payment or endorsement, indemnity, warranty or otherwise, which
obligation is individually in excess of $25,000 or in excess of $50,000 in the
aggregate;
(n) any loss of or material order cancellation or threat of
cancellation by a major supplier of or to the Company;
(o) any arrangement or commitment by the Company to do any of the
things described in this Section 2.22.
2.23 Disclosure. Each of the Company and the Subsidiary has fully
----------
provided the Purchasers with all the information that the Purchasers have
requested for deciding whether to acquire the Stock and all information that the
Company believes is reasonably necessary to enable the Purchasers to make such a
decision, including certain of the Company's projections describing its proposed
business (collectively, the "Business Plan"). To the Company's and the
-------------
Subsidiary's knowledge, neither this Agreement, any exhibits attached hereto,
nor any certificate furnished or to be furnished to Purchasers at the Closing,
or the Business Plan (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. To the extent the Business Plan was
prepared by management of the Company, the Business Plan and the financial and
other projections contained in the Business Plan were prepared in good faith;
however, neither the Company nor the Subsidiary warrants that it will achieve
such projections. None of the statements, documents, certificates or other items
prepared or supplied by the Company or the Subsidiary with respect to the
transactions contemplated contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein not
misleading. There is no fact which the Company or the Subsidiary has not
disclosed to the purchasers and their counsel in writing of which the Company or
the Subsidiary is presently aware which materially and adversely affects
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<PAGE>
the business, financial condition, operations, property, prospects or affairs of
the Company or the Subsidiary.
2.24 Year 2000. The computer systems and software owned or licensed by
---------
the Company and the Subsidiary, and to the best of the Company's and
Subsidiary's knowledge, by the Internet service provider currently used by the
Company and the Subsidiary, are able to accurately process date data, including
but not limited to, in calculating, comparing, and sequencing from, into and
between the Twentieth Century (through Year 1999), the Year 2000 and the
Twenty-First Century, including leap year calculations. The cost to the Company
and the Subsidiary to implement necessary changes to make all material Date Data
and Date-Sensitive Systems of the Company and the Subsidiary (and its
distribution contractor) Year 2000 Compliant will not have a material adverse
affect on the business of the Company or the Subsidiary as currently conducted
or prefers to be conducted."
"Date Data" means any data of any type that encodes date information or
which is otherwise derived from, dependent on or related to date information."
"Date-Sensitive Systems" means any software, microcode or hardware
system or component, including any electronic or electronically controlled
system or component, that processes any Date Data and that is installed, in
development or on order by the Company or the Subsidiary for its internal use,
or which the Company or the Subsidiary sells, leases, licenses, assigns or
otherwise provides or provision or operation of which the Company or the
Subsidiary provides the benefit, to its customer, vendors, suppliers, affiliates
or any third party.
"Year 2000 Compliant" means (i) with respect to Date Data, that such
data is in proper format and accurate for all dates in the Twentieth and
Twenty-First Centuries, and (ii) with respect to Date-Sensitive Systems, that
each such system accurately processes all Date Data, including for the Twentieth
and Twenty-First Centuries, without loss of any functionality or performance,
including but not limited to calculating, comparing, sequencing, storing and
displaying such Date Data (including all leap year considerations), when used as
a stand-alone system or in combination with other software or hardware.
2.25 Operations of the Company. The Company's and the Subsidiary's
-------------------------
e-commerce marketplace has been commercially operational meaning that its
website (http://www.onvia.com) (the "Web Site") has been continually of
performing, and has performed, order taking and fulfillment functions for at
least the thirty (30) days prior to the date of this Agreement. Each of the
Company and the Subsidiary owns and has the unrestricted right to communicate
and publish its Internet product offerings and the Web Site, including without
limitation all content, whether developed internally or by third parties,
included or presented, or proposed to be included or presented, therein, and to
conduct business on the World Wide Web at the Internet address "www.onvia.com"
and in connection therewith to use the service marks and trade names "Onvia" "
Work. Wisely." And "Mega-Depot" and in so doing is not and will not be acting in
conflict with any patent, trademark, service mark, trade name, copyright, trade
secret, license, domain name or other proprietary right with respect to any
third party.
2.26 Environmental Matters.
---------------------
-11-
<PAGE>
(a) To the Company's and the Subsidiary's knowledge, no hazardous
material, hazardous substance or toxic substance as defined in applicable
environmental laws, rules and regulations ("Hazardous Materials") (i) has been
released, stored, generated, used, treated, deposited or disposed of on or under
or is located on or under any real property currently or previously owned or
leased by the Company or the Subsidiary, (ii) is presently maintained, used,
generated, or permitted to remain in place by the Company or the Subsidiary in
violation of any applicable law, (iii) is required by applicable law to be
removed, treated or mitigated by the Company or the Subsidiary, given the nature
of its present condition, location, nature, material or maintenance, or (iv) is
of a type, location, material, nature or condition which requires special
notification to third parties by the Company or the Subsidiary under applicable
law.
(b) Each of the Company and the Subsidiary has maintained its
properties and assets and conducted its business in accordance in all material
respects with all federal, state and local statutes, laws, rules and regulations
pertaining to conservation and protection of the environment and the release,
treatment, discharge, use, handling, storage, production and disposal of
Hazardous Materials.
(c) No notice, citation, summons or order has been received by the
Company and no investigation or review is pending or, to the Company's and the
Subsidiary's knowledge, threatened by any governmental or other entity, with
respect to (i) any alleged violation by the Company or the Subsidiary of any
environmental statute, ordinance, rule, regulation or order of any governmental
entity, or (ii) any alleged failure by the Company or the Subsidiary to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with its business, or (iii) any use,
possession, generation, treatment, storage, recycling, transportation, release
or disposal by or on behalf of the Company or the Subsidiary of any Hazardous
Material.
2.27 Absence of Undisclosed Liabilities. Neither the Company nor the
----------------------------------
Subsidiary has any material obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due, whether or
not known to the Company or the Subsidiary) arising out of any transaction
entered into at or prior to the Closing, or any act or omission to act at or
prior to the Closing, or any state of facts existing at or prior to the Closing,
including taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing, and including without limitation unfunded
past service liabilities under any pension, profit sharing or similar plan,
except (a) to the extent set forth on or reserved against in the Financial
Statements, and (b) current liabilities incurred and obligations under
agreements entered into, in the usual and ordinary course of business, since
August 31, 1999, none of which (individually or in the aggregate) materially and
adversely affects the business, properties, finances or prospects of the Company
and its subsidiaries, individually or taken as a whole.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby,
------------------------------------------------
severally and not jointly, represents and warrants to the Company that:
3.1 Authorization. Such Purchaser has full power and authority to enter
-------------
into this Agreement. The Agreements, when executed and delivered by the
Purchaser, will constitute
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<PAGE>
valid and legally binding obligations of the Purchaser, enforceable in
accordance with their respective terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
any other laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief or other equitable remedies and (b) to the extent
the indemnification provisions contained in the Investors' Rights Agreement may
be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
---------------------------------
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement, the Purchaser hereby confirms,
that the Stock to be acquired by the Purchaser will be acquired for investment
for the Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Stock. The Purchaser has not been formed for the specific purpose of acquiring
the Stock.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
-------------------------
discuss the Company's business, management, financial affairs and the terms and
conditions of the offering of the Stock with the Company's management and has
had an opportunity to review the Company's facilities. The Purchaser understands
that such discussions, as well as the Business Plan and any other written
information delivered by the Company to the Purchaser, were intended to describe
the aspects of the Company's business which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the Stock has
---------------------
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the shares of Stock are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the shares of Stock indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the Company has no
obligation to register or qualify the Stock for resale except as set forth in
the Investors' Rights Agreement. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Stock, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under no obligation and may not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no public market
----------------
now exists for any of the Stock issued by the Company, and that the Company has
made no assurances that a public market will ever exist for the Stock.
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<PAGE>
3.6 Legends. The Purchaser understands that the Stock, and any
-------
securities issued in respect of or exchange for the Stock, may bear one or all
of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED."
(b) Any legend set forth in the Agreements.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. Conditions of the Purchasers' Obligations at Closing. The obligations of
----------------------------------------------------
each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied in all
-----------
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall deliver
----------------------
to the Purchasers at the Closing a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received from
--------------------------
Venture Law Group, counsel for the Company, an opinion, dated as of the Closing,
in substantially the form of Exhibit G.
---------
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<PAGE>
4.6 Board of Directors. As of the Closing, the Board shall be comprised
------------------
of Glenn Ballman, Nancy Schoendorf, Ken Fox, Mike Pickett, Anton Simunovic and
Bill Ericson.
4.7 Investors' Rights Agreement. The Company, each Purchaser and the
---------------------------
Shareholders shall have executed and delivered the Investors' Rights Agreement
in substantially the form attached as Exhibit D.
---------
4.8 Co-Sale Agreement. The Company, each Purchaser and certain of the
-----------------
Shareholders named in the Co-Sale Agreement shall have executed and delivered
the Co-Sale Agreement in substantially the form attached as Exhibit E.
---------
4.9 Voting Agreement. The Company, each Purchaser and the Shareholders
----------------
shall have executed and delivered the Voting Agreement in substantially the form
attached as Exhibit F.
---------
4.10 Restated Articles. The Company shall have filed the Restated
-----------------
Articles with the Secretary of State of Washington on or prior to the Closing
Date, which shall continue to be in full force and effect as of the Closing
Date.
4.11 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each of its employees shall have entered into the Company's standard
form Confidential Information and Invention Assignment Agreement, in
substantially the form provided to the Purchasers.
4.12 Internet Capital Group. Four Million Dollars ($4,000,000) of
----------------------
Internet Capital Group's Nine Million Dollars ($9,000,000) purchase price for
the Stock it purchased hereunder is subject to approval of Internet Capital
Group's board of directors.
5. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties. The representations and warranties
------------------------------
of each Purchaser contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
-15-
<PAGE>
6. Covenants of the Company. The Company covenants and agrees with each of
------------------------
the purchasers that, so long as such purchaser owns any shares of stock:
6.1 Reserve for Common Shares. The Company shall at all times reserve
-------------------------
and keep available out of its authorized but unissued shares of Common Stock for
the purpose of affecting the conversion of the Stock and otherwise in compliance
with the terms of this Agreement, such number of its duly authorized shares of
Common Stock as shall be sufficient to affect the conversion of the Stock from
time to time outstanding or otherwise to comply with the terms of the Restated
Articles and this Agreement. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect a conversion
of Stock or otherwise to comply with the terms of the Restated Articles and this
Agreement, the Company shall forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or making any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Stock.
6.2 Directors and Officers Liability Insurance. The Company shall use
------------------------------------------
reasonable commercial efforts to obtain directors' and officers' liability
insurance covering the Company's directors and officers with a policy limit of
at least Five Million Dollars ($5,000,000).
7. Miscellaneous.
-------------
7.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
7.2 Transfer; Successors and Assigns. The terms and conditions of this
--------------------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
-16-
<PAGE>
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or one hundred
twenty (120) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified at
such party's address as set forth on the signature page or Exhibit A hereto, or
---------
as subsequently modified by written notice, and (a) if to the Company, with a
copy to Venture Law Group, 4750 Carillon Point, Kirkland, Washington 98033,
Attention Bill Ericson or (b) if to the Purchasers, to the appropriate address
set forth on the signature pages hereto.
7.7 Finder's Fee. Each party represents that it neither is nor will be
------------
obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.8 Fees and Expenses. The Company shall pay the reasonable fees and
-----------------
expenses of Paul, Hastings, Janofsky & Walker LLP incurred with respect to this
Agreement, the documents referred to herein and the transactions contemplated
herein and therein; provided, however, that such fees and expenses do not exceed
Thirty Thousand Dollars ($30,000).
7.9 Attorneys' Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.10 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the Company and the holders of at
least a majority of the Common Stock issued or issuable upon conversion of the
Stock. Any amendment or waiver effected in accordance with this Section 7.10
shall be binding upon the Purchasers and each transferee of the Stock (or the
Common Stock issued or issuable upon conversion thereof), each future holder of
all such securities, and the Company.
7.11 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
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<PAGE>
7.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
7.13 Entire Agreement. This Agreement, and the documents referred to
----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
7.14 Confidentiality. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone (other than
its employees and attorneys having a need to know) any confidential information,
knowledge or data concerning or relating to the business or financial affairs of
the other parties to which such party shall become privy by reason of this
Agreement, the performance of its obligations hereunder or the ownership of
Stock purchased hereunder. The provisions of this Section 7.14 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to the
transactions contemplated herein.
7.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
----------------------------
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the Stock.
7.16 Waiver of Conflicts. Each party to this Agreement acknowledges that
-------------------
Venture Law Group, counsel for the Company, has in the past performed and may
continue to perform legal services for certain of the Purchasers in matters
unrelated to the transactions described in this Agreement, including the
representation of such Purchasers in venture capital financings and other
matters. Accordingly, each party to this Agreement hereby (a) acknowledges that
they have had an opportunity to ask for information relevant to this disclosure
and (b) each party other than GE Capital Equity Investments, Inc. its informed
consent to Venture Law Group's representation of certain of the Purchasers in
such unrelated matters and to Venture Law Group's representation of the Company
in connection with this Agreement and the transactions contemplated herein.
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<PAGE>
7.17 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO
--------------------
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE AGREEMENTS, THE STOCK OR THE COMMON STOCK, OR THE SUBJECT MATTER HEREOF OR
THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THIS SECTION 7.17 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND
THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO
HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR
MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY
THE COURT.
7.18 No Press Releases. The Company shall not issue, publish or
-----------------
disseminate or cause to be issued, published or disseminated any press release
or public communication relating to any of the Agreements or any of the
transactions contemplated herein or therein using the name or any trade mark,
logo, tradename or other intellectual property or otherwise referring to any
Purchaser without the prior written consent of such Purchaser. Each Purchaser
hereby agrees to respond promptly to a request for consent pursuant to this
Section 7.18. In the event such Purchaser fails to respond within three (3)
business days, such Purchaser shall be deemed to have consented.
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<PAGE>
The parties have executed this Onvia.com, Inc. Series B Preferred Stock
Purchase Agreement as of the date first written above.
COMPANY:
ONVIA.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
------------------------
Name:
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(print)
Title:
---------------------
Address:
-------------------
PURCHASERS:
---------------------------
(Print Name of Purchaser)
By:
------------------------
Name:
----------------------
(Print Name)
Title:
---------------------
Address:
-------------------
-------------------
-------------------
[SIGNATURE PAGE TO ONVIA'S SERIES B STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBITS
--------
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Amended and Restated Articles of Incorporation
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Investors' Rights Agreement
Exhibit E - Form of Right of First Refusal and Co-Sale Agreement
Exhibit F - Form of Voting Agreement
Exhibit G - Form of Legal Opinion of Venture Law Group
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
--------- ---------------- --------------
<S> <C> <C> <C>
1. GE CAPITAL EQUITY INVESTMENTS, INC. 2,036,185 $6,999,996.79
2. INTERNET CAPITAL GROUP 2,617,953 $8,999,998.82
3. MOHR, DAVIDOW VENTURES V, L.P. 405,781 $1,394,993.92
4. MOHR, DAVIDOW VENTURES V, L.P. 30,543 $105,000.73
as nominee for MDV Entrepeneurs' Network Fund II (A),
L.P. and MDV Entrepreneurs' Network Fund II (B), L.P.
5. MOHR, DAVIDOW VENTURES V-L, L.P. 1,890,740 $6,499,985.97
6. RIT VENTURES I LLC 290,883 $999,997.58
TOTAL 7,272,085 $24,999,973.81
</TABLE>
<PAGE>
EXHIBIT B
---------
FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS TO
REPRESENTATIONS AND WARRANTIES
<PAGE>
EXHIBIT D
---------
FORM OF INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
---------
FORM OF RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE>
EXHIBIT F
---------
FORM OF VOTING AGREEMENT
<PAGE>
EXHIBIT G
---------
FORM OF LEGAL OPINION
OF
VENTURE LAW GROUP
<PAGE>
Exhibit 10.4
ONVIA.COM, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
December 20, 1999
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1. PURCHASE AND SALE OF PREFERRED STOCK........................................................................1
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK............................................................1
1.2 CLOSING; DELIVERY........................................................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................................1
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION............................................................2
2.2 CAPITALIZATION...........................................................................................2
2.3 SUBSIDIARIES.............................................................................................3
2.4 AUTHORIZATION............................................................................................3
2.5 VALID ISSUANCE OF SECURITIES.............................................................................4
2.6 GOVERNMENTAL CONSENTS....................................................................................4
2.7 LITIGATION...............................................................................................4
2.8 INTELLECTUAL PROPERTY....................................................................................5
2.9 COMPLIANCE WITH OTHER INSTRUMENTS........................................................................5
2.10 AGREEMENTS; ACTION....................................................................................6
2.11 NO CONFLICT OF INTEREST...............................................................................7
2.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS..............................................................7
2.13 TITLE TO PROPERTY AND ASSETS..........................................................................7
2.14 EMPLOYEE BENEFIT PLANS................................................................................8
2.15 TAX RETURNS AND PAYMENTS..............................................................................8
2.16 INSURANCE.............................................................................................8
2.17 LABOR AGREEMENTS AND ACTIONS..........................................................................8
2.18 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS..........................................9
2.19 PERMITS...............................................................................................9
2.20 CORPORATE DOCUMENTS...................................................................................9
2.21 FINANCIAL STATEMENTS..................................................................................9
2.22 CHANGES..............................................................................................10
2.23 DISCLOSURE...........................................................................................11
2.24 YEAR 2000............................................................................................11
2.25 OPERATIONS OF THE COMPANY............................................................................12
2.26 ENVIRONMENTAL MATTERS................................................................................12
2.27 ABSENCE OF UNDISCLOSED LIABILITIES...................................................................13
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................................................13
3.1 AUTHORIZATION...........................................................................................13
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.......................................................................14
3.3 DISCLOSURE OF INFORMATION...............................................................................14
3.4 RESTRICTED SECURITIES...................................................................................14
3.5 NO PUBLIC MARKET........................................................................................14
3.6 LEGENDS.................................................................................................14
3.7 ACCREDITED INVESTOR.....................................................................................15
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING....................................................15
4.1 REPRESENTATIONS AND WARRANTIES..........................................................................15
4.2 PERFORMANCE.............................................................................................15
4.3 COMPLIANCE CERTIFICATE..................................................................................15
4.4 QUALIFICATIONS..........................................................................................15
4.5 OPINION OF COMPANY COUNSEL..............................................................................15
4.7 INVESTORS' RIGHTS AGREEMENT.............................................................................16
4.8 CO-SALE AGREEMENT.......................................................................................16
4.9 VOTING AGREEMENT........................................................................................16
4.10 RESTATED ARTICLES....................................................................................16
4.11 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT..........................................16
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.........................................................16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5.1 REPRESENTATIONS AND WARRANTIES..........................................................................16
5.2 PERFORMANCE.............................................................................................16
5.3 QUALIFICATIONS..........................................................................................16
6. COVENANTS OF THE COMPANY...................................................................................16
6.1 RESERVE FOR COMMON SHARES...............................................................................17
6.2 DIRECTORS AND OFFICERS LIABILITY INSURANCE..............................................................17
7. MISCELLANEOUS..............................................................................................17
7.1 SURVIVAL OF WARRANTIES..................................................................................17
7.2 TRANSFER; SUCCESSORS AND ASSIGNS........................................................................17
7.3 GOVERNING LAW...........................................................................................17
7.4 COUNTERPARTS............................................................................................17
7.5 TITLES AND SUBTITLES....................................................................................17
7.6 NOTICES.................................................................................................18
7.7 FINDER'S FEE............................................................................................18
7.8 FEES AND EXPENSES.......................................................................................18
7.9 ATTORNEYS' FEES.........................................................................................18
7.10 AMENDMENTS AND WAIVERS...............................................................................18
7.11 SEVERABILITY.........................................................................................18
7.12 DELAYS OR OMISSIONS..................................................................................19
7.13 ENTIRE AGREEMENT.....................................................................................19
7.14 CONFIDENTIALITY......................................................................................19
7.15 EXCULPATION AMONG PURCHASERS.........................................................................19
7.16 WAIVER OF CONFLICTS..................................................................................19
7.17 WAIVER OF JURY TRIAL.................................................................................20
7.18 NO PRESS RELEASES....................................................................................20
-----------------
PURCHASER.........................................................................................................2
NUMBER OF SHARES..................................................................................................2
</TABLE>
<PAGE>
ONVIA.COM, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Onvia.com, Inc. Series C Preferred Stock Purchase Agreement (this
"Agreement") is made as of the 20th day of December, 1999, by and between
---------
Onvia.com, Inc., a Washington corporation, (the "Company"), and the investors
-------
listed on Exhibit A attached hereto (each a "Purchaser" and together the
--------- ---------
"Purchasers").
----------
For the mutual covenants set forth below and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
------------------------------------
1.1 Sale and Issuance of Series C Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State of
the State of Washington on or before the Closing (as defined below) the Third
Amended and Restated Articles of Incorporation of the Company in the form
attached hereto as Exhibit B (the "Restated Articles").
--------- -----------------
(b) Subject to the terms and conditions of this Agreement, each
Purchaser severally agrees to purchase at the Closing, and the Company agrees to
sell and issue to each Purchaser at the Closing, that number of shares of Series
C Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
---------
attached hereto at a purchase price of Thirteen Dollars and Seventy One Cents
($13.71) per share. The shares of Series C Preferred Stock issued to the
Purchaser pursuant to this Agreement shall be hereinafter referred to as the
"Stock."
-----
1.2 Closing; Delivery.
-----------------
(a) The purchase and sale of the Stock shall take place at the
offices of Venture Law Group, 4750 Carillon Point, Kirkland, Washington, at
11:00 a.m., on December 20, 1999, or at such other time and place as the Company
and the Purchasers mutually agree upon, orally or in writing (which time and
place are designated as the "Closing").
-------
(b) At the Closing, the Company shall deliver to each Purchaser a
certificate representing the Stock being purchased thereby against payment of
the purchase price therefor by check payable to the Company, wire transfer to
the Company's bank account or cancellation of indebtedness.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C (the "Schedule of
--------- -----------
Exceptions"), which exceptions shall be deemed to be representations and
- ----------
warranties as if made hereunder:
-1-
<PAGE>
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted as set
forth in written materials provided to Purchasers by the Company. The Subsidiary
(as defined below) is a corporation duly organized, validly existing and in good
standing under the laws of the province of British Columbia and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted as set forth in written materials
provided to Purchasers by the Company. Each of the Company and the Subsidiary is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a material adverse effect on its
business or properties.
2.2 Capitalization. The authorized capital of the Company consists, or
--------------
will consist, immediately prior to the Closing, of:
(a) Twenty-three million (23,000,000) shares of Preferred Stock, of
which (i) twelve million (12,000,000) shares have been designated Series A
Preferred Stock, ten million one hundred nine thousand seven hundred forty-eight
(10,109,748) of which are issued and outstanding immediately prior to the
Closing (ii) eight million (8,000,000) shares have been designated Series B
Preferred Stock, of which seven million two hundred and seventy-two thousand
eighty-five (7,272,085) was issued and outstanding prior to the Closing and
(iii) three million (3,000,000) shares have been designated Series C Preferred
Stock, none of which are issued and outstanding prior to the Closing. The
rights, privileges and preferences of the Preferred Stock are as set forth in
the Restated Articles. The Series A Preferred Stock and Series B Preferred Stock
were issued in compliance with all applicable state and federal laws concerning
the offer, sale and issuance of securities. There are outstanding warrants to
purchase six hundred thirty-one thousand three hundred nineteen (631,319) shares
of Series A Preferred Stock.
(b) Seventy-five million (75,000,000) shares of Common Stock,
fourteen million three hundred eighty two thousand two hundred fifty eight
(14,382,258) shares of which are issued and outstanding immediately prior to the
Closing. All of the outstanding shares of Common Stock have been duly
authorized, fully paid and are nonassessable and issued in compliance with all
applicable federal and state securities laws. There are outstanding three
hundred fifty-two thousand five hundred seventy-two (352,572) warrants to
purchase Common Stock.
(c) The outstanding shares of Common Stock are owned by the
shareholders and in the numbers set forth in Section 2.2(c) of the Schedule of
Exceptions.
(d) The Company has reserved six million five hundred fifty-four
thousand four hundred fifteen (6,554,415) shares of Common Stock for issuance to
officers, directors, employees and consultants of the Company pursuant to its
1999 Stock Option Plan duly adopted by the Company's board of directors (the
"Board of Directors") and approved by the Company's shareholders (the
------------------
"Shareholders") (the "Stock Plan"). Of such reserved shares of Common Stock,
------------ ----------
five hundred seventy-three thousand one hundred twelve (573,112) shares have
-2-
<PAGE>
been issued pursuant to restricted stock purchase agreements, options to
purchase five million seventy-six thousand one hundred eighty-two (5,076,182)
shares have been granted, of which two million three hundred sixty five thousand
nine hundred seventy four (2,365,974) options have been exercised, two million
seven hundred ten thousand two hundred eight (2,710,208) options are currently
outstanding, and one million five thousand one hundred twenty one (1,005,121)
remain available for issuance to officers, directors, employees and consultants
pursuant to the Stock Plan.
(e) Except for outstanding options issued pursuant to the Stock Plan
and warrants identified in Section 2.2(e) of the Schedule of Exceptions, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or agreements, orally or
in writing, for the purchase or acquisition from the Company of any shares of
its capital stock or the capital stock of the Subsidiary.
(f) Neither the offer nor the issuance or sale of the Stock
constitutes or will constitute an event, under any capital stock or convertible
security or any anti-dilution or similar provision of any agreement or
instrument to which the Company or the Subsidiary is a party or by which it is
bound or affected, which shall either increase the number of shares or units of
capital stock issuable upon conversion of any securities or upon exercise of any
warrant or right to subscribe to or purchase any stock or similar security, or
decrease the consideration per share or unit of capital stock to be received by
the Company upon such conversion or exercise.
(g) The capitalization of the Subsidiary is set forth in Section
2.2(g) of the Schedule of Exceptions.
2.3 Subsidiaries. Except for Onvia.com, Inc., a Canadian federal
------------
corporation and a wholly-owned subsidiary of the Company (the "Subsidiary"), the
----------
Company does not currently own or control, directly or indirectly, any interest
in any other corporation, association or other business entity. The Company is
not a participant in any joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company (and
-------------
the Subsidiary, if any), its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement, the Onvia.com, Inc.
Second Amended and Restated Investors' Rights Agreement of even date herewith,
in the form attached hereto as Exhibit D (the "Investors' Rights Agreement"),
--------- ---------------------------
the Onvia.com, Inc. Second Amended and Restated Right of First Refusal and
Co-Sale Agreement of even date herewith, in the form attached hereto as Exhibit
-------
E (the "Co-Sale Agreement"), and the Onvia.com, Inc. Second Amended and Restated
- - -----------------
Voting Agreement of even date herewith, in the form attached hereto as Exhibit F
---------
(the "Voting Agreement," and together with this Agreement, the Investors' Rights
---------------- ---------
Agreement and the Co-Sale Agreement, the "Agreements"), the performance of all
----------
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Stock and the Common Stock issuable upon conversion
of the Stock (together, the "Securities") has been taken or will be taken prior
----------
to the Closing, and the Agreements, when executed and delivered by the Company,
shall constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms except (a) as
limited by applicable bankruptcy,
-3-
<PAGE>
insolvency, reorganization, moratorium, fraudulent conveyance and other laws of
general application affecting enforcement of creditors' rights generally, as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies or (b) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 Valid Issuance of Securities. The Stock that is being issued to the
----------------------------
Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer set forth in this Agreement, the Investors' Rights
Agreement and applicable state and federal securities laws and will have the
rights, preferences and privileges described in the Restated Articles. Based in
part upon the representations of the Purchasers in this Agreement and subject to
the provisions of Section 2.6 below, the Stock will be issued in compliance with
all applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Stock has been duly and validly reserved for issuance, and
upon issuance in accordance with the terms of the Restated Articles, shall be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable federal and state securities laws and
will be issued in compliance with all applicable federal and state securities
laws.
2.6 Governmental Consents. No consent, approval, order or
----------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company or the Subsidiary is required in connection with the consummation of
the transactions contemplated in this Agreement, except for filings pursuant to
applicable state securities laws and Regulation D of the Securities Act of 1933,
as amended (the "Securities Act"), which filings will be affected in accordance
---------------
with such state securities laws and the Securities Act, as applicable.
2.7 Litigation. There is no action, suit, proceeding or
----------
investigation pending or, to the Company's knowledge, currently threatened
against the Company or the Subsidiary that questions the validity of the
Agreements or the right of the Company to enter into them, or to consummate the
transactions contemplated herein or therein, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or, to the Company's
knowledge, currently threatened involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Neither the Company nor the Subsidiary is a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or investigation
by the Company or the Subsidiary currently pending or which the Company or the
Subsidiary intends to initiate.
-4-
<PAGE>
2.8 Intellectual Property. To its knowledge, each of the Company and the
---------------------
Subsidiary owns or possesses sufficient legal rights to all patents, trademarks,
service marks, tradenames, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for its business as now conducted and
proposed to be conducted as set forth in written materials provided to
Purchasers by the Company without any conflict with, or infringement of, the
rights of others. There are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company or the Subsidiary bound
by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity, except, in either case, for standard end-user, object code, internal-use
software license and support/maintenance agreements. Neither the Company nor the
Subsidiary has received any communications alleging that the Company or the
Subsidiary has violated or, by conducting its business, would violate any of the
patents, trademarks, service marks, tradenames, copyrights, trade secrets or
other proprietary rights or processes of any other person or entity. Neither the
Company nor the Subsidiary is aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or the Subsidiary or that would
conflict with the Company's business. Neither the execution or delivery of the
Agreements, nor the carrying on of the Company's business or the Subsidiary's
business by the employees of the Company or the Subsidiary, nor the conduct of
the Company's or the Subsidiary's business as presently proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. Neither
the Company nor the Subsidiary believes it is or will be necessary to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company or the Subsidiary, as applicable.
2.9 Compliance with Other Instruments.
---------------------------------
(a) Neither the Company nor the Subsidiary is in violation or
default of any provisions of the Restated Articles, its bylaws (the "Bylaws") or
------
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound or of any provision of any federal or state
statute, rule or regulation applicable to the Company or the Subsidiary or the
conduct of its business which violation or default would result in a material
adverse effect on the assets of the Company or the Subsidiary. The execution,
delivery and performance of the Agreements and the consummation of the
transactions contemplated herein or therein will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the Subsidiary.
(b) Each of the Company and the Subsidiary has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's or the Subsidiary's loss of any material right granted under
any license, distribution agreement or other agreement.
-5-
<PAGE>
(c) The Company is not in violation of any provision of the Foreign
Corrupt Practices Act.
2.10 Agreements; Action.
------------------
(a) There are no agreements, understandings or proposed transactions
between the Company or the Subsidiary and any of its officers, directors,
affiliates or any affiliate thereof.
(b) Except for agreements explicitly contemplated in the Agreements,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company or the Subsidiary is a party or by which it is
bound that involve (i) obligations (contingent or otherwise) of, or payments to,
the Company or the Subsidiary in excess of, One Hundred Thousand Dollars
($100,000), (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or the Subsidiary or (iii) the grant of
rights to manufacture, produce, assemble, license, market or sell its products
to any other person or affect the Company's or the Subsidiary's exclusive right
to develop, manufacture, assemble, distribute, market or sell its products.
(c) Neither the Company nor the Subsidiary has (i) declared or paid
any dividends, or authorized or made any distribution upon or with respect to
any class or series of its capital stock, (ii) except in connection with the
transactions contemplated in this Agreement, incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of One Hundred
Thousand Dollars ($100,000) or in excess of Two Hundred Thousand Dollars
($200,000) in the aggregate, (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(d) Neither the Company nor the Subsidiary has engaged in the past
three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the merger of the Company with or into any
such corporation or corporations, (ii) with any representative of any
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company or the Subsidiary or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company or the Subsidiary would be disposed of or (iii) regarding any other form
of liquidation, dissolution or winding up of the Company or the Subsidiary.
(e) Neither the Company nor the Subsidiary is a party to and is not
bound by any contract, agreement or instrument or subject to any restriction
under its charter documents, which materially adversely affects its business as
now conducted or as proposed to be conducted as set forth in written materials
provided to the Purchasers by the Company, its properties or its financial
condition.
-6-
<PAGE>
2.11 No Conflict of Interest. Neither the Company nor the Subsidiary is
-----------------------
indebted, directly or indirectly, to any of its officers or directors or to
their respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. To the Company's and the
Subsidiary's knowledge, none of the Company's or the Subsidiary's officers or
directors, or any members of their immediate families, are, directly or
indirectly, indebted to the Company or the Subsidiary (other than in connection
with purchases of the Company's Common Stock) or have any direct or indirect
ownership interest in any firm or corporation with which the Company or the
Subsidiary is affiliated or with which the Company or the Subsidiary has a
business relationship, or any firm or corporation which competes with the
Company or the Subsidiary except that officers, directors and/or shareholders of
the Company or the Subsidiary may own stock in (but not exceeding two percent
(2%) of the outstanding capital stock of) any publicly traded company that may
compete with the Company or the Subsidiary. To the Company's or the Subsidiary's
knowledge, none of the Company's or the Subsidiary's officers or directors or
any members of their immediate families are, directly or indirectly, interested
in any material contract with the Company or the Subsidiary. Neither the Company
nor the Subsidiary is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.12 Rights of Registration and Voting Rights. Except as contemplated in
----------------------------------------
the Investors' Rights Agreement, neither the Company nor the Subsidiary has
granted or agreed to grant any registration rights, including piggyback rights
or any preemptive rights or rights of first refusal, to any person or entity. To
the Company's and the Subsidiary's knowledge, except as contemplated in the
Voting Agreement, no shareholder of the Company or the Subsidiary has entered
into any agreements with respect to the voting of capital shares of the Company
or the Subsidiary.
2.13 Title to Property and Assets. Each of the Company and the Subsidiary
----------------------------
owns its property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's or the
Subsidiary's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company and the Subsidiary is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any liens, claims or encumbrances.
2.14 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.15 Tax Returns and Payments. Each of the Company and the Subsidiary has
------------------------
filed all tax returns and reports as required by law. These returns and reports
are true and correct in all material respects. Each of the Company and the
Subsidiary has paid all taxes and other assessments due. Each of the Company and
the Subsidiary is currently in compliance in all material respects with all
state and local sales and use tax laws.
2.16 Insurance. Each of the Company and the Subsidiary has in full force
---------
and effect fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or
-7-
<PAGE>
destroyed subject to the terms and conditions of such policies. Neither the
Company nor the Subsidiary has been refused insurance courage sought or applied
for, and neither the Company nor the Subsidiary has any reason to believe that
it will be unable to renew its existing insurance coverage as and when the same
shall expire upon terms at least as favorable as those presently in effect,
other than possible increases in premiums that do not result from any act or
omission of the Company or the Subsidiary.
2.17 Labor Agreements and Actions. Neither the Company nor the Subsidiary
----------------------------
is bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company and the Subsidiary, has sought to represent any of the
employees, representatives or agents of the Company or the Subsidiary. There is
no strike or other labor dispute involving the Company or the Subsidiary
pending, or to the knowledge of the Company and the Subsidiary threatened, which
could have a material adverse effect on the assets, properties, financial
condition, operating results or business of the Company or the Subsidiary, nor
is the Company or the Subsidiary aware of any labor organization activity
involving its employees. Neither the Company nor the Subsidiary has a present
intention to terminate the employment of any officer or key employee. The
employment of each officer and employee of the Company is terminable at the will
of the Company or the Subsidiary. No employee has any agreement or contract
regarding his employment or providing for any material compensation following
termination of employment with the Company or the Subsidiary. To the Company's
and the Subsidiary's knowledge, no employee or consultant of the Company or the
Subsidiary is in violation of any term of employment, employment contract or any
other contract or agreement relating to the relationship of such person to the
Company or the Subsidiary because of the nature of the business conducted or to
be conducted by the Company or the Subsidiary. The employment of each officer
and employee of the Company or the Subsidiary is terminable at the will of the
Company or the Subsidiary, as applicable. To its knowledge, the Company and the
Subsidiary have complied in all material respects with all applicable state and
federal equal employment opportunity laws and with other laws related to
employment.
2.18 Confidential Information and Invention Assignment Agreements. Each
------------------------------------------------------------
employee, consultant and officer of the Company and the Subsidiary has executed
an agreement with the Company and the Subsidiary, as applicable, regarding
confidentiality and proprietary information substantially in the form or forms
delivered to the counsel for the Purchasers. Neither the Company nor the
Subsidiary is aware that any of its employees or consultants is in violation
thereof, and the Company and the Subsidiary will use its respective best efforts
to prevent any such violation.
2.19 Permits. Each of the Company and the Subsidiary has all franchises,
-------
permits, licenses and any similar authority necessary for the conduct of its
business, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and the Subsidiary.
Neither the Company nor the Subsidiary is in default in any material respect
under any of such franchises, permits, licenses or other similar authority, and
reasonably believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
-8-
<PAGE>
2.20 Corporate Documents. The Restated Articles and the Bylaws are in the
-------------------
form provided to counsel for the Purchasers. The copy of the minute books of the
Company provided to the Purchasers' counsel contains minutes of all meetings of
the Board of Directors and the Shareholders and all actions by written consent
without a meeting by the Board of Directors and the Shareholders since the date
of incorporation and reflects accurately in all material respects all actions by
the Board of Directors (and any committee of Board of Directors) and the
Shareholders with respect to all transactions referred to in such minutes.
2.21 Financial Statements. The Company has made available to each
--------------------
Purchaser its audited financial statements as of September 30, 1999 and its
unaudited financial statements (including balance sheet, income statement and
statement of cash flows) as of October 31, 1999 (collectively, the "Financial
---------
Statements"). The Financial Statements are complete and correct in all material
- ----------
respects and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated,
except that the unaudited Financial Statements may not contain all footnotes
required by generally accepted accounting principles. The Financial Statements
fairly present in all material respects the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (a) liabilities incurred in the ordinary course of
business subsequent to October 31, 1999 and (b) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate are not
material to the financial condition or operating results of the Company.
2.22 Changes. Since October 31, 1999, there has not been:
-------
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company;
(c) any waiver or compromise by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects or
financial condition of the Company;
(e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
-9-
<PAGE>
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets, service marks, tradenames, licenses, domain names,
information or other proprietary rights or other intangible assets;
(h) any resignation or termination of employment of any officer or
key employee of the Company, and the Company is not aware of any impending
resignation or termination of employment of any such officer, key employee or
any group of key employees;
(i) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(k) any declaration, setting aside or payment or other distribution
in respect to any of the Company's capital stock or assets, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company;
(l) to the Company's knowledge, any other event or condition of any
character that materially and adversely affected the business, properties,
prospects or financial condition of the Company;
(m) any change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty or any assurance of
performance or payment or endorsement, indemnity, warranty or otherwise, which
obligation is individually in excess of Twenty-five Thousand Dollars ($25,000)
or in excess of Fifty Thousand Dollars ($50,000) in the aggregate;
(n) any loss of or material order cancellation or threat of
cancellation by a major supplier of or to the Company;
(o) any arrangement or commitment by the Company to do any of the
things described in this Section 2.22.
2.23 Disclosure. Each of the Company and the Subsidiary has fully
----------
provided the Purchasers with all the information that the Purchasers have
requested for deciding whether to acquire the Stock and all information that the
Company believes is reasonably necessary to enable the Purchasers to make such a
decision, including certain of the Company's projections describing its proposed
business (collectively, the "Business Plan"). To the Company's and the
-------------
Subsidiary's knowledge, neither this Agreement, any exhibits attached hereto,
nor any certificate furnished or to be furnished to Purchasers at the Closing,
or the Business Plan (when read together) contains any untrue statement of a
material fact or omits to state a material fact
-10-
<PAGE>
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. To the
extent the Business Plan was prepared by management of the Company, the Business
Plan and the financial and other projections contained in the Business Plan were
prepared in good faith; however, neither the Company nor the Subsidiary warrants
that it will achieve such projections. None of the statements, documents,
certificates or other items prepared or supplied by the Company or the
Subsidiary with respect to the transactions contemplated contains an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein not misleading. There is no fact which the Company
or the Subsidiary has not disclosed to the purchasers and their counsel in
writing of which the Company or the Subsidiary is presently aware which
materially and adversely affects the business, financial condition, operations,
property, prospects or affairs of the Company or the Subsidiary.
2.24 Year 2000. The computer systems and software owned or licensed by
---------
the Company and the Subsidiary, and to the best of the Company's and
Subsidiary's knowledge, by the Internet service provider currently used by the
Company and the Subsidiary, are able to accurately process date data, including
but not limited to, in calculating, comparing, and sequencing from, into and
between the Twentieth Century (through Year 1999), the Year 2000 and the
Twenty-First Century, including leap year calculations. The cost to the Company
and the Subsidiary to implement necessary changes to make all material Date Data
and Date-Sensitive Systems of the Company and the Subsidiary (and its
distribution contractor) Year 2000 Compliant will not have a material adverse
affect on the business of the Company or the Subsidiary as currently conducted
or prefers to be conducted."
"Date Data" means any data of any type that encodes date information or
which is otherwise derived from, dependent on or related to date information."
"Date-Sensitive Systems" means any software, microcode or hardware system
or component, including any electronic or electronically controlled system or
component, that processes any Date Data and that is installed, in development or
on order by the Company or the Subsidiary for its internal use, or which the
Company or the Subsidiary sells, leases, licenses, assigns or otherwise provides
or provision or operation of which the Company or the Subsidiary provides the
benefit, to its customer, vendors, suppliers, affiliates or any third party.
"Year 2000 Compliant" means (i) with respect to Date Data, that such data
is in proper format and accurate for all dates in the Twentieth and Twenty-First
Centuries, and (ii) with respect to Date-Sensitive Systems, that each such
system accurately processes all Date Data, including for the Twentieth and
Twenty-First Centuries, without loss of any functionality or performance,
including but not limited to calculating, comparing, sequencing, storing and
displaying such Date Data (including all leap year considerations), when used as
a stand-alone system or in combination with other software or hardware.
2.25 Operations of the Company. The Company's and the Subsidiary's
-------------------------
e-commerce marketplace has been commercially operational meaning that its
website (http://www.onvia.com) (the "Web Site") has been continually of
--------
performing, and has performed, order taking and fulfillment functions for at
least the thirty (30) days prior to the date
-11-
<PAGE>
of this Agreement. Each of the Company and the Subsidiary owns and has the
unrestricted right to communicate and publish its Internet product offerings and
the Web Site, including without limitation all content, whether developed
internally or by third parties, included or presented, or proposed to be
included or presented, therein, and to conduct business on the World Wide Web at
the Internet address "www.onvia.com" and in connection therewith to use the
service marks and trade names "Onvia" " Work. Wisely." And "Mega-Depot" and in
so doing is not and will not be acting in conflict with any patent, trademark,
service mark, trade name, copyright, trade secret, license, domain name or other
proprietary right with respect to any third party.
2.26 Environmental Matters.
---------------------
(a) To the Company's and the Subsidiary's knowledge, no hazardous
material, hazardous substance or toxic substance as defined in applicable
environmental laws, rules and regulations ("Hazardous Materials") (i) has been
released, stored, generated, used, treated, deposited or disposed of on or under
or is located on or under any real property currently or previously owned or
leased by the Company or the Subsidiary, (ii) is presently maintained, used,
generated, or permitted to remain in place by the Company or the Subsidiary in
violation of any applicable law, (iii) is required by applicable law to be
removed, treated or mitigated by the Company or the Subsidiary, given the nature
of its present condition, location, nature, material or maintenance, or (iv) is
of a type, location, material, nature or condition which requires special
notification to third parties by the Company or the Subsidiary under applicable
law.
(b) Each of the Company and the Subsidiary has maintained its
properties and assets and conducted its business in accordance in all material
respects with all federal, state and local statutes, laws, rules and regulations
pertaining to conservation and protection of the environment and the release,
treatment, discharge, use, handling, storage, production and disposal of
Hazardous Materials.
(c) No notice, citation, summons or order has been received by the
Company and no investigation or review is pending or, to the Company's and the
Subsidiary's knowledge, threatened by any governmental or other entity, with
respect to (i) any alleged violation by the Company or the Subsidiary of any
environmental statute, ordinance, rule, regulation or order of any governmental
entity, or (ii) any alleged failure by the Company or the Subsidiary to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with its business, or (iii) any use,
possession, generation, treatment, storage, recycling, transportation, release
or disposal by or on behalf of the Company or the Subsidiary of any Hazardous
Material.
2.27 Absence of Undisclosed Liabilities. Neither the Company nor the
----------------------------------
Subsidiary has any material obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due, whether or
not known to the Company or the Subsidiary) arising out of any transaction
entered into at or prior to the Closing, or any act or omission to act at or
prior to the Closing, or any state of facts existing at or prior to the Closing,
including taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing, and including without limitation unfunded
past service liabilities under any pension,
-12-
<PAGE>
profit sharing or similar plan, except (a) to the extent set forth on or
reserved against in the Financial Statements, and (b) current liabilities
incurred and obligations under agreements entered into, in the usual and
ordinary course of business, since August 31, 1999, none of which (individually
or in the aggregate) materially and adversely affects the business, properties,
finances or prospects of the Company and the Subsidiary, individually or taken
as a whole.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby,
------------------------------------------------
severally and not jointly, represents and warrants to the Company that:
3.1 Authorization. Such Purchaser has full power and authority to enter
-------------
into this Agreement. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and any other laws of general application affecting
enforcement of creditors' rights generally, and as limited by laws relating to
the availability of a specific performance, injunctive relief or other equitable
remedies and (b) to the extent the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
---------------------------------
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement, the Purchaser hereby confirms,
that the Stock to be acquired by the Purchaser will be acquired for investment
for the Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Stock. The Purchaser has not been formed for the specific purpose of acquiring
the Stock.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
-------------------------
discuss the Company's business, management, financial affairs and the terms and
conditions of the offering of the Stock with the Company's management and has
had an opportunity to review the Company's facilities. The Purchaser understands
that such discussions, as well as the Business Plan and any other written
information delivered by the Company to the Purchaser, were intended to describe
the aspects of the Company's business which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the Stock has
---------------------
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the shares of Stock are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the shares of Stock indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such
-13-
<PAGE>
registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the Stock
for resale except as set forth in the Investors' Rights Agreement. The Purchaser
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Stock, and
on requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
3.5 No Public Market. The Purchaser understands that no public market
----------------
now exists for any of the Stock issued by the Company, and that the Company has
made no assurances that a public market will ever exist for the Stock.
3.6 Legends. The Purchaser understands that the Stock, and any
-------
securities issued in respect of or exchange for the Stock, may bear one or all
of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED."
(b) Any legend set forth in the Agreements.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. Conditions of the Purchasers' Obligations at Closing. The obligations of
----------------------------------------------------
each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied in all
-----------
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing.
-14-
<PAGE>
4.3 Compliance Certificate. The President of the Company shall deliver
----------------------
to the Purchasers at the Closing a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received from
--------------------------
Venture Law Group, counsel for the Company, an opinion, dated as of the Closing,
in substantially the form of Exhibit G.
---------
4.6 Investors' Rights Agreement. The Company, each Purchaser and the
---------------------------
Shareholders shall have executed and delivered the Investors' Rights Agreement
in substantially the form attached as Exhibit D.
---------
4.7 Co-Sale Agreement. The Company, each Purchaser and certain of the
-----------------
Shareholders named in the Co-Sale Agreement shall have executed and delivered
the Co-Sale Agreement in substantially the form attached as Exhibit E.
---------
4.8 Voting Agreement. The Company, each Purchaser and the Shareholders
----------------
shall have executed and delivered the Voting Agreement in substantially the form
attached as Exhibit F.
---------
4.9 Restated Articles. The Company shall have filed the Restated
-----------------
Articles with the Secretary of State of Washington on or prior to the Closing
Date, which shall continue to be in full force and effect as of the Closing
Date.
4.10 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each of its employees shall have entered into the Company's standard
form Confidential Information and Invention Assignment Agreement, in
substantially the form provided to the Purchasers.
5. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties. The representations and warranties
------------------------------
of each Purchaser contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
-15-
<PAGE>
5.3 Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
6. Covenants of the Company. The Company covenants and agrees with each of
------------------------
the purchasers that, so long as such purchaser owns any shares of stock:
6.1 Reserve for Common Shares. The Company shall at all times reserve
-------------------------
and keep available out of its authorized but unissued shares of Common Stock for
the purpose of affecting the conversion of the Stock and otherwise in compliance
with the terms of this Agreement, such number of its duly authorized shares of
Common Stock as shall be sufficient to affect the conversion of the Stock from
time to time outstanding or otherwise to comply with the terms of the Restated
Articles and this Agreement. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect a conversion
of Stock or otherwise to comply with the terms of the Restated Articles and this
Agreement, the Company shall forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or making any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Stock.
6.2 Directors and Officers Liability Insurance. The Company shall use
------------------------------------------
reasonable commercial efforts to obtain directors' and officers' liability
insurance covering the Company's directors and officers with a policy limit of
at least Five Million Dollars ($5,000,000).
7. Miscellaneous.
-------------
7.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
7.2 Transfer; Successors and Assigns. The terms and conditions of this
--------------------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
-16-
<PAGE>
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or one hundred
twenty (120) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified at
such party's address as set forth on the signature page or Exhibit A hereto, or
as subsequently modified by written notice, and (a) if to the Company, with a
copy to Venture Law Group, 4750 Carillon Point, Kirkland, Washington 98033,
Attention Bill Ericson or (b) if to the Purchasers, to the appropriate address
set forth on the signature pages hereto.
7.7 Finder's Fee. Each party represents that it neither is nor will be
------------
obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.8 Fees and Expenses. The Company shall pay the reasonable fees and
-----------------
expenses of counsel to GE Capital Equity Investments, Inc., incurred with
respect to this Agreement, the documents referred to herein and the transactions
contemplated herein and therein; provided, however, that such fees and expenses
do not exceed Twenty Thousand Dollars ($20,000).
7.9 Attorneys' Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.10 Amendments and Waivers. Any term of this Agreement may be amended or
----------------------
waived only with the written consent of the Company and the holders of at least
a majority of the Common Stock issued or issuable upon conversion of the Stock.
Any amendment or waiver effected in accordance with this Section 7.10 shall be
binding upon the Purchasers and each transferee of the Stock (or the Common
Stock issued or issuable upon conversion thereof), each future holder of all
such securities, and the Company.
-17-
<PAGE>
7.11 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
7.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
7.13 Entire Agreement. This Agreement, and the documents referred to
----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
7.14 Confidentiality. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone (other than
its employees and attorneys having a need to know) any confidential information,
knowledge or data concerning or relating to the business or financial affairs of
the other parties to which such party shall become privy by reason of this
Agreement, the performance of its obligations hereunder or the ownership of
Stock purchased hereunder. The provisions of this Section 7.14 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to the
transactions contemplated herein.
7.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it is
----------------------------
not relying upon any person, firm or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Purchaser agrees that no Purchaser nor the respective controlling
persons, officers, directors, partners, agents, or employees of any Purchaser
shall be liable to any other Purchaser for any action heretofore or hereafter
taken or omitted to be taken by any of them in connection with the purchase of
the Stock.
7.16 Waiver of Conflicts. Each party to this Agreement acknowledges that
-------------------
Venture Law Group, counsel for the Company, has in the past performed and may
continue to perform legal services for certain of the Purchasers in matters
unrelated to the transactions
-18-
<PAGE>
described in this Agreement, including the representation of such Purchasers in
venture capital financings and other matters. Accordingly, each party to this
Agreement hereby (a) acknowledges that they have had an opportunity to ask for
information relevant to this disclosure and (b) each party other than GE Capital
Equity Investments, Inc. its informed consent to Venture Law Group's
representation of certain of the Purchasers in such unrelated matters and to
Venture Law Group's representation of the Company in connection with this
Agreement and the transactions contemplated herein.
7.17 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO
--------------------
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE AGREEMENTS, THE STOCK OR THE COMMON STOCK, OR THE SUBJECT MATTER HEREOF OR
THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THIS SECTION 7.17 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND
THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO
HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR
MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY
THE COURT.
7.18 No Press Releases. The Company shall not issue, publish or
-----------------
disseminate or cause to be issued, published or disseminated any press release
or public communication relating to any of the Agreements or any of the
transactions contemplated herein or therein using the name or any trade mark,
logo, tradename or other intellectual property or otherwise referring to any
Purchaser without the prior written consent of such Purchaser. Each Purchaser
hereby agrees to respond promptly to a request for consent pursuant to this
Section 7.18. In the event such Purchaser fails to respond within three (3)
business days, such Purchaser shall be deemed to have consented.
-19-
<PAGE>
[Signature page follows]
-20-
<PAGE>
The parties have executed this Onvia.com, Inc. Series C Preferred Stock
Purchase Agreement as of the date first written above.
COMPANY:
ONVIA.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
-------------------------------------
Name:
-----------------------------------
(print)
Title:
----------------------------------
Address:
PURCHASERS:
-----------------------------------------
(Print Name of Purchaser)
By:
-------------------------------------
Name:
------------------------------------
(Print Name)
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
[Signature Page to Onvia.com Series C Stock Purchase Agreement]
<PAGE>
EXHIBITS
--------
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Amended and Restated Articles of Incorporation
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Investors' Rights Agreement
Exhibit E - Form of Right of First Refusal and Co-Sale Agreement
Exhibit F - Form of Voting Agreement
Exhibit G - Form of Legal Opinion of Venture Law Group
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
- --------- ---------------- --------------
<S> <C> <C>
internet capital group 364,633 $4,999,118.40
435 Devon Park Drive
800 Safeguard Bldg.
Wayne, PA 19087
VAN WAGONER FUNDS 286,977 $3,934,454.67
345 California Street, Ste. 2450
San Francisco, CA 94104
MOHR, DAVIDOW VENTURES V-L, L.P. 270,530 $3,708,966.30
2775 Sand Hill Road, Ste. 240
Menlo Park, CA 94025
AMERINDO TECHNOLOGY GROWTH FUND II 128,931 $1,767,644.00
(c/o Amerindo Investments Advisors, Inc.)
43 Upper Grosvenor Street
London W1X 9PG UK
EMERIC MCDONALD 115,000 $1,576,650.00
One Embarcadero, #2300
San Francisco, CA 94104
GE CAPITAL EQUITY INVESTMENTS, INC. 108,315 $1,484,998.70
120 Long Ridge Road
Stamford, CT 06927
AMAN VENTURES 72,927 $999,829.17
10539 Bellagio Road
Los Angeles, CA 90077
COMDISCO, INC. 72,927 $999,829.17
6111 North River Road
Rosemont, IL 60018
Attn: Jill Hanses
CREDIT SUISSE FIRST BOSTON VENTURE FUND I, L.P. 72,927 $999,829.17
2400 Hanover Street
Palo Alto, CA 94304
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
- --------- ---------------- --------------
<S> <C> <C>
WILLIAM BLAIR & COMPANY 36,463 $499,907.73
222 W. Adams
Chicago, IL 60606
VERTEX CAPITAL II LLC 31,000 $425,010.00
150 W. Lake Street
Wayzata, MN 55391
ACCESS TECHNOLOGY PARTNERS, L.P. 29,171 $399,934.41
One Bush Street, 12th Floor
San Francisco, CA 94104
BAYVIEW 99 I, L.P. 19,750 $270,772.50
555 California Street, Ste. 2600
San Francisco, CA 94104
Attn: Jennifer Sherrill
BAYVIEW 99 II, L.P. 16,713 $229,135.23
555 California Street, Ste. 2600
San Francisco, CA 94104
Attn: Jennifer Sherrill
RIT VENTURES, L.L.C. 14,586 $199,974.06
1 Atomic Street, 4th Floor
Stamford, CT 06901
MATTHEW O. FITZMAURICE 9,000 $123,390.00
150 W. Lake Street
Wayzata, MN 55391
J. MARK AND NORMA CALVERT 7,293 $99,987.03
13208-136th Avenue NE
Kirkland, WA 98034
MARK J. HANDFELT 6199 $84,988.29
4750 Carillon Point
Kirkland, WA 98033
HAMBRECHT & QUIST CALIFORNIA 4,886 $66,987.06
One Bush Street, 12th Floor
San Francisco, CA 94104
VAN WAGONER CAPITAL PARTNERS 4,729 $64,834.59
345 California Street, Ste. 2450
San Francisco, CA 94104
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Purchaser Number of Shares Purchase Price
- --------- ---------------- --------------
<S> <C> <C>
ANTHONY CIULLA 4,000 $54,840.00
1080 Sunshine Circle
Danville, CA 94506
VLG INVESTMENTS 1999 3,647 $50,000.37
2800 Sand Hill Road
Menlo Park, CA 94025
JAMES STABLEFORD 2,000 $27,420.00
(c/o Amerindo Investments Advisors, Inc.)
43 Upper Grosvenor Street
London W1X 9PG UK
WILLIAM W. ERICSON 1,823 $24,993.33
5413 W. Mercer Way
Mercer Island, WA 98033
H&Q EMPLOYEE VENTURE FUND 2000, L.P. 1,823 $24,993.33
One Bush Street, 12th Floor
San Francisco, CA 94104
JOAQUIN GARCIA-LARRIEU 1,000 $13,710.00
WILLIAM S. SLATTERY 775 $10,625.25
GORDON EMPEY 729 $9,994.59
4750 Carillon Point
Kirkland, WA 98033
ACCESS TECHNOLOGY PARTNERS BROKERS FUND, L.P. 583 $7,992.93
One Bush Street, 12th Floor
San Francisco, CA 94104
IVAN GAVIRIA 364 $4,990.44
4750 Carillon Point
Kirkland, WA 98033
TOTAL 1,689,701 $23,165,800.71
</TABLE>
<PAGE>
EXHIBIT B
---------
FORM OF RESTATED
ARTICLES
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS TO
REPRESENTATIONS AND WARRANTIES
<PAGE>
EXHIBIT D
---------
FORM OF INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
---------
FORM OF CO-SALE AGREEMENT
<PAGE>
EXHIBIT F
---------
FORM OF VOTING AGREEMENT
<PAGE>
EXHIBIT G
---------
FORM OF LEGAL OPINION
OF
VENTURE LAW GROUP
<PAGE>
EXHIBIT 10.7
1000 DEXTER
OFFICE LEASE
BETWEEN
FIRDEX ASSOCIATES
AS LANDLORD,
AND
MEGADEPOT.COM, INC.
AS TENANT
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Lease Data; Exhibits........................................................ 1
--------------------
SECTION 2. Premises.................................................................... 2
--------
(a) Premises...................................................................... 2
--------
(b) Common Areas.................................................................. 2
------------
(c) Alterations................................................................... 3
-----------
SECTION 3. Term........................................................................ 3
----
(a) Initial Term.................................................................. 3
------------
(b) Renewal Option................................................................ 3
--------------
SECTION 4. Rent........................................................................ 5
----
(a) Base Rent and Additional Rent................................................. 5
-----------------------------
(b) Adjustments to Base Rent...................................................... 5
------------------------
SECTION 5. Tenant's Share of Operating Costs and Real Property Taxes................... 5
---------------------------------------------------------
(a) Amount........................................................................ 5
------
(b) Definitions................................................................... 6
-----------
SECTION 6. Late Charge; Interest....................................................... 7
---------------------
SECTION 7. Deposit..................................................................... 7
-------
SECTION 8. Tenant's Operations......................................................... 8
-------------------
(a) Use of Premises............................................................... 8
---------------
(b) Unlawful Use.................................................................. 8
------------
(c) Liens and Encumbrances........................................................ 8
----------------------
(d) Hazardous Substances.......................................................... 8
--------------------
(e) Signs......................................................................... 9
-----
SECTION 9. Utilities and Services; Deliveries.......................................... 9
----------------------------------
(a) Tenant's Responsibility....................................................... 9
-----------------------
(b) Services...................................................................... 9
--------
(c) Interruption..................................................................10
------------
(d) Telecommunications Services...................................................10
---------------------------
SECTION 10. Licenses and Taxes.........................................................10
------------------
SECTION 11. Alterations by Tenant......................................................11
---------------------
SECTION 12. Care of Premises...........................................................11
----------------
SECTION 13. Surrender of Premises......................................................11
---------------------
SECTION 14. Waiver; Indemnity..........................................................12
-----------------
(a) Tenant Indemnity..............................................................12
----------------
(b) Landlord's Indemnity..........................................................12
--------------------
(c) General Indemnity Provisions..................................................12
----------------------------
(d) Release of Claims.............................................................12
-----------------
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 15. Insurance.................................................................. 12
---------
(a) Tenant's Insurance............................................................ 12
------------------
(b) General Insurance Requirements................................................ 13
------------------------------
(c) Landlord's Insurance.......................................................... 13
--------------------
(d) Waiver of Subrogation......................................................... 13
---------------------
SECTION 16. Assignment or Subletting................................................... 13
------------------------
(a) Consent Required.............................................................. 13
----------------
(b) Recapture Right............................................................... 14
---------------
(c) Additional Consideration...................................................... 14
------------------------
(d) Entities...................................................................... 14
--------
(e) Assignment by Landlord........................................................ 14
----------------------
SECTION 17. Destruction................................................................ 14
-----------
(a) Partial Destruction........................................................... 14
-------------------
(b) Total Destruction............................................................. 15
-----------------
(c) Limitation.................................................................... 15
----------
SECTION 18. Eminent Domain............................................................. 15
--------------
(a) Taking........................................................................ 15
------
(b) Award......................................................................... 15
-----
SECTION 19. Default by Tenant.......................................................... 16
-----------------
(a) Definition.................................................................... 16
----------
(b) Remedies...................................................................... 16
--------
(c) Reentry....................................................................... 16
-------
(d) Termination................................................................... 17
-----------
(e) Adequate Security............................................................. 17
-----------------
(f) Landlord's Remedies Cumulative; Waiver........................................ 17
--------------------------------------
SECTION 20. Default by Landlord; Lender Protection..................................... 17
--------------------------------------
(a) Default by Landlord........................................................... 17
-------------------
(b) Notice to Lender.............................................................. 17
----------------
SECTION 21. Attorneys' Fees............................................................ 18
---------------
SECTION 22. Access by Landlord......................................................... 18
------------------
SECTION 23. Holding Over............................................................... 18
------------
SECTION 24. Subordination; Estoppel Certificates....................................... 18
------------------------------------
(a) Subordination................................................................. 18
-------------
(b) Estoppel Certificates......................................................... 19
---------------------
SECTION 25. Reserved................................................................... 19
--------
SECTION 26. Liability of Landlord...................................................... 19
---------------------
SECTION 27. Miscellaneous.............................................................. 19
-------------
(a) Quiet Enjoyment............................................................... 19
---------------
(b) Notices....................................................................... 19
-------
(c) Successors or Assigns......................................................... 19
---------------------
(d) Authority and Liability....................................................... 19
-----------------------
(e) Brokers' Commission........................................................... 20
-------------------
(f) Partial Invalidity............................................................ 20
------------------
(g) Recording..................................................................... 20
---------
(h) Force Majeure................................................................. 20
-------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(i) Name of Building............................................................... 20
----------------
(j) Headings....................................................................... 20
--------
(k) Execution by Landlord and Tenant; Approval of Lender........................... 20
----------------------------------------------------
(l) Transportation Management Programs; Recycling.................................. 20
---------------------------------------------
(m) Entire Agreement; Applicable Law............................................... 21
--------------------------------
(n) Financial Statements........................................................... 21
--------------------
SECTION 28. Additional Provisions...................................................... 21
---------------------
(a) Parking........................................................................ 21
-------
(b) Storage........................................................................ 21
-------
(c) Letter of Credit............................................................... 22
(d) Expansion...................................................................... 23
(e) Rooftop Equipment.............................................................. 23
(f) Emergency Power Generator...................................................... 24
</TABLE>
-iii-
<PAGE>
Exhibit 10.7
OFFICE LEASE
THIS LEASE is made as of April __, 1999, between FIRDEX ASSOCIATES, a
Washington general partnership ("Landlord"), and MEGADEPOT.COM, INC., a
Washington corporation ("Tenant"). Landlord and Tenant covenant and agree as
follows:
SECTION 1. Lease Data; Exhibits. The following terms shall have the
--------------------
following meanings, except as otherwise specifically modified in this Lease:
(a) Building: The building containing approximately 110,534 rentable
--------
square feet of office and commercial space, located at 1000
Dexter Avenue North in Seattle, King County, Washington, situated
on the real property (the "Land") legally described in Exhibit A
---------
attached. The Building consists of an office tower containing
approximately 100,261 rentable square feet of space (the "Tower")
and an adjacent parking structure with approximately 10,273
rentable square feet of commercial space situated on 8th Avenue
North.
(b) Premises: An area of approximately 19,136 rentable square feet
--------
consisting of the entire fourth (4th) floor of the Tower as shown
on the floor plan attached to this Lease as Exhibit B (the "Floor
---------
Plan").
(c) Lease Term: A period of eighty four (84) full calendar months,
----------
commencing on the Commencement Date and expiring on the
Expiration Date; provided, if the Commencement Date is a day
other than the first day of a calendar month, unless otherwise
agreed in writing, the Lease Term shall not commence until the
first day of the first calendar month starting after the
Commencement Date, however all of the terms and conditions of
this Lease (including those regarding the payment of rent) shall
be applicable on the Commencement Date. Base Rent and Additional
Rent for partial calendar months will be pro rated as provided in
Section 4 below.
(d) Commencement Date: The Commencement Date shall be determined as
-----------------
provided in Section 3. The estimated Commencement Date is July
1, 1999.
(e) Expiration Date: 11:59 p.m. on the last day of the eighty fourth
---------------
(84th) full calendar month following the Commencement Date.
(f) Base Rent: Tenant shall pay $38,272.00 per month as Base Rent on
---------
or before the first day of each month. The amount of the monthly
Base Rent will be adjusted as provided in Section 4 below.
(g) Additional Rent: Whether or not so designated, all other sums
---------------
due from Tenant under this Lease shall constitute Additional
Rent, payable when specified in this Lease.
(h) Operating Costs and Property Taxes: Tenant will pay its share of
----------------------------------
Operating Costs and Property Taxes pursuant to Section 5 of this
Lease.
(i) Deposit. $147,274.66.
-------
(j) Permitted Use: General business offices.
-------------
<PAGE>
(k) Building Standard Hours:
-----------------------
Monday through Friday 7 a.m. to 6 p.m., and 7:00 a.m. to 1:00
p.m. on Saturdays, excluding legal holidays and holiday
weekends.
(l) Notice Addresses:
----------------
To Landlord: c/o Alper Northwest, Inc.
700 Fifth Avenue, Suite 6000
Seattle, WA 98104
To Tenant: Prior to the Commencement Date -
209 1/2 1st Avenue South, Suite 302
Seattle, WA 98104
Attention: Mark T. Calvert, Vice President
and Chief Financial Officer
After the Commencement Date -
At the Premises
(m) Brokers:
-------
Listing Broker - None
Tenant's Broker - Flinn Ferguson
(n) Name and Address for Payments to Landlord:
-----------------------------------------
Firdex Associates
c/o Alper Management Services, Inc.
700 Fifth Avenue, Suite 6000
(o) Exhibits: The following exhibits are made a part of this
-------- Lease:
Exhibit A - Legal Description of Land
---------
Exhibit B - Floor Plan - Premises
---------
Exhibit C - Workletter
---------
Exhibit D - Rules and Regulations
---------
Exhibit E - Estoppel Certificate
---------
Exhibit F - Floor Plan - Storage Space
---------
SECTION 2. Premises.
---------
(a) Premises. Landlord hereby leases to Tenant, and Tenant hereby
---------
leases from Landlord, those certain premises (the "Premises") located on the
floor(s) and in the location referenced in Section 1. The Premises are leased by
Landlord and accepted by Tenant in an "AS IS" condition, subject to the
requirement that Landlord complete any improvements, alterations or
modifications to be made by Landlord pursuant to Exhibit C attached (the
"Workletter"), if any. Prior to taking occupancy of the Premises or moving any
of its furniture, fixtures or equipment, Tenant shall inspect the Premises and
Landlord and Tenant shall prepare and agree upon a "punchlist" of any items or
repairs which are the responsibility of Landlord. The existence of repairs or
defects of a nature commonly found on a "punchlist," as such term is used in the
construction industry, shall not postpone the Commencement Date or result in a
delay or abatement of Tenant's obligation to pay rent or give rise to a damage
claim against Landlord.
(b) Common Areas. During the Lease Term, Tenant and its licensees,
-------------
invitees, customers and employees shall have the non-exclusive right to use all
<PAGE>
entrances, lobbies, elevators, stairs, corridors, restrooms and other public
areas of the Building (the "Building Common Areas"), and the "Project Common
Areas" (defined below), in common with Landlord, other Building tenants, other
"Project" (defined below) tenants, and their respective licensees, invitees,
customers and employees. The Building Common Areas and the Project Common Areas
are referred to in this Lease collectively as the "Common Areas". Landlord shall
at all times have exclusive control and management of the Common Areas and no
diminution thereof shall be deemed a constructive or actual eviction or entitle
Tenant to compensation or a reduction or abatement of rent.
(c) Alterations. Landlord may in its discretion increase, decrease
-----------
or change the number, locations and dimensions of any hallways, lobby areas,
Common Areas and other improvements which are not within the Premises. Landlord
reserves the right from time to time (i) to install, use, maintain, repair,
relocate and replace pipes, ducts, conduits, wires and appurtenant meters and
equipment for service to the Premises or to other parts of the Building in areas
above the suspended ceiling surfaces, below the floor surfaces, within the walls
and in the central core areas of the Building, within the Premises and elsewhere
in the Building; (ii) to alter or expand the Building; and (iii) to alter,
relocate or substitute any of the Common Areas.
SECTION 3. Term.
----
(a) Initial Term. The Commencement Date listed in Section 1 of this
------------
Lease represents an estimate of the actual Commencement Date. The actual
Commencement Date shall be the first to occur of the following events: (i) three
(3) days after Landlord notifies Tenant that any improvements, alterations or
modifications to be made by Landlord pursuant to the Workletter are
substantially completed, or (ii) the date on which Tenant takes possession of
the Premises for purposes other than completing tenant improvements. If the
Commencement Date is later than the estimated Commencement Date specified in
Section 1 above, this Lease shall not be void or voidable. Landlord shall
confirm the Commencement Date by written notice to Tenant. The Lease Term shall
begin on the Commencement Date and end on the Expiration Date, unless extended
or sooner terminated in accordance with the terms of this Lease.
(b) Renewal Option. So long as Tenant is not then in default under
--------------
this Lease, on the terms and conditions stated in this Paragraph 3(b), Tenant
shall have the option to extend the term of this Lease for one (1) additional
thirty six (36) month period (the "Additional Term"). To exercise its option to
extend this Lease for the Additional Term, Tenant must deliver to Landlord a
written notice (an "Option Notice") exercising its renewal option at least nine
(9) months (but not more than twelve (12) months) prior to the date the then
Lease Term will expire, together with a then current financial statement of
Tenant. If such financial statement show a material adverse change in Tenant's
financial condition as compared with Tenant's financial condition as of three
(3) years prior to the date of the Option Notice, at Landlord's option, Tenant's
exercise of its renewal option shall be null and void. The renewal option
granted to Tenant pursuant to this paragraph is personal to Tenant and may not
be exercised by or for the benefit of any assignee or sublessee of Tenant. All
of the terms and conditions of this Lease shall apply during the Additional Term
except (i) the Base Rent shall be the "fair market rent" (defined below) for the
Premises as agreed to by Landlord and Tenant or determined by arbitration as set
forth below; (ii) unless otherwise agreed by Landlord in writing, there shall be
no further renewal options after the commencement of the Additional Term; and
(iii) Landlord shall have no tenant improvement obligations with respect to the
Premises except as otherwise agreed in writing by Landlord. The Base Rent during
the Additional Term will be adjusted at the commencement of the last twelve (12)
months of the Additional Term as provided in Section 4 below. When the rental
rate for the Additional Term is determined, whether by agreement of the parties
or pursuant to arbitration as provided below, Landlord and Tenant shall enter
into a lease extension agreement setting forth the new base rent for the
Premises and such other terms as may be applicable. If at the time Tenant
delivers the Option Notice to Landlord, or at any time between such date and the
commencement date of the Additional Term, Tenant defaults under this Lease and
fails to cure its default within the applicable cure period, if any, Landlord
may declare the Option Notice null and void by written notice to Tenant. The
term "fair market rent" means the rate per rentable square foot that a willing,
non-equity tenant would pay in an arms-length transaction for a three year lease
of comparable space in the Building and in comparable buildings in the Seattle
metropolitan area, taking into account the then condition of the improvements in
the Premises, the location of the Building, and the views and
<PAGE>
other amenities of the Building and the Premises as applicable. Landlord and
Tenant agree the Base Rent for the Additional Term shall be determined as
follows:
(i) Landlord shall advise Tenant in writing ("Landlord's Notice")
of Landlord's determination of fair market rent not later than thirty (30) days
after receiving the Option Notice. Within thirty (30) days after receiving
Landlord's Notice, Tenant shall notify Landlord in writing ("Tenant's Notice")
whether or not Tenant accepts Landlord's determination of the fair market rent.
If Tenant disagrees with Landlord's determination of fair market rent, Tenant's
Notice shall set forth Tenant's determination of fair market rent. If Tenant
fails to give Tenant's Notice to Landlord within such thirty (30) day period,
then the Option Notice shall be deemed null and void, unless otherwise agreed in
writing by Landlord and Tenant. If Tenant does not accept Landlord's
determination of fair market rent, and Tenant has given Tenant's Notice, the
parties (or their designated representatives) shall promptly meet and attempt to
agree on the fair market rent. If the parties have not agreed on the fair market
rent within ninety (90) days after Landlord receives the Option Notice, and
Tenant's renewal option is still in effect in accordance with the terms of this
paragraph, then unless otherwise agreed in writing by the parties, the parties
shall submit the matter to arbitration in accordance with the terms of the
following paragraphs. The last day of such ninety (90) day period (as the same
may be extended by the written agreement of the parties) is referred to in this
Lease as the "Arbitration Commencement Date".
(ii) The arbitration will be conducted by three MAI real estate
appraisers who have been active over the five (5) year period ending on the
Arbitration Commencement Date in the appraisal of commercial office buildings in
the Seattle metropolitan area. One appraiser will be selected by Tenant, one
appraiser will be selected by Landlord, and the third appraiser will be selected
by the two appraisers so chosen. If the two appraisers chosen by the parties
cannot agree on a third appraiser within ten (10) days after the date the second
appraiser has been appointed, the third appraiser will be appointed by the
Seattle office of the American Arbitration Association upon the application of
either party. Each party shall select its appraiser within ten (10) days after
the Arbitration Commencement Date. If either party fails to select its appraiser
within such ten (10) day period, and the other party timely selects its
appraiser, then the appraiser selected by the other party shall be the sole
arbitrator for determining fair market rent.
(iii) Within thirty (30) days after the selection of the third
appraiser (or if only one appraiser is to render the decision as provided in
subparagraph (ii) above, within thirty (30) days after the last day of the
above-referenced ten (10) day period), the appraiser(s) shall determine fair
market rent. If more than one appraiser has been appointed, the decision of a
majority of the appraisers shall control. If a majority of the appraisers do not
agree within the stipulated time period, then each appraiser shall in writing
render his or her separate determination as to fair market rent within five (5)
days after the expiration of the thirty (30) day period. In such case, the three
determinations shall be averaged to determine the fair market rent; however, if
the lowest fair market rent or the highest fair market rent is ten percent (10%)
lower or higher, as applicable, than the middle fair market rent, then the low
fair market rent and/or the high fair market rent, as applicable, shall be
disregarded and the remaining fair market rent(s) will be averaged in order to
establish the fair market rent.
(iv) Both parties may submit any information to the arbitrators
for their consideration, with copies to the other party. The arbitrators shall
have the right to consult experts and competent authorities for factual
information or evidence pertaining to the determination of fair market rent. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease. The determination of the arbitrators will be final and
binding upon Landlord and Tenant. The cost of the arbitration will be paid by
Landlord if the fair market rent determined by arbitration is ninety percent
(90%) or less than the fair market rent specified in Landlord's Notice; by
Tenant if the fair market rent determined by arbitration is one hundred ten
percent (110%) or more than the fair market rent specified in Tenant's Notice;
and otherwise shall be shared equally by Landlord and Tenant.
<PAGE>
SECTION 4. Rent.
----
(a) Base Rent and Additional Rent. Tenant shall pay to Landlord at
-----------------------------
the address specified by Landlord in Section 1 above or such other address as
Landlord may hereafter designate in writing, without notice or demand, or any
setoff or deduction whatsoever except as provided in this Lease, in lawful money
of the United States: (a) Base Rent in the amount specified in Section 1 above
in advance on the first day of each month, and (b) Additional Rent as and when
specified elsewhere in this Lease, but if not specified, then within thirty (30)
days of demand. Base Rent and Additional Rent shall be prorated on a daily
basis (based on a 30-day month and the actual number of days elapsed) for any
partial month within the Lease Term. If the Lease Term starts on a day other
than the first day of a calendar month, rent for such initial partial month
shall be due on the first day of the Lease Term.
(b) Adjustments to Base Rent. Commencing with the second (2nd)
------------------------
anniversary of the Commencement Date, and on every other anniversary of the
Commencement Date thereafter (each such date being referred to herein as an
"Adjustment Date"), the amount of the monthly Base Rent shall be increased in
order to reflect the proportionate increase, if any, occurring in the cost of
living as indicated by the Consumer Price Index for All Urban Consumers - US
Average - All Items, as published by the U.S. Department of Labor's Bureau of
Labor Statistics (1982 - 1984 = 100) (the "Index"). Such adjustment shall be
calculated by multiplying the monthly Base Rent for the calendar month
immediately preceding the applicable Adjustment Date by a fraction, the
numerator of which shall be the Index level most recently published prior to the
applicable Adjustment Date, and the denominator of which shall be the Index
level most recently published prior to the immediately preceding Adjustment
Date. During the Additional Term, if applicable, the Adjustment Dates shall be
the second anniversary of the date the Additional Term commences. Any adjustment
of Base Rent shall become effective immediately. In no event shall the adjusted
Base Rent be less than the Base Rent for a month prior to the applicable
Adjustment Date. If publication of the Index shall be discontinued, adjustments
to the Base Rent shall be based on the replacement index of consumer prices, if
any, published by the United States Government, or if none, another index of
consumer prices published by an independent financial periodical or recognized
authority selected by Landlord and reasonably acceptable to Tenant. In the event
of use of comparable statistics in place of the Index, revisions shall be made
in the method of computation herein provided as the circumstances may require to
carry out the intent of this section. By way of illustration only, if the
Commencement Date is in fact July 1, 1999, then the first Adjustment Date will
be July 1, 2001, and the initial Index-based adjustment will be calculated by
multiplying the June, 2001 monthly Base Rent (i.e., $38,272.00) by a fraction,
the numerator of which is the Index level most recently published prior to July
1, 2001, and the denominator of which is the Index level most recently published
prior to July 1, 1999. The Base Rent will again be adjusted on July 1, 2003 and
again on July 1, 2005.
SECTION 5. Tenant's Share of Operating Costs and Real Property Taxes.
---------------------------------------------------------
(a) Amount. In addition to Base Rent, Tenant shall pay to Landlord
------
as Additional Rent, "Tenant's Share" (defined below) of "Building Operating
Costs" (defined below), "Property Taxes" (defined below) and "Tower Operating
Costs" (defined below) incurred by Landlord in any "Lease Year" (defined below).
Promptly after the Commencement Date, and the end of each Lease Year thereafter,
Landlord will notify Tenant in writing of Landlord's estimate (based on such
information as Landlord deems reasonable and appropriate) of Tenant's Share of
the estimated Building Operating Costs, Tower Operating Costs and Property Taxes
for the current Lease Year. Tenant shall pay the estimated amount set forth in
Landlord's notice, in advance, in equal monthly installments, without deduction
or offset whatsoever, on or before the first (1st) day of each calendar month,
with the payment of Base Rent required pursuant to Section 4 above. Until
Landlord provides Tenant with the notice provided for above in this paragraph,
Tenant shall continue to pay Tenant's Share of Building Operating Costs, Tower
Operating Costs and Property Taxes in the monthly amounts specified in the last
such notice given to Tenant by Landlord. Following the end of each Lease Year,
Landlord will compute Tenant's Share due under this Section 5 for such Lease
Year, based on actual costs, and, if Tenant's Share for such Lease Year is
greater than that already paid by Tenant for such Lease Year, Tenant shall pay
<PAGE>
Landlord the deficiency within twenty (20) days of its receipt of written notice
or an invoice for the amount of the deficiency. If the total amount paid by
Tenant under this Section 5 for a Lease Year exceeds Tenant's Share, then
Landlord shall credit such excess to the payment of Base Rent and Additional
Rent thereafter coming due; however, upon the expiration or sooner termination
of the Lease Term, Landlord shall refund the excess to Tenant, provided if
Tenant is then in default of any of its obligations under this Lease, Landlord
may deduct from the amount due Tenant any damages which Landlord has incurred or
claims to have incurred as a result of Tenant's default. If during a Lease Year
Landlord obtains information regarding Building Operating Costs, Tower Operating
Costs or Property Taxes which alters its prior estimates, Landlord may adjust
the amount due from Tenant under this Section 5 during the balance of that Lease
Year to reflect such new information by written notice to Tenant. In determining
Tenant's Share of Building Operating Costs and/or Tower Operating Costs which
vary based on occupancy of the Building and/or Tower (such as utility and
janitorial costs), if less than one hundred percent of the Building or the
Tower, as applicable, shall have been occupied by tenants at any time during a
Lease Year, Tenant's Share of such Building Operating Costs and/or Tower
Operating Costs, as applicable, shall be adjusted to an amount, determined by
Landlord in its reasonable discretion, which would be expected had such
occupancy been one hundred percent throughout the applicable Lease Year;
however, in no event shall Landlord recover from Tenant and other tenants more
than one hundred percent of such Operating Costs actually incurred by Landlord
in the applicable Lease Year. Operating Costs will be equitably allocated by
Landlord between Building Operating Costs and Tower Operating Costs based on
such information as Landlord deems reasonable and appropriate.
(b) Definitions. For purposes of this Lease:
------------
(i) "Operating Costs" means all expenses paid or incurred by
Landlord or charged to Landlord for maintaining, managing, operating, repairing
and administering the Building and/or the Common Areas, and the personal
property used in conjunction therewith, including without limitation, water,
sewer, electricity, heat, air conditioning, fuel, light, fire protection, and
other utilities and services; supplies; janitorial and cleaning services; window
washing; snow, garbage and refuse removal; security services and systems
(including parking attendants); landscape maintenance; parking maintenance and
operations; compensation (including employment taxes and fringe benefits) of all
persons who perform duties in connection with the operation, management,
maintenance, repair and administration of the Building and/or the Common Areas;
insurance premiums for all insurance carried by Landlord with respect to the
Building and/or the Common Areas; licenses, permits and inspection fees;
subsidies and other payments required by public bodies (such as bus rider and
other transit subsidies); property management fees; costs of compliance with any
applicable transportation management plan; rent for any on-site property
management office; easement and license fees; legal and accounting expenses and
all other expenses or charges whether or not hereinabove described which, in
accordance with generally accepted accounting and management practices, would be
considered an expense of maintaining, managing, operating, repairing and
administering the Building and/or the Common Areas, excluding: (a) costs of any
special services rendered to individual tenants (including Tenant) for which a
special charge is made; (b) ground lease rental payments and debt service on
mortgages or deeds of trust; (c) leasing commissions and attorneys' and other
fees and costs incurred in leasing space in the Building or in connection with
disputes with tenants of the Building; (d) depreciation or amortization
expenses; (e) the cost of capital improvements (as opposed to capital
replacements) required to be capitalized in accordance with generally accepted
accounting practices, except Operating Costs shall include the amortization of
capital improvements (1) designed with a reasonable probability of improving the
operating efficiency of the Building and/or the Common Areas provided the amount
of the amortization thereof included within Operating Costs does not exceed the
amount of the reasonably expected savings, (2) required to comply with
governmental laws or regulations (including amendments to existing laws and
regulations) taking effect after the completion of the initial construction of
the Building, or (3) made for the general benefit or convenience of tenants of
the Building; and (f) Operating Costs separately billed to and paid by tenants.
(ii) "Building Operating Costs" means Operating Costs incurred by
Landlord in maintaining, managing, operating, repairing and administering the
Building as a whole but shall not include any Operating Costs which are a Tower
Operating Cost. Building Operating Costs shall include expenses incurred in
connection with the operation, management, maintenance,
<PAGE>
repairs and administration of all parking facilities serving the Building. The
Building will be part of a multiple phase project which includes the office
building located at 1100 Dexter Avenue (collectively with the Building the
"Project"). Building Operating Costs shall include the pro rata share of the
costs and expenses allocated to the Building pursuant to the declaration of
covenants, conditions, restrictions and/or easements for the Project (the
"Declaration"), related to the maintenance, repair, operation and management of
those areas (the "Project Common Areas") of the Project made available for the
general use, convenience and benefit of all occupants of the Project. The
Project Common Areas shall include without limitation exterior sidewalks,
landscape and plaza areas, service entrances, truck ramps, refuse collection and
recycling areas, loading and delivery areas, exterior pedestrian walkways,
emergency exit corridors, exterior stairs, and similar areas.
(iii) "Tower Operating Costs" means Operating Costs incurred by
Landlord only in connection with maintaining, managing, operating, repairing and
administering the Tower.
(iv) "Property Taxes" means all taxes of every kind and nature
on the Building and/or the Land and on personal property used by Landlord in
conjunction therewith; surcharges and all local improvement and other
assessments levied with respect to the Building, the Land and all other property
of Landlord used in connection with the operation of the Building; any taxes
levied or assessed in lieu of, in whole or in part, such real or personal
property taxes; any taxes in addition to such real and personal property taxes,
including, but not limited to, taxes or license fees upon or measured by the
leasing of the Building or the rents or other income collected therefrom, other
than any federal or state net income or inheritance tax; and all costs and
expenses incurred by Landlord in efforts to reduce or minimize such taxes to the
extent not in excess of the amount of the reduction.
(v) "Lease Year" means a twelve (12) month period beginning
January 1st and ending December 31st; however, if the Commencement Date is a
date other than the first day of a calendar year, the first Lease Year shall
commence on the Commencement Date and end on December 31 of such calendar year,
and the last Lease Year shall commence on January 1 of the last calendar year
during the Lease Term and end on the Expiration Date. Operating Costs and
Property Taxes for partial calendar years constituting a Lease Year shall be
prorated based on the number of days in the applicable calendar years.
(vi) "Tenant's Share" means (A) with respect to Building
Operating Costs and Property Taxes, the percentage determined by dividing the
rentable area of the Premises by the rentable area of the Building as a whole,
and (B) with respect to Tower Operating Costs, the percentage determined by
dividing the rentable area of the Premises by the rentable area of the Tower.
SECTION 6. Late Charge; Interest. Time is of the essence of this Lease.
---------------------
If Tenant fails to pay any Base Rent or Additional Rent within five (5) days of
the due date, a late charge equal to the greater of $50.00, or five percent (5%)
of the unpaid amount, shall be assessed and be immediately due and payable by
Tenant. In addition, any Base Rent or Additional Rent more than five (5) days
past due shall bear interest from the date due until paid in full (together with
late charges and interest) at an interest rate equal to the lesser of one and
one-half percent (1.5%) per month, or the maximum rate of interest permitted by
applicable law.
SECTION 7. Deposit. Tenant has deposited with Landlord the sum specified as
the Deposit in Section 1 of this Lease. This sum shall belong to Landlord and
shall constitute partial consideration for the execution of this Lease, subject
only to repayment when required in this Section. So long as Tenant is not then
in default under this Lease, $97,274.66 of the Deposit will be credited to the
Base Rent and Additional Rent payable for the first and second full calendar
months for which Base Rent is due under this Lease. Landlord shall pay Tenant
the remaining balance of the Deposit without any liability for interest within
thirty (30) days after the expiration or prior termination of the Lease Term, or
any extension thereof, provided if Tenant is then in default of any of its
obligations under this Lease, Landlord may deduct from the Deposit any damages
which Landlord has incurred or claims to have incurred as a result of Tenant's
default. Landlord may withdraw from the Deposit the amount of any unpaid rent or
other charges not paid
<PAGE>
to Landlord when due, and Tenant shall immediately redeposit an amount equal to
that so withdrawn within ten (10) days of demand.
SECTION 8. Tenant's Operations.
-------------------
(a) Use of Premises. Tenant shall use the Premises only for the
Permitted Use specified in Section 1. Tenant shall not permit any act that will
increase the then existing rate of insurance on the Building, without
Landlord's prior written consent. Tenant shall pay on demand the amount of the
increase in insurance rates caused by any such acts or omissions by Tenant, or
its agents or employees. Tenant shall not commit or allow to be committed any
waste on the Premises, or any public or private nuisance or other act which
disturbs the quiet enjoyment of any other tenant of the Building or the
Project. Tenant shall not, without the prior written consent of Landlord, use
any apparatus, machinery or devise in or about the Premises which will cause
any substantial noise, vibration or fumes. If any of Tenant's office machines
or equipment disturb the quiet enjoyment of any other tenant of the Building or
the Project, Tenant shall provide adequate insulation or take such other action
as Landlord directs to eliminate the disturbance.
(b) Unlawful Use. Tenant shall not use or permit the Premises, the
------------
Common Areas or any part thereof to be used for any purpose in violation of any
municipal, county, state or federal law, ordinance or regulation which the
Building is a part and Tenant shall comply with and shall cause its employees,
invitees and contractors to comply with such rules and regulations as Landlord
may from time to time promulgate. The current Building rules and regulations are
attached to this Lease as Exhibit D. Tenant shall promptly comply, at its sole
cost and expense, with all laws, ordinances and regulations now in force or
hereafter adopted relating to or affecting the condition, use or occupancy of
the Premises, including without limitation the Americans With Disabilities Act
of 1990, as now or hereafter amended (the "ADA").
(c) Liens and Encumbrances. Tenant shall Premises, the Building and
-----------------------
keep the the Land free and clear of, and shall indemnify, defend and hold
Landlord harmless from, any and all liens and encumbrances arising or growing
out of Tenant's acts or omissions, or breach of this Lease or its use,
improvement or occupancy of the Premises. If any lien is so filed against the
Premises, the Land or the Building, Tenant shall cause the same to be fully
discharged and released of record within ten (10) days of demand or within such
period provide Landlord with cash or other security acceptable to Landlord in an
amount equal to one and one-half (1 1/2) times the amount of the claimed lien as
security for its prompt removal. Landlord shall have the right to disburse such
security to cause the removal of the lien if a judgment is entered against
Tenant in the lien proceeding, if such lien causes difficulties for Landlord in
connection with its financing of the Building, or if Tenant is otherwise in
default under this Lease.
(d) Hazardous Substances. Tenant shall Landlord's prior written
---------------------
not, without consent, keep any substances designated as, or containing
components now or hereafter designated as, hazardous, dangerous, toxic or
harmful and/or subject to regulation under any federal, state orlocal law,
regulation or ordinance ("Hazardous Substances") on or about the Premises or
Building. Notwithstanding the preceding sentence, Tenant may keep, use, store
and dispose of, in, on and from the Premises, materials and supplies otherwis e
constituting Hazardous Substances which are normally used in general business
offices, provided such materials and supplies are used, handled, stored and
disposed of in accordance with all applicable governmental rules,regulations,
laws and requirements, and in accordance with all applicable manufacturers' or
suppliers' recommendations. With respect to any Hazardous Substances stored with
Landlord's consent orpermitted hereunder, Tenant shall: promptly, timely and
completely comply with all governmental requirements for reporting and record
keeping; submit to Landlord true and correct copies of all reports, manifests
and identification numbers at the same time as they are required to be and/or
are submitted to the appropriate governmental authorities; within five (5) days
of Landlord's request, provide evidence satisfactory to Landlord of Tenant's
compliance with all applicable governmental rules, regulations and requirements;
and comply with all governmental rules, regulations and requirements regarding
the proper and lawful use, sale, transportation, generation, treatment and
disposal of Hazardous Substances. Any and all costs incurred by Landlord and
associated with Landlord's inspections of the Premises and Landlord's monitoring
of Tenant's compliance with this Section 8(d), including Landlord's
<PAGE>
attorneys' fees and costs, shall be Additional Rent and shall be due and payable
to Landlord within ten (10) days of Landlord's demand. Tenant shall be fully and
completely liable to Landlord for any and all cleanup costs and expenses and any
and all other charges, expenses, fees, fines, penalties (both civil and
criminal) and costs imposed with respect to Tenant's use, disposal,
transportation, generation and/or sale of Hazardous Substances, in or about the
Premises or Building. Tenant shall indemnify, defend and hold Landlord, and
lenders to Landlord (each a "Lender"), harmless from any and all of the costs,
fees, penalties, charges and expenses assessed against or imposed upon Landlord
and Lender (as well as Landlord's and Lender's attorneys' fees and costs) as a
result of Tenant's use, disposal, transportation, generation and/or sale of
Hazardous Substances.
(e) Signs. Tenant shall not erect or place, or permit to be erected
------
or placed, or maintain any signs of any nature or kind whatsoever on the
exterior walls or windows of the Premises or elsewhere in the Building or the
Common Areas, with the exception of (i) a Building standard sign identifying
Tenant in the Building Directory on the first floor of the Building and (ii)
signage in the fourth floor elevator lobby, subject to Landlord's approval of
location, design and color. The cost of such signs shall be deducted from the
"Construction Allowance" (defined in the Workletter).
SECTION 9. Utilities and Services; Deliveries.
----------------------------------
(a) Tenant's Responsibility. In accordance with Section 5 of this
-----------------------
Lease, as Additional Rent, Tenant shall pay Tenant's Share of all charges for
heat, air conditioning, water, gas, electricity, sewer, garbage, fire
protection, security and any other utilities and/or services used or consumed by
or supplied to the Building, including the Premises, or the Common Areas, and
not separately metered or charged to Tenant or any other tenant of the Building.
Tenant shall be solely responsible for and shall promptly pay when due all
charges for telephone and all other charges for other utilities and/or services
which are separately metered or charged to the Premises.
(b) Services. Landlord shall cause the Common Areas, such as lobbies,
--------
elevators, stairs, corridors and restrooms, to be maintained in good order and
condition, except for reasonable wear and tear and damage occasioned by any act
or omission of Tenant or Tenant's officers, contractors, agents, invitees,
licensees or employees, the repair of which latter damage shall be paid for by
Tenant. Twenty-four (24) hours per day, seven (7) days per week, Tenant shall
have access to the Premises (subject to such Building security systems and
procedures as may be in place from time to time), and Tenant shall have
available to it water and electrical service for lighting and operation of 110-
volt office equipment. Electrical service to the Premises shall be separately
metered by a "deduct meter" to be installed with the initial improvements to the
Premises pursuant to the Workletter and paid for from the Construction Allowance
being made available under the Workletter. Tenant's consumption of electricity
will be separately billed to Tenant by Landlord and paid for by Tenant. In
calculating Tenant's Share of Tower Operating Costs, the cost of electricity
provided to other leased premises in the Building shall be excluded from Tower
Operating Costs; however Tenant will pay Tenant's Share of the electricity used
or consumed in connection with the Common Areas as reasonably estimated by
Landlord. During the Building Standard Hours specified in Section 1 above,
Landlord shall furnish the Premises with heat and air conditioning services. If
requested by Tenant, Landlord shall furnish HVAC service to the Premises at
times other than Building Standard Hours, and Tenant shall pay for the cost of
such after-hours services at rates established by Landlord from time to time.
The initial rate for HVAC service at times other than Normal Building Hours will
be $30.00 per hour.
(i) Janitorial. Landlord will provide janitorial services customary
----------
for buildings comparable to the Building in quality and location. If Tenant
requires excessive or specialized janitorial services, Tenant shall promptly pay
Landlord the additional costs and expenses incurred by Landlord in providing
such services.
(ii) Additional Service. The Building standard mechanical system is
------------------
designed to accommodate heating loads generated by lights and 110-volt office
equipment normally found in general business offices. Before installing lights
and equipment in the Premises which in the aggregate exceed the heating and
cooling loads of the Building's mechanical system, Tenant
<PAGE>
shall obtain the written permission of Landlord. Landlord may refuse
to grant such permission unless Tenant agrees to pay the cost of installing
supplementary air conditioning units or electrical systems as necessitated by
such equipment or lights. In addition, Tenant shall pay to Landlord in advance,
on the first day of each month during the Lease Term, the amount estimated by
Landlord as the cost of furnishing electricity for the operation of such
equipment or lights and the amount estimated by Landlord as the costs of
operation and maintenance of supplementary air conditioning units or electrical
systems as necessitated by Tenant's use of such equipment or lights. Landlord
shall be entitled to install and operate at Tenant's cost a monitoring/metering
system in the Premises to measure the added demands on electricity, heating,
ventilation, and air conditioning systems resulting from such equipment and
lights and from Tenant's after-hours heating, ventilation and air conditioning
service requirements. Tenant shall comply with Landlord's instructions, rules
and regulations for the use of window coverings and thermostats in the Building.
(c) Interruption. Landlord shall not be liable for any loss, injury
------------
or damage to person or property caused by or resulting from any variation,
interruption, or failure of such services due to any cause whatsoever, or from
failure to make any repairs or perform any maintenance. No temporary
interruption or failure of such services incident to the making of repairs,
alterations or improvements, or due to accident, strike or conditions or other
events beyond Landlord's reasonable control shall be deemed an eviction of
Tenant or to relieve Tenant from any of Tenant's obligations hereunder or to
give Tenant a right of action against Landlord for damages. Notwithstanding any
of the foregoing, if for reasons within the reasonable control of Landlord the
services to the Premises are interrupted for more than five (5) consecutive
business days to such an extent that Tenant is unable to reasonably use and
occupy the Premises for its intended purpose, the Base Rent and the Additional
Rent shall equitably abate in proportion to the extent of the interference with
Tenant's use of the Premises, commencing on the last day of such five (5) day
period until the services are restored or the interference ceases to the extent
Tenant can again reasonably use and occupy the Premises for its intended
purposes.
(d) Telecommunications Services. All telephone and
---------------------------
telecommunications services desired by Tenant shall be ordered and utilized by
Tenant at its sole cost and expense. Tenant shall separately contract with a
telephone or telecommunications provider (a "Provider") to provide telephone and
telecommunications services to the Premises. If Tenant desires to utilize the
services of a Provider whose equipment is not presently servicing the Building,
such Provider must obtain the written consent of Landlord (which consent will
not be unreasonably withheld) before it will be permitted to install its lines
or other equipment within the Building. Landlord's consent to the installation
of lines or equipment within the Building by any Provider shall be evidenced by
a written agreement between Landlord and the Provider, which contains terms and
conditions acceptable to Landlord in its reasonable discretion. Landlord's
refusal for any reason whatsoever to consent to any prospective Provider shall
not be deemed a default or breach by Landlord of its obligations under this
Lease. Landlord makes no warranty or representation to Tenant as to the
suitability, capability or financial strength of any Provider whose equipment is
presently serving the Building, and Landlord's consent to a Provider whose
equipment is not presently serving the Building shall not be deemed to
constitute such a representation or warranty. To the extent the service by a
Provider is interrupted, curtailed or discontinued for any reason whatsoever,
Landlord shall have no obligation or liability in connection therewith unless
the interruption is caused by the negligence or intentional misconduct of
Landlord, and it shall be the sole obligation of Tenant at its expense to obtain
substitute service. The provisions of this paragraph are solely for the benefit
of Tenant and Landlord, are not for the benefit of any third party, specifically
including without limitation, no telephone or telecommunications provider shall
be deemed a third party beneficiary hereof.
SECTION 10. Licenses and Taxes. Tenant shall be liable for, and shall pay
------------------
throughout the term of this Lease, all license and excise fees and occupation
taxes covering the business conducted on the Premises and all personal property
taxes levied with respect to all personal property located at the Premises. If
any governmental authority levies a tax or license fee on rents payable under
this Lease or rents accruing from use of the Premises or a tax or license fee in
any form against Landlord or Tenant because of or measured by or based upon
income derived from the leasing or rental thereof (other than a net income tax
on Landlord's income), or a transaction privilege tax, such tax or license fee
shall be paid by Tenant, either directly if required by law, or by reimbursing
Landlord for the amount thereof upon demand.
<PAGE>
SECTION 11. Alterations by Tenant. After the completion of the Tenant
---------------------
Improvements, Tenant shall not make any alterations, additions or improvements
in or to the Premises without first obtaining Landlord's prior written approval,
and if required by Landlord, submitting to Landlord professionally-prepared
plans and specifications. Tenant covenants it will cause all such alterations,
additions and improvements to be performed at Tenant's sole cost and expense by
a contractor reasonably acceptable to Landlord and in a manner which: (a) is
consistent with any Landlord-approved plans and specifications and any
reasonable conditions imposed by Landlord; (b) is in conformity with Building
standards for tenant improvements as described in Exhibit C-1 attached and other
-----------
first class commercial standards as may be applicable; (c) includes acceptable
insurance coverage for Landlord's benefit; (d) does not affect the structural
integrity of the Building or the Building's systems; (e) does not disrupt the
business or operations of other tenants; and (f) does not invalidate or
otherwise affect the construction and systems warranties then in effect with
respect to the Building. Tenant shall secure all governmental permits and
approvals and comply with all other applicable governmental requirements and
restrictions, and reimburse Landlord for all expenses incurred in connection
therewith. Except as provided in Section 14 with regard to concurrent
negligence, Tenant shall indemnify, defend and hold Landlord harmless from and
against all losses, liabilities, damages, liens, costs, penalties and expenses
(including attorneys' fees, but without waiver of the duty to hold harmless)
arising from or out of the performance of such alterations, additions and
improvements, including, but not limited to, all which arise from or out of
Tenant's breach of its obligations under terms of this Section 11. All
alterations, additions and improvements (expressly including all light fixtures,
heating, ventilation and air conditioning units and floor, window and wall
coverings), except Tenant's moveable trade fixtures and appliances and equipment
not affixed to the Premises, shall immediately become the property of Landlord
without any obligation on its part to pay therefor. These improvements remain
Landlord's and Tenant shall not remove all or any portion thereof on the
termination of this Lease unless otherwise specified by Landlord at the time
Tenant requests Landlord's consent to the improvements pursuant to this Section
11.
SECTION 12. Care of Premises. Tenant shall take commercially reasonable care
----------------
of the Premises (including all doors, entrances and lighting and plumbing
fixtures located within the Premises) and shall reimburse Landlord for the cost
of repairing all damage done to the Building, the Premises or the Common Areas
occasioned by any act or omission of Tenant or Tenant's officers, contractors,
agents, invitees, licensees or employees, including, but not limited to,
cracking or breaking of glass, reasonable wear and tear excepted. If Tenant
fails to take commercially reasonable care of the Premises, and Tenant does not
cure such failure within five (5) days after written notice from Landlord to
Tenant (except in an emergency when simultaneous notice shall be acceptable),
Landlord may, at its option, do so, and in such event, upon receipt of written
statements from Landlord, Tenant shall promptly pay the entire cost thereof as
Additional Rent. Landlord shall have the right to enter the Premises for such
purposes. Landlord shall not be liable for interference with light, air or view.
Except as provided in Section 17, there shall be no abatement or reduction of
rent arising by reason of Landlord's making of repairs, alterations or
improvements. Except for Landlord's obligation to provide janitorial services
under Section 9 of this Lease, Landlord shall have no obligation to make repairs
to or maintain the Premises.
SECTION 13. Surrender of Premises. At the expiration or sooner termination
---------------------
of the Lease Term, Tenant shall return the Premises to Landlord in the same or
better condition than on the Commencement Date (or, if altered, then the
Premises shall be returned in such altered condition unless otherwise directed
by Landlord pursuant to Section 11), except for reasonable wear and tear, damage
by condemnation and damage by insured casualty. Prior to such return, Tenant
shall remove its furniture and equipment and shall restore the Premises to the
condition of the Premises on the Commencement Date, and Tenant shall repair any
damage resulting from their removal. In no event shall Tenant remove heating,
ventilating and air conditioning equipment; lighting equipment or fixtures; or
floor, window or wall coverings unless otherwise specifically directed by
Landlord in writing or otherwise permitted under this Lease. Tenant's
obligations under this Section 13 shall survive the expiration or termination of
this Lease. Tenant shall indemnify Landlord for all damages and losses suffered
as a result of Tenant's failure to so redeliver the Premises on a timely basis.
<PAGE>
SECTION 14. Waiver; Indemnity.
-----------------
(a) Tenant Indemnity. Except as otherwise provided in this Section
----------------
14 or in Section 15 below, Tenant shall indemnify, defend and hold Landlord, its
partners, officers, agents, employees and contractors and Lenders, harmless from
all claims, suits, losses, damages, fines, penalties, liabilities and expenses
(including Landlord's reasonable attorneys' fees and other costs incurred in
connection with claims, regardless of whether such claims involve litigation)
resulting from any actual or alleged injury (including death) of any person or
from any actual or alleged loss of or damage to any property arising out of or
in connection with (i) Tenant's occupation, use or improvement of the Premises
or that of its employees, agents or contractors, (ii) Tenant's breach of its
obligations hereunder, or (iii) any negligent or willful act or omission of
Tenant or any subtenant, licensee, assignee or concessionaire of Tenant, or of
any officer, agent, contractor, employee, guest or invitee of Tenant, or of any
such entity in or about the Premises, the Building or the Project.
(b) Landlord's Indemnity. Except as otherwise provided in this
--------------------
Section 14 or in Section 15 below, Landlord shall indemnify, defend and hold
Tenant, its partners, officers, agents, employees and contractors, harmless from
all claims, suits, losses, damages, fines, penalties, liabilities and expenses
(including Tenant's reasonable attorneys' fees and other costs incurred in
connection with claims, regardless of whether such claims involve litigation),
resulting from any actual or alleged injury (including death) of any person or
from any actual or alleged loss of or damage to any property arising out of or
in connection with (i) Landlord's breach of its obligations hereunder, or (ii)
any negligent or willful act or omission of Landlord or any officer, agent,
contractor, employee, guest or invitee of Landlord, or of any such entity, in or
about the Premises, the Building or the Project.
(c) General Indemnity Provisions. The indemnities in Sections 14(a)
----------------------------
and 14(b) above are intended to specifically cover actions brought by the
indemnifying party's own employees, and with respect to acts or omissions during
the term of this Lease shall survive termination or expiration of this Lease.
Such indemnities are specifically and expressly intended to constitute waivers
by the indemnifying party of its immunity, if any, under Washington's Industrial
Insurance Act, RCW Title 51, to the extent necessary to provide the other party
with a full and complete indemnity from claims made by the indemnifying party
and its employees, to the extent of their negligence. Tenant shall promptly
notify Landlord of casualties or accidents occurring in or about the Premises.
If losses, liabilities, damages, liens, costs and expenses covered by either
party's indemnity are caused by the sole negligence of the other party or by the
concurrent negligence of both Landlord and Tenant, their employees, agents,
invitees and licensees, then the indemnifying party shall indemnify the other
only to the extent of the indemnifying party's own negligence or that of its
officers, agents, employees, guests or invitees. LANDLORD AND TENANT ACKNOWLEDGE
THAT THE INDEMNIFICATION PROVISIONS OF SECTION 12 AND THIS SECTION 14 WERE
SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.
(d) Release of Claims. Except as provided in Section 14(b) above or
-----------------
elsewhere in this Lease, Tenant hereby fully and completely waives and releases
all claims against Landlord for any losses or other damages sustained by Tenant
or any person claiming through Tenant resulting from any accident or occurrence
in or upon the Premises, including but not limited to: any defect in or failure
of Building equipment; any failure to make repairs; any defect, failure, surge
in, or interruption of Building facilities or services; any defect in or failure
of Common Areas; broken glass; water leakage; the collapse of any Building
component; or any act, omission or negligence of co-tenants, licensees or any
other persons or occupants of the Building.
SECTION 15. Insurance.
---------
(a) Tenant's Insurance. Tenant shall, at its own expense, maintain
------------------
comprehensive or commercial general liability insurance with broad form and stop
gap endorsements with combined single limits of Two Million Dollars
($2,000,000), for property damage and loss and for personal injuries (including
death), insuring against claims, demands, losses, damages, liabilities and
expenses arising out of or in connection with the use, operation,
<PAGE>
occupancy or condition of the Premises and Tenant's operations in and
about the Premises. Landlord shall have the right to periodically review the
appropriateness of such limits in view of inflation and/or changing industry
conditions and to require a reasonable increase in such limits no more
frequently than annually, upon ninety (90) days prior written notice. Landlord,
any Lender designated by Landlord, and any agents of Landlord designated by
Landlord (such as the Building property manager), shall be named as additional
insureds and shall be furnished with a certificate of insurance on request. All
such insurance shall bear an endorsement that the same shall not be canceled or
materially altered without at least thirty (30) days prior written notice to
such additional insureds. During the Lease Term, Tenant shall also maintain at
its own expense insurance covering its furniture, fixtures, equipment and
inventory and all improvements which it makes to the Premises in an amount equal
to the full replacement cost thereof, against fire and such other perils as are
covered by an all risk policy including plate glass coverage and coverage for
sprinkler leakage.
(b) General Insurance Requirements. All insurance required of
------------------------------
Tenant under this Lease shall (a) be issued by insurance companies authorized to
do business in the State of Washington and otherwise acceptable to Landlord; (b)
be issued as a primary policy, or under a blanket policy, not contributing with
and not in excess of coverage which Landlord may carry; (c) in the case of the
liability policy, contain a contractual liability coverage endorsement covering
Tenant's indemnification duties under this Lease to the fullest extent
insurable; and (d) have deductibles reasonably acceptable to Landlord. Tenant
shall deliver to Landlord prior to the Commencement Date, and thereafter not
less than ten (10) days before the expiration dates of any expiring policies of
insurance, and from time to time thereafter within ten (10) days after written
request from Landlord, certificates of insurance evidencing the insurance
coverages required of Tenant pursuant to this Section 15. In no event shall the
limits of any such policies be considered as limiting the liability of Tenant
under this Lease. If Tenant does not deliver to Landlord certificates of
insurance as required above, Landlord may charge Tenant a $50.00 noncompliance
fee. If Tenant fails to maintain any insurance required of it under this Section
15, Landlord may do so, and Tenant shall reimburse Landlord for the full expense
thereof upon demand.
(c) Landlord's Insurance. Throughout the Landlord shall maintain
--------------------
such Lease Term, property and liability insurance coverages as are customarily
maintained by owners of buildings similar in age, location and construction to
the Building, and such additional insurance as any Lender may reasonably
require, and the cost of all such insurance shall be considered an Operating
Cost.
(d) Waiver of Subrogation. Neither Landlord nor Tenant shall be
---------------------
liable to the other party or to any insurance company (by way of subrogation or
otherwise) insuring the other party for any loss or damage to any building,
structure or tangible personal property of the other occurring in or about the
Premises, Land or the Building, even though such loss or damage might have been
occasioned by the negligence of such party, its agents or employees, if such
loss or damage is covered by insurance benefiting the party suffering such loss
or damage or was required to be covered by insurance under terms of this Lease.
Each party shall use its best efforts to cause each insurance policy obtained by
it to contain the waiver of subrogation clause. Notwithstanding the foregoing,
no such release shall be effective unless a party's insurance policy or policies
expressly permit such a release or contain a waiver of the carrier's right to be
subrogated.
SECTION 16. Assignment or Subletting.
-------------------------
(a) Consent Required. Tenant shall not sublet or encumber the whole
----------------
or any part of the Premises, nor shall this Lease or any interest thereunder be
assignable (for security purposes or otherwise) or transferable, voluntarily or
involuntarily, by operation of law or by any process or proceeding of any court
or otherwise without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. In determining whether to consent to a proposed
assignment or subletting, Landlord may consider any commercially reasonable
basis for approving or disapproving the proposed subletting or assignment,
including without limitation any of the following: (i) the experience or
business reputation of the proposed assignee or sublessee, (ii) whether the
clientele, personnel or foot traffic which will be generated by
<PAGE>
the business of the proposed assignee or sublessee is consistent in
Landlord's opinion with the businesses of other tenants of the Building, (iii)
notwithstanding that Tenant or others may remain liable under this Lease,
whether the proposed assignee or sublessee has a net worth and financial
strength and credit record satisfactory to Landlord, and (iv) whether the use of
the Premises by the proposed assignee or sublessee will be substantially the
same as the use of the Premises by Tenant, or whether such use is consistent
with the businesses of other tenants then occupying the Building, and whether
such use will violate or create any potential violation of any laws or a breach
or violation of any other lease or agreement by which Landlord is bound. Any
assignment or sublease without Landlord's prior written consent, at Landlord's
option, shall be void. No assignment or sublease shall release Tenant from
primary liability hereunder. Each assignment and sublease shall be by an
instrument in writing in form satisfactory to Landlord. The granting of consent
to a given transfer shall not constitute a waiver of the consent requirement as
to future transfers. Tenant shall also pay all reasonable out-of-pocket legal
fees and other reasonable out-of-pocket costs incurred by Landlord in connection
with Landlord's consideration of Tenant's request for approval of assignments or
subleases, including assignments for security purposes. Tenant shall deliver to
Landlord with its request for Landlord's approval of a proposed assignment or
subletting a fee of $500.00 which shall be credited against the fees and costs
payable by Tenant pursuant to the preceding sentence.
(b) Recapture Right. In lieu of giving its consent to a proposed
---------------
assignment or subletting during the last three (3) years of the Initial Term or
at any time during the Additional Term, Landlord may terminate the Lease as to
the portion of the Premises affected by the action for which Landlord's consent
is requested and recover possession thereof from Tenant within twenty (20) days
following written notice thereof to Tenant. All costs incurred by Landlord in
separating the remainder of the Premises from the area so retaken shall be paid
by Tenant as Additional Rent.
(c) Additional Consideration. If Tenant assigns its interest in
------------------------
this Lease or sublets the Premises, Tenant shall pay to Landlord one-half (1/2)
of any and all consideration received by Tenant for such assignment or sublease,
whether such additional consideration is in the form of rent in excess of the
Base Rent and/or Additional Rent payable by Tenant under this Lease, cash
payments or otherwise; however, such additional consideration shall be reduced
by any reasonable costs and expenses (including brokerage fees, legal fees,
architectural and engineering fees and tenant improvement costs) incurred by
Tenant in connection with the sublease or assignment.
(d) Entities. If Tenant is a corporation, then any transfer of this
--------
Lease by merger, consolidation or liquidation, or any direct or indirect change
in the ownership of, or power to vote the majority of, Tenant's outstanding
voting stock, shall constitute an assignment for the purposes of this Lease; if
Tenant is a partnership, then a change in general partners in or voting or
decision-making control of the partnership shall also constitute an assignment;
or if Tenant is a limited liability company, then a change in the members in or
voting or decision-making control of the company shall also constitute an
assignment. The foregoing limitations shall not be applicable so long as the
stock in Tenant is publicly traded on the New York Stock Exchange or NASDAQ.
(e) Assignment by Landlord. If Landlord sells or otherwise
----------------------
transfers the Building, such purchaser or transferee shall be deemed to have
assumed Landlord's obligations hereunder, and Landlord shall thereupon be
relieved of all liabilities hereunder arising thereafter, but this Lease shall
otherwise remain in full force and effect and Tenant shall attorn to Landlord's
successor.
SECTION 17. Destruction.
-----------
(a) Partial Destruction. If the Premises are rendered partially
-------------------
untenantable by fire or other insured casualty, and if the damage is repairable
within sixty (60) days from the date of the occurrence (with the repair work and
preparations therefore to be done during regular working hours on regular work
days), Landlord shall repair the Premises with due diligence, to the extent of
the insurance proceeds available, and the monthly Base Rent and Additional Rent
shall be abated in the proportion that the untenantable portion of the Premises
<PAGE>
bears to the whole thereof for the period from the date of the casualty to the
completion of the repairs, unless the casualty is uninsured and results from
Tenant's negligence or its breach of the terms hereof. If thirty percent (30%)
or more of the rentable area of the Building is destroyed or damaged, regardless
of whether the Premises are damaged, Landlord may terminate this Lease as of the
date of such damage or destruction by giving notice to Tenant within thirty (30)
days thereafter of the election to so terminate this Lease.
(b) Total Destruction. If the Premises are completely destroyed by
-----------------
fire or other casualty, or if they are damaged by uninsured casualty, or by
insured casualty to such an extent that the damage cannot be repaired within
ninety (90) days of the occurrence, Landlord shall have the option to restore
the Premises or to terminate this Lease on thirty (30) days written notice,
effective as of any date not more than sixty (60) days after the occurrence. If
this Section becomes applicable, Landlord shall advise Tenant within thirty (30)
days after such casualty whether Landlord elects to restore the Premises or to
terminate this Lease. If Landlord elects to restore the Premises, it shall
commence and prosecute the restoration work with diligence. For the period from
the date of the casualty until completion of the repairs (or the date of
termination of this Lease, if Landlord elects not to restore the Premises), the
monthly Base Rent and Additional Rent shall be abated in the same proportion
that the untenantable portion of the Premises bears to the whole thereof, unless
the casualty is uninsured and results from Tenant's negligence or its breach of
its obligations under this Lease. If the Premises are totally damaged or
destroyed, and the repairs to the Premises have not been completed within nine
(9) months after the damage or destruction (subject to delays such as force
majeure delays which are beyond Landlord's control), Tenant shall have the right
to terminate this Lease by written notice given to Landlord after the end of the
foregoing nine (9) month period, provided Landlord does not complete the repairs
within thirty (30) days after the date Tenant delivers its termination notice to
Landlord.
(c) Limitation. Except as otherwise provided in this Lease, Landlord
----------
shall not be liable to Tenant for destruction or damage to any of Tenant's
property including fixtures, equipment or other improvements, or for damages or
compensation for inconvenience, loss of business or disruption arising from
repairs or restoration of any portion of the Building or the Premises.
SECTION 18. Eminent Domain.
--------------
(a) Taking. If all of the Premises are taken by Eminent Domain,
------
this Lease shall terminate as of the date Tenant is required to vacate the
Premises and all Base Rent and Additional Rent shall be paid to that date. The
term "Eminent Domain" shall include the taking or damaging of property by,
through or under any governmental or statutory authority, and any purchase or
acquisition in lieu thereof, whether the damaging or taking is by government or
any other person which under applicable law has the power to exercise the power
of condemnation or eminent domain. If, in the reasonable judgment of Landlord, a
taking of any part of the Premises by Eminent Domain renders the remainder
thereof unusable for the business of Tenant this Lease, at the option of either
party, may be terminated by written notice given to the other party not more
than thirty (30) days after Landlord gives Tenant written notice of the taking,
and such termination shall be effective as of the date when Tenant is required
to vacate the portion of the Premises so taken. If this Lease is so terminated,
all Base Rent and Additional Rent shall be paid to the date of termination.
Whenever any portion of the Premises is taken by Eminent Domain and this Lease
is not terminated, Landlord shall at its expense proceed with all reasonable
dispatch to restore, to the extent of available proceeds and to the extent it is
reasonably prudent to do so, the remainder of the Premises to the condition they
were in immediately prior to such taking, and Tenant shall at its expense
proceed with all reasonable dispatch to restore its personal property and all
improvements made by it to the Premises to the same condition they were in
immediately prior to such taking. The Base Rent and Additional Rent payable
hereunder shall be reduced from the date Tenant is required to partially vacate
the Premises in the same proportion that the rentable area taken bears to the
total rentable area of the Premises prior to taking.
(b) Award. Landlord reserves all right to the entire damage award or
-----
payment for any taking by Eminent Domain, and except as provided below, Tenant
waives all claim whatsoever against Landlord for damages for termination of its
leasehold interest in the Premises or for interference with its business. Tenant
hereby grants and assigns to Landlord
<PAGE>
any right Tenant may now have or hereafter acquire to such damages and agrees to
execute and deliver such further instruments of assignment as Landlord may from
time to time request. Tenant shall, however, have the right to claim from the
condemning authority all compensation that may be recoverable by Tenant on
account of any loss incurred by Tenant in moving Tenant's merchandise,
furniture, trade fixtures and equipment, provided, however, that Tenant may
claim such damages only if they are awarded separately in the eminent domain
proceeding and not out of or as part of Landlord's damages.
SECTION 19. Default by Tenant.
-----------------
(a) Definition. Each of the following events and circumstances
----------
shall constitute a default by Tenant under this Lease: (i) Tenant vacates or
abandons the Premises, (ii) Tenant fails to pay Base Rent or Additional Rent, or
make any other payment required of Tenant under this Lease on the date such rent
or payment is due, or Tenant fails to comply with Section 28(c) of this Lease,
(iii) Tenant violates or breaches or fails to keep or perform any covenant, term
or condition of this Lease other than those requiring the payment of rent or
otherwise requiring Tenant to make payments pursuant to this Lease, (iv) Tenant
or any Guarantor, if any, files a petition in bankruptcy, or a trustee or
receiver is appointed for Tenant, and any Guarantor, or either of their
respective assets, or Tenant or a Guarantor makes an assignment for the benefit
of creditors, or Tenant or a Guarantor is adjudicated insolvent, or (v) a
petition in bankruptcy is filed against Tenant or a Guarantor and such petition
is not dismissed within forty-five (45) days after filing. With respect to a
default under (ii) above, Tenant shall have five (5) days after receiving
written notice of the default to remedy or cure its default. With respect to a
default under (iii) above, Tenant shall have twenty (20) days after receiving
written notice from Landlord to remedy or cure the default; however, if the
default cannot reasonably be cured within such twenty (20) day period, and
Tenant commences the cure within the twenty (20) day period, and Tenant
thereafter diligently prosecutes the cure to completion in good faith, such
twenty (20) day period shall be extended for such period of time as is
reasonably necessary for Tenant to cure the default, but in no event more than
an additional sixty (60) days. The foregoing notice and cure provisions shall be
inclusive of and not in addition to the notices and cure periods provided for in
RCW 59.12, as now or hereafter amended, or any legislation in lieu or
substitution thereof.
(b) Remedies. If Tenant defaults and fails to cure the default
--------
within the applicable cure period, if any, Landlord shall have the following
rights and remedies, at its option, which shall be cumulative and not exclusive,
and which shall be in addition to and not in lieu of any other rights or
remedies available to Landlord at law or in equity, or elsewhere in this Lease:
(i) to declare the Lease Term ended and reenter the Premises and take possession
thereof and remove all persons therefrom, and Tenant shall have no further claim
thereon or hereunder; (ii) to cure such default on Tenant's behalf and at
Tenant's cost and expense and charge Tenant as Additional Rent for all costs and
expenses incurred by Landlord in effecting the cure; (iii) without declaring
this Lease terminated, to reenter the Premises and occupy the whole or any part
thereof for and on account of Tenant and collect any unpaid rentals and other
charges, which have become payable, or which may thereafter become payable; (iv)
even though it may have reentered the Premises, to thereafter elect to terminate
this Lease and all of the rights of Tenant in or to the Premises.
(c) Reentry. If Landlord reenters the Premises under option (iii) of
-------
Section 19(b), Landlord shall not be deemed to have terminated this Lease or the
liability of Tenant to pay any Rent thereafter accruing as it becomes due, or to
have terminated Tenant's liability for damages under any of the provisions
hereof, by any such reentry or by any action, in unlawful detainer or otherwise,
to obtain possession of the Premises, unless Landlord shall have notified Tenant
in writing that it has so elected to terminate this Lease, and Tenant shall be
liable for and reimburse Landlord upon demand for all reasonable costs and
expenses of every kind and nature incurred in retaking possession of the
Premises and all other losses suffered by Landlord as a consequence of Tenant's
default. In the event of any entry or taking possession of the Premises,
Landlord shall have the right, but not the obligation, to remove therefrom all
or any part of the personal property located therein and may place the same in
storage at a public warehouse at the expense and risk of Tenant.
<PAGE>
(d) Termination. If Landlord elects to terminate this Lease pursuant
-----------
to the provisions of options (i) or (iv) of Section 19(b), Landlord may recover
from Tenant as damages, the following: (i) the worth at the time of award of any
unpaid Rent which had been earned at the time of such termination; plus (ii) the
worth at the time of award of the amount by which the unpaid Rent which would
have been earned after termination until the time of award exceeds the amount of
the Rent loss Tenant proves could have been reasonably avoided; plus (iii) the
worth at the time of award of the amount by which the unpaid Rent for the
balance of the term after the time of award exceeds the amount of the Rent loss
that Tenant proves could be reasonably avoided; plus (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including but not
limited to, any costs or expenses incurred by Landlord in retaking possession of
the Premises, including reasonable attorneys' fees therefor; maintaining or
preserving the Premises after such default; preparing the Premises for reletting
to a new tenant, including repairs or alterations to the Premises for such
reletting; leasing commissions; and any other costs necessary or appropriate to
relet the Premises; and (v) such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by the laws of the State of
Washington. As used in items (i) and (ii) of this Section 19(d), the "worth at
the time of award" shall be computed by allowing interest at the interest rate
specified in Section 6 of this Lease. As used in item (iii) above, the "worth at
the time of award" shall be computed by using the then applicable discount rate
quoted by the Federal Reserve Bank of San Francisco or its successor. For
purposes of this Section 22 only, the term "rent" shall be deemed to be the Base
Rent and all Additional Rent and other sums required to be paid by Tenant
pursuant to the terms of this Lease.
(e) Adequate Security. If a petition is filed by or against Tenant
-----------------
under any provision of the Bankruptcy Code or successor act, Tenant agrees that
it shall be obligated to post a cash bond with Landlord equal to six (6) months
Base Rent and Additional Rent, to provide Landlord with adequate security for
Tenant's performance of its obligations under this Lease.
(f) Landlord's Remedies Cumulative; Waiver. Landlord's rights and
--------------------------------------
remedies hereunder are not exclusive, but cumulative, and Landlord's exercise of
any right or remedy due to a default or breach by Tenant shall not be deemed a
waiver of, or alter, affect or prejudice any other right or remedy which
Landlord may have under this Lease or by law or in equity. Neither the
acceptance of rent nor any other acts or omissions of Landlord at any time or
times after the happening of any event authorizing the cancellation or
forfeiture of this Lease shall operate as a waiver of any past or future
violation, breach or failure to keep or perform any covenant, agreement, term or
condition hereof or to deprive Landlord of its right to cancel or forfeit this
Lease, upon the written notice provided for herein, at any time that cause for
cancellation or forfeiture may exist, or be construed so as at any future time
to estop Landlord from promptly exercising any other option, right or remedy
that it may have under any term or provision of this Lease.
SECTION 20. Default by Landlord; Lender Protection.
---------------------------------------
(a) Default by Landlord. Landlord shall be in default if Landlord
-------------------
fails to perform its obligations under this Lease within twenty (20) days after
its receipt of notice of nonperformance from Tenant; provided that if the
default cannot reasonably be cured within the twenty (20) day period, Landlord
shall not be in default if Landlord commences the cure within the twenty (20)
day period and thereafter diligently pursues such cure to completion.
(b) Notice to Lender. Notwithstanding anything to the contrary in
----------------
this Lease, Landlord shall not be in default under any provision of this Lease
unless written notice specifying such default is given to Landlord and to any
Lender who has been identified (with its address) to Tenant in writing as a
party to whom notice must be sent. Any Lender of Landlord entitled to notice
pursuant to the preceding sentence shall have the right to cure any default on
behalf of Landlord within the later of (a) thirty (30) days after receipt of
such notice, or (b) thirty (30) days after the expiration of any cure period
provided to Landlord pursuant to this Lease; provided, if such default cannot
reasonably be cured within such thirty (30) day period, the
<PAGE>
Lender shall be entitled to such additional time as may be reasonably necessary
to cure the default, if within the thirty (30) day period the Lender commences
and thereafter diligently pursues the actions necessary for the Lender to cure
such default by Landlord (including, if possession of the Premises is necessary
to cure the default, commencing such judicial or nonjudicial proceedings as may
be necessary for the Lender or a receiver to take possession of the Premises).
So long as a Lender is diligently taking the actions reasonably necessary for it
to cure Landlord's default, Tenant shall not exercise its remedies for
Landlord's default under this Lease.
SECTION 21. Attorneys' Fees. If either party retains the services of an
---------------
attorney in connection with enforcing the terms of this Lease, or if suit is
brought for the recovery of the Base Rent or Additional Rent due under this
Lease or for the breach of any covenant or condition of this Lease or for the
restitution of the Premises to Landlord and/or eviction of Tenant during the
term of this Lease or after the expiration thereof, the substantially prevailing
party therein will be entitled to recover from the other party the substantially
prevailing party's reasonable attorneys' fees, witness fees and other court
costs incurred in connection therewith.
SECTION 22. Access by Landlord. Landlord and its agents shall have the right
------------------
to enter the Premises at any time upon reasonable prior notice to Tenant to
examine the same, and to show them to prospective purchasers or lenders or, at
any time during the last eighteen (18) months of the Lease Term or following a
default by Tenant, to prospective tenants, and to make such repairs to the
Premises or repairs, alterations, improvements, additions or improvements to the
Building as Landlord may deem necessary or desirable; provided, in an emergency
or perceived emergency or to provide normal services (such as janitorial and
security services) to the Premises, no advance notice shall be required. If
Tenant is not personally present to permit entry and an entry is necessary in an
emergency, Landlord may enter the same by master key or may forcibly enter the
same, without rendering Landlord liable therefor. Nothing contained herein shall
be construed to impose upon Landlord any duty of repair or other obligation not
specifically stated in this Lease. Tenant shall change the locks to the Premises
only through Landlord and upon paying Landlord for all costs related thereto.
SECTION 23. Holding Over. Any holding over by Tenant after the expiration
------------
of the term hereof consented to in advance in writing by Landlord shall be
construed as a tenancy from month-to-month on the terms and conditions set forth
herein, except the Base Rent shall be the Base Rent agreed to by Landlord and
Tenant. Any such holdover tenancy may be terminated by either party upon thirty
(30) days written notice to the other party. If Tenant fails to surrender the
Premises upon the termination of this Lease, without the prior written consent
of Landlord, Tenant shall indemnify, defend and hold harmless Landlord from all
losses, damages, liabilities and expenses resulting from such failure,
including, without limiting the generality of the foregoing, any claims made by
any succeeding tenant arising out of such failure. Any holding over by Tenant
after the expiration of the Lease Term without Landlord's consent shall be
deemed a tenancy at will, terminable at any time by Landlord, at a rental rate
equal to one and one-half (1-1/2) times the Base Rent and Additional Rent
payable by Tenant during the last month rent is payable by Tenant pursuant to
this Lease.
SECTION 24. Subordination; Estoppel Certificates.
-------------------------------------
(a) Subordination. This Lease shall be automatically subordinate to all
-------------
of Landlord's mortgages, deeds of trust, or ground leases which heretofore and
hereafter affect the Premises, the Building or the Land, to any and all advances
made or to be made thereunder, to the interest on the obligations secured
thereby, and to all renewals, modifications, consolidations, replacements or
extensions thereof. This subordination shall be self operative, and no further
instrument of subordination shall be necessary to effect such subordination;
nevertheless, within fifteen (15) days after receiving a written request from
Landlord, Tenant shall execute such additional instrument of subordination as
may be required by Landlord (or its lenders or ground lessors) if such
instrument of subordination contains a nondisturbance provision reasonably
acceptable to Tenant which provides that so long as Tenant is not in default
hereunder beyond any applicable cure period in this Lease, Tenant shall have
continued enjoyment of the Premises free from any disturbance or interruption by
reason of any foreclosure of any such deed of trust,
<PAGE>
mortgage or the exercise of any remedies by the lessor under any such ground
lease. In the event of sale or foreclosure of any such mortgage or deed of
trust, or exercise of the power of sale thereunder, or in the event of a
transfer in lieu of foreclosure, or in the event a ground lessor acquires the
Landlord's interests in the Building, Tenant shall attorn to the purchaser (or
transferee) of the Building at such foreclosure or sale and recognize such
purchaser (or transferee) as Landlord under this Lease if so requested by such
purchaser (or transferee). Such attornment shall be self operative and no
further instruments need be executed to effect such attornment. If any lender
elects to have this Lease superior to its mortgage or deed of trust and gives
notice of its election to Tenant, then this Lease shall thereupon become
superior to the lien of such mortgage or deed of trust, whether this Lease is
dated or recorded before or after the mortgage or deed of trust.
(b) Estoppel Certificates. Tenant shall, within ten (10) days of the
---------------------
receipt thereof, acknowledge and deliver to Landlord an estoppel certificate in
the form attached to this Lease as Exhibit D, or such other form requested by
Landlord from time to time, certifying, to the extent true, that (i) Tenant
shall be in occupancy, (ii) this Lease is unmodified and in full force and
effect, or if there have been modifications, that the same is in full force and
effect as modified and stating the modifications, (iii) Base Rent and Additional
Rent have been paid only through a certain specified date, (iv) Tenant has no
offsets, defenses or claims against Landlord, and (v) such other matters as
Landlord may reasonably request. Tenant's failure to deliver an estoppel
certificate within the fifteen (15) day period shall be deemed its confirmation
of the accuracy of the information supplied by Landlord to the prospective
lender or purchaser. Tenant acknowledges and agrees that Landlord and others
will be relying and are entitled to rely on the statements contained in such
estoppel certificates.
SECTION 25. Reserved.
--------
SECTION 26. Liability of Landlord. Tenant shall look solely to Landlord's
---------------------
interest in the Building or the Land, and the rents, issues and profits from the
Building, for the satisfaction of any judgment or decree against Landlord,
whether for breach of the terms hereof or arising from a right created by
statute or under common law. Tenant agrees that no other property or assets of
the Landlord or any partner in Landlord shall be subject to levy, execution or
other enforcement procedures for satisfaction of any such judgment or decree;
and no partner, shareholder of other holder of an ownership interest in Landlord
shall be sued or named as a party in any suit or action (except as may be
necessary to secure jurisdiction over the partnership).
SECTION 27. Miscellaneous.
-------------
(a) Quiet Enjoyment. If Tenant fully complies with and promptly performs
---------------
all of the terms, covenants and conditions of this Lease on its part to be
performed, it shall have quiet enjoyment of the Premises throughout the Lease
term, subject, however, to matters of record (including the Declaration) and to
those matters to which this Lease may be subsequently subordinated.
(b) Notices. Any notices required in accordance with any of the
-------
provisions herein shall be in writing and delivered personally, sent via Federal
Express or another overnight courier service, or mailed by registered or
certified mail to the parties at the addresses set forth in Section l above, or
to such other address as a party shall from time to time designate in writing by
notice given pursuant to this Section 27(b). If Tenant is a partnership, any
notice required or permitted hereunder may be given by or to any one partner
thereof with the same force and effect as if given by or to all thereof. If
mailed, a notice shall be deemed received on the date of delivery or the date
delivery is refused.
(c) Successors or Assigns. All of the terms, conditions, covenants and
---------------------
agreements of this Lease shall be binding upon and subject to Section 16 above,
benefit Landlord, Tenant and their respective heirs, administrators, executors,
successors and assigns, and upon any person or persons coming into ownership or
possession of any interest in the Premises by operation of law or otherwise.
(d) Authority and Liability. Each party warrants to the other that this
-----------------------
Lease has been duly authorized, executed and delivered by it, and it has the
<PAGE>
requisite power and authority to enter into this Lease and perform its
obligations hereunder. Each party covenants to provide the other with evidence
of its authority and the authorization of this Lease upon request. All persons
and entities named as Tenant or Landlord herein shall be jointly and severally
liable for Tenant's or Landlord's respective liabilities, covenants and
agreements under this Lease.
(e) Brokers' Commission. Each party represents to the other that it has
-------------------
not dealt with any broker, agent or finder in connection with this Lease other
than the brokers listed in Section 1 of this Lease, and each party agrees to
indemnify and hold the other party harmless from all damages, judgments,
liabilities, claims and expenses (including attorneys' fees) arising out of or
in connection with any claim or demand of any other broker, agent or finder with
whom the indemnifying party has dealt for any commission or fee alleged to be
due in connection with its participation in the procurement of Tenant or the
negotiation of this Lease. Landlord agrees to pay Tenant's Broker a fee in
connection with this Lease in as provided in a separate agreement between
Landlord and Tenant's Broker.
(f) Partial Invalidity. If any court determines that any provision of
------------------
this Lease or the application thereof to any person or circumstance is, to any
extent, invalid or unenforceable, the remainder of this Lease, or application of
such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby and each other
term, covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
(g) Recording. Tenant shall not record this Lease or a memorandum
---------
thereof without the prior written consent of Landlord.
(h) Force Majeure. Neither party shall be deemed in default under this
-------------
Lease for failing to perform its duties or obligations under this Lease if such
failure is due to causes beyond its reasonable control, including but not
limited to acts of God, acts of civil or military authorities, fires, floods,
windstorms, adverse weather conditions, earthquakes, strikes or labor
disturbances, civil commotion, delays in transportation, governmental delays or
war; provided, nothing in this Section 27(h) shall limit or otherwise modify or
waive Tenant's obligation to pay Base Rent and Additional Rent as and when due
pursuant to the terms of this Lease.
(i) Name of Building. Landlord may change the name of the Building at
----------------
any time. Any such change shall not require amendment of this Lease or affect in
any way Tenant's obligations under this Lease, and except for the name change,
all terms and conditions of this Lease shall remain in full force and effect.
(j) Headings. The section headings used in this Lease are used for
--------
purposes of convenience and do not alter or limit in any manner the content of
the sections. Whenever appropriate from the context, the use of any gender shall
include any other or all genders, and the singular shall include the plural, and
the plural shall include the singular.
(k) Execution by Landlord and Tenant; Approval of Lender. Landlord shall
----------------------------------------------------
not be deemed to have made an offer to Tenant by furnishing Tenant with a copy
of this Lease with particulars inserted. No contractual or other rights shall
exist or be created between Landlord and Tenant until all parties have executed
this Lease, and if specified in writing by Landlord, until it has been approved
in writing by Landlord's lender and fully executed copies have been delivered to
Landlord and Tenant. Tenant agrees to make such changes herein as may be
reasonably requested by Landlord's lender, so long as such changes do not
increase Base Rent and Additional Rent due from Tenant or otherwise materially
alter Tenant's rights or obligations hereunder.
(l) Transportation Management Programs; Recycling. Tenant shall
---------------------------------------------
cooperate with Landlord in meeting the objectives and complying with the terms
and conditions of any transportation management plan (the "TMP") now or
hereafter instituted by any governmental authority and applicable to the
Building. Landlord will provide Tenant with notice of any such transportation
plan now or hereafter in effect. In
<PAGE>
addition, Tenant will cooperate with and participate in any and all recycling
programs now or hereafter in place with respect to the Building, whether or not
governmentally mandated, if all tenants of the Building are requested to
participate.
(m) Entire Agreement; Applicable Law(m). This Lease and the attached
-----------------------------------
exhibits set forth the entire agreement of Landlord and Tenant concerning the
Premises and the Building, and there are no other agreements or understanding,
oral or written, between Landlord and Tenant concerning the Premises or the
Building. Any subsequent modification or amendment of this Lease shall be
binding upon Landlord and Tenant only if reduced to writing and signed by them.
This Lease shall be governed by, and construed in accordance with the laws of
the State of Washington.
(n) Financial Statements. Within twenty (20) days after Landlord's
--------------------
written request, Tenant shall provide Landlord with a current financial
statement, prepared in accordance with generally accepted accounting principles,
consistently applied, or such other accounting practices as may be reasonably
acceptable to Landlord, and certified as true and correct by the President or
chief financial officer of Tenant. Landlord will keep such financial statements
confidential and will not provide copies of such financial statements to persons
or entities other than Landlord's financial and legal advisors and actual or
prospective lenders or purchasers of the Building, or as otherwise required by
applicable law or court order. At the request of Tenant, Landlord will execute a
non-disclosure agreement with terms and conditions reasonably acceptable to
Landlord and Tenant.
SECTION 28. Additional Provisions.
---------------------
(a) Parking. On the Commencement Date, Tenant shall be allocated and
-------
shall purchase and pay for three (3) parking permits per 1,000 rentable square
feet of the Premises initially leased for unreserved, unassigned parking
privileges in the Building parking facilities. Tenant acknowledges that the
number of parking permits allocated to Tenant pursuant to this Section 28(a) may
be reduced to the extent Landlord is required to set aside parking spaces in the
Building as short term visitor parking or for carpools or vanpools in order to
comply with the TMP. For each parking permit so allocated to Tenant, Tenant
shall be charged a monthly charge equal to the then monthly charge for
unreserved parking in the Building, as such charge may change from time to time
to reflect changes in the market (but not more than once per Lease Year). In no
event, however, shall the monthly charge per parking permit be less than the
monthly charge per permit during the initial Lease Year. The initial charge for
unreserved, unassigned monthly parking in the Building garage shall be $80.00
per space per month (plus applicable sales tax). Tenant's parking privileges in
the Building shall be subject to whatever parking methods (e.g., stack parking,
valet parking, self- parking, etc.) are then being used in the Building and
subject to any applicable rules and regulations. Any parking spaces allocated to
Tenant pursuant to this Section 28(a) and not initially purchased by Tenant
shall immediately and irrevocably revert to Landlord and may be reallocated by
Landlord to other tenants of the Project. If Tenant elects to purchase the full
number of parking permits allocated to it pursuant to this Section 28(c) but
Tenant does not require the use of all such parking permits, Landlord agrees to
assist Tenant in finding other tenants in the Building or the Project to
purchase such permits on an interim basis.
(b) Storage. In addition to the Premises, Tenant hereby leases from
-------
Landlord and Landlord hereby leases to Tenant approximately 212 square feet of
storage space (the "Storage Space") located on the mid-parking level of the
Building garage, as more specifically shown on Exhibit F attached. Landlord
---------
shall have the option of relocating the Storage Space to another space in the
Building or the Project with substantially the same square footage as the
initial Storage Space by giving Tenant at least thirty (30) days advance written
notice. If Landlord so elects to relocate the Storage Space, at its expense,
Landlord will construct any walls necessary to demise the substitute space and
Landlord, at its expense, will cause the substitute space to be improved with
improvements comparable to those, if any, then existing in the initial Storage
Space. As rent for the Storage Space (the "Storage Space Rent"), Tenant shall
pay monthly (with the Base Rent required to be paid pursuant to this Lease), an
amount equal to $194.33 per month (the "Storage Rent"). The Storage Rent shall
be adjusted at the same times and in the same manner that Base Rent is adjusted
pursuant to Section 4 above. Tenant's use of the Storage Space shall be at its
sole risk and expense, and Tenant hereby assumes full responsibility for the
safety of any goods, personal
<PAGE>
property or other items stored therein by Tenant. Tenant will use and occupy the
Storage Space in compliance with all applicable laws, keep and maintain the
Storage Space in neat, clean, sanitary and orderly condition, and comply with
all reasonable rules and regulations issued by Landlord with respect to the
Storage Space. At the end of the Lease Term, Tenant shall return the Storage
Space to Landlord in the same condition as when received, except for reasonable
wear and tear, damage by condemnation, and damage by fire or other casualty. All
Storage Space shall be leased to Tenant on an "AS IS, WHERE IS" basis, without
any obligation by Landlord to make any improvements to the Storage Space after
the completion of the Building to Shell Condition. Tenant shall not alter or
improve the Storage Space without Landlord's prior consent, which consent shall
not be unreasonably withheld or delayed.
(c) Letter of Credit.
----------------
(i) As additional security for the payment and performance by
Tenant of all its obligations under this Lease, and as a condition precedent to
the effectiveness of this Lease, within two (2) business days after the full
execution of this Lease, Tenant will deliver to Landlord an irrevocable standby
letter of credit in the amount of $650,000 (the "Letter of Credit"). The Letter
of Credit must be issued to Landlord and its assigns as beneficiary by a bank
acceptable to Landlord, and must be acceptable to Landlord in form and content.
The Letter of Credit shall be issued in such form as to enable Landlord, at its
option, to draw the same, in whole or in part, from time to time on demand.
Tenant authorizes Landlord to draw on the Letter of Credit and apply the
proceeds thereof toward the payment of any sum in default or any other sum which
Landlord may be required or may in its reasonable discretion deem necessary to
spend or incur by reason of Tenant's default. The Letter of Credit shall renew
annually for consecutive one (1) year periods, at least thirty (30) days prior
to each anniversary of its initial issuance. Landlord shall have the right to
assign the Letter of Credit to any person to whom Landlord sells the Building.
Tenant may elect at any time to replace all or part of the Letter of Credit with
a cash deposit with Landlord. Any cash so deposited with Landlord will be held
by Landlord in a non-interest bearing account and may be used by Landlord in the
same manner that Landlord can draw on the Letter of Credit pursuant to this
Section 28(c).
(ii) If Tenant defaults under this Lease and fails to cure the
default prior to the expiration of any applicable cure period, Landlord may draw
on the entire amount of the Letter of Credit and deduct from the proceeds of the
Letter of Credit the amount of any unpaid rent or other sums due to Landlord as
a result of the default. Tenant on demand by Landlord will cause a replacement
Letter of Credit (which also must be issued by a bank and be in form and content
acceptable to Landlord) in the amount of the initial Letter of Credit (as the
same may have been reduced pursuant to subparagraph (iii) below) to be issued to
Landlord within ten (10) days of Landlord's demand to do so. Upon receipt of the
replacement Letter of Credit, Landlord will deliver to Tenant the unused balance
of the funds drawn under the original Letter of Credit so long as Tenant is not
then in default under this Lease. If Tenant fails to renew the Letter of Credit
as required by this Section 28(c), or if Tenant defaults under this Lease and
fails to provide Landlord with a replacement Letter of Credit as required
pursuant to the preceding sentence, then Landlord without notice may draw upon
the entire Letter of Credit if it has not already done so and the amount so
drawn by Landlord will be held by Landlord as a deposit to secure the payment
and performance of Tenant's obligations under this Lease. A failure by Tenant to
provide Landlord with a replacement Letter of Credit pursuant to this Section
28(c) or to otherwise comply with the requirements of this Section 28(c) will
constitute a default under Section 19(a)(ii) of this Lease. If Tenant defaults
in the payment or performance of any of its obligations under this Lease, and
fails to cure the default prior to the expiration of the applicable cure period,
if any, Landlord may withdraw from any funds held by Landlord pursuant to the
preceding sentence for the amount of any unpaid rent or other sums due to
Landlord as a result of the default, and the remaining balance of any such funds
shall be returned to Tenant without interest within thirty (30) days after the
expiration or earlier termination of the Lease Term if Tenant is not then in
default of any its obligations under this Lease.
(iii) So long as Tenant is not then in default under this Lease,
on each of December 31, 1999, December 31, 2000 and December 31, 2001, the
required amount of the Letter of Credit will be reduced to by one-third (1/3)
of its original amount, if and only if Tenant is able to provide Landlord with
evidence acceptable to Landlord in its sole discretion that during
<PAGE>
the three (3) month period preceding the applicable date, the average cash
balances in Tenant's depository accounts with financial institutions equaled or
exceeded $9,000,000.
(d) Expansion. If Tenant requires additional space, Tenant shall so
---------
advise Landlord and Landlord will advise Tenant if any space is available in the
Building for to satisfy Tenant's space needs, the date the available space will
be available and the terms and conditions on which Landlord will make such space
available to Tenant.
(e) Rooftop Equipment.
-----------------
(i) Subject to the terms of this Section 28(e), Tenant shall have
a non-exclusive license to install on the roof of the Building or elsewhere in
the Project in a mutually acceptable location, an antenna or antennas and
related communications equipment using signal strength similar to such equipment
commonly located on the rooftops of Class A downtown office buildings in Seattle
(the "Equipment"). Landlord's approval of the Equipment and its location in the
Project shall not be unreasonably withheld. Prior to installation, in addition
to the location of the Equipment, Landlord must approve, which approval will not
be unreasonably withheld, (1) the Equipment, (2) drawings submitted by Tenant
showing the Equipment to be installed, method of installation, connectors to
electrical services, conduit to the Premises in the Building, and such other
information concerning the installation, use and maintenance of the Equipment
which Landlord may request, and (3) the contractor selected by Tenant to install
the Equipment, and the terms of the contract between Tenant and its contractor.
If required by Landlord, Tenant shall use Landlord's roofing contractor during
the installation of the Equipment. The installation work shall be done in a
manner which does not invalidate any roof warranty then in effect, and Tenant
will repair any damage to the roof or roof structure caused by such
installation. The Equipment may be used only for Tenant's own communications
needs and on a non-fee basis. Tenant shall obtain (through Landlord or with
Landlord's approval) all permits and approvals required by any governmental
entities to install, operate or maintain the Equipment. At its sole cost and
expense, Tenant shall maintain the Equipment and comply with all the laws,
rules, regulations, ordinances and standards of all governmental authorities
having jurisdiction over the Equipment or the Building. Tenant shall be
responsible for all roof repair and additional maintenance costs, if any,
attributable to the Equipment and Tenant's use of the Building roof pursuant to
this Section 28(e). Tenant shall pay for all utilities used or consumed in
connection with the Equipment; pay all personal property taxes, if any,
separately assessed with respect to the Equipment; and if and to the extent the
Equipment is assessed for tax purposes as part of the Building or Landlord's
personal property, reimburse Landlord within thirty (30) days of Landlord's
written demand for all additional taxes, if any, attributable to the Equipment
as reasonably determined by Landlord.
(ii) Installation, maintenance and use of the Equipment shall not
in any way interfere with the systems of the Building or the Project or the
quiet enjoyment by any other tenant or occupant of the Building or the Project,
including without limitation the use of computers, television, radio, telephone
and other communications equipment and any other communications apparatus now or
hereafter located on the roof of the Building or elsewhere in the Project. If
Landlord receives complaints regarding interference with reception from another
tenant, and Landlord reasonably believes the source of the interference is the
Equipment, Tenant shall take all steps necessary to stop the interference. To
the extent Landlord has the right to do so, Landlord will cause other tenants
that are being interfered with to use replacement equipment or other filter
devices, in either case at Tenant's expense, in accordance with the requirement
of the Federal Communications Commission, in order to solve the problem. Tenant
shall reimburse Landlord within ten (10) days after demand for all losses,
liabilities, damages and expenses related to the repair of such damage
attributable to such interference. Tenant shall within thirty (30) days
following expiration or earlier termination of the Lease or this license, remove
the Equipment, repair any damage caused by such removal and restore the roof and
any other affected areas of the Building or the Project to a condition at least
as good as its condition immediately prior to the installation of the Equipment,
ordinary wear and tear excepted. If Tenant fails to so remove the Equipment and
restore the Building or the Project, Landlord may do so on Tenant's behalf, and
Tenant shall within ten (10) days after demand pay to Landlord the actual costs
incurred by Landlord in so doing. Landlord agrees to permit Tenant reasonable
access to the roof and other common areas of the Building or the Project to
facilitate the
<PAGE>
installation, use and maintenance of the Equipment and the removal of the
Equipment. Any Equipment so installed shall be installed and used at Tenant's
sole risk, and in no event shall Landlord be liable under any circumstances for
any damage to the Equipment or loss of use related to the Equipment, except to
the extent the damage is the result of the negligence or intentional misconduct
of Landlord. Nothing in this Section 28(e) is intended to create any exclusive
right in favor of Tenant to use the roof of the Building any other portion of
the Project for telecommunications equipment or otherwise. Tenant agrees to
cooperate with Landlord in relocating the Equipment to another location on the
roof of the Building or elsewhere in the Project so long as Landlord pays the
reasonable cost of such relocation.
(f) Emergency Power Generator.
-------------------------
(i) Subject to the terms of this Section 28(f), Tenant shall have
a non- exclusive right to install an emergency power generator at a mutually
acceptable location in the Project (the "Generator"). Prior to installation, in
addition to the location, Landlord must approve, which approval shall not be
unreasonably withheld, (1) the Generator, (2) drawings submitted by Tenant
showing the Generator to be installed, method of installation, connectors to
electrical services, conduit to the Premises, and such other information
concerning the installation, use and maintenance of the Generator which Landlord
may request, and (3) the contractor selected by Tenant to install the Generator,
and the terms of the contract between Tenant and its contractor. The Generator
shall be painted in a color approved by Landlord to match the adjacent
improvements and shall be surrounded by an acoustic shield. Tenant shall obtain
(through Landlord or with Landlord's approval) all permits and approvals
required by any governmental entities to install, operate or maintain the
Generator. At its sole cost and expense, Tenant shall maintain the Generator and
comply with all the laws, rules, regulations, ordinances and standards of all
governmental authorities having jurisdiction over the Building. Tenant shall be
responsible for all additional maintenance costs, if any, attributable to the
use, operation or maintenance of the Generator. Tenant shall pay for all
utilities used or consumed in connection with the Generator; pay all personal
property taxes, if any, separately assessed with respect to the Generator; and
if and to the extent the Generator is assessed for tax purposes as part of the
Building or Landlord's personal property, reimburse Landlord within thirty (30)
days of Landlord's written demand for all additional taxes, if any, attributable
to the Generator. The Generator shall be used only for periodic testing and in
the event Tenant's primary electrical service is interrupted. All testing shall
take place at times reasonably selected to minimize interference with other
tenants. The Generator shall be used only for backup power only for Tenant, and
may not be used as a primary power source.
(ii) Installation, maintenance and use of the Generator shall not
in any way interfere with the systems of the Building or the Project or the
quiet enjoyment by any other tenant or occupant of the Building or the Project.
Tenant shall within thirty (30) days following expiration or earlier termination
of the Lease, remove the Generator, repair any damage caused by such removal and
restore the affected areas of the Building or the Project to a condition at
least as good as its condition immediately prior to the installation of the
Generator, ordinary wear and tear excepted. If Tenant fails to so remove the
Generator and restore the Building or the Project, Landlord may do so on
Tenant's behalf, and Tenant shall within ten (10) days after demand pay to
Landlord the actual costs incurred by Landlord in so doing. Landlord agrees to
permit Tenant reasonable access to the common areas of the Building or the
Project to facilitate the installation, use and maintenance of the Generator and
the removal of the Generator. Any Generator so installed shall be installed and
used at Tenant's sole risk, and in no event shall Landlord be liable under any
circumstances for any damage to the Generator or loss of use related to the
Generator.
DATED as of the day and year first indicated above.
LANDLORD:
FIRDEX ASSOCIATES, a Washington
general partnership
By: ALPER NORTHWEST, INC., a Washington
<PAGE>
corporation, Managing General Partner
By /s/ Kenneth V. Bellamy
-------------------------------------
Its President
-----------------------------------
By /s/ Dean R. Erickson
-------------------------------------
Its Vice President
-----------------------------------
TENANT:
MEGADEPOT.COM, INC., a Washington
corporation
By /s/ Mark Calvert
-------------------------------------
Its CFO
----------------------------------
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 5th day of May, 1999, before me, a Notary Public in and for the State
of Washington, duly commissioned and sworn, personally appeared Kenneth V.
Bellamy and Dean R. Erickson, to me known to be the President and Vice
President, respectively, of ALPER NORTHWEST, INC., the Managing General Partner
of FIRDEX ASSOCIATES, the partnership named in and which executed the foregoing
instrument; and they acknowledged to me that they signed the same as the free
and voluntary act and deed of said corporation and partnership for the uses and
purposes therein mentioned.
I certify that I know or have satisfactory evidence that the persons appearing
before me and making this acknowledgment are the persons whose true signatures
appear on this document.
WITNESS my hand and official seal the day and year in this certificate above
written.
/s/ Eleanor C. Romero
---------------------
Signature
Eleanor C. Romero
-----------------
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at Kent.
My commission expires 11-19-01.
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 4TH day of May, 1999, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn personally appeared
Mark Calvert, known to me to be the CFO of MEGADEPOT.COM, INC., the corporation
that executed the foregoing instrument, and acknowledged the said instrument to
be the free and voluntary act and deed of said corporation, for the purposes
therein mentioned, and on oath stated that he/she was authorized to execute said
instrument.
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
/s/ Angela Leonard
------------------
Signature
Angela Leonard
--------------
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at King County.
My commission expires 2-9-2000.
<PAGE>
EXHIBIT 10.9
LEASE
THIS LEASE, dated October 1, 1999, is made and entered into by the Landlord and
Tenant named herein who, in consideration of the covenants herein contained,
agree as follows:
ARTICLE 1 - BASIC TERMS, SCHEDULES, DEFINITIONS
- -----------------------------------------------
1. Basic Terms
- --- -----------
(A) (i) Landlord: No. 150 Cathedral Ventures Ltd.
(ii) Address of Landlord: #1300 - 409 Granville Street
Vancouver, BC
V6C 1T2
(B) (i) Tenant: Onvia.com Channels, Inc.
(ii) Head Office of Tenant: Suite 205 - 1008 Homer Street
Vancouver, B.C.
V6B 2X1
(C) Address of Premises: 330 - 948 Homer Street
Vancouver, BC
(D) Floor Area of Premises: 5,271 square feet (more or less) located on
the third floor of the Building shown on Schedule "A" including the
leasehold improvements referenced in Schedule "B".
(E) (i) Term: 5 years
(ii) Renewal Terms: Three (of three years each)
(iii) Commencement Date: August 1, 1999 or upon completion of
Landlord's work, whichever last occurs.
(iv) Occupation Date: Upon completion of Landlord's work. Landlord
to use best efforts to complete no later
than July 17, 1999.
(F) Minimum Rent: (exclusive of GST)
<PAGE>
<TABLE>
<CAPTION>
Lease Years Sq. Ft Rate $/Sq. Ft. $/Month $/Annum
- ----------- ----------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Aug. 1/99, Feb. 29/00 3,696 $16.00 $4,928.00 $34,496.00
Mar. 1/99, Jul. 31/00 4,371 $16.00 $5,828.00 $29,140.00
2 5,271 $16.00 $7,028.00 $84,336.00
3 5,271 $16.00 $7,028.00 $84,336.00
4 5,271 $16.00 $7,028.00 $84,336.00
5 5,271 $16.00 $7,028.00 $84,336.00
</TABLE>
Notwithstanding the above, the Landlord and the Tenant acknowledge and
agree that as contemplated by Section 4.2 hereof:
2. the Tenant is not to pay any Minimum Rent for the first two months of
the Term; and
3. the Tenant has paid Landlord a deposit of $12,792.92 which is to be
applied on account of the third months Minimum Rent ($4,928.00) and
the last months Minimum Rent ($7,028.00) and applicable GST.
(G) Permitted Use of Premises: General office use including computer
software development and ancillary offices and for no other use without the
express written consent of the Landlord.
(H) Legal Description of Lands: Parcel B of 5 & 6, Lot A of 6 & 7 of 39 to
58, Block 76, D.L. 541, Plan 4544, Vancouver District, Vancouver, B.C.
The foregoing Basic Terms are hereby approved by the parties and each reference
in this Lease to any of the Basic Terms shall be construed to include the
provisions set forth above as well as all of the additional terms and conditions
of the applicable sections of this Lease where such Basic Terms are more fully
set forth.
1.2 Schedules
---------
The schedules to this Lease are incorporated into and form an integral part
of this Lease.
1.3 Definitions
-----------
In this Lease, the words, phrases and expressions set forth in Schedule "C"
are used with the meanings defined therein.
ARTICLE II - GRANT OF LEASE
- ---------------------------
2.1 Demise
------
The Landlord, being registered as owner of the Lands legally described in
Section 1.1(h),
2
<PAGE>
subject, however, to such mortgages and encumbrances as are registered
against title thereto as of the date hereof, does hereby lease to the
Tenant, for the Term and upon and subject to covenants and conditions
hereinafter expressed, the Premises.
2.2 The Landlord in addition to the foregoing does hereby grant to the Tenant
the exclusive use during the Term of two parking space located on the Lands
at no cost to the Tenant.
2.3 The Tenant and its employees and all persons lawfully requiring
communication with them shall have and are hereby granted the full, free
and uninterrupted non-exclusive right, licence and privilege at all times
and from time to time during the normal business hours of the Tenant to
enter, pass and repass over those portions of Lands and the Buildings which
are not rented to or designated for rent for the purposes of access to and
from the Premises, subject to all rules, regulations and bylaws of all
governmental authorities having jurisdiction and subject to the reasonable
rules and regulations imposed by the Landlord from time to time.
ARTICLE III - TERM, COMMENCEMENT, RENEWAL
- -----------------------------------------
3.1 Term
----
The Term of this Lease shall be for the period set out in Section
1.1(e)(i), beginning on the Commencement Date.
3.2 Option to Renew
---------------
(a) If the Tenant duly and regularly pays all rent and other sums hereunder to
be paid and performs each and every of the covenants, conditions and
provisions herein contained the Landlord shall, at the expiration of the
Term, upon request in writing by the Tenant delivered to the Landlord not
less than six (6) months prior to the expiration of the Term, grant to the
Tenant, a renewal lease of the Premises for a further term of three (3)
years from the expiration of each Term to be legally documented at the
expense of the Tenant upon the same terms and conditions as contained in
this Lease except as to the inclusion of Section 12.4 hereof and except as
to the amount of Minimum Rent which shall be equal to the Fair Market Rent
for the Premises including without limitation to the use of the Parking
Space at the commencement of the Renewal Term as agreed upon by the
Landlord and the Tenant, but in no event less than the rate in the
preceding term.
(b) In the event that the parties are unable to agree upon the Fair Market Rent
at least thirty (30) days prior to the commencement of the Renewal Term,
the matter shall be determined by arbitration in accordance with the
provisions of the Commercial Arbitration Act of British Columbia (or any
successor statute) by a single arbitrator.
(c) Notwithstanding the provisions of paragraph (a) the Tenant will only be
entitled to a maximum of three renewal options of three years each.
3
<PAGE>
ARTICLE IV - RENT
- -----------------
4.1 Minimum Rent
------------
Subject to the provisions of Section 4.2 the Tenant shall pay to the
Landlord in and for each Lease Year, Minimum Rent in the amount per annum
set out in Section 1.1(f) for the respective Lease Year, by equal
consecutive monthly installments in the amount set out in Section 1.1(f)
for such Lease Year plus the applicable Goods and Services Tax. The
parties confirm that the Minimum Rent as set out in Section 1.1(f) is based
in part on the Premises containing an estimated 5,271 square feet of
rentable floor area. The parties agree that the final rentable floor area
of the Premises shall be determined as per the American national Standard
used by the Building Owners and Managers Association International ("BOMA")
in effect at the date of this Lease and, the Minimum Rent shall be adjusted
upwards or downwards as the case may be to reflect such final measurements
by no later than August 1st, 2000.
4.2 Payment of Minimum Rent
-----------------------
The Landlord grants a two (2) month abatement of Minimum Rent from the
beginning of the Lease Term. The first monthly installment of Minimum Rent
shall be paid on or before two (2) months after the Commencement Date and
subsequent installments of Minimum Rent shall be paid strictly in advance
on the first day of each and every succeeding month throughout the Term
including the Goods and Services Tax. Notwithstanding the foregoing, the
Tenant will be responsible for its Proportionate Share of Property Taxes
and Operating Costs during the abatement period. The Landlord and the
Tenant further agree that:
(c) any portion of any leasehold improvement allowance not spent by the Tenant
will be credited on account of Minimum Rent; and
(d) the Landlord has received the sum of $12,792.92 from the Tenant which will
be applied towards the payment of the third and final months Minimum Rent
and applicable GST.
4.3 Pro Rata Adjustment of Rent
---------------------------
All rent shall be deemed to accrue from day to day, and if for any reason
it shall become necessary to calculate rent for irregular periods of less
than one (1) year or one (1) month, as the case may be, and appropriate pro
rata adjustment shall be made in order to calculate rent for such irregular
period.
4.4 Payments Generally
------------------
All payments by the Tenant to the Landlord of whatsoever nature required or
contemplated by this Lease shall be:
(a) paid to the Landlord by the Tenant in lawful currency of Canada;
(b) made when due hereunder, without prior demand therefor and without any set-
off, compensation or deduction whatsoever, at the address of the Landlord
set forth in
4
<PAGE>
Section 1.1 (a)(ii) or such other place as the Landlord may designate from
time to time to the Tenant;
(c) applied towards amounts then outstanding hereunder, in such manner as the
Landlord may, in its discretion, see fit, and without restricting the
generality of the foregoing, no acceptance by the Landlord of any amount
less than the full sum which is due and owing by the Tenant shall
constitute an accord and satisfaction or oblige the Landlord to accept in
full settlement anything less than the full amount owing and outstanding at
any time;
(d) deemed to be rent, in partial consideration for which this Lease has been
entered into, and shall be payable and recoverable as rent such that the
Landlord shall have all rights and remedies against the Tenant for default
in making any such payment which may not be expressly said to be rent as
the Landlord has for default in payment or rent; and
(e) subject to an overdue charge if any such payment is not made when due,
which charge shall be Additional Rent equal to twelve (12%) percent per
annum of the overdue amount both before and after judgement payable with
the next monthly installment of Minimum Rent, all without prejudice to any
other right or remedy of the Landlord.
ARTICLE V - ADDITIONAL RENT
- ---------------------------
5.1 Intent of Lease
---------------
It is the intent of the parties and agreed that this Lease shall be
absolutely net to the Landlord such that, without limiting the generality
of the foregoing, the Tenant shall pay for its own account, and without any
variation, set-off or deduction, all amounts, charges, cost, duties,
expenses, fees rates, sums, taxes and increases therein any way relating to
the Premises.
5.2 Additional Rent
---------------
Without limiting the generality of the preceding Section, the Tenant shall
pay as Additional Rent in each Lease Year the aggregate of:
(a) the Property Taxes;
(b) the Operating Costs;
(c) such other amounts, charges, costs, sums or increases therein as are
required to be paid by the Tenant to the Landlord pursuant to this Lease in
addition to Minimum Rent;
to either the Landlord or direct to suppliers as determined from time to
time by both parties. Taxes and Operating Costs are based on a
proportionate share of the building and are estimated to be $6.00 per
square foot and are to be paid on a monthly basis.
5
<PAGE>
<TABLE>
<CAPTION>
Initial Estimated
-----------------------
Lease Years Sq. Ft. Monthly
- ----------------------- -------------------- -----------------------
<S> <C> <C>
Aug. 1/99, Feb. 29/00 3,696 $1,848.00
- ----------------------- ----- ---------
Mar. 1/99, Jul. 31/00 4,371 $2,185.50
- ----------------------- ----- ---------
2 5,271 $2,635.50
- ----------------------- ----- ---------
3 5,271 $2,635.50
- ----------------------- ----- ---------
4 5,271 $2,635.50
- ----------------------- ----- ---------
5 5,271 $2,635.50
- ----------------------- ----- ---------
</TABLE>
5.3 Estimate of Additional Rent
---------------------------
The Landlord may, in respect of any or all of the items of Additional Rent,
compute bona fide estimates of the amounts which are anticipated to accrue
in the next following Lease Year, calendar year or fiscal year, or portion
thereof, as the Landlord in its discretion may determine is the most
appropriate period for each or all items of Additional Rent, and the
Landlord may provide the Tenant with written notice of the amount of any
such estimate.
5.4 Payment of Additional Rent
--------------------------
With respect to any item of Additional Rent which the Landlord elects to
estimate from time to time, following receipt of the written notice of the
estimated amount thereof, the Tenant shall pay to the Landlord such amount,
in equal consecutive monthly installments throughout the applicable period
with the monthly installments of Minimum Rent. With respect to any item of
Additional Rent which the Landlord has not elected to estimate from time to
time, the Tenant shall pay to the Landlord the amount of such item of
Additional Rent, determined pursuant to the applicable provisions of this
Lease, forthwith upon receipt of an invoice therefor.
6
<PAGE>
5.5 Adjustment of Additional Rent
-----------------------------
Within ninety (90) days of the end of each Lease Year, calendar year or
fiscal year, or portion thereof, as the case may be, for which the Landlord
has estimated any item of Additional Rent, the Landlord shall compute the
actual amount of such item of Additional Rent, and make available to the
Tenant for examination an unaudited statement of the gross amount of such
item of Additional Rent, and the calculation of the Tenant's Proportionate
Share thereof for each year or portion thereof. If the actual amount of
such item of Additional Rent, as set out in any such statement, exceeds the
aggregate amount of the installments paid by the Tenant in respect of such
item, the Tenant shall pay to the Landlord the amount of the excess within
fifteen (15) days of the receipt of such statement. If the contrary is the
case, any such statement shall be accompanied by a refund to the Tenant of
any such overpayment without interest, provided that the Landlord may first
deduct from such refund any rent or other sum which is then owing by the
Tenant or in arrears. The Tenant may audit, if required, the Additional
Rent within 30 days after it has been given unaudited statements by the
Landlord. The cost of such audit will be for the Tenant's account unless
the audit shows errors in excess of 5% of the total, in which case the cost
will be for the Landlord's account.
5.6 Review of Additional Rent
-------------------------
No party hereto may claim a readjustment in respect of any item of
Additional Rent whether paid or payable in installments or otherwise, if
based on any error of estimation, allocation, calculation or computation
thereof, unless claims in writing prior to the expiration of one (1) year
from the conclusion of the period in respect of which such item of
Additional Rent accrued.
ARTICLE VI - TAXES
- ------------------
6.1 Tenant's Taxes
--------------
The Tenant shall pay promptly when due; all business, sales, machinery,
equipment and all other taxes, assessments, charges and rates, as well as
any permit or license fees, attributable to the Premises or the property,
business, sales or income of the Tenant in respect of the Premises.
6.2 Payment of Property Taxes
-------------------------
The Tenant shall pay to the Landlord as Additional Rent the Tenant's
Proportionate Share of Property Taxes.
6.3 Increases in Property Taxes
---------------------------
The Tenant shall pay to the Landlord as Additional Rent an amount equal to
any increase in the Property Taxes by reason of any installation,
alteration or use made in or to the Premises by or for the sole benefit of
the Tenant or any assignee, concessionaire, licensee or subtenant of the
Tenant.
ARTICLE VII - OPERATING COSTS
- -----------------------------
7
<PAGE>
7.1 Payment of Operating Costs
--------------------------
The Tenant shall pay to the Landlord as Additional Rent the Tenant's
Proportionate Share of the Operating Costs.
ARTICLE VIII - UTILITIES
- ------------------------
8.1 Tenant's Utilities
------------------
The Landlord shall be responsible for heating the Premises and for the
supply of all utilities thereto and the Tenant shall pay all rates,
charges, costs and expenses as may be assessed or levied and at the rates
so assessed or levied by all suppliers of electricity, heating, air
conditioning or other utilities to the Premises.
ARTICLE IX - INSURANCE
- ----------------------
9.1 Tenant's Insurance
------------------
(a) The Tenant shall, during the whole of the Term and during such other time
as the Tenant occupies the Premises, take out and maintain the following
Insurance, at the Tenant's sole expense, in such form and with such
companies as the Landlord may reasonably approve:
(i) comprehensive general liability insurance applying to all operations of the
Tenant and against claims for bodily injury, including death, and property
damage or loss arising out of the use or occupation of the Premises, or the
Tenant's business on or about the Premises; such insurance shall include
the Landlord as an additional named insured and indemnify and protect both
the Tenant and the Landlord and shall contain a "cross liability" or
"severability of interests" clause so that the Landlord and the Tenant may
be insured in the same manner and to the same extent as if individual
policies had been issued to each, and shall be for the amount of not less
than two million ($2,000,000) dollars combined single limit or such other
amount as may be reasonably required by the Landlord from time to time;
such comprehensive general liability insurance shall, for the Tenant's
benefit only, include contractual liability insurance in a form and of a
nature broad enough to insure the obligations imposed upon the Tenant under
the terms of this Lease; and
(ii) "all risks" insurance upon its merchandise, stock-in-rade, furniture,
fixtures and improvements, including leasehold improvements, and upon all
other property in the Premises owned by the Tenant or for which the Tenant
is legally liable.
8
<PAGE>
(b) The policies of insurance referred to above shall contain the following:
(ii) provisions that the Landlord is protected notwithstanding any act,
neglect or misrepresentation of the Tenant which might otherwise result
in the avoidance of a claim under such policies and that such policies
shall not be affected or invalidated by any act, omission or negligence
of any third party which is not within the knowledge or control of the
insured(s);
(iii) provisions that such policies and the coverage evidenced thereby shall be
primary and non-contributing with respect to any policies carried by the
Landlord and that any coverage carried by the Landlord shall be excess
coverage;
(iv) all property insurance referred to above shall provide for waiver of the
Insurer's rights of subrogation as against the Landlord;
(v) provisions that such policies of insurance shall not be cancelled without
the insurer providing the Landlord with thirty (30) days written notice
stating when such cancellation shall be effective.
(c) evidence satisfactory to the Landlord of such policies of insurance shall
be provided to the Landlord upon request.
(d) The Tenant shall at the written request of the Landlord maintain such other
insurance in such amounts and in such sums as the Landlord may reasonably
determine from time to time the necessity of which arises during the Term
as a result of a change in equipment use or business activity on the part
of the Tenant not contemplated at the commencement of the Term.
9.2 Increase in Rates
-----------------
The Tenant shall not do, omit or permit to be done or omitted upon the
Premises anything which shall cause any rate of insurance upon the Premises
or any part thereof to be increased or cause insurance to be cancelled. If
any such rate of insurance shall be increased as aforesaid, the Tenant
shall pay to the Landlord the amount of the increase as Additional Rent.
If any use or occupancy by the Tenant or any act or omission as aforesaid
cause an insurance policy to be cancelled the Tenant shall forthwith remedy
or rectify such use, occupation, act or omission upon being requested to do
so by the Landlord, and if the Tenant fails to so remedy or rectify, the
Landlord may at its option terminate this Lease forthwith and the Tenant
shall immediately deliver up possession of the Premises to the Landlord.
ARTICLE X - USE AND OCCUPATION
- ------------------------------
10.1 Use
---
The Premises shall be used for the purposes set forth in Section 1.1(g) and
for no other purpose.
9
<PAGE>
10.2 Compliance with Laws
--------------------
The Tenant shall carry on and conduct its business from the Premises in
such manner as to comply with any and all statutes, by-laws, rules and
regulations of any Federal, Provincial, Municipal or other competent
authority for the time being in force, and shall not do anything upon the
Premises in contravention thereof.
10.3 Nuisance
--------
The Tenant shall not do or permit to be done or omit doing anything which
could damage the Premises, reasonable wear and tear excepted, or which
shall or might result in any nuisance in or about the Premises, whether to
the Landlord, any tenant of the Premises, or any other party, the whole as
determined by the Landlord, acting reasonably. In any of the foregoing
events, the Tenant shall forthwith remedy the same and if such thing or
condition shall not be so remedied, the Landlord may, after such notice if
any as the Landlord may reasonably deem appropriate in the circumstances,
correct such situation at the expense of the Tenant and the Tenant shall
pay such expense to the Landlord as Additional Rent.
ARTICLE XI - CLEANING, REPAIR
- -----------------------------
11.1 Cleaning
--------
(a) The Tenant shall keep the Premises and, without limitation, the inside of
all glass windows of the Premises and all interior surfaces of the
Premises, in a neat, clean and sanitary condition and shall not allow any
refuse, garbage or other loose or objectionable wastage material to
accumulate in or about the Premises, but rather shall dispose of the same.
(b) The Tenant shall pay for its own janitorial service, cleaning or debris,
removal of garbage and such other costs as may be incurred in cleaning in
accordance with this Article.
(c) In the event the Tenant fails to clean in accordance with this Article,
upon reasonable notice to do so from the Landlord, the Landlord may clean
the same and the Tenant shall pay to the Landlord as Additional Rent the
cost thereof.
11.2 Tenant's Repairs
----------------
(a) The Tenant shall keep and maintain the Premises and any improvements now or
hereafter erected or installed therein in good order and repair; reasonable
wear and tear and repairs for which the Landlord is responsible excepted.
(b) The Tenant, its employees or agents, shall not mark, paint, drill or in any
way deface any walls, ceilings, partitions, floors, wood, stone or ironwork
elsewhere in the Building without the written approval of the Landlord.
10
<PAGE>
11.3 View Repairs
------------
The Landlord may, on not less than 24 hours written notice, enter the
Premises at any reasonable time between 9:00 a.m. and 5:00 o'clock p.m.
Monday through Friday and at any time during any emergency to view the
state of repair and the Tenant shall repair according to notice in writing
from the Landlord to do so, subject to the exceptions contained in this
Article.
11.4 Landlord may Repair
-------------------
If the Tenant fails to repair as required herein and according to notice
from the Landlord within fourteen (14) days of receipt thereof, or such
longer period as may be reasonable in the circumstances, the Landlord may
make such repairs without liability to the Tenant for any loss or damage
that may occur to the Tenant's merchandise, fixtures or other property or
to the Tenant's business by any reason thereof, and upon completion thereof
the Tenant shall pay as Additional Rent the Landlord's cost for making such
repairs and provided the Landlord does not disturb the Tenant's use and
occupation of the Premises as contemplated hereby.
11.5 Taking of Possession
--------------------
The taking of possession of the Premises by the Tenant shall be conclusive
evidence against the Tenant, that at the time of taking possession, the
Premises were in good and fully satisfactory order and condition save and
except as may be specified in writing by the Tenant to the Landlord at the
time of taking possession. Notwithstanding the foregoing, the taking of
possession of the Premises by the Tenant for the purpose of undertaking the
Tenant's improvements in conjunction with or separately from the Landlord's
undertaking of the Landlord's Work as contemplated under Section 12.4 and
Schedule "B" shall not be deemed or construed as the Tenant's acceptance
that the Premises were in good and fully satisfactory order and condition
at that time.
ARTICLE XII - ALTERATIONS, FIXTURES
- -----------------------------------
12.1 Tenant's Alterations
--------------------
(a) The Tenant shall not make or cause to be made any alterations, additions or
improvements or erect or cause to be erected any partitions or install or
cause to be installed any trade fixtures, exterior signs, floor covering,
interior or exterior lighting, plumbing fixtures, apparatus for air-
conditioning, cooling, heating, illuminating, refrigerating, or ventilating
the Premises, shades, awnings, exterior decorations or make any changes to
the Premises without first obtaining the Landlord's written approval
thereto, which approval shall not be unreasonably withheld.
(b) When seeking the approval of the Landlord as required by this article, the
Tenant shall present to the Landlord plans and specifications for the
proposed work.
(c) The Tenant shall be responsible for the cost of clearing any builder's lien
that may be filed with respect to improvements undertaken by the Tenant.
(d) The Landlord shall respond to any request for approval by the Tenant
hereunder within 10 days of receipt of being provided with plans and
specifications.
11
<PAGE>
12.2 Removal of Fixtures
-------------------
(a) So long as the Tenant is not in default hereunder at the expiration of the
Term, the Tenant shall then have the right to remove its trade fixtures
from the Premises but shall make good any damage caused to the Premises
resulting from the installation or removal thereof.
(b) If the Tenant fails to remove its trade fixtures and restore the Premises
as aforesaid, all such trade fixtures shall become the property of the
Landlord except to the extent that the Landlord continues to require
removal thereof.
(c) Should the Tenant abandon the Premises or should this Lease be terminated
before the proper expiration of the Term due to a default on the part of
the Tenant then, ten days immediately following such default by the Tenant,
all alterations, additions, and improvements made to the Premises but
specifically excluding all trade fixtures and furnishings of the Tenant
(whether or not attached in any manner to the Premises) shall, except to
the extent the Landlord requires the removal thereof, become and be deeded
to be the property of the Landlord, without indemnity to the Tenant and as
additional liquidated damages in respect of such default but without
prejudice to any other right or remedy of the Landlord.
(d) Notwithstanding that any alterations, additions, improvements or fixtures
are or may become the property of the Landlord, the Tenant shall forthwith
remove all or part of the same and shall make good any damage caused to the
Premises resulting from the installation or removal thereof, all at the
Tenant's expense, should the Landlord so require by notice to the Tenant.
(e) If the Tenant, after receipt of a notice from the Landlord, fails to
promptly remove any furnishings, alterations, additions, improvements and
fixtures in accordance with such notice, then the Landlord may enter into
the Premises and remove therefrom all or part of such furnishings,
alterations, additions, improvements and fixtures without any liability and
at the expense of the Tenant, which expense shall forthwith be paid by the
Tenant to the Landlord.
12.3 Landlord's Alterations
----------------------
Provided that the Landlord does not disturb the Tenants right to quiet
enjoyment, the Landlord may make any changes or additions to the apparatus,
appliances, conduits, ducts, equipment, pipes or structures of any kind in
the Premises where necessary to service premises on adjoining floors of the
Building or other parts of the Premises.
12.4 Landlord's Work
---------------
The Landlord will, upon approval of the lease by both Landlord and Tenant,
provide the premises to the Tenant in a condition sufficient for the
Tenant's contractor to commence construction of their Tenant improvements.
The Landlord shall have completed, at its cost, the Base Building upgrades
as referenced in Schedule "B" by the commencement date, unless as otherwise
may be agreed in writing.
12
<PAGE>
ARTICLE XIII - SUBSTANTIAL DAMAGE AND DESTRUCTION
- -------------------------------------------------
13.1 Abatement
---------
Subject to the provisions of Section 13.2, if during the Term the Premises
shall be damaged or destroyed by any cause whatsoever such that the
Premises are rendered unfit for occupancy by the Tenant, the Rent hereby
reserved shall abate but only to the extent that the Premises are so
rendered unfit for occupancy and only during the period while the Premises
remain in such unfit condition.
13.2 Substantial Damage or Destruction
---------------------------------
In the event of Substantial Damage or Destruction of the Premises, the
Landlord may within sixty (60) days after such damage or destruction and on
giving thirty (30) days written notice to the Tenant declare this Lease
terminated forthwith, and in such event the Term shall be deemed to have
expired and the Tenant shall deliver up possession of the Premises
accordingly. Rent shall be apportioned and shall be payable, subject to any
right of abatement under Section 13.1, up to the date of termination stated
in such notice and the Tenant shall be entitled to be repaid by the
Landlord any rent paid in advance and unearned or an appropriate portion
thereof. "Substantial Damage or Destruction" means such damage as, in the
opinion of the Landlord's architect acting reasonably, requires
substantial alteration or reconstruction of the Premises or such damage to
the Premises as cannot be repaired within a period of one hundred and
eighty (180) days from the time of such damage to the state wherein the
Tenant could use substantially all of the Premises for its business.
ARTICLE XIV - ASSIGNMENT, SUBLETTING, SALE
- ------------------------------------------
14.1 Assignment and Subletting
-------------------------
(a) The Tenant shall not assign this Lease in whole or in part, nor sublet all
or any part of the Premises, nor grant any license or part with possession
of the Premises or transfer any other right or interest under this Lease,
without the prior written consent of the Landlord in each instance, which
consent shall not be unreasonably withheld, so long as the proposed
assignment or sublease complies with the provisions of this Article.
Notwithstanding the foregoing, no consent of the Landlord shall be required
in the event that the Tenant assigns or sublets the whole or any portion of
the demised premises to a corporate entity controlled by, or affiliated to
the Tenant or to a corporation which controls the Tenant.
(b) Notwithstanding any assignment or sublease, the Tenant shall remain fully
liable on this Lease and shall not be released from performing any of the
terms, covenants and conditions of this Lease.
(c) If the Premises or any part thereof are sublet or occupied by anyone other
than the Tenant, then if and when the Tenant is in default in the payment
of any of the Rent reserved hereunder, the Landlord may collect rent
payable to the Tenant by such
13
<PAGE>
person(s) directly and apply it to the outstanding unpaid Rent reserved
hereby.
(d) No assignment shall be made or proposed other than to persons, firms,
partnerships, or bodies corporate who undertake in favour of the Landlord
to perform and observe the obligations of the Tenant hereunder by entering
into an assumption agreement directly with the Landlord.
(e) The prohibition against assigning or subletting without the consent
required by this Article shall be construed to include a prohibition
against any assignment or sublease by operation of law.
(f) The consent by the Landlord to any assignment or sublease shall not
constitute a waiver of the necessity of such consent to any subsequent
assignment or sublease.
14.2 Subordination
-------------
This Lease and the Tenant's rights hereunder shall be automatically
subordinate to any mortgage or mortgages, or encumbrances resulting from
any other method of financing or refinancing, now or hereafter in force
against the Premises or any part thereof, as now or hereafter constituted,
and to all advances made or hereafter to be made upon the security hereof
provided that any such mortgagee agrees with the Tenant in writing that so
long as the Tenant is not in default hereunder, it will not disturb the
Tenants use and occupancy of the Premises under this Lease or any renewal
hereof. Upon the request of the Landlord, the Tenant shall execute such
documentation as may be required by the Landlord in order to confirm and
evidence such subordination; provided however, it being understood that any
such subordination by the Tenant shall not impair the Tenant's right to
continue in possession of the Premises so demised and in confirmation of
the foregoing, the Landlord upon receipt of a written request from the
Tenant agrees to enter into a non-disturbance agreement with the Tenant and
the mortgagee of the Landlord. Further, the Landlord agrees that the
Tenant at its own expense may register a Notice of Lease against title to
the Premises.
14.3 Sale by Landlord
----------------
In the event of a sale by the Landlord of any portion or all its interest
in the Premises, the Landlord shall thereafter be entirely relieved of the
performance of all terms, covenants and obligations thereafter to be
performed by the Landlord under this Lease, to the extent of the interest
or portion so sold or transferred and it shall be deemed and construed
without further agreement between the parties that the purchaser or
transferee, as the case may be, has assumed and agreed to carry out any and
all covenants of the Landlord hereunder.
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ARTICLE XV - INDEMNITY, LIENS
- -----------------------------
15.1 Tenant's Indemnity
------------------
The Tenant shall at all times during the Term, indemnify and save harmless
the Landlord of and from all loss and damage and all actions, claims,
costs, demands, expenses, fines, liabilities and suits of any nature
whatsoever for which the Landlord shall or may become liable, incur or
suffer by reason of a breach, violation or non-performance by the Tenant of
any covenant, term or provision hereof or by reason of any builders' or
other liens for any work done or materials provided or services rendered
for alterations, improvements or repairs to the Premises, made by or on
behalf of the Tenant, or by reason of any injury occasioned to or suffered
by any person or damage to any property, by reason of any wrongful act or
omission, default or negligence on the part of the Tenant or any of its
agents, concessionaires, contractors, customers, employees, invitees or
licenses in or about the Premises not caused by the negligence or wilful
neglect of the Landlord or any of its employees or agents or invitees.
15.2 Personal Injury and Property Damage
-----------------------------------
The Landlord shall not be liable or responsible for:
(a) any personal injury or consequential damage of any nature whatsoever,
however caused, that may be suffered or sustained by the Tenant or by any
other person who may be upon the Premises; or
(b) any loss or damage of any nature whatsoever, howsoever caused, to the
Premises, any property belonging to the Tenant or to any person while such
property is in or about the Premises.
Provided the same is not caused by the negligence or wilful neglect of the
Landlord or any of its employees or agents or invitees.
15.3 Liens
-----
The Tenant shall, immediately upon demand by the Landlord, remove or cause
to be removed, and thereafter institute and diligently prosecute any action
pertinent thereto, any builder's or other lien or claim of lien referenced
in Section 15.1 hereof noted or filed against or otherwise constituting an
encumbrance on the Landlord's title to the Lands. Without limiting the
foregoing obligations of the Tenant, the Landlord may cause the same to be
removed, in which case the Tenant shall pay to the Landlord as Additional
Rent the cost thereof, including the Landlord's complete legal costs.
15.4 Landlord's Indemnity
--------------------
The Landlord shall at all times during the Term indemnify and save harmless
the Tenant and its directors, officers, employees, agents and invitees of
and, from all loss and damage and all actions, claims, costs, demands,
expenses, fines, liabilities and suits of any nature whatsoever for which
any one or more of the Tenant and its directors, officers, employees,
agents and invitees
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shall or may become liable, incur or suffer by reason of:
(a) a breach, violation or non-performance of any of the Landlord's covenants
hereunder; or
(b) any injury occasioned to or suffered by any person or damage to any
property, by reason of any wrongful act or omission, defaut or negligence
by or on the part of the Landlordor any of its agents, concessionaires,
contractors, customers, employees, invitees or licenses in or about the
Lands and/or Building;
not caused by Tenant or any of its directors, officers, emplyoees, agents
or invitees.
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ARTICLE XVI - DEFAULT, REMEDIES, TERMINATION
- --------------------------------------------
16.1 Default
-------
If and whenever:
(a) the Tenant shall be in default in the payment of any money, whether hereby
expressly reserved or deemed as rent, or any part thereof, and such default
shall continue for ten (10) days following any specific due date on which
the Tenant is to make such payment or, in the absence of such specific due
date, for the ten (10) days following written notice by the Landlord
requiring the Tenant to pay the same; or
(b) the Tenant's leasehold interest hereunder, or any goods, chattels or
equipment of the Tenant located in the Premises shall be validly taken or
seized after due process in execution or attachment, or if any writ of
execution shall issue against the Tenant and not be discharged within
twenty one (21) days of its issuance, or the Tenant shall become insolvent
or commit an act of bankruptcy or become bankrupt or take the benefit of
any Act that may be in force for bankrupt or insolvent debtors or become
involved in voluntary or involuntary winding up, dissolution or liquidation
proceedings, or if a receiver or receiver and manager shall be appointed
for the affairs, business, property or revenues of the Tenant; or
(c) The Tenant shall fail to commence, diligently pursue and complete the
Tenant's work to be performed pursuant to any agreement to lease pertaining
to the Premises or other agreement signed by the parties or fail to open
for business when required by the provisions of the Lease, or vacate or
abandon the Premises or fail or cease to operate pursuant to the provisions
of this Lease or otherwise cease to conduct business from the Premises, or
use or permit or suffer the use of the Premises for any purposes other than
as allowed pursuant to this Lease, or fail to remedy or rectify any act or
omission hereunder, or move or commence, attempt or threaten to move its
goods, chattels and equipment out of the Premises other than in the routine
and ordinary course of business; or
(d) the Tenant commences a wholesale removal of trade fixtures, goods or
chattels of the Tenant sufficient to negate the Landlord's remedy of
distraint for unpaid rent; or
(e) the Premises become and remain vacant for a period of five (5) consecutive
days other than a holiday vacation office closure of which the Landlord has
been given prior notice or the Premises are used by any persons other than
such as are entitled to use them hereunder; or
(f) The Tenant assigns, transfers, encumbers, sublets or permits the occupation
or use or the parting with or sharing possession of all or any part of the
Premises by anyone
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except in a manner permitted by this Lease; or
(g) re-entry is permitted under any other term of this Lease; or
(h) the Tenant fails to observe, perform or keep each and every of the
covenants, agreements, stipulations, obligations, conditions and other
provisions of this Lease to be observed, performed and kept by the Tenant
and persists in such default, in the case of monetary payments, beyond the
ten (10) day period stipulated in paragraph (a) aforesaid or, in the case
of any other default, after ten (10) days written notice from the Landlord
requiring that the Tenant remedy, correct or comply or, in the case of any
such default which would reasonably require more than ten (10) days to
rectify, unless the Tenant shall commence rectification within the said ten
(10) day notice period and thereafter promptly and diligently and
continuously proceed with the rectification of any such default;
then, and in each of such cases, and at the option of the Landlord and in
addition to any other rights or remedies the Landlord may have pursuant to
this Lease or at law, the Landlord may immediately re-enter upon the
Premises and may expel all occupants thereof and remove all property from
the Premises and such property may be removed and sold or disposed of by
the Landlord in such manner as it deems advisable, including by private
sale, or may be stored in a public warehouse or elsewhere at the cost and
for the account of the Tenant, all without service of notice or resort to
legal process and without the Landlord being considered guilty of trespass
or becoming liable for any loss or damage which may be occasioned thereby.
If the Landlord elects to re-enter the Premises as herein provided, or if
it takes possession pursuant to the legal proceedings or pursuant to any
notice provided for by law, it may either terminate this Lease or it may
from time to time without terminating this Lease, make such alterations and
repairs as are necessary in order to relet the Premises, or any part
thereof, for such term or terms (which may be for a term extending beyond
the Term) and at such rent and upon such other terms, covenants and
conditions as the Landlord in its sole discretion considers advisable.
16.2 Landlord may Perform
--------------------
If the Tenant shall fail to observe, perform or keep any of the provisions
of this Lease to be observed, performed and kept by the Tenant, the
Landlord may, but shall not be obliged to, at its discretion and without
prejudice to any other right, claim, or action it may have, rectify the
default of the Tenant, whether or not performance by the Landlord on behalf
of the Tenant is otherwise expressly referred to in the applicable Section
of this Lease. For such purpose the Landlord may make any payment or do or
cause to be done, such things as may be required including, without
limiting the generality of the foregoing, entry upon the Premises. Any
such performance by or at the behest of the Landlord shall be at the
expense of the Tenant and the Tenant shall pay to the Landlord as
Additional Rent the cost thereof.
16.3 Distress
--------
If and whenever the Tenant shall be in default in the payment of any money,
whether hereby expressly reserved or deemed as rent, or any part thereof,
the Landlord may, without notice or any form of legal process whatever,
enter upon the Premises and seize, remove and sell by
18
<PAGE>
judicial or formal process or by private sale the Tenant's goods, chattels
and equipment at any place to which the Tenant or any other person may have
removed them, in the same manner as if they had remained and been
distrained upon the Premises, all notwithstanding any rule of law or equity
to the contrary, and the Tenant hereby waives and renounces the benefit of
any present or future statute or law limiting the Landlord's right of
distress or sale.
16.4 Costs and Interest
------------------
All costs, expenses and expenditures of the Landlord, incurred upon any
default by the Tenant hereunder, including, without limitation, the legal
costs incurred by the Landlord on an indemnification basis as between
solicitor and his own client shall, forthwith on demand, be paid by the
Tenant to the Landlord as Additional Rent.
All rent and other sums due to the Landlord pursuant to the terms of this
Lease shall be paid by the Tenant promptly when due, and if not so paid,
shall bear interest from their respective due dates at the rate of twelve
(12) percent per annum, both before and after default, demand and
judgement.
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16.5 Vacate Upon Termination, Survival
---------------------------------
At the termination of this Lease, whether by affluxion of time or
otherwise, the Tenant shall vacate and deliver up possession to the Tenant,
subject to the exceptions from the Tenant's obligation to repair and
subject to the Tenant's rights and obligations in respect of removal and
the Tenant shall thereupon surrender all keys to the Premises to the
Landlord at the place then fixed for payment of rent and shall inform the
Landlord of all combinations on locks, safes and vaults, if any, in the
Premises. The indemnity agreements contained in this Lease shall survive
the termination of this Lease.
16.6 Additional Rights on Re-Entry
-----------------------------
If the Landlord shall re-enter the Premises or terminate this Lease, then:
(a) notwithstanding any such re-entry, termination, or the Term thereby
becoming forfeited and void, the provisions of this Lease relating to the
consequence of termination shall survive;
(b) the Landlord may use such force as it may deem necessary for the purpose of
gaining admittance to and retaking possession of the Premises and the
Tenant hereby releases the Landlord from all actions, proceedings, claims
and demands whatsoever for or in respect of any such forcible entry or any
loss or damage in connection therewith or consequential thereupon;
(c) the Landlord may relet the Premises or any part thereof for a term or terms
which may be less or greater than the balance of the Term and may grant
reasonable concessions in connection therewith; and
(d) the Tenant shall pay to the Landlord on demand:
(ii) rent and all other amounts payable hereunder up to the time of re-entry or
to termination, whichever shall be the later; and
(iii) such reasonable expenses as the Landlord may incur or has incurred in
connection with the re-entering, terminating, reletting, collecting sums
due or payable by the Tenant, realizing upon assets seized, including
without limitation brokerage, legal fees and disbursements on an
indemnification basis as between a solicitor and his own client, and the
expenses of keeping the Premises in good order, repairing the same and
preparing them for reletting; and
(iv) as liquidated damages for the loss of rent and other income of the Landlord
expected to be derived from the Lease during the period which would have
constituted the unexpired portion of the Term had it not been terminated,
at the option of the Landlord, either:
(A) an amount determined by reducing to present worth at an assumed interest
rate of twelve (12) percent per annum all Minimum Rent and Additional rent
to become payable during the period which would have
20
<PAGE>
constituted the unexpired portion of the Term, such determination to be
made by the Landlord, who may make reasonable estimates of when any such
other amounts would have become payable and may make such other assumptions
or fact as may be reasonable in the circumstances; or
21
<PAGE>
(B) an amount equal to accelerated
(i) Minimum Rent, plus
(ii) Additional Rent,
For a period of six (6) months; or
(C) such other amount as may be claimed by the Landlord according to law.
16.7 No Waiver
---------
No provision of this Lease shall be deemed to have been waived by the
Landlord unless a written waiver from the Landlord has first been obtained
and, without limiting the generality of the foregoing, no acceptance of
rent subsequent to any default and no condoning, excusing or overlooking by
the Landlord on previous occasions of any default or any earlier written
waiver shall be taken to operate as a waiver by the Landlord or in any way
to defeat or affect the rights and remedies of the Landlord.
16.8 Remedies Cumulative
-------------------
No reference to or exercise of any specific right or remedy by the Landlord
shall prejudice or preclude the Landlord from any other remedy, whether
allowed at law or in equity or expressly provided for herein. No such
remedy shall be exclusive or dependent upon any other such remedy, but the
Landlord may, from time to time, exercise any one or more of such remedies
independently or in combination. Without limiting the generality of the
foregoing, the Landlord shall be entitled to commence and maintain an
action against the Tenant to collect any rent not paid when due without
exercising the option to terminate this Lease.
16.9 Holding Over
------------
If the Tenant continues to occupy the Premises with the written consent of
the Landlord after the expiration or other termination of the Term, then,
without any further written agreement, the Tenant shall be a Tenant from
month to month at the aggregate of:
(a) a minimum monthly rent equal to one hundred and twenty (120)
percent of the monthly Minimum Rent prevailing immediately prior to
expiration or termination;
(b) Additional Rent as herein provided;
and subject always to all of the other provisions in this Lease insofar as
the same are applicable to a month to month tenancy and a tenancy from year
to year shall not be created by implication of law; provided that if the
Tenant continues to occupy the Premises without the written consent of the
Landlord at the expiration or other termination of the Term, then the
Tenant shall be a tenant at will and shall pay to the Landlord, as
liquidated damages and not as rent, an amount equal to the aggregate set
forth above during the period of such occupancy, accruing from day to day
and adjusted pro rata accordingly and subject always to all of the other
provisions of this Lease insofar as they are applicable to a tenancy at
sufferance and a tenancy from month to month or from year to year shall not
be created by implication of law; provided that nothing herein contained
shall preclude the Landlord from taking action for recovery of possession
of the Premises.
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<PAGE>
ARTICLE XVII - RIGHT OF FIRST REFUSAL
- -------------------------------------
The Landlord agrees to give the Tenant a Right of First Refusal to lease space
adjacent to the demised premises. If at any time during the term hereof the
Landlord receives either:
(a) an acceptable bonafide offer to lease the adjacent space in the Building;
or
(b) a conditional acceptance of a bonafide offer to lease the adjacent space in
the Building.
The Tenant shall have a Right of First Refusal to lease any available space in
the Building and will give to the Landlord written notice within the said period
of five (5) working days that the Right of First Refusal has been exercised.
ARTICLE XVIII - GENERAL PROVISIONS
- ----------------------------------
18.1 Time
----
Time is of the essence hereof.
18.2 Notices
-------
Any Notice required to be given hereunder by any party shall be deemed to
have been well and sufficiently given if:
(a) personally delivered to the party to whom it is intended or if such party
is a corporation to an officer of that corporation; or
(b) if mailed by prepaid registered mail, to the address of the party to whom
it is intended hereinafter set forth:
(ii) if to the Tenant:
(A) to the address of Premises, or
(B) if the Tenant is a corporation, to its registered office.
(ii) if to the Landlord, at the address set forth in Section 1.1(a)(i) or
to such other address as a party may from time to time direct in
writing.
Any Notice delivered as aforesaid shall be deemed to have been received on
the date of delivery and any Notice mailed shall be deemed to have been
received seventy two (72) hours after the date it is postmarked. If normal
mail service is interrupted after the Notice has been sent the Notice will
not be deemed to be received until actually received. In the event normal
mail service is impaired at the time of sending the Notice, then personal
delivery only shall be effective.
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<PAGE>
18.3 Extended Meanings
-----------------
"Hereof", "herein", "hereunder" and similar expressions used anywhere in
this Lease relate to the whole of this Lease and not to any particular
section or subsection, unless otherwise expressly provided. The use of the
neuter singular pronoun to refer to the Landlord or the Tenant is deemed a
proper reference even though the Landlord or the Tenant is an individual,
partnership, corporation or group of two or more individuals, partnerships
or corporations. The necessary grammatical changes required to make the
provisions of this Lease apply in the plural sense where there is more than
one Landlord or Tenant and to either corporations, associations,
partnerships or individuals, males or females, shall in all instances be
assumed as though in each case fully expressed.
18.4 No Transfer on Bankruptcy
-------------------------
Neither this Lease or any interest of the Tenant herein or any estate
hereby created will pass or enure to the benefit of any trustee in
bankruptcy or any receiver or any assignee for the benefit or creditors of
the Tenant or otherwise by operation of law.
18.5 Successors Bound
----------------
All rights and liabilities herein given to, or imposed upon, the respective
parties hereto shall extend to and bind the several respective heirs,
executors, administrators, successors and assigns of the said parties and
if there is more than one party described in Section 1.1(b), they shall all
be bound jointly and severally by the terms, covenants and agreements
herein on the part of the Tenant. No rights, however shall enure to the
benefit of any assignee of the Tenant unless the assignment to such
assignee has been first approved by the Landlord. All covenants,
agreements, stipulations, obligations and other provisions of this Lease to
be observed, performed and kept by the Tenant shall run with the land and
therefore be enforceable by all successors of the Landlord.
18.6 Headings
--------
The headings in this Lease have been inserted for reference and as a matter
of convenience only and in no way define, limit or enlarge the scope of
meaning of this Lease or any provisions hereof.
18.7 Limitation on Terms and Conditions
----------------------------------
The terms and conditions herein contained together with those contained in
an Offer to Lease signed by the parties on or before May 25, 1999
constitute the entire agreement between the parties and shall supersede all
previous oral or written communications. In the event there is any
conflict between any term or condition in this Lease and any term or
condition in the aforesaid Offer to Lease, the latter shall prevail.
18.8 Tenant's Acceptance
-------------------
The Tenant hereby accepts this Lease of the Premises, to be held by the
Tenant, subject to the conditions, restrictions and covenants set forth
herein.
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<PAGE>
ARTICLE XIX - LANDLORD'S COVENANTS
19.1 Quiet Enjoyment
---------------
The Landlord covenants with the Tenant for quiet enjoyment, for so long as
the Tenant is not in default hereunder, and except for permitted
interventions described in Sections 11.1(c), 11.3 and 11.4 herein.
19.2 Taxes
-----
The Landlord covenants with the Tenant to pay, subject to the provisions of
this Lease, all Property Taxes that may be charged, levied, rated or
assessed against the Lands and the Building. If, in the sole opinion and
discretion of the Landlord, any Property Taxes are not fair and equitable,
the Landlord may take all steps necessary to contest or appeal the validity
thereof, but the Tenant shall not postpone or omit payment of the Tenant's
Proportionate Share of Property Taxes because of any such appeal or on-
going contest or otherwise provided that the Landlord shall notify and
account to the Tenant for any portion to which the Tenant may be entitled
of any savings, refund or reduction which may be forthcoming as a result of
such appeal or contest.
19.3 Repair
------
The Landlord covenants with the Tenant to keep the HVAC Facilities and the
common area and facilities from time to time forming part of the Lands and
the Buildings in good order and repair. The Landlord further agrees to
make Structural Repairs to the Building and repairs necessitated by damage
from hazards covered by insurance which the Landlord has maintained or is
obligated to maintain unless such repairs are necessitated by the acts or
omissions of the Tenant, its agents, employees, invitees or licensees.
19.4 Landlord's Insurance
--------------------
The Landlord shall take out and maintain during the Term:
(a) all risk commercial insurance, including earthquake and flood, to the full
replacement value of the Building;
(b) loss of rental income insurance not to exceed one year's net rental
revenue;
(c) general liability insurance, including general liability insurance in
respect of common areas forming part of the Lands and Building in an amount
of not less than $2,000,000.00 in respect of any injury to or death of one
or more persons and loss of or damage to property of others; and
(d) boiler and machinery insurance for direct damage and associated loss of
rental income.
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<PAGE>
The aforesaid insurance shall exclude the exercise of any claim by the
Landlord's insurer against the Tenant by subrogation and shall provide that
such insurance may not be terminated, cancelled or materially altered
unless thirty (30) days' written notice of such termination, cancellation
or material alteration is given by the insurers to the Tenant. The
Landlord shall, upon the request of the Tenant, deliver to the Tenant
certificates of such insurance, or the original or certified copy of such
insurance policies.
19.5 Access
------
The Landlord agrees that the Tenant and its employees shall have access to
the Premises twenty four (24) hours a day, seven (7) days a week.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Lease as of the day and
year first above written.
THE COMMON SEAL OF (the Landlord)
NO. 150 CATHEDRAL VENTURES LTD.
was hereunto affixed in the presence of:
/s/
- ----------------------------------------
AUTHORIZED SIGNATORY C/S
/s/
- ----------------------------------------
AUTHORIZED SIGNATORY
THE COMMON SEAL OF (the Tenant)
ONVIA.com CHANNELS, INC.
was hereunto affixed in the presence of:
/s/
- ----------------------------------------
AUTHORIZED SIGNATORY C/S
/s/
- ----------------------------------------
AUTHORIZED SIGNATORY
27
<PAGE>
SCHEDULE "A"
------------
Layout of the 5,271 square feet of rentable area on the third floor of the
Building.
(Map or Plan).
Note: Not shown here is two (2) parking spaces in the Building (the "Parking
Space") which are reserved for the exclusive use of the Tenant during the Term
and any Renewal Term of the Lease.
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<PAGE>
SCHEDULE "B"
------------
The Landlord shall provide the premises finished, to the extent as set out below
as per the Tenant's space plan including the following and will carry out such
work with all due diligence. It is understood that some of the Landlord's Work
can only be undertaken contemporaneously with or subsequent to work done by the
Tenant's and that certain work, including correction of deficiencies may be
undertaken or completed subsequent to the commencement date of the lease.
LANDLORD'S WORK:
1. Electrical: Provide sufficient power to the building for the needs of the
Tenant.
2. Paint: Provide entire interior perimeter walls to be dry-walled and
sanded ready for painting or to a painted finish.
3. Flooring: Floor smooth and ready for Tenant's floor finish.
4. HVAC: Install HVAC unit of a size and capacity sufficient for the
Tenant's intended use by reputable supplier complete with industry standard
guarantee and maintenance service contract. The Tenant is responsible for
distribution of the HVAC. Specifications and final design to be provided by
the Landlord's engineer .
TENANT'S WORK:
The Landlord will complete the premises to a basic "turnkey" position to a
maximum leasehold improvement allowance of $25.00 per square foot of the
rentable area as per the Tenant's space plan including the following: All
additional leasehold improvements will be the responsibility of the Tenant and
must be approved in writing by the Landlord's consultants prior to the start of
construction.
1. Electrical: Electrical outlets, light switches and dedicated
circuits as required in office area as per space plan.
2. Lighting: As required as per space plan.
3. Paint: All walls and interior doors to be painted to Tenant's
choice of colour.
4. Flooring: Install new carpet or floor covering to Tenant's choice
of colour.
5. Partitions: Partition walls as per space plan.
6. HVAC: Distribution of HVAC.
7. Venetian Blinds: Building standard blinds.
29
<PAGE>
8. The Tenant will deliver a layout to the Landlord to construct the Tenant's
work as above within seven (7) days of acceptance of this Offer to Lease.
The Landlord will be responsible for any permits required for the
alterations for the demised premises.
9. The Tenant will approve the plan and all tenders for the Tenant's Work in
writing, prior to commencement of construction.
30
<PAGE>
SCHEDULE "C"
------------
Definitions
- -----------
In this Lease, the following words, phrases and expressions are used with the
meanings defined as follows:
1. Additional Rent means any sum or sums payable by the Tenant to the Landlord
pursuant to any provision of the Lease, all of which are recoverable by the
Landlord as rent, other than Minimum Rent.
2. Building means the building located on the Lands containing an aggregate of
46,000 square feet (more or less) on four storeys and within which the
Premises are located and contains the number of square feet of floor area
set out in Section 1.1(d) (more or less).
3. Commencement Date means that date set out in Section 1.1(e)(ii).
4. Fair Market Rent means the amount (exclusive of Additional Rent) that a
willing tenant and a willing landlord would accept in bonafide
negotiations, without any additional inducements, for a lease of the
Premises for a three (3) year term. Fair Market Rent shall be agreed upon
or determined upon consideration of the most recent leases and market
renewal leases for comparable buildings and terms that are near the
Premises. Appropriate adjustments may be made for lease duration,
inducements and any other special term or condition of such other leases.
5. "HVAC Facilities" means the heating, ventilating and air conditioning
system installed by the Landlord on the third floor of the Building for the
sole and exclusive use of the Tenant in connection with its use and
occupation of the Premises.
6. Landlord means the party or parties described in Section 1.1(a) and the
heirs, executors, administrators, successors and assigns thereof.
7. Lands means the lands described in Section 1.1(h) upon which the Building
is located.
8. Lease Year means, in the case of the first Lease Year, the period beginning
on Commencement date and terminating twelve (12) months from the last day
of the calendar month in which the Commencement Date occurs and, in the
case of each subsequent Lease Year, means each twelve (12) month period
after the First Lease Year.
9. Minimum Rent means the rent set out in Section 1.1(f).
10. Notice includes requests, demands, designations, statements or other
writings in this Lease required or permitted to be given by the Landlord to
the Tenant or by the Tenant to the Landlord and all writs, originating
notices of motion, affidavits and any other ancillary documents in support
of all legal proceedings.
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<PAGE>
11. "Operating Costs" means all of the Landlord's outlays, costs, charges and
expenses, without duplication which are paid or incurred by the Landlord to
operate, supervise, repair and maintain the Lands and the Building,
including without limitation, the cost of supplying electricity, water and
other utilities not separately metered; cleaning and janitorial services;
snow and ice removal; striping and repairing parking areas; supervising,
policing and providing security; painting; planting and landscaping;
operating and maintaining garbage compaction equipment; the cost of repairs
and replacements to the Building; insurance premiums; the salaries and
remuneration (including contributions towards fringe benefits, unemployment
insurance and similar contributions and worker's compensation assessments)
of persons and staff employed by the Landlord to provide security,
management, maintenance, supervisory and operating services for the
Building. Notwithstanding the foregoing there shall be excluded from the
Operating Costs, without duplication:
iai costs properly chargeable to capital account including periodic
depreciation on the capital cost to the Landlord of the Building;
ibi costs incurred by the Landlord in selling, leasing, syndicating, financing,
mortgaging or hypothecating any interest of the Landlord in the Lands or
the Building; and payments of principal and interest under any mortgages on
the Building;
ici corporate, income, profits or excess profit taxes assessed upon the income
of the Landlord;
idi Structural repairs;
iei the costs to repair damage to the extent that insurance proceeds are
actually recovered by the Landlord in respect thereof;
ifi depreciation of the machinery, equipment and fixtures of the Landlord
located anywhere on the Lands or the Building;
igi replacements required in respect of the HVAC facilities; and
ihi costs resulting from damage caused by the negligence or wilful act of the
Landlord or any persons for whom it is responsible in law; and
iii costs described in the definition of Operating Costs in the preceding
paragraph which relate solely to the Premises and pursuant to the Lease are
payable by the Tenant.
1. Premises means the premises on the third floor of the Building demised by
the Landlord to the Tenant pursuant to this Lease and containing the square
footage (more or less) described in Section 1.1(D) hereof.
2. Proportionate Share, at any point in time, means a fraction the numerator
of which is the square footage of the Premises being leased at that point
in time as per Section 1.1(F) and the denominator of which is the square
footage of all of the rentable premises in the Building, including the
Premises.
3. Property taxes means all general, special, local improvement, school and
water taxes, levies,
32
<PAGE>
rates and charges from time to time imposed against the Premises, or any
part thereof, by municipal or other governmental authorities having
jurisdiction, together with the costs of contesting or negotiating the
same, but exclusive of income taxes, business place of business taxes,
estate, inheritance, succession, capital levy or transfer tax. (Should it
be found that due to changes in the method of levying or collection or any
tax, levy, rate or charge to be imposed upon the Premises, or any part
thereof, or should any new tax, levy, rate or charge be levied or imposed
in lieu of or in addition to those contemplated by the above definition,
the Landlord and the Tenant hereby agree to negotiate an amendment or new
provision to this Lease as is necessary to deal with such tax, levy, rate
or charge, in an equitable manner so as to obviate any injustice or
inequity which shall have arisen and should the Landlord and the Tenant
fail to agree on such amendment or new provision the same shall be settled
by arbitration in accordance with the Commercial Arbitration Act of British
Columbia, and amendments thereto, or any like statute in effect from time
to time).
4. Sales Tax means any sales tax, goods and services tax, business transfer
tax, value added tax or any similar tax imposed against the Landlord by the
Government of Canada, or any provincial or municipal government to the
extent that such tax is imposed against the Landlord or is required to be
paid or collected by the Landlord by reason of any payment by the Tenant to
the Landlord pursuant to any provision of this Lease.
5. Structural Repairs means only repairs to the foundations, the structural
subfloors, columns and beams and the structural portions of bearing walls
and roofs of the Premises and specifically excludes maintenance of every
kind.
6. Tenant means the party or parties described in Section 1.1(b) and the
heirs, executors, administrators, successors and permitted assigns thereof.
33
<PAGE>
Exhibit 10.10
ONVIA.COM, INC.
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Onvia.com, Inc. Amended
--------------------
and Restated 1999 Stock Option Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to Employees and Consultants of the Company and its Subsidiaries and
to promote the success of the Company's business. Options granted under the
Plan may be incentive stock options (as defined under Section 422 of the Code)
or non-statutory stock options, as determined by the Administrator at the time
of grant of an option and subject to the applicable provisions of Section 422 of
the Code, as amended, and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board of Directors or any of its
-------------
Committees appointed pursuant to Section 4 below.
(b) "Affiliate" means an entity other than a Subsidiary in which the
---------
Company owns an equity interest or which, together with the Company, is under
common control of a third person or entity.
(c) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under applicable U.S. state corporate laws,
U.S. federal and applicable state securities laws, the Code, any Stock Exchange
rules or regulations and the applicable laws of any other country or
jurisdiction where Options are granted under the Plan, as such laws, rules,
regulations and requirements shall be in place from time to time.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Code" means the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" means one or more committees or subcommittees
---------
appointed by the Board of Directors in accordance with Section 4(a) below.
(g) "Common Stock" means the Common Stock of the Company.
------------
(h) "Company" means Onvia.com, Inc., a Delaware corporation.
-------
(i) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent, Subsidiary or Affiliate to render services
and is compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "Continuous Status as an Employee or Consultant" means the absence
----------------------------------------------
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave, (ii) military leave, (iii) any
other leave of absence approved by the Administrator; provided, however, that
such leave is for a period of not more than ninety (90) days, unless re-
employment
<PAGE>
upon the expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to Company policy adopted from time to time
or (iv) in the case of transfers between locations of the Company or between the
Company, its Subsidiaries, its Affiliates, or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(k) "Director" means a member of the Board of Directors.
--------
(l) "Employee" means any person, including officers and Directors,
--------
employed by the Company or any Parent, Subsidiary or Affiliate of the Company,
with the status of employment determined based upon such minimum number of hours
or periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee by the
Company to a Director shall not be sufficient to constitute "employment" of such
director by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(n) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq"), its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq (but not on the
National Market thereof) or regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
--------
Street Journal or such other source as the Administrator deems reliable; or
- --------------
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(p) "Listed Security" means any security of the Company that is listed
---------------
or approved for listing on a national securities exchange or designated or
approved for designation as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
<PAGE>
(q) "Named Executive" means any individual who, on the last day of
---------------
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(r) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(u) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(v) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(w) "Plan" means this Onvia.com, Inc. Amended and Restated 1999 Stock
----
Option Plan.
(x) "Reporting Person" means an officer, Director, or greater than
----------------
ten percent (10%) shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(z) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
(aa) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(bb) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
(cc) "Ten Percent Holder" means a person who owns stock requesting
------------------
more than 10% of the voting power of all classes of stock of the Company or any
Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 18,000,000 shares of Common Stock (on a post-split basis),
plus an automatic annual increase on the first day of each of the Company's
fiscal years beginning in 2001 and ending in 2009 equal to the lesser of: (i)
3,200,000 Shares (on a post-split basis); (ii) four percent (4%) of the Shares
outstanding on the last day of the immediately preceding fiscal year; or (iii)
such lesser number of shares as is determined by the Board of Directors. The
shares may be authorized, but unissued, or reacquired Common Stock. If an
Option should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares that were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan. In addition, any shares of Common Stock which are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option or any withholding
<PAGE>
taxes due with respect to such exercise shall be treated as not issued and shall
continue to be available under the Plan. Shares repurchased by the Company
pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.
4. Administration of the Plan
--------------------------
(a) General. The Plan shall be administered by the Board or a
--------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more Directors to grant Options under the Plan.
(b) Administration with Respect to Reporting Persons. With respect to
-------------------------------------------------
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Options to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
(c) Committee Composition. If a Committee has been appointed pursuant
----------------------
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
(d) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any option granted hereunder;
<PAGE>
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(g) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and
Options granted under the Plan;
(x) to permit the early exercise of any Option in exchange for
restricted stock subject to a right of repurchase; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(e) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility
-----------
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees; provided however that Employees of Affiliates shall not be eligible
to receive Incentive Stock Options. An Employee or Consultant who has been
granted an Option may, if he or she is otherwise eligible, be granted additional
Options.
(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds One Hundred Thousand Dollars ($100,000), such excess
Options shall be treated as Nonstatutory Stock Options. For purposes of Section
5(b), Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of the Shares subject to an
Incentive Stock Option shall be determined as of the date of the grant of such
Option.
(c) At-Will Employment Relationship. The Plan shall not confer upon
-------------------------------
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in
<PAGE>
Section 19 of the Plan. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided
---------------------------------
in Section 12 below, the maximum number of Shares which may be subject to
Options granted to any one Employee under this Plan for any fiscal year of the
Company shall be 2,000,000 Shares.
9. Option Exercise Price and Consideration
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, is a Ten Percent Holder, the per Share exercise
price shall be no less than one hundred ten percent (110%) of the Fair Market
Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than one hundred percent (100%) of the Fair Market Value
per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a person who, at the time of the grant of
such Option, is a Ten Percent Holder, the per Share exercise price shall be no
less than one hundred ten percent (110%) of the Fair Market Value per Share on
the date of the grant.
(B) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to any other eligible person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant if required by the Applicable Laws and, if not so required,
shall be such price as is determined by the Administrator.
<PAGE>
(C) granted on or after the date, if any, on which the Common
Stock becomes a Listed Security to any eligible person, the per share Exercise
Price shall be such price as determined by the Administrator; provided, however,
that if such eligible person is, at the time of the grant of such Option, a
Named Executive of the Company, the per share Exercise Price shall be no less
than 100% of the Fair Market Value on the date of grant if such Option is
intended to qualify as performance-based compensation under Section 162(m) of
the Code.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) at the discretion of the Board of Directors, a promissory note,
(iv) other Shares that (x) in the case of Shares acquired upon exercise of an
Option, have been owned by the Optionee for more than six (6) months on the date
of surrender or such other period as may be required to avoid a charge to the
Company's earnings, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which such Option
shall be exercised, (v) authorization for the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (vi)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price and any applicable income or
employment taxes, (vii) delivery of an irrevocable subscription agreement for
the Shares that irrevocably obligates the option holder to take and pay for the
Shares not more than twelve months after the date of delivery of the
subscription agreement, (viii) any combination of the foregoing methods of
payment or (ix) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. Exercise of Option
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with
<PAGE>
respect to which the Option is exercised. Full payment may, as authorized by the
Board of Directors, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, not withstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
----------------------------------------------------
Sections 10(c) and 10(d), in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant with the Company, such Optionee
may, but only within three (3) months (or such other period of time not less
than thirty (30) days as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding three (3) months) after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. No termination shall be deemed to occur and this Section 10(b)
shall not apply if (i) the Optionee is a Consultant who becomes an Employee; or
(ii) the Optionee is an Employee who becomes a Consultant.
(c) Disability of Optionee.
----------------------
(i) Notwithstanding the provisions of Section 10(b) above, in
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to
<PAGE>
the extent that such Optionee fails to exercise an Option which is an Incentive
Stock Option (within the meaning of Section 422 of the Code) within three (3)
months of the date of such termination, the Option will not qualify for
Incentive Stock Option treatment under the Code. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within six months (6)
from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant, or within
thirty (30) days following the termination of the Optionee's Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death or, if
earlier, the date of termination of the Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Extension of Exercise Period. The Administrator shall have full
----------------------------
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 10(b), 10(c)
and 10(d) above or in the Option Agreement to such greater time as the Board
shall deem appropriate, provided, that in no event shall such Option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(g) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six (6)
months on the date of surrender and (ii) have a fair market value on the date of
surrender equal to or less
<PAGE>
than the statutory minimum tax withholding applicable to the ordinary income
recognized by the Optionee or (d) if permitted by the Administrator, by electing
to have the Company withhold from the Shares to be issued upon exercise of the
Option, if any, that number of Shares having a fair market value equal to the
statutory minimum amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
--------
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy
tax withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator; and
(d) if the Optionee is a Reporting Person, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization; Corporate Transactions
------------------------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, the number of Shares described in Sections 3(i) and 8 above, as
well as the price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination, recapitalization or reclassification
of the Common Stock, or any other
<PAGE>
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board of Directors, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Option will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Administrator. The Administrator may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Administrator and give each Optionee the right to exercise his
or her Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable.
(c) Acquisition, Merger or Change in Control
----------------------------------------
(i) In the event of a Change in Control, if and to the extent
such outstanding Option is not to be assumed by the successor corporation at the
consummation of the Change of Control, the vesting of such Option shall
automatically be accelerated so that twenty-five percent (25%) of the unvested
shares of Common Stock covered by such Option shall be fully vested upon the
consummation of the Change in Control.
(ii) The vesting of each outstanding Option held by an Optionee
who is an executive officer shall be accelerated completely so that one hundred
percent (100%) of the shares of common stock covered by such Option are fully
vested and exercisable in the event that within twelve (12) months of the
consummation of such Change of Control, such Optionee's employment by the
Company is either terminated by the Company other than for Cause (as defined
below) or terminated by the Optionee for Good Reason (as defined below). For
purposes of this Plan, "executive officer" shall mean: President, Chief
Financial Officer, Executive Officer, Chairman of the Board, Vice President
Marketing, Vice President Sales, Vice President Engineering, Director of
Customer Experience, Vice President of Business Development, Chief Financial
Officer and Vice President of Products and Services.
For purposes of this Section 11(c)(ii), "Cause" means fraud,
misappropriation or embezzlement on the part of the Optionee which results in
material loss, damage or injury to the Company, the Optionee's conviction of a
felony involving moral turpitude, or the Optionee's gross neglect of duties.
For purposes of this Section 11(c)(ii), "Good Reason" means a
material reduction in compensation or a relocation of the Optionee's principal
worksite to a location more than fifty (50) miles from the Optionee's pre-Change
of Control worksite or a material reduction in the Optionee's compensation,
responsibilities or authority as in effect before the Change of Control.
<PAGE>
(iii) The Administrator shall have the authority, in the
Administrator's sole discretion, to provide for the automatic acceleration of
any outstanding Option upon the occurrence of a Change in Control, but only to
the extent that such acceleration does not interfere with any "pooling of
interests" accounting treatment used in connection with the Change in Control.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
13. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution; provided however that, after the
date, if any, upon which the Common Stock becomes a Listed Security, the
Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to Option Agreements specifying (i) the manner in which such
Nonstatutory Stock Options are transferable and (ii) that any such transfer
shall be subject to the Applicable Laws. The designation of a beneficiary by an
Optionee will not constitute a transfer. An Option may be exercised, during the
lifetime of the holder of the Option, only by such holder or a transferee
permitted by this Section 13.
14. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board of
Directors. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
15. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment and Termination. The Board of Directors may at any time
-------------------------
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board of Directors, which
agreement must be in writing and signed by the Optionee and the Company.
<PAGE>
16. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with the
Applicable Laws, with such compliance determined by the Company in consultation
with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
19. Shareholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the shareholders of the Company
within twelve (12) months before or after the date the Plan is adopted or
amended, as applicable. Such shareholder approval shall be obtained in the
degree and manner required under the Applicable Laws. All Options issued under
the Plan shall become void in the event such approval is not obtained.
20. Information to Optionees. To the extent required by the Applicable
------------------------
Laws, the Company shall provide financial statements at least annually to each
Optionee during the period such Optionee has one or more Options outstanding.
The Company shall not be required to provide such information if the issuance of
Options under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information. In addition, at
the time of issuance of any securities under the Plan, the Company shall provide
to the Optionee a copy of the Plan and a copy of any agreement(s) pursuant to
which securities granted under the Plan are issued.
<PAGE>
Exhibit 10.11
SECURED PROMISSORY NOTE
-----------------------
$350,000 October 14, 1999
Seattle, Washington
For value received, Glenn Ballman, an individual residing in the State of
Washington ("Ballman"), promises to pay to Onvia.com, Inc., a Washington
-------
corporation (the "Holder"), the principal sum of Three Hundred Fifty Thousand
------
Dollars ($350,000). Interest shall accrue from the date of this Note on the
unpaid principal amount at a rate equal to six percent (6%) per annum,
compounded annually. This Note is subject to the following terms and conditions.
1. Maturity. Principal and any accrued but unpaid interest under this Note
--------
shall be due and payable upon demand by the Holder at any time after the earlier
to occur of (i) October 14, 2004, (ii) the expiration of any contractual lock-up
period after the Holder's initial public offering of its common stock (the
"IPO") (if Ballman is a selling shareholder in such IPO or, if Ballman is not a
---
selling shareholder in such IPO, in Holder's next registered public offering of
its securities in which Ballman is a selling shareholder), or (iii) the
expiration of any contractual lock-up period or other lock-up period imposed
under the Securities Act of 1933, as amended, with respect to shares received by
Ballman in exchange for his shares of Holder's Common Stock in connection with
an acquisition of Holder. The entire unpaid principal sum of this Note, together
with accrued and unpaid interest thereon will be forgiven and this Note will be
cancelled in its entirety upon the earlier to occur of (A) the insolvency of
Ballman or Holder, (B) the commission of any act of bankruptcy by Ballman or
Holder, (C) the execution by Ballman or Holder of a general assignment for the
benefit of creditors, (D) the filing by or against Ballman or Holder of a
petition in bankruptcy or any petition for relief under the federal bankruptcy
act or the continuation of such petition without dismissal for a period of
ninety (90) days or more, or (E) the appointment of a receiver or trustee to
take possession of the property or assets of Ballman or Holder.
2. Payment. All payments shall be made in lawful money of the United States
-------
of America at such place as the Holder hereof may from time to time designate in
writing to Ballman. Payment shall be credited first to the accrued interest then
due and payable and the remainder applied to principal. Prepayment of this Note
may be made at any time without penalty.
3. Transfer; Successors and Assigns. The terms and conditions of this Note
--------------------------------
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Notwithstanding the foregoing, the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of Ballman, except for transfers to affiliates. Subject to the preceding
sentence, this Note may be transferred only upon surrender of the original Note
for registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form satisfactory to the Holder. Thereupon, a
new note for the same principal amount and interest will be issued
<PAGE>
to, and registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of this Note.
4. Governing Law. This Note and all acts and transactions pursuant hereto
-------------
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
5. Notices. Any notice required or permitted by this Note shall be in
-------
writing and shall be deemed sufficient upon delivery, when delivered personally
or by a nationally-recognized delivery service (such as Federal Express or UPS),
or forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth below or as subsequently modified by
written notice.
6. Amendments and Waivers. Any term of this Note may be amended only with
----------------------
the written consent of Ballman and the Holder. Any amendment or waiver effected
in accordance with this Section 6 shall be binding upon Ballman, the Holder and
each transferee of the Note.
-2-
<PAGE>
7. Security Interest. This Note is secured by certain assets of Ballman in
-----------------
accordance with a separate Pledge Agreement (the "Pledge Agreement") of even
----------------
date herewith between Ballman and the Holder. In case of an Event of Default (as
defined in the Pledge Agreement), the Holder shall have the rights set forth in
the Pledge Agreement.
GLENN BALLMAN:
By: /s/ Glenn Ballman
-----------------------------------
Address: 1000 Dexter Avenue
Suite 400
Seattle, WA 98104
AGREED TO AND ACCEPTED:
ONVIA.COM, INC.
By: /s/ Mark Calvert
------------------------------
Name: ____________________________
(print)
Title: __________________________
Address: 1000 Dexter Avenue
Suite 400
Seattle, WA 98104
-3-
<PAGE>
Exhibit 10.17
MEGADEPOT INC.
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
This Common Stock Purchase Agreement (this "Agreement") is made as of
---------
January 9, 1999 by and between MegaDepot Inc., a Washington corporation (the
"Company"), and Glenn Ballman ("Purchaser").
------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company, One
Hundred (100) shares of the Company's Common Stock (the "Shares") at a purchase
------
price of One Cent ($0.01) per Share, for a total purchase price of One Dollar
($1.00). The term "Shares" refers to the purchased Shares and all securities
received in replacement of or in connection with the Shares pursuant to stock
dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement by the parties, or on such other date as the Company
and Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the
-------------
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) for cash,
services rendered, intellectual property, or any combination thereof by
Purchaser to the Company in the amount of One Dollar ($1.00).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of Purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability), with or without cause, the Company shall upon the date of
such termination (the "Termination Date") have an irrevocable, exclusive option
----------------
(the "Repurchase Option") to repurchase all or any portion of the Shares held by
-----------------
Purchaser as of the Termination Date which have not yet been released from the
Company's Repurchase Option at the original purchase price per Share specified
in Section 1 (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company by written
notice to Purchaser or Purchaser's executor and, at the Company's option, (A) by
delivery to Purchaser or Purchaser's executor of a check in the amount of the
purchase price for
<PAGE>
the Shares being purchased, or (B) in the event Purchaser is indebted to the
Company, by cancellation by the Company of an amount of such indebtedness equal
to the purchase price for the Shares being repurchased, or (C) by a combination
of (A) and (B) so that the combined payment and cancellation of indebtedness
equals such purchase price. Upon delivery of such notice and payment of the
purchase price in any of the ways described above, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interest therein or related thereto, and the Company shall have the right to
transfer to its own name the number of Shares being repurchased by the Company,
without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be subject
to the Repurchase Option, of which (A) three forty-eighths (3/48) of the Shares
shall be vested on the date that is three months from the Vesting Commencement
Date (as set forth on the signature page of this Agreement), and (B) an
additional one forty-eighth (1/48) of the Shares shall vest and be released from
the Repurchase Option (provided in each case that Purchaser's employment or
consulting relationship with the Company has not been terminated prior to the
date of any such release) each month thereafter until such Shares are fully
vested. Fractional shares shall be rounded to the nearest whole share.
(iv) In the event of a Change in Control Transaction (as defined below),
fifty percent (50%) of all unvested Shares shall be fully vested upon the
consummation of the Change in Control Transaction, and the remaining fifty
percent (50%) of all unvested Shares shall be fully vested upon the consummation
of the Change in Control Transaction if and only if, within twelve (12) months
of the consummation of such Change in Control Transaction, Purchaser's
employment or consultancy, as the case may be, with the Company (or the
Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of
this Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty percent (50%) of the total combined voting power of the outstanding
voting stock of the Company or the corporation or corporations to which the
assets of the Company were transferred, as the case may be.
<PAGE>
(b) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (A) the Holder's
------
bona fide intention to sell or otherwise transfer such Shares, (B) the name of
each proposed purchaser or other transferee ("Proposed Transferee"), (C) the
-------------------
number of Shares to be transferred to each Proposed Transferee and (D) the terms
and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the "Offered Price") and upon the same terms (or terms
-------------
as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase Price")
-------------- -------------------
for the Shares purchased by the Company or its assignee(s) under this Section
3(b) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Company's board of directors in good faith. In the event
the transfer occurs by gift or operation of law, the Offered Price shall be
equal to the fair market value as determined by the Company's board of directors
of the Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made,
-------
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price; provided, however, that such sale or
other transfer is consummated within sixty (60) days after the date of the
Notice; and provided further, however that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section 3 shall
continue to apply to the Shares in the hands of such Proposed Transferee. If the
Shares described in the Notice are not transferred to the Proposed Transferee
within such period, or if the Holder proposes to change the price or other terms
to make them more favorable to the Proposed Transferee, a new Notice shall be
<PAGE>
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding in the event of death a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the fair market value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following
receipt by the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(c)(i), the price per Share shall be a
price set by the Company's board of directors that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Company's board of directors, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a one hundred percent
(100%) owned subsidiary of the Company, must pay the Company, upon assignment of
such right, cash equal to the difference between the original purchase price and
fair market value, if the original purchase price is less than the fair market
value of the Shares subject to the assignment.
<PAGE>
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option
---------------------
to repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
--------------
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
<PAGE>
(c) Purchaser further acknowledges and understands that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
------------
the securities exempt under Rule 701 may be resold by Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act); and (2) in the
case of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that,
<PAGE>
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY PARTICULAR STATE, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(iii) Any legend required to be placed thereon by the Secretary
of State of the State of Washington or other applicable
state securities laws.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
<PAGE>
(e) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
MEGADEPOT INC.,
a Washington corporation
By: /s/ Glenn Ballman
-----------------
Glenn Ballman
President
Address: 209 1/2 1st Ave. S., Suite 302
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
Glenn Ballman
/s/ Glenn Ballman
--------------------------
(Signature)
Address:
1928 12th Avenue
Seattle, WA 98119
Vesting Commencement
Date: November 24, 1996
I, ________________________________, spouse of Glenn Ballman, have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or similar interest that I may have in the
Shares shall be similarly bound by the Agreement. I hereby appoint my spouse as
my attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
--------------------------------------
Spouse of Glenn Ballman (if applicable)
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and MegaDepot Inc., a Washington
---------
corporation (the "Company"), dated January 9, 1999 (the "Agreement"), Purchaser
------- ---------
hereby sells, assigns and transfers unto the Company ____________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. COM-1, and does
hereby irrevocably constitute and appoint _____________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT
AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Glenn Ballman
------------------------------
Glenn Ballman
______________________________
Spouse of Glenn Ballman (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
-----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with MegaDepot
Inc., a Washington corporation (the "Company"), pursuant to which the
-------
undersigned is purchasing One Hundred (100) shares of Common Stock of the
Company (the "Shares"). In connection with the purchase of the Shares, the
------
undersigned hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase
agreement pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the
undersigned's own tax advisor, __________________________,
whose business address is _____________________________,
regarding the federal, state and local tax consequences of
purchasing the Shares, and particularly regarding the
advisability of making elections pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code")
and pursuant to the corresponding provisions, if any, of
applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided
[check as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the
undersigned's executed Common Stock Purchase Agreement, an
executed form entitled "Election Under Section 83(b) of the
Internal Revenue Code of 1986;" or
(b) ____ not to make an election pursuant to Section 83(b) of the
Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of the Shares or of the
making or failure to make an election pursuant to Section 83(b) of the Code or
the corresponding provisions, if any, of applicable state law.
Date: /s/ Glenn Ballman
------------- -------------------------
Glenn Ballman
Date:
------------- -----------------------------------
Spouse of Glenn Ballman (if applicable)
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Glenn Ballman
NAME OF SPOUSE: _____________________
ADDRESS:
1928 12th Avenue
Seattle, WA 98119
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
100 shares of the Common Stock (the "Shares") of MegaDepot Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: January 9, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $1.00.
6. The amount (if any) paid for such property: $1.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: /s/ Glenn Ballman
---------------------- --------------------------
Glenn Ballman
Dated:
---------------------- -------------------------------
Spouse of Glenn Ballman (if applicable)
<PAGE>
RECEIPT
-------
MegaDepot Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of a check or services rendered in the amount of $1.00
given by Glenn Ballman as consideration for Certificate No. COM-1 for 100 shares
of Common Stock of the Company.
Dated:
----------------------
MegaDepot Inc.
By: /s/ Glenn Ballman
----------------------------
Name:
---------------------------
Title:
---------------------------
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. COM-1 for 100 shares of Common Stock of MegaDepot Inc., a Washington
corporation (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated:
------------------------------
/s/ Glenn Ballman
----------------------------
Glenn Ballman
<PAGE>
Exhibit 10.18
MEGADEPOT INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made as of
---------
January 18, 1999 by and between MegaDepot Inc., a Washington corporation (the
"Company"), and Glenn Ballman ("Purchaser").
------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company, One
Million Two Hundred Ninety-None Thousand Nine Hundred (1,299,900) shares of the
Company's Common Stock (the "Shares") at a purchase price of One Cent ($0.01)
------
per Share, for a total purchase price of Twelve Thousand Nine Hundred
Ninety-Nine Dollars ($12,999.00). The term "Shares" refers to the purchased
Shares and all securities received in replacement of or in connection with the
Shares pursuant to stock dividends or splits, all securities received in
replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement shall
--------
occur at the principal office of the Company simultaneously with the execution
of this Agreement by the parties, or on such other date as the Company and
Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the Company
-------------
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) for cash, services
rendered, intellectual property, or any combination thereof by Purchaser to the
Company in the amount of Twelve Thousand Nine Hundred Ninety-Nine Dollars
($12,999.00).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") to repurchase all or any portion of
-----------------
the Shares held by Purchaser as of the Termination Date which have not yet been
released from the Company's Repurchase Option at the original purchase price per
Share specified in Section 1 (adjusted for any stock splits, stock dividends and
the like).
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by
<PAGE>
delivery to Purchaser or Purchaser's executor of a check in the amount of the
purchase price for the Shares being purchased, or (B) in the event Purchaser is
indebted to the Company, by cancellation by the Company of an amount of such
indebtedness equal to the purchase price for the Shares being repurchased, or
(C) by a combination of (A) and (B) so that the combined payment and
cancellation of indebtedness equals such purchase price. Upon delivery of such
notice and payment of the purchase price in any of the ways described above, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interest therein or related thereto, and the
Company shall have the right to transfer to its own name the number of Shares
being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be
subject to the Repurchase Option, of which (A) three forty-eighths (3/48) of the
Shares shall be vested on the date that is three months from the Vesting
Commencement Date (as set forth on the signature page of this Agreement), and
(B) an additional one forty-eighth (1/48) of the Shares shall vest and be
released from the Repurchase Option (provided in each case that Purchaser's
employment or consulting relationship with the Company has not been terminated
prior to the date of any such release) each month thereafter until such Shares
are fully vested. Fractional shares shall be rounded to the nearest whole share.
(iv) In the event of a Change in Control Transaction (as defined
below), fifty percent (50%) of all unvested Shares shall be fully vested upon
the consummation of the Change in Control Transaction, and the remaining fifty
percent (50%) of all unvested Shares shall be fully vested upon the consummation
of the Change in Control Transaction if and only if, within twelve (12) months
of the consummation of such Change in Control Transaction, Purchaser's
employment or consultancy, as the case may be, with the Company (or the
Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of this
Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty percent (50%) of the total combined voting power of the outstanding
voting stock of the
<PAGE>
Company or the corporation or corporations to which the assets of the Company
were transferred, as the case may be.
(b) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (A) the Holder's
------
bona fide intention to sell or otherwise transfer such Shares, (B) the name of
each proposed purchaser or other transferee ("Proposed Transferee"), (C) the
-------------------
number of Shares to be transferred to each Proposed Transferee and (D) the terms
and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the "Offered Price") and upon the same terms (or terms
-------------
as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase Price")
-------------- -------------------
for the Shares purchased by the Company or its assignee(s) under this Section
3(b) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Company's board of directors in good faith. In the event
the transfer occurs by gift or operation of law, the Offered Price shall be
equal to the fair market value as determined by the Company's board of directors
of the Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price; provided, however, that such sale or
other transfer is consummated within sixty (60) days after the date of the
Notice; and provided further, however that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section 3 shall
continue to apply to the Shares in the hands of such Proposed Transferee. If the
Shares described in the Notice are not transferred to the Proposed
<PAGE>
Transferee within such period, or if the Holder proposes to change the price or
other terms to make them more favorable to the Proposed Transferee, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding in the event of death a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the fair market value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following
receipt by the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to
------------------------------
be transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Company's board of directors that will reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the
valuation as determined by the Company's board of directors, the Purchaser shall
be entitled to have the valuation determined by an independent appraiser to be
mutually agreed upon by the Company and the Purchaser and whose fees shall be
borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a one hundred percent
(100%) owned subsidiary of the Company, must pay the Company, upon assignment of
such right, cash equal to the difference between the original purchase price and
fair market value, if the original purchase price is less than the fair market
value of the Shares subject to the assignment.
<PAGE>
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option to
---------------------
repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
--------------
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement
-------------------------
of the provisions of Section 3 above, Purchaser agrees, immediately upon receipt
of the certificate(s) for the Shares subject to the Repurchase Option, to
deliver such certificate(s), together with an Assignment Separate from
Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the purchase
---------------------------------------
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
<PAGE>
(c) Purchaser further acknowledges and understands that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
------------
the securities exempt under Rule 701 may be resold by Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act); and (2) in the
case of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that,
<PAGE>
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER THE SECURITIES LAWS OF ANY PARTICULAR STATE, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) Any legend required to be placed thereon by the
Secretary of State of the State of Washington or other
applicable state securities laws.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with this
executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
---------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets forth
---------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
<PAGE>
(e) Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
MEGADEPOT INC.,
a Washington corporation
By: /s/ Glenn Ballman
------------------------
Glenn Ballman
President
Address: 209 1/2 1st Ave. S., Suite 302
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
Glenn Ballman
/s/ Glenn Ballman
---------------------------
(Signature)
Address:
1928 12th Avenue
Seattle, WA 98119
Vesting Commencement
Date: November 24, 1996
I, ________________________________, spouse of Glenn Ballman, have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or similar interest that I may have in the
Shares shall be similarly bound by the Agreement. I hereby appoint my spouse as
my attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
---------------------------------------
Spouse of Glenn Ballman (if applicable)
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and MegaDepot Inc., a Washington
---------
corporation (the "Company"), dated January 18, 1999 (the "Agreement"), Purchaser
------- ---------
hereby sells, assigns and transfers unto the Company ___________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. COM-1, and does
hereby irrevocably constitute and appoint _____________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT
AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Glenn Ballman
-------------------------------------
Glenn Ballman
-------------------------------------
Spouse of Glenn Ballman (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with MegaDepot Inc.,
a Washington corporation (the "Company"), pursuant to which the undersigned is
-------
purchasing One Million Two Hundred Ninety-None Thousand Nine Hundred (1,299,900)
shares of Common Stock of the Company (the "Shares"). In connection with the
------
purchase of the Shares, the undersigned hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase
agreement pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and local
tax consequences of purchasing the Shares, and particularly regarding
the advisability of making elections pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and pursuant to
the corresponding provisions, if any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided
[check as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Common Stock Purchase Agreement, an executed form entitled "Election
Under Section 83(b) of the Internal Revenue Code of 1986;" or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of the Shares or of the
making or failure to make an election pursuant to Section 83(b) of the Code or
the corresponding provisions, if any, of applicable state law.
Date: __________________ /s/ Glenn Ballman
---------------------------------------
Glenn Ballman
Date: __________________ ---------------------------------------
Spouse of Glenn Ballman (if applicable)
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Glenn Ballman
NAME OF SPOUSE:
ADDRESS:
1928 12th Avenue
Seattle, WA 98119
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
1,299,900 shares of the Common Stock (the "Shares") of MegaDepot Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: January 18, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $12,999.00.
6. The amount (if any) paid for such property: $12,999.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ /s/ Glenn Ballman
----------------------------------------
Glenn Ballman
Dated: ______________________ ----------------------------------------
Spouse of Glenn Ballman (if applicable)
<PAGE>
RECEIPT
-------
MegaDepot Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of a check or services rendered in the amount of $12,999.00
given by Glenn Ballman as consideration for Certificate No. COM-1 for 1,299,900
shares of Common Stock of the Company.
Dated: ________________
MegaDepot Inc.
By: /s/ Glenn Ballman
---------------------------------------
Name:_____________________________________
Title:____________________________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. COM-1 for 1,299,900 shares of Common Stock of MegaDepot Inc., a Washington
corporation (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
/s/ Glenn Ballman
--------------------------
Glenn Ballman
<PAGE>
Exhibit 10.19
MEGADEPOT INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made as of
---------
January 18, 1999 by and between MegaDepot Inc., a Washington corporation (the
"Company"), and Rob Ayer ("Purchaser").
------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company, Seven
Hundred Thousand (700,000) shares of the Company's Common Stock (the "Shares")
------
at a purchase price of One Cent ($0.01) per Share, for a total purchase price of
Seven Thousand Dollars ($7,000.00). The term "Shares" refers to the purchased
Shares and all securities received in replacement of or in connection with the
Shares pursuant to stock dividends or splits, all securities received in
replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement shall
--------
occur at the principal office of the Company simultaneously with the execution
of this Agreement by the parties, or on such other date as the Company and
Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the Company
-------------
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) for cash, services
rendered, intellectual property, or any combination thereof by Purchaser to the
Company in the amount of Seven Thousand Dollars ($7,000.00).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") to repurchase all or any portion of
-----------------
the Shares held by Purchaser as of the Termination Date which have not yet been
released from the Company's Repurchase Option at the original purchase price per
Share specified in Section 1 (adjusted for any stock splits, stock dividends and
the like).
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by
<PAGE>
delivery to Purchaser or Purchaser's executor of a check in the amount of the
purchase price for the Shares being purchased, or (B) in the event Purchaser is
indebted to the Company, by cancellation by the Company of an amount of such
indebtedness equal to the purchase price for the Shares being repurchased, or
(C) by a combination of (A) and (B) so that the combined payment and
cancellation of indebtedness equals such purchase price. Upon delivery of such
notice and payment of the purchase price in any of the ways described above, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interest therein or related thereto, and the
Company shall have the right to transfer to its own name the number of Shares
being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be
subject to the Repurchase Option, of which (A) three forty-eighths (3/48) of the
Shares shall be vested on the date that is three months from the Vesting
Commencement Date (as set forth on the signature page of this Agreement), and
(B) an additional one forty-eighth (1/48) of the Shares shall vest and be
released from the Repurchase Option (provided in each case that Purchaser's
employment or consulting relationship with the Company has not been terminated
prior to the date of any such release) each month thereafter until such Shares
are fully vested. Fractional shares shall be rounded to the nearest whole share.
(iv) In the event of a Change in Control Transaction (as defined
below), fifty percent (50%) of all unvested Shares shall be fully vested upon
the consummation of the Change in Control Transaction, and the remaining fifty
percent (50%) of all unvested Shares shall be fully vested upon the consummation
of the Change in Control Transaction if and only if, within twelve (12) months
of the consummation of such Change in Control Transaction, Purchaser's
employment or consultancy, as the case may be, with the Company (or the
Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of this
Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty percent (50%) of the total combined voting power of the outstanding
voting stock of the
-2-
<PAGE>
Company or the corporation or corporations to which the assets of the Company
were transferred, as the case may be.
(b) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (A) the Holder's
------
bona fide intention to sell or otherwise transfer such Shares, (B) the name of
each proposed purchaser or other transferee ("Proposed Transferee"), (C) the
-------------------
number of Shares to be transferred to each Proposed Transferee and (D) the terms
and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the "Offered Price") and upon the same terms (or terms
-------------
as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase Price") for
-------------- -------------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Company's board of directors in good faith. In the event the
transfer occurs by gift or operation of law, the Offered Price shall be equal to
the fair market value as determined by the Company's board of directors of the
Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(b), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price; provided, however, that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice; and
provided further, however that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed
-3-
<PAGE>
Transferee within such period, or if the Holder proposes to change the price or
other terms to make them more favorable to the Proposed Transferee, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding in the event of death a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the fair market value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following
receipt by the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Company's board of directors that will reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the
valuation as determined by the Company's board of directors, the Purchaser shall
be entitled to have the valuation determined by an independent appraiser to be
mutually agreed upon by the Company and the Purchaser and whose fees shall be
borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a one hundred percent
(100%) owned subsidiary of the Company, must pay the Company, upon assignment of
such right, cash equal to the difference between the original purchase price and
fair market value, if the original purchase price is less than the fair market
value of the Shares subject to the assignment.
-4-
<PAGE>
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option to
---------------------
repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
--------------
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement
-------------------------
of the provisions of Section 3 above, Purchaser agrees, immediately upon receipt
of the certificate(s) for the Shares subject to the Repurchase Option, to
deliver such certificate(s), together with an Assignment Separate from
Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the purchase
---------------------------------------
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under
the Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.
-5-
<PAGE>
(c) Purchaser further acknowledges and understands that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of issuance of the securities, such
issuance will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), the securities
------------
exempt under Rule 701 may be resold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including, among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act); and (2) in the case of
an affiliate, the availability of certain public information about the Company,
and the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that,
-6-
<PAGE>
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY PARTICULAR STATE, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) Any legend required to be placed thereon by the
Secretary of State of the State of Washington or other
applicable state securities laws.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
-7-
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with this
executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
-8-
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets forth
---------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
-9-
<PAGE>
(e) Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-10-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
MEGADEPOT INC.,
a Washington corporation
By: /s/ Glenn Ballman
------------------------------
Glenn Ballman
President
Address: 209 1/2 1st Ave. S., Suite 302
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
Rob Ayer
/s/ Rob Ayer
------------------------------
(Signature)
Address:
2502 27th Avenue West
Seattle, WA 98199
Vesting Commencement
Date: February 15, 1997
I, Wendy Ayer, spouse of Rob Ayer, have read and hereby approve the foregoing
Agreement. In consideration of the Company's granting my spouse the right to
purchase the Shares as set forth in the Agreement, I hereby agree to be
irrevocably bound by the Agreement and further agree that any community property
or similar interest that I may have in the Shares shall be similarly bound by
the Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to
any amendment or exercise of any rights under the Agreement.
/s/ Wendy Ayer
------------------------------
Spouse of Rob Ayer (if applicable)
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and MegaDepot Inc., a Washington
corporation (the "Company"), dated January 18, 1999 (the "Agreement"), Purchaser
hereby sells, assigns and transfers unto the Company ________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. COM-3, and does
hereby irrevocably constitute and appoint _____________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT
AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Rob Ayer
----------------------
Rob Ayer
/s/ Wendy Ayer
----------------------
Spouse of Rob Ayer (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned has entered a stock purchase agreement with MegaDepot Inc.,
a Washington corporation (the "Company"), pursuant to which the undersigned is
purchasing Seven Hundred Thousand (700,000) shares of Common Stock of the
Company (the "Shares"). In connection with the purchase of the Shares, the
undersigned hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase agreement
pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and local
tax consequences of purchasing the Shares, and particularly regarding
the advisability of making elections pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and pursuant to
the corresponding provisions, if any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check as
applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Common Stock Purchase Agreement, an executed form entitled "Election
Under Section 83(b) of the Internal Revenue Code of 1986;" or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of the Shares or of the making or
failure to make an election pursuant to Section 83(b) of the Code or the
corresponding provisions, if any, of applicable state law.
Date: __________________ /s/ Rob Ayer
------------------------
__________________ Rob Ayer
Date: __________________ /s/ Wendy Ayer
------------------------
__________________ Spouse of Rob Ayer (if applicable)
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Rob Ayer
NAME OF SPOUSE:
ADDRESS:
2502 27th Avenue West
Seattle, WA 98199
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
700,000 shares of the Common Stock (the "Shares") of MegaDepot Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: January 18, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $7,000.00.
6. The amount (if any) paid for such property: $7,000.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ______________________ /s/ Rob Ayer
----------------------------
Rob Ayer
Dated: ______________________ /s/ Wendy Ayer
----------------------------
Spouse of Rob Ayer (if applicable)
<PAGE>
RECEIPT
-------
MegaDepot Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of a check or services rendered in the amount of $7,000.00
given by Rob Ayer as consideration for Certificate No. COM-3 for 700,000 shares
of Common Stock of the Company.
Dated: ________________
MegaDepot Inc.
By: /s/ Glenn Ballman
________________________
Name:______________________
Title:_____________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. COM-3 for 700,000 shares of Common Stock of MegaDepot Inc., a
Washington corporation (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
_________________________________
Rob Ayer
<PAGE>
Exhibit 10.20
MEGADEPOT INC.
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
This Common Stock Purchase Agreement (this "Agreement") is made as of
---------
January 18, 1999 by and between MegaDepot Inc., a Washington corporation (the
"Company"), and Kristen Hamilton ("Purchaser").
------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company, One
Hundred Eighty-Five Thousand (185,000) shares of the Company's Common Stock (the
"Shares") at a purchase price of One Cent ($0.01) per Share, for a total
------
purchase price of One Thousand Eight Hundred Fifty Dollars ($1,850.00). The
term "Shares" refers to the purchased Shares and all securities received in
replacement of or in connection with the Shares pursuant to stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement by the parties, or on such other date as the Company
and Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the
-------------
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) for cash,
services rendered, intellectual property, or any combination thereof by
Purchaser to the Company in the amount of One Thousand Eight Hundred Fifty
Dollars ($1,850.00).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of Purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability), with or without cause, the Company shall upon the date of
such termination (the "Termination Date") have an irrevocable, exclusive option
----------------
(the "Repurchase Option") to repurchase all or any portion of the Shares held by
-----------------
Purchaser as of the Termination Date which have not yet been released from the
Company's Repurchase Option at the original purchase price per Share specified
in Section 1 (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company by written
notice to Purchaser or Purchaser's executor and, at the Company's option, (A) by
<PAGE>
delivery to Purchaser or Purchaser's executor of a check in the amount of the
purchase price for the Shares being purchased, or (B) in the event Purchaser is
indebted to the Company, by cancellation by the Company of an amount of such
indebtedness equal to the purchase price for the Shares being repurchased, or
(C) by a combination of (A) and (B) so that the combined payment and
cancellation of indebtedness equals such purchase price. Upon delivery of such
notice and payment of the purchase price in any of the ways described above, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interest therein or related thereto, and the
Company shall have the right to transfer to its own name the number of Shares
being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be subject
to the Repurchase Option, of which (A) three forty-eighths (3/48) of the Shares
shall be vested on the date that is three months from the Vesting Commencement
Date (as set forth on the signature page of this Agreement), and (B) an
additional one forty-eighth (1/48) of the Shares shall vest and be released from
the Repurchase Option (provided in each case that Purchaser's employment or
consulting relationship with the Company has not been terminated prior to the
date of any such release) each month thereafter until such Shares are fully
vested. Fractional shares shall be rounded to the nearest whole share.
(iv) In the event of a Change in Control Transaction (as defined below),
fifty percent (50%) of all unvested Shares shall be fully vested upon the
consummation of the Change in Control Transaction, and the remaining fifty
percent (50%) of all unvested Shares shall be fully vested upon the consummation
of the Change in Control Transaction if and only if, within twelve (12) months
of the consummation of such Change in Control Transaction, Purchaser's
employment or consultancy, as the case may be, with the Company (or the
Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of
this Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty percent (50%) of the total combined voting power of the outstanding
voting stock of the
-2-
<PAGE>
Company or the corporation or corporations to which the assets of the Company
were transferred, as the case may be.
(b) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
- -------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver
---------------------------
to the Company a written notice (the "Notice") stating: (A) the Holder's bona
------
fide intention to sell or otherwise transfer such Shares, (B) the name of each
proposed purchaser or other transferee ("Proposed Transferee"), (C) the number
-------------------
of Shares to be transferred to each Proposed Transferee and (D) the terms and
conditions of each proposed sale or transfer. The Holder shall offer the Shares
at the same price (the "Offered Price") and upon the same terms (or terms as
-------------
similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty (30)
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase Price") for the
-------------- -------------------
Shares purchased by the Company or its assignee(s) under this Section 3(b) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Company's board of directors in good faith. In the event the
transfer occurs by gift or operation of law, the Offered Price shall be equal to
the fair market value as determined by the Company's board of directors of the
Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(b), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price; provided, however, that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice; and
provided further, however that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed
-3-
<PAGE>
Transferee within such period, or if the Holder proposes to change the price or
other terms to make them more favorable to the Proposed Transferee, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section 3(b) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the event,
-----------------------------------------------------
at any time after the date of this Agreement, of any transfer by operation of
law or other involuntary transfer (including death or divorce, but excluding in
the event of death a transfer to Immediate Family as set forth in Section
3(b)(vi) above) of all or a portion of the Shares by the record holder thereof,
the Company shall have an option to purchase all of the Shares transferred at
the greater of the purchase price paid by Purchaser pursuant to this Agreement
or the fair market value of the Shares on the date of transfer. Upon such a
transfer, the person acquiring the Shares shall promptly notify the Secretary of
the Company of such transfer. The right to purchase such Shares shall be
provided to the Company for a period of thirty (30) days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Company's board of directors that will reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the
valuation as determined by the Company's board of directors, the Purchaser shall
be entitled to have the valuation determined by an independent appraiser to be
mutually agreed upon by the Company and the Purchaser and whose fees shall be
borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a one hundred percent
(100%) owned subsidiary of the Company, must pay the Company, upon assignment of
such right, cash equal to the difference between the original purchase price and
fair market value, if the original purchase price is less than the fair market
value of the Shares subject to the assignment.
-4-
<PAGE>
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option
---------------------
to repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
--------------
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
-5-
<PAGE>
(c) Purchaser further acknowledges and understands that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
------------
the securities exempt under Rule 701 may be resold by Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act); and (2) in the
case of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that,
-6-
<PAGE>
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares shall
-------
bear the following legends (as well as any legends required by applicable state
and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY PARTICULAR STATE, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(iii) Any legend required to be placed thereon by the Secretary
of State of the State of Washington or other applicable
state securities laws.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
-7-
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
-8-
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
-9-
<PAGE>
(e) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-10-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
MEGADEPOT INC.,
a Washington corporation
By: /s/ Glenn Ballman
-----------------
Glenn Ballman
President
Address: 209 1/2 1st Ave. S., Suite 302
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
Kristen Hamilton
/s/ Kristen Hamilton
--------------------
(Signature)
Address:
2353 W. Barrett Street
Seattle, WA 98199
Vesting Commencement
Date: June 1, 1998
I, ________________________________, spouse of Kristen Hamilton, have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or similar interest that I may have in the
Shares shall be similarly bound by the Agreement. I hereby appoint my spouse as
my attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
----------------------------------------
Spouse of Kristen Hamilton (if applicable)
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and MegaDepot Inc., a Washington
---------
corporation (the "Company"), dated January 18, 1999 (the "Agreement"), Purchaser
------- ---------
hereby sells, assigns and transfers unto the Company ___________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. COM-7, and does
hereby irrevocably constitute and appoint _____________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT
AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Kristen Hamilton
--------------------
Kristen Hamilton
__________________________________________
Spouse of Kristen Hamilton (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.#10018839 v1 - Onvia - Form of Common Stock
Purchase Agreement
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
-----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with MegaDepot
Inc., a Washington corporation (the "Company"), pursuant to which the
-------
undersigned is purchasing One Hundred Eighty-Five Thousand (185,000) shares of
Common Stock of the Company (the "Shares"). In connection with the purchase of
------
the Shares, the undersigned hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase
agreement pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the
undersigned's own tax advisor, __________________________,
whose business address is _____________________________,
regarding the federal, state and local tax consequences of
purchasing the Shares, and particularly regarding the
advisability of making elections pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code")
----
and pursuant to the corresponding provisions, if any, of
applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the
undersigned's executed Common Stock Purchase Agreement, an
executed form entitled "Election Under Section 83(b) of the
Internal Revenue Code of 1986;" or
(b) ____ not to make an election pursuant to Section 83(b) of the
Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of the Shares or of the
making or failure to make an election pursuant to Section 83(b) of the Code or
the corresponding provisions, if any, of applicable state law.
Date: /s/ Kristen Hamilton
-------------- -------------------------
Kristen Hamilton
Date:
-------------- -----------------------------------
Spouse of Kristen Hamilton (if applicable)
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Kristen Hamilton
NAME OF SPOUSE:_______________________
ADDRESS:
2353 W. Barrett Street
Seattle, WA 98199
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
185,000 shares of the Common Stock (the "Shares") of MegaDepot Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: January 18, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $1,850.00.
6. The amount (if any) paid for such property: $1,850.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ /s/ Kristen Hamilton
--------------------
Kristen Hamilton
Dated: ______________________ ________________________________________
Spouse of Kristen Hamilton (if applicable)
<PAGE>
RECEIPT
-------
MegaDepot Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of a check or services rendered in the amount of $1,850.00
given by Kristen Hamilton as consideration for Certificate No. COM-7 for 185,000
shares of Common Stock of the Company.
Dated: ________________
MegaDepot Inc.
By: /s/ Glenn Ballman
-----------------
Name:_________________
Title:________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. COM-7 for 185,000 shares of Common Stock of MegaDepot Inc., a Washington
corporation (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
/s/ Kristen Hamilton
--------------------
Kristen Hamilton
<PAGE>
Exhibit 10.21
MEGADEPOT INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made as of
---------
January 18, 1999 by and between MegaDepot Inc., a Washington corporation (the
"Company"), and William W. Ericson ("Purchaser").
------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company,
Twenty-Seven Thousand Five Hundred Thirty (27,530) shares of the Company's
Common Stock (the "Shares") at a purchase price of One Cent ($0.01) per Share,
------
for a total purchase price of Two Hundred Seventy-Five Dollars and Thirty Cents
($275.30). The term "Shares" refers to the purchased Shares and all securities
received in replacement of or in connection with the Shares pursuant to stock
dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement shall
--------
occur at the principal office of the Company simultaneously with the execution
of this Agreement by the parties, or on such other date as the Company and
Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the Company
-------------
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) for cash, services
rendered, intellectual property, or any combination thereof by Purchaser to the
Company in the amount of Two Hundred Seventy-Five Dollars and Thirty Cents
($275.30).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") to repurchase all or any portion of
-----------------
the Shares held by Purchaser as of the Termination Date which have not yet been
released from the Company's Repurchase Option at the original purchase price per
Share specified in Section 1 (adjusted for any stock splits, stock dividends and
the like).
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by
<PAGE>
delivery to Purchaser or Purchaser's executor of a check in the amount of the
purchase price for the Shares being purchased, or (B) in the event Purchaser is
indebted to the Company, by cancellation by the Company of an amount of such
indebtedness equal to the purchase price for the Shares being repurchased, or
(C) by a combination of (A) and (B) so that the combined payment and
cancellation of indebtedness equals such purchase price. Upon delivery of such
notice and payment of the purchase price in any of the ways described above, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interest therein or related thereto, and the
Company shall have the right to transfer to its own name the number of Shares
being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be
subject to the Repurchase Option, of which (A) three forty-eighths (3/48) of the
Shares shall be vested on the date that is three months from the Vesting
Commencement Date (as set forth on the signature page of this Agreement), and
(B) an additional one forty-eighth (1/48) of the Shares shall vest and be
released from the Repurchase Option (provided in each case that Purchaser's
employment or consulting relationship with the Company has not been terminated
prior to the date of any such release) each month thereafter until such Shares
are fully vested. Fractional shares shall be rounded to the nearest whole share.
(iv) In the event of a Change in Control Transaction (as defined
below), fifty percent (50%) of all unvested Shares shall be fully vested upon
the consummation of the Change in Control Transaction, and the remaining fifty
percent (50%) of all unvested Shares shall be fully vested upon the consummation
of the Change in Control Transaction if and only if, within twelve (12) months
of the consummation of such Change in Control Transaction, Purchaser's
employment or consultancy, as the case may be, with the Company (or the
Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of this
Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty percent (50%) of the total combined voting power of the outstanding
voting stock of the
-2-
<PAGE>
Company or the corporation or corporations to which the assets of the Company
were transferred, as the case may be.
(b) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (A) the Holder's
------
bona fide intention to sell or otherwise transfer such Shares, (B) the name of
each proposed purchaser or other transferee ("Proposed Transferee"), (C) the
-------------------
number of Shares to be transferred to each Proposed Transferee and (D) the terms
and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the "Offered Price") and upon the same terms (or terms
-------------
as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase Price") for
-------------- -------------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Company's board of directors in good faith. In the event the
transfer occurs by gift or operation of law, the Offered Price shall be equal to
the fair market value as determined by the Company's board of directors of the
Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(b), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price; provided, however, that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice; and
provided further, however that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed
-3-
<PAGE>
Transferee within such period, or if the Holder proposes to change the price or
other terms to make them more favorable to the Proposed Transferee, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding in the event of death a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the fair market value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following
receipt by the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Company's board of directors that will reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the
valuation as determined by the Company's board of directors, the Purchaser shall
be entitled to have the valuation determined by an independent appraiser to be
mutually agreed upon by the Company and the Purchaser and whose fees shall be
borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a one hundred percent
(100%) owned subsidiary of the Company, must pay the Company, upon assignment of
such right, cash equal to the difference between the original purchase price and
fair market value, if the original purchase price is less than the fair market
value of the Shares subject to the assignment.
-4-
<PAGE>
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option to
---------------------
repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
--------------
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement
-------------------------
of the provisions of Section 3 above, Purchaser agrees, immediately upon receipt
of the certificate(s) for the Shares subject to the Repurchase Option, to
deliver such certificate(s), together with an Assignment Separate from
Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the purchase
---------------------------------------
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under
the Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.
-5-
<PAGE>
(c) Purchaser further acknowledges and understands that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of issuance of the securities, such
issuance will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), the securities
------------
exempt under Rule 701 may be resold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including, among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act); and (2) in the case of
an affiliate, the availability of certain public information about the Company,
and the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that,
-6-
<PAGE>
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY PARTICULAR STATE, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) Any legend required to be placed thereon by the
Secretary of State of the State of Washington or other
applicable state securities laws.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
-7-
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with this
executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
-8-
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets forth
---------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
-9-
<PAGE>
(e) Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-10-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
MEGADEPOT INC.,
a Washington corporation
By: /s/ Glenn Ballman
_______________________________
Glenn Ballman
President
Address: 209 1/2 1st Ave. S., Suite 302
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
William W. Ericson
/s/ William W. Ericson
----------------------
(Signature)
Address:
c/o Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
Vesting Commencement
Date: July 1, 1998
I, Carmen Ericson, spouse of William W. Ericson, have read and hereby approve
the foregoing Agreement. In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be irrevocably bound by the Agreement and further agree that any community
property or similar interest that I may have in the Shares shall be similarly
bound by the Agreement. I hereby appoint my spouse as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Agreement.
/s/ Carmen Ericson
--------------------------------------------
Spouse of William W. Ericson (if applicable)
-11-
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and MegaDepot Inc., a Washington
---------
corporation (the "Company"), dated January 18, 1999 (the "Agreement"), Purchaser
------- ---------
hereby sells, assigns and transfers unto the Company __________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. COM-19, and does
hereby irrevocably constitute and appoint _____________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT
AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ William W. Ericson
------------------------------------
William W. Ericson
/s/ Carmen Ericson
------------------------------------
Spouse of William W. Ericson (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with MegaDepot
Inc., a Washington corporation (the "Company"), pursuant to which the
-------
undersigned is purchasing Twenty-Seven Thousand Five Hundred Thirty (27,530)
shares of Common Stock of the Company (the "Shares"). In connection with the
------
purchase of the Shares, the undersigned hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase agreement
pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the
undersigned's own tax advisor, __________________________,
whose business address is _____________________________,
regarding the federal, state and local tax consequences of
purchasing the Shares, and particularly regarding the
advisability of making elections pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code") and
----
pursuant to the corresponding provisions, if any, of
applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided
[check as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and
is submitting to the Company, together with the undersigned's
executed Common Stock Purchase Agreement, an executed form
entitled "Election Under Section 83(b) of the Internal Revenue
Code of 1986;" or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of the Shares or of the
making or failure to make an election pursuant to Section 83(b) of the Code or
the corresponding provisions, if any, of applicable state law.
Date: __________________ /s/ William W. Ericson
-------------------------------------
William W. Ericson
Date: __________________ /s/ Carmen Ericson
-------------------------------------
Spouse of William W. Ericson (if applicable)
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
-------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of
the Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: William W. Ericson
NAME OF SPOUSE:
------------------------
ADDRESS:
c/o Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
27,530 shares of the Common Stock (the "Shares") of MegaDepot Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: January 18, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never lapse,
of such property is: $275.30.
6. The amount (if any) paid for such property: $275.30.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ /s/ William W. Ericson
-------------------------------
William W. Ericson
Dated: ______________________ /s/ Carmen Ericson
-------------------------------
Spouse of William W. Ericson (if applicable)
<PAGE>
RECEIPT
-------
MegaDepot Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of a check or services rendered in the amount of $275.30
given by William W. Ericson as consideration for Certificate No. COM-19 for
27,530 shares of Common Stock of the Company.
Dated: ________________
MegaDepot Inc.
By: /s/ Glenn Ballman
-----------------
Name:_________________
Title:________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of
Certificate No. COM-19 for 27,530 shares of Common Stock of MegaDepot Inc., a
Washington corporation (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company,
or his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
/s/ William W. Ericson
---------------------------
William W. Ericson
<PAGE>
Exhibit 10.22
MEGADEPOT.COM, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made as of April
---------
9, 1999 by and between MegaDepot.com, Inc., a Washington corporation (the
"Company"), and Mike Pickett ("Purchaser").
------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company, Two
Hundred Fifty-Six Thousand Five Hundred Fifty-Six (256,556) shares of the
Company's Common Stock (the "Shares") at a purchase price of Five Cents ($0.05)
------
per Share, for a total purchase price of Twelve Thousand Eight Hundred and
Twenty-Seven Dollars and Eighty Cents ($12,827.80). The term "Shares" refers to
the purchased Shares and all securities received in replacement of or in
connection with the Shares pursuant to stock dividends or splits, all securities
received in replacement of the Shares in a recapitalization, merger,
reorganization, exchange or the like, and all new, substituted or additional
securities or other properties to which Purchaser is entitled by reason of
Purchaser's ownership of the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement by the parties, or on such other date as the Company
and Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the
-------------
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) for cash,
services rendered, intellectual property, or any combination thereof by
Purchaser to the Company in the amount of Twelve Thousand Eight Hundred and
Twenty-Seven Dollars and Eighty Cents ($12,827.80).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") to repurchase all or any portion of
-----------------
the Shares held by Purchaser as of the Termination Date which have not yet been
released from the Company's Repurchase Option at the original purchase price per
Share specified in Section 1 (adjusted for any stock splits, stock dividends and
the like).
-1-
<PAGE>
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor of a check in the
amount of the purchase price for the Shares being purchased, or (B) in the event
Purchaser is indebted to the Company, by cancellation by the Company of an
amount of such indebtedness equal to the purchase price for the Shares being
repurchased, or (C) by a combination of (A) and (B) so that the combined payment
and cancellation of indebtedness equals such purchase price. Upon delivery of
such notice and payment of the purchase price in any of the ways described
above, the Company shall become the legal and beneficial owner of the Shares
being repurchased and all rights and interest therein or related thereto, and
the Company shall have the right to transfer to its own name the number of
Shares being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially
be subject to the Repurchase Option, of which (A) one-fourth (1/4) of the Shares
shall be vested on the date that is one year from the Vesting Commencement Date
(as set forth on the signature page of this Agreement), and (B) an additional
one forty-eighth (1/48) of the Shares shall vest and be released from the
Repurchase Option (provided in each case that Purchaser's employment or
consulting relationship with the Company has not been terminated prior to the
date of any such release) each month thereafter until such Shares are fully
vested. Fractional shares shall be rounded to the nearest whole share.
(iv) In the event of a Change in Control Transaction (as
defined below), fifty percent (50%) of all unvested Shares shall be fully vested
upon the consummation of the Change in Control Transaction, and the remaining
fifty percent (50%) of all unvested Shares shall be fully vested upon the
consummation of the Change in Control Transaction if and only if, within twelve
(12) months of the consummation of such Change in Control Transaction,
Purchaser's employment or consultancy, as the case may be, with the Company (or
the Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of this
Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty
-2-
<PAGE>
percent (50%) of the total combined voting power of the outstanding voting stock
of the Company or the corporation or corporations to which the assets of the
Company were transferred, as the case may be.
(b) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (A) the Holder's
------
bona fide intention to sell or otherwise transfer such Shares, (B) the name of
each proposed purchaser or other transferee ("Proposed Transferee"), (C) the
-------------------
number of Shares to be transferred to each Proposed Transferee and (D) the terms
and conditions of each proposed sale or transfer. The Holder shall offer the
Shares at the same price (the "Offered Price") and upon the same terms (or terms
-------------
as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase
-------------- -------------
Price") for the Shares purchased by the Company or its assignee(s) under this
- -----
Section 3(b) shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Company's board of directors in good
faith. In the event the transfer occurs by gift or operation of law, the Offered
Price shall be equal to the fair market value as determined by the Company's
board of directors of the Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made,
-------
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price; provided, however, that such sale or
other transfer is consummated within sixty (60) days after the date of the
Notice; and provided further, however that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section 3 shall
continue to apply to the Shares in the hands of such
-3-
<PAGE>
Proposed Transferee. If the Shares described in the Notice are not transferred
to the Proposed Transferee within such period, or if the Holder proposes to
change the price or other terms to make them more favorable to the Proposed
Transferee, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal before any
Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding in the event of death a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the fair market value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of thirty (30) days following
receipt by the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(c)(i), the price per Share shall be a
price set by the Company's board of directors that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Company's board of directors, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of
----------
the Shares may be assigned in whole or in part to any shareholder or
shareholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the parent or a one
hundred percent (100%) owned subsidiary of the Company, must pay the Company,
upon assignment of such right, cash equal to the difference between the original
-4-
<PAGE>
purchase price and fair market value, if the original purchase price is less
than the fair market value of the Shares subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares or
----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option to
---------------------
repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement
-------------------------
of the provisions of Section 3 above, Purchaser agrees, immediately upon receipt
of the certificate(s) for the Shares subject to the Repurchase Option, to
deliver such certificate(s), together with an Assignment Separate from
Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the purchase
---------------------------------------
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
-5-
<PAGE>
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
------------
the securities exempt under Rule 701 may be resold by Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act); and (2) in the
case of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
-6-
<PAGE>
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER THE SECURITIES LAWS OF ANY PARTICULAR STATE, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) Any legend required to be placed thereon by the
Secretary of State of the State of Washington or other
applicable state securities laws.
-7-
<PAGE>
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
-8-
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets forth
---------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
-9-
<PAGE>
(e) Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-10-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
MEGADEPOT.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
------------------------------
Glenn Ballman
President
Address: 209 1/2 1st Ave. S., Suite 302
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
/s/ Mike Pickett
-----------------------------------
Mike Pickett
Address: 4640 Admiralty Way, 5th Floor
Marina del Rey, CA 90262
Vesting Commencement
Date: January 1, 1999
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and MegaDepot.com, Inc., a
---------
Washington corporation (the "Company"), dated April 9, 1999 (the "Agreement"),
---------
Purchaser hereby sells, assigns and transfers unto the Company
_________________________________ (________) shares of the Common Stock of the
Company standing in Purchaser's name on the Company's books and represented by
Certificate No. COM-23, and does hereby irrevocably constitute and appoint
_____________________________ to transfer said stock on the books of the Company
with full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Mike Pickett
-------------------------------
Mike Pickett
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with MegaDepot.com,
Inc., a Washington corporation (the "Company"), pursuant to which the
-------
undersigned is purchasing 256,556 shares of Common Stock of the Company (the
"Shares"). In connection with the purchase of the Shares, the undersigned hereby
------
represents as follows:
1. The undersigned has carefully reviewed the stock purchase agreement
pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a)____ has consulted, and has been fully advised by, the undersigned's own
tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and
local tax consequences of purchasing the Shares, and particularly
regarding the advisability of making elections pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended (the "Code")
and pursuant to the corresponding provisions, if any, of applicable
state law; or
(b)____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check as
applicable]:
(a)____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Common Stock Purchase Agreement, an executed form entitled
"Election Under Section 83(b) of the Internal Revenue Code of
1986;" or
(b)____ not to make an election pursuant to Section 83(b) of the Code.
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of the Shares or of the making or
failure to make an election pursuant to Section 83(b) of the Code or the
corresponding provisions, if any, of applicable state law.
Date: __________________ /s/ Mike Pickett
------------------------------
Mike Pickett
<PAGE>
EXHIBIT C
----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Mike Pickett
ADDRESS: 4640 Admiralty Way, 5th Floor
Marina del Rey, CA 90262
IDENTIFICATION NO. OF TAXPAYER: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
256,556 shares of the Common Stock (the "Shares") of MegaDepot.com, Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: April 9, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $12,827.80.
6. The amount (if any) paid for such property: $12,827.80.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ /s/ Mike Pickett
------------------------------
Mike Pickett
<PAGE>
RECEIPT
-------
MegaDepot.com, Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of a check or services rendered in the amount of $12,827.80
given by Mike Pickett as consideration for Certificate No. COM-23 for 256,556
shares of Common Stock of the Company.
Dated: ________________
MegaDepot.com, Inc.
By: /s/ Glenn Ballman
-------------------------
Name:_________________________
Title:________________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. COM-23 for 256,556 shares of Common Stock of MegaDepot.com, Inc., a
Washington corporation (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
/s/ Mike Pickett
------------------------------
Mike Pickett
<PAGE>
Exhibit 10.23
ONVIA.COM, INC.
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
This Common Stock Purchase Agreement (this "Agreement") is made as of
---------
December 8, 1999 by and between Onvia.com, Inc., a Washington corporation (the
"Company"), and Jeffrey Ballowe ("Purchaser").
- -------- ---------
1. Sale of Stock. Upon the terms and subject to the conditions of this
-------------
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company, Sixty
Thousand (60,000) shares of the Company's Common Stock (the "Shares") at a
------
purchase price of Two Dollars and Fifty Cents ($2.50) per Share, for a total
purchase price of One Hundred Fifty Thousand Dollars ($150,000). The term
"Shares" refers to the purchased Shares and all securities received in
replacement of or in connection with the Shares pursuant to stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares. The Shares are being
issued pursuant to a restricted stock plan unanimously approved by the Company's
board of directors.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement by the parties, or on such other date as the Company
and Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the
-------------
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) for cash,
services rendered, intellectual property, or any combination thereof by
Purchaser to the Company in the amount of One Hundred Fifty Thousand Dollars
($150,000).
3. Limitations on Transfer. In addition to any other limitations on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of Purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability), with or without cause, the Company shall upon the date of
such termination (the "Termination Date") have an irrevocable, exclusive option
----------------
(the "Repurchase Option") to repurchase all or any portion of the Shares held by
-----------------
Purchaser as of the Termination Date which have not yet been released from the
Company's Repurchase Option at the original purchase price per Share specified
in Section 1 (adjusted for any stock splits, stock dividends and the like).
<PAGE>
(ii) The Repurchase Option shall be exercised by the Company by written
notice to Purchaser or Purchaser's executor and, at the Company's option, (A) by
delivery to Purchaser or Purchaser's executor of a check in the amount of the
purchase price for the Shares being purchased, or (B) in the event Purchaser is
indebted to the Company, by cancellation by the Company of an amount of such
indebtedness equal to the purchase price for the Shares being repurchased, or
(C) by a combination of (A) and (B) so that the combined payment and
cancellation of indebtedness equals such purchase price. Upon delivery of such
notice and payment of the purchase price in any of the ways described above, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interest therein or related thereto, and the
Company shall have the right to transfer to its own name the number of Shares
being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be subject
to the Repurchase Option. Twenty-five percent (25%) of the total Shares shall
be vested as of the Vesting Commencement Date (as set forth on the signature
page of this Agreement) and 1/36 of the remaining Shares shall vest and be
released from the Repurchase Option (provided in each case that Purchaser's
employment or consulting relationship with the Company has not been terminated
prior to the date of any such release) each month thereafter until such Shares
are fully vested. Fractional shares shall be rounded to the nearest whole
share.
(iv) In the event of a Change in Control Transaction (as defined below),
fifty percent (50%) of all unvested Shares shall be fully vested upon the
consummation of the Change in Control Transaction, and the remaining fifty
percent (50%) of all unvested Shares shall be fully vested upon the consummation
of the Change in Control Transaction if and only if, within twelve (12) months
of the consummation of such Change in Control Transaction, Purchaser's
employment or consultancy, as the case may be, with the Company (or the
Company's successor) is either terminated by the Company (or the Company's
successor) other than for Cause (as defined below) or terminated by the
Purchaser for Good Reason (as defined below). For purposes of this Agreement,
"Cause" means fraud, misappropriation or embezzlement on the part of Purchaser
which results in material loss, damage or injury to the Company (or the
Company`s successor), the Purchaser's conviction of a felony involving moral
turpitude, or the Purchaser's gross neglect of duties. For purposes of this
Agreement, "Good Reason" means (A) a material reduction in compensation, (B) a
relocation of the Purchaser's principal worksite to a location more than fifty
(50) miles from the Purchaser's pre-Change of Control Transaction worksite or
(C) a demotion or a material reduction in responsibilities or authority from
Purchaser's pre-Change of Control Transaction position. For the purposes of
this Agreement, a "Change in Control Transaction" shall mean (i) the direct or
indirect sale of or exchange in a single series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company, (ii) a merger or consolidation in which the Company is a party
or (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, in each case wherein the shareholders of the Company
immediately before such transaction or single series of related transactions do
not retain immediately after such transaction or single series of related
transactions, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before such transaction or single
series of related transactions, direct or indirect beneficial ownership of more
than fifty percent (50%) of the total combined voting power of the outstanding
voting stock of the
-2-
<PAGE>
Company or the corporation or corporations to which the assets of the Company
were transferred, as the case may be.
(b) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
- -------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver
---------------------------
to the Company a written notice (the "Notice") stating: (A) the Holder's bona
------
fide intention to sell or otherwise transfer such Shares, (B) the name of each
proposed purchaser or other transferee ("Proposed Transferee"), (C) the number
-------------------
of Shares to be transferred to each Proposed Transferee and (D) the terms and
conditions of each proposed sale or transfer. The Holder shall offer the Shares
at the same price (the "Offered Price") and upon the same terms (or terms as
-------------
similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty (30)
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("ROFR Purchase Price") for the
-------------- -------------------
Shares purchased by the Company or its assignee(s) under this Section 3(b) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Company's board of directors in good faith. In the event the
transfer occurs by gift or operation of law, the Offered Price shall be equal to
the fair market value as determined by the Company's board of directors of the
Company in its reasonable judgment.
(iv) Payment. Payment of the ROFR Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(b), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price; provided, however, that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice; and
provided further, however that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed
-3-
<PAGE>
Transferee within such period, or if the Holder proposes to change the price or
other terms to make them more favorable to the Proposed Transferee, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section 3(b) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the event,
-----------------------------------------------------
at any time after the date of this Agreement, of any transfer by operation of
law or other involuntary transfer (including death or divorce, but excluding in
the event of death a transfer to Immediate Family as set forth in Section
3(b)(vi) above) of all or a portion of the Shares by the record holder thereof,
the Company shall have an option to purchase all of the Shares transferred at
the greater of the purchase price paid by Purchaser pursuant to this Agreement
or the fair market value of the Shares on the date of transfer. Upon such a
transfer, the person acquiring the Shares shall promptly notify the Secretary of
the Company of such transfer. The right to purchase such Shares shall be
provided to the Company for a period of thirty (30) days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Company's board of directors that will reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the
valuation as determined by the Company's board of directors, the Purchaser shall
be entitled to have the valuation determined by an independent appraiser to be
mutually agreed upon by the Company and the Purchaser and whose fees shall be
borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a one hundred percent
(100%) owned subsidiary of the Company, must pay the Company, upon assignment of
such right, cash equal to the difference between the original purchase price and
fair market value, if the original purchase price is less than the fair market
value of the Shares subject to the assignment.
-4-
<PAGE>
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option
---------------------
to repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
--------------
termination of the Right of First Refusal and the expiration or exercise of the
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable when acting in good faith to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Company's board of directors
shall have the power to appoint a successor to serve as escrow holder pursuant
to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
-5-
<PAGE>
(c) Purchaser further acknowledges and understands that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
------------
the securities exempt under Rule 701 may be resold by Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act); and (2) in the
case of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 5(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the two-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required, and that,
-6-
<PAGE>
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares shall
-------
bear the following legends (as well as any legends required by applicable state
and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY PARTICULAR STATE, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(iii) Any legend required to be placed thereon by the Secretary
of State of the State of Washington or other applicable
state securities laws.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
-7-
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
-8-
<PAGE>
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the public offering.
10. Miscellaneous.
-------------
(a) Release of Claims. Purchaser acknowledges and agrees that the
-----------------
opportunity granted to Purchaser by the Company to purchase the Shares pursuant
to this Agreement constitutes good and adequate consideration for Purchaser's
release of the Company (including all subsidiaries of the Company) from any and
all claims, actions and suits, whether known or unknown, suspected or
unsuspected, that the Company (including all subsidiaries of the Company) or
Purchaser may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement relating to or
arising from Purchaser's right to receive or purchase (i) shares of capital
stock of the Company or M-Depot Internet Superstore Inc., a corporation
organized under the laws of British Columbia ("M-Depot"), and/or (ii) securities
convertible into shares of capital stock of the Company or M-Depot including,
but not limited to as set forth in any offer letter made by the Company in favor
of Purchaser. The Company and the Purchaser hereby acknowledge and agree that
the release set forth in this Section 10(a) shall be and remain in effect in all
respects as a complete and general release as to the matters set forth in this
Section 10(a). The complete and general release set forth in this Section 10(a)
does not extend to any obligations incurred under this Agreement.
(b) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
(c) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(d) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
-9-
<PAGE>
(e) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(g) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-10-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
ONVIA.COM, INC.,
a Washington corporation
By: /s/ Glenn Ballman
-----------------
Glenn Ballman
President
Address: 1000 Dexter Avenue, Suite 400
Seattle, WA 98104
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
/s/ Jeffrey Ballowe
-------------------
Jeffrey Ballowe
Address:
-------------------
-------------------
Vesting Commencement
Date: December 8, 1999
I, ________________________________, spouse of Jeffrey Ballowe, have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or similar interest that I may have in the
Shares shall be similarly bound by the Agreement. I hereby appoint my spouse as
my attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
--------------------------
Spouse of Jeffrey Ballowe
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and Onvia.com, Inc., a
---------
Washington corporation (the "Company"), dated December 8, 1999 (the
-------
"Agreement"), Purchaser hereby sells, assigns and transfers unto the Company
---------
_________________________________ (________) shares of the Common Stock of the
Company standing in Purchaser's name on the Company's books and represented by
Certificate No. COM-___, and does hereby irrevocably constitute and appoint
_____________________________ to transfer said stock on the books of the Company
with full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Jeffrey Ballowe
-------------------
Jeffrey Ballowe
______________________________
Spouse of Jeffrey Ballowe (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.10018839.01
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
-----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with Onvia.com,
Inc., a Washington corporation (the "Company"), pursuant to which the
-------
undersigned is purchasing 60,000 shares of Common Stock of the Company (the
"Shares"). In connection with the purchase of the Shares, the undersigned
- -------
hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase
agreement pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ___ has consulted, and has been fully advised by, the
undersigned's own tax advisor, __________________________,
whose business address is _____________________________,
regarding the federal, state and local tax consequences of
purchasing the Shares, and particularly regarding the
advisability of making elections pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code")
----
and pursuant to the corresponding provisions, if any, of
applicable state law; or
(b) ___ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided
[check as applicable]:
(a) ___ to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the
undersigned's executed Common Stock Purchase Agreement, an
executed form entitled "Election Under Section 83(b) of the
Internal Revenue Code of 1986;" or
(b) ___ not to make an election pursuant to Section 83(b) of the
Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of the Shares or of the
making or failure to make an election pursuant to Section 83(b) of the Code or
the corresponding provisions, if any, of applicable state law.
Date: /s/ Jeffrey Ballowe
-------------- -------------------
Jeffrey Ballowe
Date:
--------------------- -----------------------
Spouse of Jeffrey Ballowe (if applicable)
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Jeffrey Ballowe
SPOUSE OF TAXPAYER:
------------------------
ADDRESS:
----------------------------------
----------------------------------
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows:
60,000 shares of the Common Stock (the "Shares") of Onvia.com, Inc., a
Washington corporation (the "Company").
3. The date on which the property was transferred is: December 8, 1999
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $150,000.00.
6. The amount (if any) paid for such property: $150,000.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: /s/ Jeffrey Ballowe
------------------ -------------------
Jeffrey Ballowe
Dated:
----------------- ------------------------
Spouse of Jeffrey Ballowe
<PAGE>
RECEIPT
-------
Onvia.com, Inc., a Washington corporation (the "Company"), hereby
acknowledges receipt of cash, check or services rendered in the amount of
$150,000.00 given by Jeffrey Ballowe as consideration for Certificate No. COM-
___ for 60,000 shares of Common Stock of the Company.
Dated:
------------------------
Onvia.com, Inc.
By: /s/ Glenn Ballman
------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. COM-___ for 60,000 shares of Common Stock of Onvia.com, Inc., a Washington
corporation (the "Company").
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The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated:
-----------------------
/s/ Jeffrey Ballowe
-----------------------
Jeffrey Ballowe
<PAGE>
Exhibit 10.24
MERCER YALE BUILDING
OFFICE LEASE AGREEMENT
Landlord: BLUME YALE LIMITED PARTNERSHIP
Tenant: ONVIA.COM INC.
Date: December 9, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. PREMISES.......................................................................... 1
Section 1.1 Premises Defined............................................................... 1
Section 1.2 Alterations.................................................................... 1
Section 1.3 Condition of Premises.......................................................... 1
Section 1.4 Common Areas.................................................................. 1
ARTICLE 2. BUSINESS PURPOSE AND USE......................................................... 2
Section 2.1 Permitted Uses................................................................ 2
Section 2.2 Prohibited Uses............................................................... 2
Section 2.3 Compliance With Laws.......................................................... 2
ARTICLE 3. TERM............................................................................. 2
Section 3.1 Term.......................................................................... 2
Section 3.2 Lease Year.................................................................... 3
Section 3.3 Possession by Tenant.......................................................... 3
ARTICLE 4. RENT............................................................................. 3
Section 4.1 Basic Rent.................................................................... 4
Section 4.2 Operating Expenses............................................................ 4
Section 4.3 Rent.......................................................................... 7
Section 4.4 Place of Payment.............................................................. 7
ARTICLE 5. PREPAID RENT...................................................................... 7
Section 5.1 Prepaid Rent.................................................................. 7
ARTICLE 6. TAXES............................................................................ 8
Section 6.1 Personal Property Taxes....................................................... 8
Section 6.2 Business Taxes................................................................ 8
Section 6.3 Right to Contest.............................................................. 8
ARTICLE 7. MAINTENANCE, REPAIRS AND ALTERATIONS............................................. 8
Section 7.1 Landlord's and Tenant's Improvements.......................................... 8
Section 7.2 Services to Be Furnished by Landlord.......................................... 8
Section 7.3 Tenant's Maintenance and Repairs.............................................. 9
Section 7.4 Tenant's Alterations.......................................................... 9
Section 7.5 Liens......................................................................... 9
ARTICLE 8. INSURANCE........................................................................ 10
Section 8.1 Use; Rate..................................................................... 10
Section 8.2 Liability Insurance........................................................... 10
Section 8.3 Worker's Compensation Insurance............................................... 10
Section 8.4 Casualty Insurance............................................................ 10
Section 8.5 Compliance With Regulations................................................... 10
Section 8.6 Waiver of Subrogation......................................................... 10
Section 8.7 General Requirements.......................................................... 10
Section 8.8 Blanket Insurance............................................................. 11
ARTICLE 9. DESTRUCTION AND CONDEMNATION..................................................... 11
Section 9.1 Total or Partial Destruction.................................................. 11
Section 9.2 Condemnation.................................................................. 12
Section 9.3 Sale Under Threat of Condemnation............................................. 13
ARTICLE 10. INDEMNITY AND WAIVER.............................................................. 13
Section 10.1 Indemnity..................................................................... 13
Section 10.2 Waiver........................................................................ 13
ARTICLE 11. DELAYS............................................................................ 14
Section 11.1 Delays........................................................................ 14
ARTICLE 12. ASSIGNMENT, SUBLEASE AND SUCCESSION............................................... 14
Section 12.1 Consent Required.............................................................. 14
Section 12.2 Landlord's Consent............................................................ 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 12.3 Terms of Assignment or Sublease; Profit on Approved Assignment................ 15
Section 12.4 General Conditions............................................................ 16
ARTICLE 13. SURRENDER OF POSSESSION........................................................... 17
Section 13.1 Surrender..................................................................... 17
Section 13.2 Condition at Time of Surrender................................................ 17
ARTICLE 14. HOLDING OVER...................................................................... 17
Section 14.1 Holding Over.................................................................. 17
ARTICLE 15. ENTRY BY LANDLORD................................................................. 17
Section 15.1 Entry by Landlord............................................................. 17
Section 15.2 Failure to Surrender.......................................................... 18
ARTICLE 16. SUBORDINATION..................................................................... 18
Section 16.1 Lease Subordinate To Mortgages................................................ 18
Section 16.2 Estoppel Certificates......................................................... 18
ARTICLE 17. DEFAULT AND REMEDY................................................................ 18
Section 17.1 Events of Tenant's Default.................................................... 18
Section 17.2 Remedies...................................................................... 19
Section 17.3 Reletting..................................................................... 20
Section 17.4 Default of Landlord........................................................... 20
Section 17.5 Non-Waiver.................................................................... 20
Section 17.6 Mortgagee Protection.......................................................... 21
ARTICLE 18. LIMITATION OF LIABILITY........................................................... 21
Section 18.1 Limitation of Landlord's Liability............................................ 21
Section 18.2 Applicability................................................................. 21
ARTICLE 19. NOTICES........................................................................... 21
Section 19.1 Notices....................................................................... 21
ARTICLE 20. HAZARDOUS SUBSTANCES.............................................................. 22
Section 20.1 Presence and Use of Hazardous Substances...................................... 22
Section 20.2 Landlord Indemnification...................................................... 22
Section 20.3 Cleanup Costs, Default and Indemnification.................................... 22
ARTICLE 21. MISCELLANEOUS..................................................................... 22
Section 21.1 Headings...................................................................... 22
Section 21.2 Amendments.................................................................... 22
Section 21.3 Time of the Essence........................................................... 22
Section 21.4 Entire Agreement.............................................................. 22
Section 21.5 Language...................................................................... 22
Section 21.6 Invalidity.................................................................... 23
Section 21.7 Late Charges.................................................................. 23
Section 21.8 [Not Used].................................................................... 23
Section 21.9 Computation of Time........................................................... 23
Section 21.10 Applicable Law................................................................ 23
Section 21.11 Attorneys' Fees............................................................... 23
Section 21.12 Termination................................................................... 23
Section 21.13 Broker's Commission........................................................... 23
Section 21.14 Signs or Advertising.......................................................... 23
Section 21.15 Transfer of Landlord's Interest............................................... 24
Section 21.16 Counterparts.................................................................. 24
Section 21.17 Quiet Enjoyment............................................................... 24
Section 21.18 Authority..................................................................... 24
Section 21.19 Name of Building.............................................................. 24
Section 21.20 Rules and Regulations......................................................... 24
Section 21.21 Consents...................................................................... 24
Section 21.22 Agency Disclosure............................................................. 24
Section 21.23 Lease Summary, Addendum and Exhibits.......................................... 24
Section 21.24 Survival...................................................................... 24
Section 21.25 Additional Provisions......................................................... 25
</TABLE>
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<PAGE>
Exhibits:
A - Tenant Floor Plan
B - Description of Property
C - Workletter
D - Rules and Regulations
E - Additional Provisions
F - Estoppel Certificate
G - Subordination
H - Parking Agreement
iii
<PAGE>
MERCER YALE BUILDING
OFFICE LEASE AGREEMENT
THIS OFFICE LEASE AGREEMENT is made as of this 9th day of December, 1999,
by and between BLUME YALE LIMITED PARTNERSHIP, a Washington limited partnership
(hereinafter referred to as "Landlord"), and ONVIA.COM INC., a Washington
corporation (hereinafter referred to as "Tenant").
LEASE SUMMARY
<TABLE>
<S> <C>
Section 1.1 The Building
(a) Name: Mercer Yale Building
(b) Address: 1260 Mercer Street
Seattle, Washington 98109
(c) Total Rentable Area of Building: 104,500 square feet
The Premises Collectively, the Stage I Premises and Stage II
Premises (as defined immediately below)
Stage I Premises
(a) Total Rentable Area: 51,000 square feet
(b) Floor Location: Third and Fourth
Stage II Premises
(a) Total Rentable Area: 25,500 square feet
(b) Floor Location: Second
Section 2.1 Use of Premises and
Tenant's Trade Name
(a) Tenant's Trade Name: Onvia.com
(b) Use of Premises: General Office
</TABLE>
Section 3.1 Lease Term
(a) Eighty-Four (84) months for Stage I Premises; Ninety-Six (96)
months for Stage II Premises
(b) Target Lease Commencement Date: March 1, 2000.
Section 4.1 Basic Rent
<TABLE>
<CAPTION>
Rent Per Rentable
Month(s) Monthly Rent Installment Sq. Ft. Per Year
-------- ------------------------ -----------------
<S> <C> <C>
1 - 24 $157,250.00 $24.00 (Stage I); $26.00 (Stage II)
25 - 48 $163,625.00 $25.00 (Stage I); $27.00 (Stage II)
49 - 72 $170,000.00 $26.00 (Stage I); $28.00 (Stage II)
73 - 84 $173,187.50 $26.50 (Stage I); $28.50 (Stage II)
85 - 96 $61,625.00 $29.00 (Stage II)
</TABLE>
1
<PAGE>
Section 4.2 Operating Expenses
<TABLE>
<S> <C>
(a) Tenant's Proportionate Share: 73.20%
Section 5.1 Prepaid Rent
(a) Prepaid Rent: $478,125.00
(b) Month(s) to which the
Prepaid Rent is applied: Month 01 ($157,250.00)
Month 13 ($157,250.00)
Month 25 ($163,625.00)
Section 19.1 Addresses for Notices
(a) Landlord: (b) Tenant:
Before Lease Commencement Date:
The Blume Company Onvia.com
2825 Eastlake Avenue East 1000 Dexter Avenue, Fourth Floor
Suite 115 Attn: Chief Financial Officer
Seattle, Washington 98102 Seattle, Washington 98109
After Lease Commencement Date:
Onvia.com
1260 Mercer Street, Suite 400
Attn: Chief Financial Officer
Seattle, Washington 98109
Section 21.25 Stipulated Parking Spaces: 2.50 parking spaces per 1,000 Rentable Square Feet.
</TABLE>
Section 21.13 Broker's Commission
<TABLE>
<S> <C>
(a) Landlord's Leasing
Representative
(Broker/Salesperson): Rich Mermelstein and Tim O'Keefe
(b) Landlord's Leasing
Representative (Firm): Colliers International
(c) Address: 601 Union Street, Suite 5300
Seattle, Washington 98101-4045
(d) Tenant's Leasing
Representative
(Broker/Salesperson): Dan Flinn and Stu Ford
(e) Tenant's Leasing
Representative (Firm): Flinn Ferguson
(f) Address: 601 Union Street, Suite 3636
Seattle, Washington 98101
</TABLE>
2
<PAGE>
MERCER YALE BUILDING
OFFICE LEASE AGREEMENT
ARTICLE 1. PREMISES
Section 1.1 Premises Defined. Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, upon the terms and conditions hereinafter set
forth, those certain premises and improvements consisting of the floor area and
the location described in the Lease Summary and designated on the plans attached
hereto as Exhibit A (hereinafter referred to as the "Premises"). The Premises
---------
are located in the building known as the Mercer Yale Building (the "Building")
which is situated in the City of Seattle, County of King, State of Washington
and located upon the real property described in Exhibit B (the "Property"). The
---------
Premises are comprised of the "Stage I Premises", which includes the Third and
Fourth Floors of the Building, and the "Stage II Premises", which includes the
Second Floor of the Building.
Section 1.2 Alterations. Landlord and Tenant acknowledge that Exhibit A
---------
sets forth the floor plan for the floor(s) of the Building on which the Premises
is located and the location of the Premises therein. Landlord may in its sole
discretion increase, decrease, or change the number, locations and dimensions of
any hallways, lobby areas and other improvements shown on Exhibit A that are not
---------
within the Premises. Landlord reserves the right from time to time (a) to
install, use, maintain, repair, relocate and replace pipes, ducts, conduits,
wires, and appurtenant meters and equipment for service to the Premises or to
other parts of the Building which are above the ceiling surfaces, below the
floor surfaces, within the walls and in the central core areas of the Building
which are located within the Premises or located elsewhere in the Building; (b)
to alter or expand the Building; and (c) to alter, relocate or substitute any of
the Common Areas, as defined in Section 1.4 below. Landlord further reserves the
-----------
right to install at any time vertical risers and associated duct work within
portions of the Premises designed to provide access between the roof of the
Building and all levels of the Building through existing "punch out" areas
located in the slab floors for the installation of cooling towers and other
equipment and apparatus servicing floors beneath the floors comprising the
Premises. Landlord agrees to execute any work permitted pursuant to this Section
-------
1.2 in a manner (x) designed to minimize disruption to Tenant's business
- ---
operations and (y) such that such work does not result in additional charges or
expenses to Tenant (except to the extent that the cost of such work constitutes
an Operating Expense pursuant to Section 4.2.6).
-------------
Section 1.3 Condition of Premises. The Premises are leased by Landlord and
accepted by Tenant in an "as is" condition, subject to any improvements,
alterations or modifications to be made pursuant to Article 7 below, and the
---------
requirement of Landlord to complete the improvements specified therein.
Section 1.4 Common Areas. So long as Tenant occupies the Premises under the
terms of this Lease, Tenant, its licensees, invitees, customers and employees
shall have the non-exclusive right to use all entrances, lobbies, and other
public areas of the Building (the "Common Areas") in common with Landlord, other
Building tenants, and their respective licensees, invitees, customers and
employees. The use of the Common Areas shall be subject to the terms and
conditions of this Lease.
ARTICLE 2. BUSINESS PURPOSE AND USE
Section 2.1 Permitted Uses. Tenant shall use the Premises solely for the
purposes specified in the Lease Summary, and for no other business or purpose
without the prior written consent of the Landlord.
Section 2.2 Prohibited Uses. Tenant shall not do or permit anything to be
done in or about the Premises, nor bring or keep anything therein, which will
(a) in any way increase the existing rate of or
1
<PAGE>
adversely affect any policy of fire or other insurance upon the Building or any
of its contents, or cause a cancellation of any insurance policy covering any
part thereof or any of its contents; (b) obstruct or interfere in any way with
the rights of other tenants or occupants of the Building or injure or
unreasonably annoy any of them; or (c) use or allow the Premises to be used for
any improper, unlawful or objectionable purposes. Tenant shall not cause,
maintain or permit any nuisance in, on or about the Premises, nor shall Tenant
commit or suffer to be committed any waste in, on or about the Premises. Tenant
shall not place upon or install in windows or other openings any signs, symbols,
drapes, or other material without written approval of Landlord (subject to
Tenant's right to install a sign on the Building as set forth in Exhibit E).
Tenant shall not place any object or barrier within, or otherwise obstruct, any
of the Common Areas.
Section 2.3 Compliance With Laws. Tenant shall at all times comply with all
laws, ordinances and any regulations promulgated by any governmental authority
having jurisdiction over the Building and/or the Premises. To the extent
Landlord is required by the City of Seattle to maintain carpooling and public
transit programs, Tenant shall use commercially reasonable efforts to cooperate
in the implementation and use of these programs by and among Tenant's employees.
ARTICLE 3. TERM
Section 3.1 Term. The term of this Lease shall commence on the first day of
the calendar month in which the earlier of the following dates occurs (such
first day of the calendar month shall be referred to as the "Lease Commencement
Date"):
3.1.1 The date the "Tenant Improvements" pertaining to the
Stage I Premises and which are described in Part II of Exhibit C are approved by
---------
the appropriate governmental agency as being in accordance with its building
code and the building permit issued for such improvements, as evidenced by the
issuance of a final building inspection approval; or
3.1.2 The date Landlord's architect and general contractor have
both certified in writing to Tenant that the Tenant Improvements pertaining to
the Stage I Premises which are described in Part II of Exhibit C have been
---------
substantially completed in accordance with the plans and specifications
therefor; or
3.1.3 The date that Tenant takes possession or beneficial
occupancy of all or any portion of the Premises.
provided, that if the first to occur of Sections 3.1.1, 3.1.2 or 3.1.3 above
------------------------------
falls on a day other than the first day of a calendar month, Tenant's rent and
other obligations pursuant to this Lease for the first month of the Lease Term
(as defined below) shall be prorated based upon the number of days from and
including the first to occur of Sections 3.1.1, 3.1.2 or 3.1.3 above to the end
------------------------------
of such first month.
From the Lease Commencement Date, the term of this Lease shall continue for the
time period specified in the Lease Summary, the expiration of which shall be the
Termination Date of this Lease, unless this Lease is sooner terminated as
hereinafter provided. The period between the Lease Commencement Date and the
Termination Date shall be referred to as the "Lease Term" or "Term". The
Landlord and Tenant acknowledge that certain obligations under the provisions of
this Lease may be binding upon them prior to the Lease Commencement Date, such
as, but not limited to, the provisions of Exhibit C, and Landlord and Tenant
---------
shall be bound by such provisions prior to the Lease Commencement Date. The Term
for the Stage I Premises is twelve (12) months shorter than the Term for the
Stage II Premises, as set forth in the Lease Summary. References in this Lease
to "Lease Term", "Term", and "Termination Date" shall refer to the Term as it
pertains to the Stage I Premises, Stage II Premises, or both, as the context
requires. Alternatively, terms such as "Stage I Lease Term", "Stage I
Termination Date", and so on, are sometimes used to identify the term or dates
particular to the Stage I Premises or Stage II Premises.
2
<PAGE>
Section 3.2 Lease Year. "Lease Year" shall mean that period of twelve (12)
consecutive months which ends on December 31 of each year and which falls within
the Term of this Lease; provided, however, the first Lease Year (which may be a
-------- -------
partial Lease Year) shall mean that period from the Lease Commencement Date
until the December 31 first occurring after the Lease Commencement Date and the
last Lease Year (which may be a partial Lease Year) shall mean that period from
the January 1st last occurring during the Term of this Lease until the
Termination Date.
Section 3.3 Possession by Tenant.
3.3.1 Landlord shall deliver to Tenant, and Tenant shall accept
from Landlord, possession of the Premises, upon the date of substantial
completion of the "Tenant Improvements" for the Stage I Premises described in
Part II of Exhibit C. Certification by Landlord's architect (the "Project
---------
Architect") and Landlord's general contractor as to the substantial completion
of the Tenant Improvements shall be conclusive and binding upon Landlord and
Tenant.
3.3.2 If Landlord cannot deliver possession of the Premises to
Tenant by the Target Lease Commencement Date, as specified in the Lease Summary,
then this Lease shall not be void or voidable, nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom, but in that event all Rent
shall be abated until the Landlord delivers possession of the Premises to Tenant
in the condition described in the first sentence of Section 3.3.1 (except to the
-------------
extent any such delay is caused by Tenant or anyone acting through or on behalf
of Tenant).
ARTICLE 4. RENTRENT
Section 4.1 Basic Rent. Tenant shall pay to Landlord as minimum rental for
the use and occupancy of the Premises the "Basic Rent" as specified in the Lease
Summary. Basic Rent shall be payable in Monthly Rent Installments of the amount
specified in the Lease Summary, on or before the first day of each month of the
Lease Term beginning on the Lease Commencement Date. Basic Rent for any partial
year shall be prorated based upon the actual number of months left in such
partial year. The Monthly Rent Installment for any partial month shall be
prorated based upon the actual number of days in that partial month. The Basic
Rent set forth in the Lease Summary shall not be adjusted (either upward or
downward) despite subsequent measurements of the rentable area of the Premises
which identify discrepancies between the actual area and that shown in the Lease
Summary.
Section 4.2 Operating Expenses.
4.2.1 This is a "triple net lease". With respect to each Lease
Year commencing with the first Lease Year, and commencing as of the Lease
Commencement Date, the Tenant shall pay, in monthly installments and as
"Additional Rent", an amount equal to the "Tenant's Proportionate Share" (as
hereinafter defined) of actual "Total Operating Expenses" (as hereinafter
defined). Notwithstanding anything herein to the contrary, Tenant shall in no
event pay less than the Basic Rent in any calendar year.
4.2.2 "Tenant's Proportionate Share" shall be computed by
dividing the Total Rentable Area of the Premises by the Total Rentable Area of
the Building. Tenant's Proportionate Share upon the Lease Commencement Date for
the entire Premises is as specified in the Lease Summary.
4.2.3 "Rentable Area of the Building" and "Rentable Area of the
Premises" are defined as those areas obtained by measuring the Building and
Premises using Landlord's method of measurement, which method is based
substantially on the method of measuring floor area in office buildings
specified in the American National Standard Publication ANSI/BOMA Z65.1-1996
published by the Building Owners and Managers Association International
(otherwise known as "BOMA Standard"). The Total Rentable Area of the Building
and Total Rentable Area of the Premises, as of the Lease Commencement Date, are
as specified in the Lease Summary. The Total Rentable Area of the Premises
3
<PAGE>
exceeds the usable area of the Premises to include a pro rata share of hallways,
restrooms, and other common elements located on the floor on which the Premises
are located.
4.2.4 Landlord shall provide Tenant with a written estimate of
Total Operating Expenses for the first Lease Year not later than the Lease
Commencement Date. Landlord shall provide Tenant with a written estimate of
Total Operating Expenses for each succeeding year not later than sixty (60) days
after the start of each Lease Year during the Lease Term. Tenant shall then pay
to Landlord, monthly in advance, one-twelfth (1/12) of Tenant's Proportionate
Share of the estimated Total Operating Expenses for the said Lease Year. In the
event any item of actual Operating Expenses, including without limitation those
items identified in subparagraph 4.2.6 below, increases five percent (5%) or
------------------
more in price or cost over any twelve (12) month period, Landlord shall have the
option to proportionally increase the amount of Tenant's monthly remittance on
account of any such increase upon thirty (30) days' written notice from Landlord
to Tenant.
4.2.5 Within one hundred twenty (120) days after the end of
every Lease Year during the Lease Term, Landlord shall provide the Tenant with a
written statement of the actual Total Operating Expenses for that Lease Year. If
the actual Total Operating Expenses should exceed the estimated amount with
respect to such Lease Year, then Tenant shall pay Landlord the additional amount
due to the Landlord within thirty (30) days and, if actual Total Operating
Expenses should be less than the estimated Total Operating Expenses for that
Lease Year, then Landlord shall credit, against future Additional Rent due under
this Article, the amount of any overpayment by Tenant; provided, that if any
overpayment by Tenant exists at the Termination Date, Landlord shall remit to
Tenant the amount of any such overpayment within thirty (30) days of the date of
determination.
4.2.6 "Operating Expenses" as used herein shall mean all costs,
expenses and other charges incurred by Landlord in connection with the
ownership, operation, repair and maintenance of the Property and the Building as
an office building in Seattle, Washington, including but not limited to:
4.2.6.1 Wages, salaries and fringe benefits of all employees
and contractors engaged in the management, operation and maintenance of the
Property and/or the Building (but only to the extent so engaged); employer's
Social Security taxes, unemployment taxes or insurance, and any other taxes
which may be levied against Landlord on those wages and salaries; and the cost
to Landlord of disability and hospitalization insurance and pension or
retirement benefits for these employees;
4.2.6.2 All supplies and materials used in the operation and
maintenance of the Property and/or the Building;
4.2.6.3 Cost of water and power, and cost of heating, lighting,
air conditioning and ventilating the Building, the Common Areas and the
Premises, which costs shall be based on either Tenant's Proportionate Share or
separately allocated to the Premises, at Landlord's option, based upon either
direct usage, if separately metered, or an appropriate allocation among all
tenants consuming those services as measured from the meter monitoring this
usage;
4.2.6.4 The electrical costs incurred in the operation of the
"chiller" for the Building, which shall be allocated pro rata among the Building
tenants;
4.2.6.5 Cost of maintenance, depreciation and replacement of
machinery, tools and equipment (if owned by Landlord) and for rental paid for
such machinery, tools and equipment (if rented) used in connection with the
operation or maintenance of the Building maintenance (except that if such
equipment is used at a location other than the Property, all costs attributable
to such equipment shall be allocated proportionately to the Property based on
the ratio of the number of hours of operation at the Property during a specific
time period [such as a month, Lease Year, calendar year or fiscal year] divided
by the total number of hours of operation of such equipment at all locations
during the same time period);
4
<PAGE>
4.2.6.6 All premiums and deductibles on policies of
compensation, public liability, property damage, automobile, garage keepers,
rental loss and any other policies of insurance maintained by Landlord with
respect to the Property, Building or any insurable interest therein. Cost of
casualty and liability insurance applicable to the Property and/or the Building,
the improvements therein, and Landlord's personal property used in connection
therewith;
4.2.6.7 Cost of janitorial services, repairs and general
maintenance;
4.2.6.8 Any capital improvements made or installed (a) to be in
compliance with any applicable government statutes, ordinances, regulations or
other requirements, and (b) for purposes of saving labor or otherwise reducing
applicable operating costs amortized over the useful life of such improvements,
as determined by Landlord in accordance with generally accepted accounting
principles and practices in effect at the time of acquisition of the capital
item;
4.2.6.9 Costs in connection with maintaining and operating any
garage owned by the Landlord for use by tenants of the Building;
4.2.6.10 All taxes and assessments and governmental charges
whether federal, state, county or municipal and any other taxes and assessments
attributable to the Property and/or the Building or its operation, including
without limitation real property taxes and assessments and any tax or other
levy, however denominated, on or measured by the rental collected by the
Landlord with respect to the Building, or on Landlord's business of leasing the
Building, but excluding federal and state taxes on income and corporate
franchise taxes (Any such assessments which are payable in installments shall
only be included in Operating Expenses to the extent Landlord had elected to pay
the same over the longest installment permitted by the jurisdiction imposing
such assessment and Tenant shall not be responsible for the portion thereof
attributable to periods not included in the Lease Term. If at any time during
the Lease Term a tax, license fee or excise on rents or other tax, however
described, is levied or assessed against Landlord on account of the rent
expressly reserved hereunder, as a substitute in whole or in part for taxes
levied or assessed on land and buildings or on land or buildings, such tax or
excise on rents or other tax shall be included within the definition of
Operating Expenses, but only to the extent of the amount thereof which is
lawfully levied, assessed or imposed as a direct result of Landlord's ownership
of this Lease or of the rentals accruing under this Lease);
4.2.6.11 The cost of maintaining any public transit system,
vanpool, or other public or semi-public transportation imposed upon Landlord's
ownership and operation of the Building;
4.2.6.12 Cost of all accounting and other professional fees
incurred in connection with the operation of the Property and/or the Building;
4.2.6.13 A management fee, not to exceed current market rates,
which may be payable to the Landlord;
4.2.6.14 Cost of replacing lamps, bulbs, starters and ballasts
used in the Building, other than those for which the cost is billed directly to
a tenant.
Notwithstanding the foregoing, Operating Expenses shall not include
expenses for which the Landlord is reimbursed or indemnified (either by an
insurer, condemnor, tenant or otherwise); expenses incurred in leasing or
procuring tenants (including, without limitation, lease commissions, legal
expenses, advertising costs, and expenses of renovating space for tenants);
legal, accounting and other expenses arising out of disputes with tenants or
other occupants of the Building, the enforcement of the provisions of any lease
of space in the Building or the defense of Landlord's title to or interest in
the Property, Building or any portion of either; fines or penalties incurred due
to violations by Landlord of any governmental rule or authority; provided that
if, as a consequence of any such violation, Landlord is required to incur costs
on an ongoing basis which are in the nature of Operating Expenses as described
herein, such
5
<PAGE>
costs shall be included in Operating Expenses; except as provided in Section
-------
4.2.6.1, Landlord's general corporate overhead and general administrative
- -------
expenses (excluding reimbursement of out-of-pocket costs for postage,
photocopies, and telephone costs incurred in operating the Building); interest
or amortization payments on any mortgage or mortgages, and rental under any
ground or underlying lease or leases; costs of any work or service performed for
or facilities furnished to a tenant at the tenant's cost; the cost of correcting
defects (latent or otherwise) in the construction, design, workmanship or
material of the Building, except those conditions (not occasioned by
construction defects) resulting from wear and tear shall not be deemed defects;
and costs of capital improvements and depreciation and amortization (except as
provided in Section 4.2.6.8 or otherwise above). Landlord and Tenant shall each
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from time to time upon request of the other sign a written memorandum confirming
the amount of the Additional Rent as adjusted from time to time hereunder.
Landlord shall not collect in excess of one hundred percent (100%) of the Total
Operating Expenses for any Lease Year and shall not recover any item of cost
more than once. In computing Operating Expenses for any period, if less than one
hundred percent (100%) of the rentable square feet of the Building are occupied
by tenants during such period, the amount of Operating Expenses will be deemed
to be increased to an amount equal to the like Operating Expenses which would
have been incurred in Landlord's reasonable judgment had such occupancy been one
hundred percent (100%) of the rentable square feet of the Building during such
period.
4.2.7 Tenant shall have the right, upon fulfillment of the
conditions set forth below, to conduct one (1) audit of the Landlord's books and
records covering the Operating Expenses for a particular calendar year to verify
the accuracy of the Landlord's determination of the Operating Expenses for such
period. The conditions which must be met before Tenant shall have the right to
audit the books and records of a particular calendar year are as follows:
4.2.7.1 Tenant must provide Landlord not less than thirty (30)
days' prior written notice of the Tenant's election to audit (the "Tenant's
Notice of Audit"), together with the information concerning the auditor as
outlined in subsection 4.2.7.4 below, which Tenant's Notice of Audit and
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information must be delivered to Landlord within thirty (30) days after Tenant's
receipt of the Landlord's statement of actual Operating Expenses for a
particular calendar year.
4.2.7.2 Tenant's audit must be undertaken and completed by
Tenant or its agents at reasonable times during Landlord's normal business hours
at the place where the Landlord's records are kept. Said audit must be commenced
within ninety (90) days of Tenant's receipt of the Landlord's statement of
Operating Expenses for a particular calendar year and completed within a
reasonable time of commencement.
4.2.7.3 Tenant shall not entitled to conduct an audit if
Landlord has delivered written notice to Tenant that Tenant is in default under
this Lease.
4.2.7.4 At the time the Tenant delivers its Tenant's Notice of
Audit to Landlord, the Tenant shall also provide evidence that the audit will be
a "fair and true audit." For the purposes hereof, the term "fair and true audit"
shall mean that the review of the subject books and records shall be undertaken
and completed by the Tenant, its officers or employees, or by an independent
accounting firm being paid on an hourly basis and that in no event will the
party auditing the books (or that party's employer or principal) directly or
indirectly base the compensation or fees for such audit work upon a percentage
of the savings found or the return due the Tenant by reason of that audit.
4.2.7.5 The Tenant's rights to audit the Landlord's books and
records shall be strictly limited to the right set forth above and the Tenant
shall have no right to audit any of the Landlord's books or records for any
calendar year before or after the Lease Term or for any calendar year other than
the immediately preceding calendar year as set forth above. All costs and
expenses of the audit shall be borne solely by the Tenant.
4.2.7.6 A true and correct copy of the audit shall be delivered
to the Landlord within fifteen (15) days of the completion of such audit if
Tenant requests a credit for overpayment. Any overpayment shown by such audit
shall be subject to the Landlord's prompt verification
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and, upon such verification, shall be given to the Tenant as a credit against
Operating Expenses next falling due or, if after the expiration of the Term,
shall be promptly paid directly to Tenant.
Section 4.3 Rent. The terms "Rent" and "Rental" as used in this Lease shall
mean all amounts to be paid hereunder by Tenant whether those sums are
designated as Basic Rent or Additional Rent and as adjusted by the terms of this
Lease. Failure by Tenant to pay any sum of Rent due under this Article 4 shall
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entitle Landlord to pursue any or all remedies specified in this Lease as well
as remedies specified in RCW Chapter 59.12 or otherwise allowed by law.
Section 4.4 Place of Payment. All Rent shall be paid to the Landlord on or
before the first day of each calendar month at the address to which notices to
Landlord are to be given. All Rental payments to be made hereunder, whether
Basic Rent, or Additional Rent or otherwise, are to be made without deduction,
setoff, prior notice or demand by Landlord.
ARTICLE 5. PREPAID RENTPREPAID RENT
Section 5.1 Prepaid Rent. Contemporaneously with Tenant's execution of this
Lease, Tenant shall pay to Landlord the sum set forth as Prepaid Rent in the
Lease Summary to be applied to Basic Rent for the month during the Term hereof
as specified in the Lease Summary. In the event Tenant defaults under the terms
of this Lease prior to the application of the Prepaid Rent, such sums shall not
be applicable to the Basic Rent as set forth in the Lease Summary but shall be
held by Landlord as a security deposit for the full and faithful performance of
every provision of this Lease to be performed by Tenant.
ARTICLE 6. TAXESTAXES
Section 6.1 Personal Property Taxes. Tenant shall pay before delinquency
all license fees, public charges, property taxes and assessments on the
furniture, fixtures, equipment and other property of or being used by Tenant at
any time situated on or installed in the Premises.
Section 6.2 Business Taxes. Tenant shall pay before delinquency all taxes
and assessments or license fees levied, assessed or imposed by law or ordinance,
by reason of the use of the Premises for the specific purposes set forth in this
Lease.
Section 6.3 Right to Contest. Notwithstanding the foregoing, Tenant shall
have the right to contest the validity or amount of any taxes, assessments,
duties or fees contemplated by Sections 6.1 or 6.2 as long as Tenant first
-------------------
provides such security in lieu of payment as Landlord may reasonably require and
Landlord's interest in the Premises or the Property is not rendered subject to
forfeiture, sale or disturbance. In such case, during the bona fide period of
such contest, Tenant will not be in default hereunder. However, upon final
determination of such contest, Tenant must immediately pay the amount found to
be due thereby, if any, together with all costs, penalties or interest. After
such payment, Tenant will be entitled to the release of any security.
ARTICLE 7. MAINTENANCE, REPAIRS AND ALTERATIONSMAINTENANCE,
REPAIRS AND ALTERATIONS
Section 7.1 Landlord's and Tenant's Improvements. Landlord and Tenant
shall, each at its own expense, complete and install in a good and workmanlike
manner within the Stage I Premises those items specified as the "Landlord's
Work" and "Tenant's Work", respectively, on Exhibit C attached hereto.
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Section 7.2 Services to Be Furnished by Landlord. Provided Tenant is
not in default under any of the provisions of this Lease, and subject to
reimbursement pursuant to Section 4.2 above, Landlord shall provide the
------------
following services during standard hours of operation of the Building. These
standard hours of operation are 8 a.m. to 6 p.m., Monday through Friday.
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7.2.1 Public utilities shall be caused to furnish the Premises
with electricity and water utilized in operating any and all facilities serving
the Premises;
7.2.2 Hot and cold water at those points of supply provided for
general use of other tenants in the Building, central heat and air conditioning
in season, at such times as Landlord normally furnishes these services to other
tenants in the Building and at temperatures and in amounts as are considered by
Landlord to be standard, but this service at times during the weekdays at other
than standard hours of operation for the Project, on weekends and holidays shall
be furnished only upon request of Tenant, who shall bear the entire costs
thereof in respect to the Premises;
7.2.3 Routine maintenance, painting and electric lighting
service for all Common Areas and special service areas of the Building in the
manner and to the extent deemed by Landlord to be standard and consistent with
the operation and maintenance of the Building as a first-class office building
in Seattle, Washington;
7.2.4 Janitorial service on a five (5) day week basis,
excluding Fridays, Saturdays, and legal holidays;
7.2.5 Electrical facilities to provide sufficient power for
typewriters, personal computers and other small office machines of similar low
electrical consumption, but not including electricity required for electronic
data processing equipment, special lighting in excess of building standard, and
any other item of electrical equipment which (itself) consumes more than .5
kilowatts per hour at rated capacity or requires a voltage other than 120 volts
single phase per square foot. If any electrical equipment installed in the
Premises requires air conditioning capacity above that provided by the building
standard system, then the additional air conditioning installation and
corresponding operating costs will be the separate obligation of the Tenant; and
7.2.6 Security for the Building; provided, however, Landlord
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shall not be liable to Tenant or any employee, invitee, licensee or sublessee of
Tenant for bodily injury, property damage, or other losses or damages due to
theft, burglary, or other criminal activities occurring in or about the
Building.
In the event Tenant desires any of the aforementioned services in amounts in
excess of those deemed by Landlord to be "standard" and in the event Landlord
elects to provide these additional services, Tenant shall pay Landlord as
Additional Rent hereunder the cost of providing these additional services.
Failure by Landlord to any extent to furnish any of the above services, or any
cessation thereof, resulting from causes beyond the control of Landlord, shall
not render Landlord liable in any respect for damages to either person or
property, nor shall that event be construed as an eviction of Tenant, nor result
in an abatement of Rent, nor relieve Tenant from any of Tenant's obligations
hereunder (including, but not limited to, the payment of Rent). Should any of
the equipment or machinery utilized in supplying the services listed herein for
any cause cease to function properly, Landlord shall use commercially reasonable
diligence to repair that equipment or machinery promptly, but Tenant shall have
no right to terminate this Lease, and shall have no claim for a reduction,
abatement or rebate of Rent or damages on account of any interruption in service
occasioned thereby or resulting therefrom.
Section 7.3 Tenant's Maintenance and Repairs. Tenant shall be obligated to
maintain and to make all repairs, replacements or additions of any kind
whatsoever to all personal property located within the Premises and to all trade
fixtures, furnishings and carpet located within the Premises. Tenant shall keep
all such items in good condition, subject to ordinary wear and tear. Tenant also
shall be responsible for maintaining and replacing all specialty lamps, bulbs,
starters and ballasts.
Section 7.4 Tenant's Alterations. Subject to Landlord's prior written
approval, Tenant may make, at its expense, additional improvements or
alterations to the Premises which it may deem necessary or desirable. Landlord's
approval to any improvements or alterations may be withheld in Landlord's sole
discretion if such improvements or alterations require any other alteration,
addition, or improvement to be performed or made to any portion of the Building
other than the Premises. Any
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repairs or new construction by Tenant shall be done in compliance with all
applicable laws, rules, and regulations (including, without limitation, the
Americans with Disabilities Act of 1990 (the "ADA")) and in conformity with
plans and specifications approved by Landlord and shall be performed by a
licensed contractor approved by Landlord; provided, however, Landlord's consent
to any alterations or improvements, or Landlord's approval of plans and
specifications for such alterations or improvements shall create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules, and regulations
(including, without limitation, the ADA). If requested by Landlord, Tenant shall
post a bond or other security satisfactory to Landlord to protect Landlord
against liens arising from work performed for Tenant. All work performed shall
be done in a workmanlike manner and with materials of the quality and appearance
as exist throughout the Building. Landlord may require Tenant to remove and
restore any improvements or alterations on the termination of this Lease in
accordance with Section 13.2 below.
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Section 7.5 Liens. Tenant shall keep the Premises and the Building free
from any liens arising out of any work performed, material furnished, or
obligations incurred by Tenant. If Tenant disputes the correctness or validity
of any claim of lien, Tenant shall, within ten (10) days after written request
by Landlord, post or provide security in a form and amount acceptable to
Landlord to insure that title to the Property remains free from the lien
claimed.
ARTICLE 8. INSURANCEINSURANCE
Section 8.1 Use; Rate. Tenant shall not do anything in or about the
Premises which will in any way tend to increase insurance rates paid by Landlord
on policies of liability or casualty insurance maintained with respect to the
Building and/or Property. In no event shall Tenant carry on any activities which
would invalidate any insurance coverage maintained by Landlord.
Section 8.2 Liability Insurance. Tenant shall during the Lease Term, at its
sole expense, maintain in full force a policy or policies of commercial general
liability insurance issued by one or more insurance carriers, insuring against
liability for injury to or death of persons and loss of or damage to property
occurring in or on the Premises and any portion of the Common Area which is
subject to Tenant's exclusive control. Said liability insurance shall be in an
amount not less than Two Million Dollars ($2,000,000.00) combined single limit
for bodily and personal injury and property damage per occurrence and not less
than Five Million Dollars ($5,000,000.00) in the aggregate.
Section 8.3 Worker's Compensation Insurance. Tenant shall at all times
maintain Worker's Compensation Insurance in compliance with Washington law.
Section 8.4 Casualty Insurance. Tenant shall pay for and shall maintain in
full force and effect during the Term of this Lease a standard form policy or
policies of property and all-risk coverage with an extended coverage endorsement
covering all interior and storefront glass, whether plate or otherwise, stock in
trade, trade fixtures, equipment, and other personal property located in the
Premises and used by Tenant in connection with its business.
Section 8.5 Compliance With Regulations. Tenant shall, at its own expense,
comply with all requirements, including installation of fire extinguishers, or
automatic dry chemical extinguishing systems, required by insurance underwriters
or any governmental authority having jurisdiction thereover, necessary for the
maintenance of reasonable fire and extended insurance for the Premises and/or
Building.
Section 8.6 Waiver of Subrogation. Any property and all-risk coverage
insurance carried by Landlord or Tenant insuring, in whole or in part, the
Building and/or the Premises, including improvements, alterations and changes in
and to the Premises made by either of them, and Tenant's trade fixtures therein
shall be written in such a manner as to permit the waiver of rights of
subrogation prior to loss by either party against the other in connection with
loss or damage covered by the policies involved. So long as the policy or
policies can be so written and maintained in effect, neither Landlord nor
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Tenant shall be liable to the other for any such loss or damage. Either party
shall, upon request by the other party, furnish such other party evidence of its
compliance with this Section 8.6.
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Section 8.7 General Requirements.
8.7.1 All policies of insurance required to be carried
hereunder by Tenant shall be written by companies licensed to do business in
Washington and which have A.M. Best rating of not less than A:XIII or better in
the "Best's Key Rating Guide". Tenant shall, when requested by Landlord, furnish
Landlord with a certificate evidencing insurance required to be maintained by
Tenant pursuant to this Article 8 and shall satisfy Landlord that each such
---------
policy is in full force and effect.
8.7.2 The commercial general liability insurance required to be
carried under Section 8.2 above shall be primary and non-contributing with the
insurance carried by Landlord.
8.7.3 Each policy required under Sections 8.2 and 8.4 shall
--------------------
expressly include, severally and not collectively, as named or additionally
named insured thereunder, the Landlord, Landlord's property manager, and any
person or firm designated by the Landlord and having an insurable interest
thereunder, hereinafter called "Additional Insured," as their respective
interests may appear.
8.7.4 All insurance policies maintained by Tenant shall not be
subject to cancellation in coverage except upon at least thirty (30) days' prior
written notice to Landlord. The policies of insurance or duly executed Accord
Form 27, Evidence of Property Insurance Forms evidencing such policies, together
with satisfactory evidence of the payment of premiums thereon, shall be
deposited with Landlord.
8.7.5 If the Tenant fails to procure and maintain insurance as
required by this Article 8, the Landlord may obtain such insurance and keep it
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in effect, and the Tenant shall pay to Landlord the premium cost thereof, upon
demand and as Additional Rent, with interest as provided in Section 21.7 below
------------
from the date of payment by the Landlord to the date of repayment by the Tenant.
8.7.6 The limits of any insurance maintained by Tenant pursuant
to this Article 8 shall in no way limit the liability of Tenant under this
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Lease.
Section 8.8 Blanket Insurance. The Tenant may fulfill its insurance
obligations hereunder by maintaining a so-called "blanket" policy or policies of
insurance in a form that provides by specific endorsement coverage not less than
that which is required hereunder for the particular property or interest
referred to herein; provided, however, that the coverage required by this
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Article 8 will not be reduced or diminished by reason of use of such blanket
- ---------
policy of insurance.
ARTICLE 9. DESTRUCTION AND CONDEMNATION
Section 9.1 Total or Partial Destruction.
9.1.1 In the event the Building and/or the Premises is damaged
by fire or other perils covered by Landlord's insurance, Landlord shall:
9.1.1.1 In the event of Total Destruction, either Landlord or
Tenant may elect to terminate this Lease by written notice delivered to the
other not later than sixty (60) days after the event causing the Total
Destruction. In the event neither party delivers such notice, the Lease shall
remain in effect, subject to the remaining provisions of this Section 9.1. As
-----------
used herein, the term "Total Destruction" means damage to the Building and/or
Premises exceeding fifty percent (50%) of the full insurable value thereof.
9.1.1.2 In the event of partial destruction of the Building
and/or the Premises, to an extent not exceeding fifty percent (50%) of the full
insurable value thereof, and if the damage thereto is such that the Building
and/or the Premises may be repaired, reconstructed or restored
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<PAGE>
within a period of ninety (90) days from the date of the discovery of such
casualty, and if Landlord will receive insurance proceeds sufficient to cover
the cost of such repairs, then Landlord shall commence and proceed diligently
with the work of repair, reconstruction and restoration and this Lease shall
continue in full force and effect. If such work of repair, reconstruction and
restoration shall require a period longer than ninety (90) days or exceeds fifty
percent (50%) of the full insurable value thereof, or if said insurance proceeds
will not be sufficient to cover the cost of such repairs, then Landlord either
may elect to so repair, reconstruct or restore and the Lease shall continue in
full force and effect or Landlord may elect not to repair, reconstruct or
restore and the Lease shall then terminate. Under any of the conditions of this
Section 9.1.1.2, Landlord shall give written notice to Tenant of its intention
- ---------------
within sixty (60) days after Landlord's discovery of such partial destruction.
In the event Landlord elects not to restore the Building and/or the Premises,
this Lease shall be deemed to have terminated as of the date possession of the
Premises is surrendered to Landlord.
9.1.2 Upon any termination of this Lease under any of the
provisions of this Section 9.1, the parties shall be released without further
-----------
obligation to the other from the date possession of the Premises is surrendered
to Landlord except for items which have therefore accrued and are then unpaid.
9.1.3 In the event of repair, reconstruction and restoration by
Landlord as herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration;
provided that there shall be no abatement of rent if such damage is the result
of Tenant's negligence or intentional wrongdoing. Tenant shall not be entitled
to any compensation or damages for loss in the use of the whole or any part of
the Premises and/or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration. Tenant shall not be released from any of
its obligations under this Lease except to the extent and upon the conditions
expressly stated in this Section 9.1. Notwithstanding anything to the contrary
-----------
contained in this Section 9.1, if Landlord is delayed or prevented from
-----------
repairing or restoring the damaged Premises within one (1) year after the
discovery of such damage or destruction by reason of acts of God, war,
governmental restrictions, inability to procure the necessary labor or
materials, or other cause beyond the control of Landlord, Landlord, at its
option, may terminate this Lease, whereupon Landlord shall be relieved of its
obligation to make such repairs or restoration and Tenant shall be released from
its obligations under this Lease as of the end of said one year period.
9.1.4 If damage is due to any cause other than fire or other
peril covered by extended coverage insurance, Landlord may elect to terminate
this Lease.
9.1.5 If Landlord is obligated to or elects to repair or
restore as herein provided, Landlord shall be obligated to make repair or
restoration only of those portions of the Building and the Premises which were
originally provided at Landlord's expense, and the repair and restoration of
items not provided at Landlord's expense shall be the obligation of Tenant.
9.1.6 Notwithstanding anything to the contrary contained in
this Section 9.1, Landlord shall not have any obligation whatsoever to repair,
-----------
reconstruct or restore the Premises when the damage resulting from any casualty
covered under this Section 9.1 is discovered during the last twelve (12) months
-----------
of the Stage II Term of this Lease or any extension hereof.
9.1.7 Landlord and Tenant hereby waive the provisions of any
statutes or court decisions which relate to the abatement or termination of
leases when leased property is damaged or destroyed and agree that such event
shall be exclusively governed by the terms of this Lease.
Section 9.2 Condemnation. If the whole of the Building or the Premises, or
such portion thereof as shall be required for its reasonable use, shall be taken
by virtue of any condemnation or eminent domain proceeding, this Lease shall
automatically terminate as of the date of the condemnation, or as of the date
possession is taken by the condemning authority, whichever is later. Current
Rent shall be apportioned as of the date of the termination. In case of a taking
of a part of the Building not required
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for the reasonable use of the Premises, then this Lease shall continue in full
force and effect and the Rental shall be equitably reduced based upon the
proportion by which the Rentable Area of the Premises is reduced. This Rent
reduction shall be effective on the date of the partial taking. No award,
settlement in lieu of an award, or any partial or entire taking shall be
apportioned, and Tenant hereby assigns to Landlord any award or settlement in
lieu of an award which may be made in the taking or condemnation proceeding,
together with any and all rights of Tenant now or hereafter arising in or to the
same or any part thereof; provided that nothing herein shall prevent Tenant from
making a separate claim against the condemning authority for the taking of
Tenant's personal property and/or moving costs so long as such claim in no way
affects the award to be received by Landlord.
Section 9.3 Sale Under Threat of Condemnation. A sale by Landlord to any
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed to
be a taking under the power of eminent domain for all purposes under this
Article 9.
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ARTICLE 10. INDEMNITY AND WAIVERINDEMNITY AND WAIVER
Section 10.1 Indemnity.
10.1.1 Tenant, as a material part of the consideration to be
rendered to Landlord, and subject to subsection 10.1.2 below, hereby agrees to
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defend, indemnify, and hold Landlord harmless against any and all claims, costs,
and liabilities, including reasonable attorneys' fees and costs (including costs
and fees associated with any lawsuit or appeal), arising by reason of any injury
or claim of injury to person or property, of any nature and howsoever caused,
arising out of the use, occupation and/or control of the Premises, or from any
breach of the terms of this Lease, or any violation of any governmental or
insurance requirements by Tenant, its sublessees, assignees, invitees, agents,
employees, contractors, or licensees, except and to the extent as may arise out
of the willful or negligent acts of Landlord or Landlord's agents, employees or
contractors.
10.1.2 In the event of concurrent negligence of Tenant, its
sublessees, assignees, invitees, agents, employees, contractors, or licensees on
the one hand, and that of Landlord, its agents, employees, or contractors on the
other hand, which concurrent negligence results in injury or damage to persons
or property of any nature and howsoever caused, and relates to the construction,
alteration, repair, addition to, subtraction from, improvement to or maintenance
of the Premises, Common Areas, or Building, Tenant's obligation to indemnify
Landlord as set forth in this Section 10.1 shall be limited to the extent of
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Tenant's negligence, and that of Tenant's sublessees, assignees, invitees,
agents, employees, contractors or licensees, including Tenant's proportional
share of costs, attorneys' fees and expenses incurred in connection with any
claim, action or proceeding brought with respect to such injury or damage.
Tenant agrees that it will not assert its industrial insurance immunity if such
assertion would be inconsistent with Landlord's right to indemnification from
Tenant pursuant to this Section 10.1. The parties agree that this provision was
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mutually negotiated.
Section 10.2 Waiver. All property kept, stored or maintained on
the Premises shall be so kept, stored or maintained at the sole risk of Tenant.
Except in the case of Landlord's negligence or willful misconduct, Landlord
shall not be liable, and Tenant waives all claims against Landlord, for damages
to persons or property sustained by Tenant or by any other person or firm
resulting from the Building or by reason of the Premises or any equipment
located therein becoming out of repair, or through the acts or omissions of any
persons present in the Building (including the Common Areas) or renting or
occupying any part of the Building (including the Common Areas), or for loss or
damage resulting to Tenant or its property from burst, stopped or leaking
sewers, pipes, conduits, or plumbing fixtures, or for interruption of any
utility services, or from any failure of or defect in any electric line,
circuit, or facility, or any other type of improvement or service on or
furnished to the Premises or the Common Areas or resulting from any accident in,
on, or about the Premises or the Common Areas.
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ARTICLE 11. DELAYS
Section 11.1 Delays. If either party is delayed in the performance of any
covenant of this Lease because of any of the following causes (referred to
elsewhere in this Lease as a "Delaying Cause"): acts of the other party, action
of the elements, war, riot, labor disputes, inability to procure or general
shortage of labor or materials in the normal channels of trade, delay in
transportation, delay in inspections, or any other cause beyond the reasonable
control of the party so obligated, whether similar or dissimilar to the
foregoing, financial inability excepted, then that performance shall be excused
for the period of the delay but shall in no way affect Tenant's obligation to
pay Rent or the length of the Lease Term.
ARTICLE 12. ASSIGNMENT, SUBLEASE AND SUCCESSIONASSIGNMENT,
SUBLEASE AND SUCCESSION
Section 12.1 Consent Required. Tenant shall not voluntarily or by operation
of law, (1) mortgage, pledge, hypothecate or encumber this Lease or any interest
herein, (2) assign or transfer this Lease or any interest herein, sublease the
Premises or any part thereof, or any right or privilege appurtenant thereto, or
allow any other person (the employees and invitees of Tenant excepted) to occupy
or use the Premises, or any portion thereof, without first obtaining the written
consent of Landlord, which consent shall not be withheld unreasonably as set
forth below in this Section 12, provided that (i) Tenant is not then in default
----------
under this Lease nor is any event then occurring which with the giving of notice
or the passage of time, or both, would constitute a default hereunder, and (ii)
Tenant has not previously assigned or transferred this Lease or any interest
herein or subleased the Premises or any part thereof. When Tenant requests
Landlord's consent to such assignment or subletting, it shall notify Landlord in
writing of the name and address of the proposed assignee or subtenant and the
nature and character of the business of the proposed assignee or subtenant and
shall provide current and prior financial statements for the proposed assignee
or subtenant, which financial statements shall be audited to the extent
available and shall in any event be prepared in accordance with generally
accepted accounting principles. Tenant shall also provide Landlord with a copy
of the proposed sublease or assignment agreement, including all material terms
and conditions thereof. Landlord shall have the option, to be exercised within
thirty (30) days of receipt of the foregoing, to (1) terminate this Lease as of
the commencement date stated in the proposed sublease or assignment, (2)
sublease or take an assignment, as the case may be, from Tenant of the interest,
or any portion thereof, in this Lease and/or the Premises that Tenant proposes
to assign or sublease, on the same terms and conditions as stated in the
proposed sublet or assignment agreement, (3) consent to the proposed assignment
or sublease, or (4) refuse its consent to the proposed assignment or sublease,
providing that such consent shall not be unreasonably withheld so long as Tenant
is not then in default under this Lease nor is any event then occurring which
with the giving of notice or the passage of time, or both, would constitute a
default hereunder. In the event Landlord elects to terminate this Lease or
sublease or take an assignment from Tenant of the interest, or portion thereof,
in the Lease and/or the Premises that Tenant proposes to assign or sublease as
provided in the foregoing clauses (1) and (2), respectively, then Landlord shall
have the additional right to negotiate directly with Tenant's proposed assignee
or subtenant and to enter into a direct lease or occupancy agreement with such
party on such terms as shall be acceptable to Landlord in its sole and absolute
discretion, and Tenant hereby waives any claims against Landlord related
thereto, including, without limitation, any claims for any compensation or
profit related to such lease or occupancy agreement.
Section 12.2 Landlord's Consent. Without otherwise limiting the criteria
upon which Landlord may withhold its consent, Landlord shall be entitled to
consider all reasonable criteria including, but not limited to, the following:
(1) whether or not the proposed subtenant or assignee is engaged in a business
which, and the use of the Premises will be in an manner which, is in keeping
with the then character and nature of all other tenancies in the Building, (2)
whether the use to be made of the Premises by the proposed subtenant or assignee
will conflict with any so-called "exclusive" use then in favor of any other
tenant of the Building, and whether such use would be prohibited by any other
portion of this Lease, including, but not limited to, any rules and regulations
then in effect, or under applicable Laws, and whether such use imposes a greater
load upon the Premises and the Building services then imposed by
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Tenant, (3) the business reputation of the proposed individuals who will be
managing and operating the business operations of the assignee or subtenant, and
the long-term financial and competitive business prospects of the proposed
assignee or subtenant, and (4) the creditworthiness and financial stability of
the proposed assignee or subtenant in light of the responsibilities involved. In
any event, Landlord may withhold its consent to any assignment or sublease, if
(i) the actual use proposed to be conducted in the Premises or portion thereof
conflicts with the provisions of Section 2.1 above or with any other lease which
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restricts the use to which any space in the Building may be put, (ii) the
proposed assignment or sublease requires material alterations, improvements or
additions to the Premises or portions thereof, (iii) the portion of the Premises
proposed to be sublet is irregular in shape and/or does not permit safe or
otherwise appropriate means of ingress and egress, or does not comply with
governmental safety and other codes, (iv) the proposed sublessee or assignee is
either a governmental agency or instrumentality thereof; (v) the proposed
sublessee or assignee, or any person or entity which directly or indirectly,
controls, is controlled by, or is under common control with, the proposed
sublessee or assignee, either (x) occupies space in the Building at the time of
the request for consent, or (y) is negotiating with Landlord or has negotiated
with Landlord during the six (6) month period immediately preceding the date
Landlord receives Tenant's request for consent, to lease space in the Building.
As a further condition to any rights Tenant may have under this Lease to sublet
all or any portion of the Premises, Tenant shall offer space for sublease at a
starting base rental rate no lower than Landlord's then current highest asking
base rental rate for other space in the Building which is then on the market for
direct lease. If there is no space in the Building then currently on the market
for direct lease, Tenant shall offer the space for sublease at a starting base
rental rate no lower than a rate which is the average of the starting rate for
Landlord's last two new leases and/or renewals in the Building, or if Landlord
has not entered into two new leases and/or renewals within the immediately
preceding six month period, then Tenant shall offer the space for sublease at a
starting base rental rate no lower than the fair market rental rate.
Section 12.3 Terms of Assignment or Sublease; Profit on Approved
Assignment.
12.3.1 If Landlord approves an assignment or subletting as
herein provided, the assignment or sublease agreement, as the case may be, after
approval by Landlord, shall not be amended without Landlord's prior written
consent, and shall contain a provision directing the assignee or subtenant to
pay the rent and other sums due thereunder directly to Landlord upon receiving
written notice from Landlord that Tenant is in default under this Lease with
respect to the payment of Rent. In the event that, notwithstanding the giving of
such notice, Tenant collects any rent or other sums from the assignee or
subtenant, then Tenant shall hold such sums in trust for the benefit of Landlord
and shall immediately forward the same to Landlord. Landlord's collection of
such rent and other sums shall not constitute an acceptance by Landlord of
attornment by such assignee or subtenant. A consent to one assignment,
subletting, occupation or use shall not be deemed to be a consent to any other
or subsequent assignment, subletting, occupation or use, and consent to any
assignment or subletting shall in no way relieve Tenant of any liability under
this Lease. Any assignment or subletting without Landlord's consent shall be
void, and shall, at the option of Landlord, constitute a default under this
Lease.
12.3.2 If Landlord approves an assignment of the entirety of
Tenant's interest in the Lease (as opposed to a subletting) as herein provided,
and provided Landlord's approval is accompanied by an instrument by which
Landlord releases Tenant from Tenant's obligations under this Lease which first
accrue from and after the date of assignment, then Tenant shall pay to Landlord,
as Additional Rent, one hundred percent (100%) of the excess, if any, of (1) the
rent, additional rent and any other consideration payable by the assignee to
Tenant, less reasonable and customary market-based leasing commissions, if any,
incurred by Tenant in connection with such assignment; minus (2) Base Rent plus
Additional Rent allocable to that part of the Premises affected by such
assignment or sublease pursuant to the provisions of this Lease, which
commissions shall, for purposes of the aforesaid calculation, be amortized on a
straight-line basis over the term of such assignment or sublease.
Section 12.4 General Conditions.
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12.4.1 Except as may be to the contrary as provided for in
Section 12.3.2, notwithstanding any assignment or subletting, Tenant and any
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guarantor or surety of Tenant's obligations under this Lease shall at all times
remain fully and primarily responsible and liable for the payment of the Rent
and for compliance with all of Tenant's other obligations under this Lease
(regardless of whether Landlord's approval has been obtained for any such
assignment or subletting); provided, however, (X) in the event Landlord has made
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the election to terminate pursuant to clause (1) of Section 12.1, Tenant shall
------------
be released from its obligations hereunder to the extent the Lease has been
terminated and (Y) in the event Landlord has made the election to sublease or
take an assignment pursuant to clause (2) of Section 12.1, Tenant shall be
------------
released of its obligations to the extent Landlord has taken an assignment of a
portion of the lease, or having taken a sublease, Landlord fails to perform its
obligations under such sublease.
12.4.2 Tenant shall pay Landlord's reasonable fees (including,
without limitation, the fees of Landlord's counsel), incurred in connection with
Landlord's review and processing of documents regarding any proposed assignment
or sublease.
12.4.3 Notwithstanding anything in this Lease to the contrary,
in the event Landlord consents to an assignment or subletting by Tenant in
accordance with the terms of this Section 12, Tenant's assignee or subtenant
----------
shall have no right to further assign this Lease or any interest therein or
thereunder or to further sublease all or any portion of the Premises. In
furtherance of the foregoing, Tenant acknowledges and agrees on behalf of itself
and any assignee or subtenant claiming under it (and any such assignee or
subtenant by accepting such assignment or sublease shall be deemed to
acknowledge and agree) that no sub-subleases or further assignments of this
Lease shall be permitted at any time.
12.4.4 If this Lease is assigned, whether or not in violation
of the provisions of this Lease, Landlord may collect Rent from the assignee. If
the Premises or any part thereof is sublet or used or occupied by anyone other
than Tenant, whether or not in violation of this Lease, Landlord may, after a
default by Tenant, collect Rent from the subtenant or occupant. In either event,
Landlord may apply the net amount collected to Rent, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any of the
provisions of this Section 12, or the acceptance of the assignee, subtenant or
----------
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to an
assignment, mortgaging, pledging, encumbering, transfer, use, occupancy or
subletting pursuant to any provision of this Lease shall not, except as
otherwise provided herein, in any way be considered to relieve Tenant from
obtaining the express consent of Landlord to any other or further assignment,
mortgaging, pledging, encumbering, transfer, use, occupancy or subletting.
References in this Lease to use or occupancy by anyone other than Tenant shall
not be construed as limited to subtenants and those claiming under or through
subtenants but as including also licensees or others claiming under or through
Tenant, immediately or remotely. The listing of any name other than that of
Tenant on any door of the Premises or on any directory or in any elevator in the
Building, or otherwise, shall not, except as otherwise provided herein, operate
to vest in the person so named any right or interest in this Lease or in the
Premises, or be deemed to constitute, or serve as a substitute for, or any
waiver of, any prior consent of Landlord required under this Section 12.
----------
12.4.5 Each subletting and/or assignment pursuant to this
Section 12 shall be subject to all of the covenants, agreements, terms,
- ----------
provision and conditions contained in this Lease and each of the covenants,
agreements, terms, provisions and conditions of this Lease shall be
automatically incorporated therein. If Landlord shall consent to, or reasonably
withhold its consent to, any proposed assignment or sublease, Tenant shall
indemnify, defend and hold harmless Landlord against and from any and all loss,
liability, damages, costs and expenses (including reasonable counsel fees)
resulting from any claims that may be made against Landlord by the proposed
assignee or sublessee or by any brokers or other persons claiming a commission
or similar in connection with the proposed assignment or sublease.
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ARTICLE 13. SURRENDER OF POSSESSION
Section 13.1 Surrender. Upon the Stage I Termination Date, the Stage II
Termination Date, or upon the earlier termination of this Lease as provided for
herein, whether by lapse of time or otherwise, Tenant shall surrender the Stage
I Premises, the Stage II Premises, or the Premises to Landlord, as applicable.
Section 13.2 Condition at Time of Surrender. Furnishings, trade fixtures
and equipment including but not limited to voice and data cabling,
telecommunications equipment installed by Tenant shall be the property of
Tenant. Upon termination of this Lease, Tenant shall remove any such property.
Tenant shall repair any damage to the Premises and/or Common Areas resulting
from the installation or removal of Tenant's property, and Tenant shall deliver
the Premises to Landlord in clean and good condition, except for reasonable wear
and tear.
ARTICLE 14. HOLDING OVER
Section 14.1 Holding Over. This Lease shall terminate without further
notice at the expiration of the Stage I Term and Stage II Term, as applicable.
Any holding over by Tenant without the express written consent of Landlord shall
not constitute the renewal or extension of this Lease or give Tenant any rights
in or to the Premises. In the event of such a holding over by Tenant without the
express written consent of Landlord, the monthly Rent payments to be paid by
Tenant shall be subject to increase at the sole discretion of Landlord in an
amount equal to two hundred percent (200%) of the then applicable Rental rate;
provided, however, no payment of such increased Rental by Tenant shall be deemed
- -------- -------
to extend or renew the Term of this Lease, and such Rental payments shall be
fixed by Landlord only to establish the amount of liability for payment of Rent
on the part of Tenant during such period of holding over. In the event Landlord
shall give its express written consent to Tenant to occupy the Premises beyond
the expiration of the Term, that occupancy shall be construed to be a
month-to-month tenancy upon all the same terms and conditions as set forth
herein unless modified by Landlord in such written consent; provided that Rent
charged during any period of holding over shall be as stated above.
ARTICLE 15. ENTRY BY LANDLORDENTRY
Section 15.1 Entry by Landlord. Landlord reserves, and shall at any and all
times have, the right to enter the Premises during business hours to inspect the
same, to show the Premises to prospective purchasers or lessees, to post notices
of nonresponsibility, to repair the Premises and any portion of the Building
that Landlord may deem necessary or desirable, without abatement of Rent, and
may for that purpose erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed; provided, that
the entrance to the Premises shall not be blocked unreasonably thereby and,
provided, further that the business of the Tenant shall not be interfered with
unreasonably. Tenant hereby waives any claim for damages, injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned by Landlord's
exercise of its rights pursuant to this Section 15.1, except and to the extent
------------
any such damage, injury or interference results from the negligence of Landlord.
Landlord shall at all times have and retain a key with which to unlock all of
the doors in, upon and about the Premises, excluding Tenant's vaults, safes and
files, and Landlord shall have the right to use any and all means which Landlord
may deem proper to open the doors to or in the Premises in an emergency, in
order to obtain entry to the Premises without liability to Tenant. Any entry to
the Premises obtained by Landlord by any of these means, or otherwise, shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or an eviction of Tenant from the
Premises or any portion thereof.
Section 15.2 Failure to Surrender. If Tenant fails to surrender the Stage I
Premises upon the expiration of the Stage I Term, the Stage II Premises upon the
expiration of the Stage II Term, or the entirety of the Premises upon the sooner
termination of this Lease, Tenant shall indemnify and hold Landlord harmless
from loss and liability resulting from that failure, including, without limiting
the generality of the foregoing, any claims made by any succeeding tenant.
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ARTICLE 16. SUBORDINATION
Section 16.1 Lease Subordinate To Mortgages. This Lease shall automatically
be subordinate to any existing mortgages or deeds of trust which affect the
Property, the Building and/or the Premises; to any first mortgages or deeds of
trust hereafter affecting the Property, the Building and/or the Premises, and to
all renewals, modifications, consolidations, replacements or extensions thereof.
This provision shall be self-operative and no further instrument of
subordination shall be required by any existing or first mortgagee or
beneficiary of a deed of trust; provided, that Tenant shall have the continued
--------
enjoyment of the Premises free from any disturbance or interruption by any
existing or first mortgagee or beneficiary of a deed of trust, or any purchaser
at a foreclosure or private sale of the Property as a result of Landlord's
default under a mortgage or deed of trust, so long as Tenant is not then in
default under the terms and conditions of this Lease. In the event of the
foreclosure of a deed of trust or mortgage affecting the Property, judicially or
nonjudicially, or if title to the Property is conveyed by deed in lieu of
foreclosure, Tenant agrees to attorn to and accept the purchaser(s) at the
foreclosure sale(s) conducted pursuant to the deed of trust or mortgage or the
grantee(s) in such deed(s) in lieu of foreclosure and his or its (or their)
heirs, legal representatives, successors and assigns as Landlord under this
Lease for the balance then remaining of the term hereof, subject to all terms
and conditions of this Lease.
Section 16.2 Estoppel Certificates. Tenant shall, within fifteen (15) days
of presentation, acknowledge and deliver to Landlord (a) any subordination or
non-disturbance agreement or other instrument that Landlord may require to carry
out the provisions of this Article, and (b) any estoppel certificate requested
by Landlord from time to time in the standard form of any mortgagee or
beneficiary of and deed of trust affecting the Building and Premises certifying,
if such be true, that Tenant is in occupancy, that this Lease is unmodified and
in full force and effect, or if there have been modifications, that the Lease as
modified is in full force and effect, and stating the modifications and the
dates to which the Rent and other charges shall have been paid, and that there
are no Rental offsets or claims. Acceptable forms of estoppel certificate and
subordination agreement are attached as Exhibits F and G.
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ARTICLE 17. DEFAULT AND REMEDY
Section 17.1 Events of Tenant's Default. The occurrence of any one or more
of the following events shall constitute a material default and breach of this
Lease by Tenant:
17.1.1 Vacation or abandonment of the Premises;
17.1.2 Failure by Tenant to make any payment required as and
when due, where that failure shall continue for a period of three (3) calendar
days;
17.1.3 Failure of Tenant to deposit with Landlord an amount
equal to the proceeds of any Letter of Credit or cash proceeds deposited with
Landlord pursuant to Paragraph 7 of Exhibit E to this Lease which have been
-----------
applied or retained by Landlord to satisfy any obligation of Tenant under this
Lease, within ten (10) calendar days after Landlord's written demand to Tenant
to do so;
17.1.4 Failure of Tenant to deposit with Landlord a substitute
letter of credit in the Stipulated Amount on or before the LC Increase Date
pursuant to Paragraph 7.5 of Exhibit E to this Lease;
------------- ---------
17.1.5 Failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease, other than making any payment
when due, where that failure shall continue for a period of ten (10) calendar
days after Landlord gives written notice to Tenant of that failure; and
17.1.6 Making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition in bankruptcy, including reorganization or arrangement, unless, in the
case of a petition filed against Tenant, the petition is dismissed within
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ninety (90) calendar days; or the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises, or
of Tenant's interest in this Lease.
Section 17.2 Remedies. In the event of any breach or default by Tenant
under the terms or provisions of this Lease, Landlord, in addition to any other
rights or remedies that it may have, shall have the immediate right of reentry.
Should Landlord elect to reenter or take possession of the Premises, it may
either terminate this Lease, or from time to time, without terminating this
Lease, relet the Premises or any part thereof for the account and in the name of
the Tenant or otherwise, for any term or terms and conditions as Landlord in its
sole discretion may deem advisable, with the right to complete construction of
or make alterations and repairs to the Premises and/or improvements installed by
Tenant. Tenant shall pay to Landlord in the event of reletting, as soon as
ascertained, the costs and expenses incurred by Landlord in the reletting,
completion of construction, or in making any alterations and repairs. Rentals
received by Landlord from any reletting shall be applied: first, to the payment
of any indebtedness, other than Rent, due hereunder from Tenant to Landlord;
second, to the payment of Rent due and unpaid hereunder and to any other
payments required to be made by the Tenant hereunder; and the residue, if any,
shall be held by Landlord as payment of future Rent or damages in the event of
termination as the same may become due and payable hereunder; and the balance,
if any, at the end of the Term of this Lease shall be paid to Tenant. Should
rental received from time to time from the reletting during any month be a
lesser Rental than herein agreed to by Tenant, the Tenant shall pay the
deficiency to Landlord. The Tenant shall pay the deficiency each month as the
amount thereof is ascertained by the Landlord. Notwithstanding the foregoing,
Landlord shall also have the right upon Tenant's default to terminate this Lease
and all rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event that Landlord shall elect to so terminate this Lease
then Landlord may recover from Tenant:
17.2.1 The worth at the time of award of any unpaid Rent and
any other sums due and payable which have been earned at the time of such
termination; plus
17.2.2 The worth at the time of award of the amount by which
the unpaid Rent and any other sums due and payable which would have been earned
after termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus
17.2.3 The worth at the time of award of the amount by which
the unpaid Rent and any other sums due and payable for the balance of the term
of this Lease after the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; plus
17.2.4 Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course would be likely to
result therefrom, including, without limitation, (A) any costs or expenses
incurred by Landlord (1) in retaking possession of the Premises; (2) in
maintaining, repairing, preserving, restoring, replacing, cleaning, altering,
remodeling or rehabilitating the Premises or any affected portions of the
Building or the Project, including such actions undertaken in connection with
the reletting or attempted reletting of the Premises to a new tenant or tenants;
(3) for leasing commissions, advertising costs and other expenses of reletting
the Premises; or (4) in carrying the Premises, including taxes, insurance
premiums, utilities and security precautions; (B) any unearned brokerage
commissions paid in connection with this Lease; (C) reimbursement of any
previously waived or abated Base Rent or Additional Rent or any free rent or
reduced rental rate granted hereunder; and (D) any concession made or paid by
Landlord to the benefit of Tenant in consideration of this Lease including, but
not limited to, any moving allowances, contributions, payments or loans by
Landlord for tenant improvements or build-out allowances (including without
limitation, any unamortized portion of the improvement allowance provided to
Tenant pursuant to Exhibit C, such improvement allowance to be amortized over
---------
the Term in the manner reasonably determined by Landlord), or assumptions by
Landlord of any of Tenant's previous lease obligations; plus
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17.2.5 Such reasonable attorneys' fees incurred by Landlord as
a result of a default, and costs in the event suit is filed by Landlord to
enforce such remedy; and plus
17.2.6 At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
17.2.7 As used in subparagraphs 17.2.1 and 17.2.2 above, the
-------------------------------
"worth at the time of award" is computed by allowing interest at an annual rate
equal to twelve percent (12%) per annum or the maximum rate permitted by law,
whichever is less. As used in subparagraph 17.2.3 above, the "worth at the time
-------------------
of award" is computed by discounting such amount at the discount rate of Federal
Reserve Bank of San Francisco at the time of award, plus one percent (1%).
Tenant hereby waives for Tenant and for all those claiming under Tenant all
right now or hereafter existing to redeem by order or judgment of any court or
by any legal process or writ, Tenant's right of occupancy of the Premises after
any termination of this Lease.
Section 17.3 Reletting. No reletting of the Premises by Landlord permitted
under Section 17.2 shall be construed as an election on Landlord's part to
------------
terminate this Lease unless a notice of Landlord's intention to terminate is
given to Tenant, or unless the termination of the Lease is decreed by a court of
competent jurisdiction. In the event of reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for a previous breach,
provided it has not been cured. Should Landlord at any time terminate this Lease
for any breach, in addition to any other remedy it may have, it may recover from
Tenant all damages it may incur by reason of that breach.
Section 17.4 Default of Landlord. Landlord shall not be in default unless
Landlord fails to perform its obligations under this Lease within thirty (30)
days after written notice by Tenant, or if such failure is not reasonably
capable of being cured within such thirty (30) day period, Landlord shall not be
in default unless Landlord has failed to commence the cure and diligently pursue
the cure to completion.
Section 17.5 Non-Waiver. Failure by Landlord to take action or declare a
default as a result of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of that term, covenant, or
condition, or of any subsequent breach of any term, covenant or condition herein
contained. The subsequent acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, other than the failure of Tenant to pay the particular
Rental so accepted, regardless of Landlord's knowledge of that preceding breach
at the time of acceptance of the Rent.
Section 17.6 Mortgagee Protection. In the event of any uncured default on
the part of Landlord, which default would entitle Tenant to terminate this
Lease, Tenant shall not terminate this Lease unless Tenant has notified any
mortgagee or beneficiary of deed of trust, whose address shall have been
furnished to Tenant, at least thirty (30) days in advance of the proposed
effective date of the termination. During the thirty (30) day period the
mortgagee or beneficiary shall be entitled to commence to cure the default. If
the default is not capable of being cured with due diligence within the thirty
(30) day period, the Lease shall not be terminated if the mortgagee or
beneficiary of a deed of trust shall have commenced to cure the default within
the thirty (30) day period and shall pursue the cure with due diligence
thereafter. If the default is one which is not capable of cure by the mortgagee
or beneficiary of a deed of trust within the thirty (30) day period because the
mortgagee or beneficiary of a deed of trust is not in possession of the Building
or Property, the thirty (30) day period shall be extended to include the time
needed to obtain possession of the Premises by the mortgagee or beneficiary of a
deed of trust by power of sale, judicial foreclosure, or other legal action
required to recover possession, provided that these avenues are pursued with due
diligence.
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ARTICLE 18. LIMITATION OF LIABILITY
Section 18.1 Limitation of Landlord's Liability. Tenant understands,
covenants and agrees that the obligations of Landlord under this Lease shall not
constitute personal obligations of Landlord, the individual partners of Landlord
or its or their individual partners, directors, officers or shareholders, and
Tenant shall look solely to the Property and the Building, and to no other
assets of Landlord, for the satisfaction of any liability of Landlord with
respect to this Lease, and shall not seek recourse against the individual
partners of Landlord, or its or their individual partners, directors, officers
or shareholders, or any of their personal assets for such satisfaction.
Section 18.2 Applicability. Tenant agrees that each of the covenants and
agreements contained in Section 18.1 above shall be applicable to any covenant
------------
or agreement either expressly contained in this Lease or imposed by statute or
at common law.
ARTICLE 19. NOTICES
Section 19.1 Notices. Any notice required or desired to be given under this
Lease shall be in writing with copies directed as indicated herein and shall be
personally served or given by mail. Any notice given by mail shall be deemed to
have been given when seventy-two (72) hours have elapsed from the time such
notice was deposited in the United States mail, certified mail, return receipt
requested, and postage prepaid, addressed to the party to be served at the last
address given by that party to the other party under the provisions of this
section. As of the Lease Commencement Date, the addresses of the Landlord and
Tenant are as specified in the Lease Summary.
ARTICLE 20. HAZARDOUS SUBSTANCES
Section 20.1 Presence and Use of Hazardous Substances. Tenant shall not,
without Landlord's prior written consent, keep on or around the Premises, Common
Areas or Building, for use, disposal, transportation, treatment, generation,
storage or sale, any substances designated as, or containing components
designated as, hazardous, dangerous, toxic or harmful (collectively referred to
as "Hazardous Substances"), and/or are subject to regulation by any federal,
state or local law, regulation, statute or ordinance.
Section 20.2 Landlord Indemnification. Landlord shall indemnify, defend,
reimburse and hold Tenant harmless from and against any and all environmental
damages, including the cost of remediation, which existed as a result of
Hazardous Substances on the Premises prior to the Lease Commencement Date or
which are caused by the gross negligence or willful misconduct of Landlord, its
agents or employees.
Section 20.3 Cleanup Costs, Default and Indemnification. Tenant shall be
fully and completely liable to Landlord for any and all cleanup costs and any
and all other charges, fees, penalties (civil and criminal) imposed by any
governmental authority with respect to Tenant's use, disposal, transportation,
treatment, generation, storage and/or sale of Hazardous Substances, in or about
the Premises, Common Areas, or Building, whether or not consented to by
Landlord. Tenant shall indemnify, defend and hold Landlord harmless from any and
all of the costs, fees, penalties, liabilities and charges incurred by, assessed
against or imposed upon Landlord (as well as Landlord's attorneys' fees and
costs) as a result of Tenant's use, disposal, transportation, treatment,
generation, storage and/or sale of Hazardous Substances.
ARTICLE 21. MISCELLANEOUS
Section 21.1 Headings. The headings used in this Lease are for convenience
only. They shall not be construed to limit or to extend the meaning of any part
of this Lease.
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Section 21.2 Amendments. Any amendments or additions to this Lease shall be
in writing by the parties hereto, and neither Tenant nor Landlord shall be bound
by any verbal or implied agreements.
Section 21.3 Time of the Essence. Time is expressly declared to be of the
essence of this Lease.
Section 21.4 Entire Agreement. This Lease contains the entire agreement of
the parties hereto with respect to the matters covered hereby, and no other
agreement, statement or promise made by any party hereto, or to any employee,
officer or agent of any party hereto, which is not contained herein, shall be
binding or valid.
Section 21.5 Language. The words "Landlord" and "Tenant", when used herein,
shall be applicable to one (1) or more persons, as the case may be, and the
singular shall include the plural and the neuter shall include the masculine and
feminine, and if there be more than one (1) the obligations hereof shall be
joint and several. The word "persons" whenever used shall include individuals,
firms, associations and corporations and any other legal entity, as applicable.
The language in all parts of this Lease shall in all cases be construed as a
whole and in accordance with its fair meaning, and shall not be construed
strictly for or against Landlord or Tenant.
Section 21.6 Invalidity. If any provision of this Lease shall be deemed to
be invalid, void or illegal, it shall in no way affect, impair or invalidate any
other provision hereof.
Section 21.7 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which is
difficult to determine, but include, without limitation, processing and
accounting charges, and late charges which may be imposed upon Landlord by the
terms of any mortgage or deed of trust covering the Premises. Therefore, in the
event Tenant shall fail to pay any installment of Rent or other sum due
hereunder within five (5) days of the due date, Tenant shall pay to Landlord as
Additional Rent and as a reasonable estimate of the costs to Landlord, a late
charge equal to ten percent (10%) of each installment or the sum of One Hundred
Fifty Dollars ($150.00) per month, whichever is greater. A One Hundred Fifty
Dollar ($150.00) charge will be paid by the Tenant to the Landlord for each
returned check. In the event Landlord pays any sum or expense on behalf of
Tenant which Tenant is obligated to pay hereunder, or in the event Landlord
expends any other sum or incurs any expense, or Tenant fails to pay any sum due
hereunder, Landlord shall be entitled to receive interest upon that sum at the
rate of fifteen percent (15%) per annum until paid.
Section 21.8 [Not Used].
Section 21.9 Computation of Time. The word "day" means "calendar day"
herein, and the computation of time shall include all Saturdays, Sundays and
holidays for purposes of determining time periods specified herein.
Section 21.10 Applicable Law. This Lease shall be interpreted and construed
under and pursuant to the laws of the State of Washington.
Section 21.11 Attorneys' Fees. In the event either party requires the
services of an attorney in connection with enforcing the terms of this Lease or
in the event suit is brought for the recovery of any Rent due under this Lease
for the breach of any covenant or condition of this Lease, or for the
restitution of the Premises to Landlord, and/or eviction of Tenant during the
Term of this Lease or after the expiration thereof, the prevailing party will be
entitled to a reasonable sum for attorneys' fees, witness fees, and other court
costs, both at trial and on appeal.
Section 21.12 Termination. Upon the termination of this Lease by expiration
of time or otherwise, the rights of Tenant and all persons claiming under Tenant
in and to the Premises shall cease.
21
<PAGE>
Section 21.13 Broker's Commission. Tenant represents and warrants that it
has incurred no liabilities or claims for brokerage commissions or finder's fees
in connection with the negotiation and/or execution of this Lease and that it
has not dealt with or has any knowledge of any real estate broker/agent or
salesperson in connection with this Lease except for those identified in the
Lease Summary. Tenant agrees to indemnify, defend, and hold Landlord harmless
from and against, all of such liabilities and claims (including, without
limitation, attorneys' fees and costs) made by any other broker/agent or
salesperson claiming to represent Tenant in connection with this Lease.
Section 21.14 Signs or Advertising. The Tenant will not inscribe any
inscription or post, place, or in any manner display any sign, notice, picture
or poster or any advertising matter whatsoever, anywhere in or about the
Premises or Building which can be seen from outside the Premises, without first
obtaining Landlord's written consent thereto. Any consent so obtained from
Landlord shall be with the understanding and agreement that Tenant will remove
these items at the termination of the tenancy herein created and repair any
damage or injury to the Premises or the Building caused thereby. Landlord will
install and maintain a directory of tenants in the principal lobby entrance of
the Building, and Landlord may, as it may determine from time to time, publish
or advertise the tenancy list of the Building. Tenant shall not use photographs,
drawings, or other renderings of the Building, the Building logo or tradename,
or any other proprietary name, mark or symbol of Landlord without first
obtaining Landlord's prior written consent.
Section 21.15 Transfer of Landlord's Interest. In the event Landlord
transfers its reversionary interest in the Premises or its rights under this
Lease, other than a transfer for security purposes only, Landlord shall be
relieved of all obligations occurring hereunder after the effective date of such
transfer.
Section 21.16 Counterparts. This Agreement may be executed by the parties
in counterparts, and each counterpart Agreement shall be deemed to be an
original hereof.
Section 21.17 Quiet Enjoyment. Subject to the provisions of this Lease and
conditioned upon performance of all of the provisions to be performed by Tenant
hereunder, Landlord shall secure to Tenant during the Lease Term the quiet and
peaceful possession of the Premises and all rights and privileges appertaining
thereto.
Section 21.18 Authority. Each party hereto warrants that it has the
authority to enter into this Agreement and that the signatories hereto have the
authority to bind Landlord and Tenant, respectively. Not later than ten (10)
days following the execution of this Lease, Tenant shall deliver to Landlord
resolution(s) of Tenant, certified by its secretary, in form satisfactory to
Landlord, authorizing the execution and delivery of this Lease by Tenant and the
officers executing this Lease on behalf of Tenant.
Section 21.19 Name of Building. During all periods that Tenant is not in
default hereunder, (a) Landlord grants Tenant permission to refer to the
Building as the "Onvia Building" and (b) Landlord covenants and agrees not to
use any other name to identify the Building.
Section 21.20 Rules and Regulations. Tenant agrees to abide by and adhere
to any rules and regulations for the Building, and all amendments thereto, which
may be promulgated from time to time by Landlord which do not materially change
the provisions of this Lease. The rules and regulations currently in effect upon
the date of execution of this Lease are set forth as Exhibit D attached hereto.
---------
Section 21.21 Consents. Landlord shall act reasonably when determining
whether to give any consents or approvals under the terms of this Lease.
Section 21.22 Agency Disclosure. At the signing of this Lease, the Leasing
Representative(s) identified in the Lease Summary represented the party noted
therein. Each party signing this document confirms that prior oral and/or
written disclosure of agency was provided to him/her in this transaction (as
required by WAC 308-124D-040).
22
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Section 21.23 Lease Summary, Addendum and Exhibits. The Lease Summary, set
forth in the opening pages of the Lease, as well as any Addenda and Exhibits to
this Lease are hereby incorporated herein by reference.
Section 21.24 Survival. Those provisions of this Lease which, in order to
be given full effect, require performance by either Landlord or Tenant following
the termination of this Lease shall survive the Termination Date.
Section 21.25 Additional Provisions. Additional provisions to this Lease
are set forth in Exhibit E annexed hereto.
IN WITNESS WHEREOF, this Lease Agreement is executed on the day and year
first written above.
TENANT: ONVIA.COM INC.,
a Washington corporation
By: ____________________________
Its: _____________________________
LANDLORD: BLUME YALE LIMITED PARTNERSHIP,
a Washington limited partnership
By : ___________________________
Its: ___________________________
23
<PAGE>
TENANT'S ACKNOWLEDGEMENT
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgement is the person whose true
signature appears on this document.
On this _____ day of _______________, ____, before me personally appeared
____________________, to me known to be the ____________________ of
______________________________, the corporation that executed the within and
foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he/she was authorized to execute said
instrument and that the seal affixed, if any is the corporate seal of said
corporation.
WITNESS my hand and official seal hereto affixed the day and year first
above written.
Notary Public in and for the State of _______________,
residing at___________________________________________
My commission expires:________________________________
______________________________________________________
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
<PAGE>
LANDLORD'S ACKNOWLEDGEMENT
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that the persons
appearing before me and making this acknowledgment are the persons whose true
signatures appear on this document.
On this _____ day of _________________, _____, before me personally
appeared __________________, to me known to be the General Partner of BLUME YALE
LIMITED PARTNERSHIP, the limited partnership that executed the within and
foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said limited partnership, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument.
WITNESS my hand and official seal hereto affixed the day and year first
above written.
___________________________________________________
Notary Public in and for the State of Washington,
residing at________________________________________
My commission expires:_____________________________
___________________________________________________
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
<PAGE>
EXHIBIT A
TENANT FLOOR PLAN
1
<PAGE>
EXHIBIT B
DESCRIPTION OF PROPERTY
THOSE PORTIONS OF LOTS 2, 3, 4 AND 5 IN BLOCK 1 OF HOWARD'S
AVENUE LYING SOUTHERLY OF PRIMARY STATE HIGHWAY NO. 1 (SR 5)
AND ALL OF LOTS 6, 7, 8, 9 AND 10 IN BLOCK 1 OF HOWARD'S
AVENUE, AS PER PLAT RECORDED IN VOLUME 13 OF PLATS, PAGE 65;
TOGETHER WITH THAT PORTION OF THE NORTHWEST 1/4 OF THE
SOUTHWEST 1/4 OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 4 EAST
W. M., LYING SOUTHERLY OF SAID PRIMARY STATE HIGHWAY NO. 1
(SR 5), NORTH OF MERCER STREET, EAST OF PONTIUS STREET AND
MARKED "UNPLATTED" ON SAID PLAT;
SITUATE IN THE CITY OF SEATTLE, COUNTY OF KING, STATE OF WASHINGTON.
EXHIBIT C
TO
MERCER YALE BUILDING OFFICE LEASE AGREEMENT
------------------------
WORKLETTER
TABLE OF CONTENTS
I. BASIC BUILDING IMPROVEMENTS PROVIDED BY LANDLORD
II. TENANT IMPROVEMENTS
III. DESIGN OF TENANT IMPROVEMENTS
A. PROGRAM INFORMATION
B. BASIC SPACE PLANS
C. DESIGN DEVELOPMENT PROGRAM INFORMATION
D. FINAL PLANS
E. DESIGN CHANGES
IV. CONSTRUCTION OF TENANT IMPROVEMENTS
A. CONSTRUCTION BY LANDLORD
B. PAYMENTS
C. CHANGES IN FINAL PLANS
1
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D. WARRANTIES
E. IMPROVEMENTS CONSTRUCTED BY TENANT
F. TENANT'S ENTRY TO PREMISES
G. COMMENCEMENT DATE
2
<PAGE>
EXHIBIT C
TO
MERCER YALE BUILDING OFFICE LEASE AGREEMENT
TENANT IMPROVEMENT WORKLETTER
TABLE OF CONTENTS
I. BASIC BUILDING IMPROVEMENTS PROVIDED BY LANDLORD
II. TENANT IMPROVEMENTS
III. DESIGN OF TENANT IMPROVEMENTS
A. TENANT PLANS
B. APPROVAL BY LANDLORD
C. SUBMISSION BY TENANT
D. PERMITS
IV. CONSTRUCTION OF TENANT IMPROVEMENTS
A. CONSTRUCTION BY LANDLORD
B. PRELIMINARY CONSTRUCTION ESTIMATE
C. CONSTRUCTION CONTRACT; CONSTRUCTION SCHEDULE
D. CONSTRUCTION WARRANTIES
E. CHANGES, ADDITIONS OR ALTERATIONS
F. SCHEDULE
G. COST OF TENANT IMPROVEMENTS; PAYMENT
H. TENANT DELAY
I. COOPERATION
J. PUNCH LIST
K. STAGE II PREMISES
3
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I. BASIC BUILDING IMPROVEMENTS PROVIDED BY LANDLORD.
Landlord shall construct the Building described in the Lease. The Building
shall be completed substantially in accordance with the architect's design and
all requirements necessary to obtain a temporary Certificate of Occupancy for
the Building (or the equivalent thereof). Landlord shall, at its sole cost and
expense, complete the base, shell and core of the Building, including the
following structural/core items ("Landlord's Work"):
(1) Air Conditioning and Heating. Landlord shall install the vertical
----------------------------
distribution of the main heating, ventilation and air conditioning system (the
"HVAC System") to each floor of the Premises to provide for the supply of
conditioned air to and the removal of return air from the Premises.
(2) Electrical Distribution System. Electrical power service furnished to
------------------------------
an electrical room on each floor; 75 KVA per floor. Capacity in electrical
distribution to provide 60 candlefoot plus 3 watts per square foot of 208/120.
Ten percent (10%) spare AMP capacity on 480 volt at shell and core completion.
Ten percent (10%) additional breaker space capacity at 480 volt and 208/120 at
shell on core completion.
(3) Telephone System. Landlord shall provide means of access to a telephone
----------------
room on each floor on which the Premises are located. All other communications
or telephone equipment or services shall be considered Tenant Improvements
pursuant to Paragraph II below.
------------
(4) Fire and Life Safety. Landlord shall install fire detection equipment
--------------------
to the Building in accordance with the Uniform Fire Prevention Code, as well as
fire prevention equipment, including sprinklers, in accordance with said fire
prevention code for shell purposes only.
(5) Plumbing. Landlord shall furnish all plumbing lines and fixtures for
--------
lavatory facilities on each floor per the Uniform Building Code of the City of
Seattle, including handicap facilities.
(6) Finishes. Landlord shall provide the following:
--------
1. Concrete floor slab which shall be flat and level within recognized
industry standards and shall be left broom clean.
2. Exterior perimeter surfaces which are to receive interior finishes
shall be furred and insulated per code.
3. Interior partitions around all vertical shafts, taped and sanded
ready for paint.
4. Doors and hardware required by code at vertical shafts as exits from
each floor.
Except as set forth above, all work, improvements, finishes and/or equipment
required by Tenant and/or pursuant to the approved Plans for the Premises shall
be considered Tenant Improvements pursuant to Paragraph II. below.
------------
II. TENANT IMPROVEMENTS
Design and construction of all Improvements in the Premises beyond those listed
in Section I of this Exhibit shall be provided at Tenant's expense. Landlord
shall pay the cost of such additional Improvements up to an amount equal to the
Tenant Improvement Allowance described in Section IVG of this Exhibit. The cost
of design and construction of such Improvements shall include, but not be
limited to: partitions (including one-half the cost of any public corridor or
demising partitions enclosing the Premises), doors, door frames, hardware,
paint, wall coverings, base, floor coverings, thermostats, telephone and
electrical outlets, light switches, window coverings, all fire life safety
modifications and upgrades, all applicable permit fees, Landlord's construction
management fee of three percent (3%),
4
<PAGE>
building standard signage and sales tax. Reimbursement by Landlord shall be made
by crediting the amount to be reimbursed against the amount of monthly progress
statements payable by Tenant in accordance with Section IVG of this Exhibit C.
----------- ---------
The credit in each monthly progress statement shall be applied to the cost of
the Improvements as incurred.
III. DESIGN OF TENANT IMPROVEMENTS
A. Tenant's Plans. Tenant shall cause Tenant's architect/space planner
("Architect") to prepare architectural drawings and specifications for all
layout and improvements to the Premises not included in Landlord's Work ("Tenant
Improvements") and shall employ Landlord's engineers (the "Engineers") to
prepare mechanical and electrical working drawings and specifications for all
Tenant Improvements not included in Landlord's Work. All such drawings and
specifications are referred to herein as "Tenant's Plans" and shall include the
"Preliminary Plans"; "M & E Working Drawings" and "Issued for Construction
Documents" all of which are hereinafter defined. Tenant's Plans shall be in form
and detail sufficient to secure all required governmental approvals and shall be
completed on Auto-Cad (Version 11).
(1) Preliminary Plans: The "Preliminary Plans" shall be a schematic
-----------------
plan (1/8" scale) for the Premises showing interior partitions, a preliminary
reflected ceiling plan, and rough locations and approximate quantities for
phone, data and electrical outlets. Tenant shall indicate locations, power
requirements and heat loads for special equipment. Additionally, locations for
special structural and loading requirements in excess of 70 pounds per square
foot (dead load plus live load) will be noted in order to allow Landlord's
engineers to commence with this work.
(2) Mechanical; Electrical and Structural Engineered Working Drawings
-----------------------------------------------------------------
and Specifications ("M & E Working Drawings"): In the event the drawings are to
- --------------------------------------------
be engineered, Tenant shall contract with the Engineers and cause them to
prepare M & E Working Drawings showing complete plans for electrical, life
safety, automation, plumbing, and air cooling, ventilating, heating and
temperature controls.
(3) Issued for Construction Documents: The "Issued for Construction
---------------------------------
Documents" shall consist of all drawings (1/8" scale) and specifications
necessary to construct all Tenant Improvements in form and detail sufficient to
secure all required governmental approvals and to demonstrate conformity with
the Building standard details and quality.
B. Approval by Landlord. Tenant's Plans shall be subject to Landlord's approval,
which approval shall not be unreasonably withheld or delayed. If Landlord
disapproves of any of Tenant's Plans, Landlord shall advise Tenant in reasonable
detail of required revisions and the reasons therefor. After being so advised by
Landlord, Tenant shall promptly submit a redesign, incorporating the revisions
required by Landlord; for Landlord's approval. Within ten (10) days after
Landlord's approval of Tenant's Plans, Landlord shall notify Tenant of any
materials, finishes or installations shown on Tenant's Plans that are not
readily available and as a result will adversely affect the "Construction
Schedule" (as hereinafter defined), as well as the approximate Tenant Delay that
will result therefrom.
C. Submission by Tenant. Tenant shall submit Tenant's Plans to Landlord and
Landlord shall review and return Tenant's Plans to Tenant on or before the dates
indicated in the following schedule:
<TABLE>
<CAPTION>
Return to Resubmit to
Submit to Tenant for Landlord with
Landlord Required Rev. Required Rev.
--------- ------------- --------------
<S> <C> <C> <C>
Preliminary Plans December 27, 1999 3 business days 3 business days
Issued for Construction January 17, 2000 3 business days 3 business days
Documents (to include M&E
Working Drawings)
</TABLE>
5
<PAGE>
D. Permits. Tenant and Tenant's Architect shall be responsible for submission of
Tenant's Plans for plan check by the City and the obtaining of a building permit
for the Tenant Improvements. Any changes which are required by the City and
which affect the base, shell and core of the Building shall be immediately
submitted to Landlord for Landlord's review, but Landlord shall have no
obligation to modify any of the planned or constructed base, shell and core work
for the Building unless such changes were reasonably foreseeable at the time
Landlord approved Tenant's Plans or are reasonable changes of an immaterial
nature. Provided that Landlord complies with the submission schedule set forth
above, Tenant shall submit Tenant's Plans to the City not later than two (2)
days after Landlord's approval of the Issued for Construction Documents (the
"Submission Date"). After submission of the Tenant's Plans to the City, Tenant
shall diligently pursue the City's approval of the Tenant's Plans. Tenant's
failure to submit Tenant's Plans to the City by the Submission Date, or Tenant's
failure to obtain the building permit by January 31, 2000, shall each be a cause
of Tenant Delay.
IV. CONSTRUCTION OF TENANT IMPROVEMENTS
A. Construction by Landlord. Landlord shall retain Landlord's contractor to
construct the Tenant Improvements in the Premises.
B. Preliminary Cost Estimate. Within fifteen (15) days after receipt of the
Preliminary Plans, Landlord's contractor shall submit to Tenant a preliminary
cost estimate for the Tenant Improvements. Not later than ten (10) days after
final approval of the Tenant's Plans by the Landlord, Landlord shall provide to
Tenant a final pricing for the Tenant Work. Any City required modification after
the issuance of the building permit for the Premises shall be treated as a
Change Order pursuant to the procedures set forth in Section IVE below.
-----------
C. Construction Contract; Construction Schedule. Landlord's construction
contract with its contractor shall be a guaranteed maximum price contract (the
"Construction Contract") and shall contain a construction schedule (the
"Construction Schedule") for construction of the Tenant Improvements. The
guaranteed maximum price specified in the Construction Contract shall include
all costs and fees for construction of the Tenant Improvements with the
exception of any required governmental permit fees, professional fees and
Washington State Sales Tax.
D. Construction Warranties. To the extent Landlord obtains any construction
warranties from the general contractor and/or any of the subcontractors
performing any of the Tenant Improvement work, it shall assign such warranties
to Tenant, to the extent assignable, and, in the event such warranties are not
assignable, Landlord agrees to enforce such warranties on Tenant's behalf.
E. Changes, Additions or Alterations. If Tenant shall request any change,
addition or alteration in any of the work shown in the Tenant's Plans (a "Change
Order") after Landlord's approval thereof (whether the result of governmental
requirement or otherwise), Tenant shall promptly give Landlord a written
description of the changes requested and submit to Landlord plans and
specifications relative to such change. Provided the plans and specifications
are complete, Landlord shall expeditiously (but in no event longer than within
ten (10) days after receipt of the completed plans and specifications) review
such plans and specifications and provide to Tenant a written itemized estimate
of the cost of construction of such Change Order and the "Tenant Delay" (as
hereinafter defined) expected because of such Change Order, if any. The cost of
construction of the Change Order shall include Landlord's contractor's fee and
the actual costs of those general conditions incurred by Landlord's contractor
relative to such Change Order that are not duplicative of general conditions in
the general contractor's construction contract. Within three (3) business days
following receipt of such itemized estimate, Tenant shall deliver to Landlord
written notice either granting or withholding authorization to proceed with the
performance of the work shown on the Change Order. If authorization is so
received by Landlord, then Landlord shall proceed with the performance of the
work at the sole cost of the Tenant. If authorization is not received by
Landlord within such three (3) business day period, Tenant shall be deemed to
have withheld authorization of performance of the Change Order. If Tenant elects
6
<PAGE>
to have the Change Order work performed, the cost of the Change Order shall be
paid in the same manner provided in Section IVG for the payment of the cost of
-----------
Tenant Improvements in excess of the Tenant Improvement Allowance.
Notwithstanding the foregoing, the costs of any Change Order relating to the
Tenant Improvements shall be applied against the Tenant Improvement Allowance to
the extent of any remaining balance thereof.
F. Schedule.
(1) Landlord shall begin construction of the Tenant Improvements not later
than three (3) business days following Tenant's receipt of the building permit
for the Tenant Improvements, subject to any Tenant Delay.
(2) Tenant's obligation to pay Rent commences on the "Lease Commencement
Date" as defined in Section 3.1 of the Lease. If the satisfaction of any of the
conditions or approval necessary to cause the Premises to satisfy the status
described in said Section 3.1 is delayed by any of the factors described in
Section IVH of this Exhibit, then the Lease Commencement Date pursuant to
- -----------
Section 3.1 of the Lease shall be deemed the date the Premises would have been
tendered by Landlord to Tenant in the absence of the delay
(3) Landlord agrees to provide access to the Premises to Tenant prior to
substantial completion thereof for the purposes of installing its
telecommunications and computer equipment, which entry shall be subject to the
following: (i) such early entry shall be in compliance with all governmental
requirements; (ii) such entry and the installation of the telecommunications and
computer equipment shall not delay obtaining the Certificate of Occupancy or
temporary Certificate of Occupancy for the Premises; (iii) such entry and the
installation of the telecommunications and computer equipment shall occur
pursuant to a construction schedule to be reasonably agreed upon by Landlord and
Tenant, (iv) such entry shall not interfere with the work then being performed
on the Premises; (v) the insurance to be maintained by Tenant pursuant to the
Lease shall be in effect prior to any such entry and the indemnity and hold
harmless provisions of Article 10 of the Lease shall apply with respect to all
costs, losses, damages, injuries and liabilities related in any way to such
entry.
G. Cost of Tenant Improvements; Payment. Landlord shall provide Tenant with an
allowance of up to Twenty-Five and 00/100 Dollars ($25.00) per usable square
foot comprising the Premises (the "Tenant Improvement Allowance") towards the
cost of the installation of the Tenant Improvements excluding Tenant's
furniture, fixtures and equipment. Landlord shall have no additional
responsibility or obligation to pay any amount in excess of the Tenant
Improvement Allowance. All costs or expenses incurred by Landlord in excess of
the Tenant Improvement Allowance shall be the sole and exclusive responsibility
of Tenant and shall be payable to Landlord as Additional Rent upon invoice by
Landlord on an ongoing basis during construction based on Tenant's pro rata
share of Tenant Improvement costs, which pro rata share shall be based on the
amount by which the total estimated costs of the Tenant Improvements exceeds the
amount of the Tenant Improvement Allowance. The Tenant Improvement Allowance
shall be disbursed by Landlord directly to Landlord's contractor.
H. Tenant Delay. The term "Tenant Delay" shall include, but shall not be limited
to, any delay in the occurrence of the Lease Commencement Date resulting from:
(1) Tenant's failure to perform any of its obligations with respect to the
Preliminary Plans, M & E Working Drawings, and/or the Issued for Construction
Documents including without limitation compliance with the submission schedule
set forth in Section IIIC above; or
------------
(2) any request by Tenant for materials, finishes or installations which
are not readily available and, as a result; adversely affect the Construction
Schedule; or
(3) any modification by Tenant in the Tenant's Plans that adversely affects
the Construction Schedule; provided, however; Landlord has provided to Tenant
notice of the anticipated delay promptly after such modification; or
7
<PAGE>
(4) any act by Tenant or its agents and contractors in installing any
tenant fixtures or equipment, including without limitation the
telecommunications and computer equipment pursuant to Section IVF, that
-----------
unreasonably delays the issuance of the Certificate of Occupancy or temporary
Certificate of Occupancy for the Premises.
I. Cooperation. The parties agree to use best efforts to cause each of their
respective consultants, architects and/or engineers to cooperate with one
another so that the Tenant Improvements are promptly, diligently and efficiently
constructed in accordance with the Construction Schedule.
J. Punch List. Within twenty (20) days after substantial completion of the
Tenant Improvements, Tenant shall supply to Landlord a written punch list
setting forth the additional corrective work to the Tenant Improvements which
Tenant believes is required to be performed pursuant to the Tenant's Plans. Once
Landlord has been provided with a punch list in accordance with the foregoing,
Landlord shall promptly take such measures as are necessary to correct such
defective work. In the event that Tenant fails to notify Landlord of an item of
defective work within such twenty (20) day period, then Landlord shall have no
obligation to repair such item of defective work. Nothing in this Section shall
negate the obligations of Landlord pursuant to Section IVD above to assign or
-----------
enforce any construction warranties, or those obligations of Landlord
specifically set forth in this Lease to repair and maintain the Building and the
Premises.
K. Stage II Premises. The within and foregoing terms and conditions of this
Exhibit C are applicable to the Tenant Improvements for the Stage I Premises as
defined in the Lease. It is contemplated that Landlord will construct and
install the Tenant Improvements to be located in the Stage I Premises before the
Tenant Improvements to be located in the Stage II Premises are constructed and
installed, even if the Tenant Improvements for the Stage II Premises are
included in the Tenant's Plans and permitted as part of the permit for the Stage
I Premises. Landlord shall be under no obligation to construct and install the
Tenant Improvements for the Stage II Premises until such time as Tenant has
directed Landlord to do so ("Notice to Commence Stage II Improvements") and
Tenant has deposited a replacement letter of credit with Landlord as described
in Exhibit E. Upon the delivery of such notice and replacement letter of credit,
---------
the Tenant Improvements for the Stage II Premises shall be designed,
constructed, and paid for as set forth generally in this Exhibit C. Each of
---------
Landlord and Tenant shall cooperate in good faith with each other to allow such
improvements for the Stage II Premises to be completed as soon as practicable.
8
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. The sidewalks, halls, passages, elevators, stairways, exits and entrances of
the Building shall not be obstructed by Tenant or used by it for any purpose
other than for ingress and egress from the Premises. The halls, passages, exits,
entrances, elevators, retail arcade, escalators, balconies and stairways are not
for the use of the general public, and Landlord shall in all cases retain the
right to control and prevent access to those areas by all persons whose presence
in the judgment of Landlord would be prejudicial to the safety, character,
reputation and interests of the Building and its tenants, provided that nothing
in this Lease shall be construed to prevent access to persons with whom Tenant
normally deals in the ordinary course of its business, unless those persons are
engaged in illegal activities. Tenant shall not go upon the roof of the
Building, except in areas that Landlord may designate as "Common Areas" from
time to time.
2. The Premises shall not be used for lodging. Unless ancillary to a restaurant
or other food service use specifically authorized in Tenant's Lease, no cooking
shall be done or permitted by Tenant on the Premises, except that the
preparation of food for Tenant's employees shall be permitted.
3. Landlord shall clean the leased Premises in manner reasonably standard and
consistent with the Building as a first class building in Seattle, Washington,
attached hereto, and except with the written consent of Landlord, no person or
persons other than those approved by Landlord will be permitted to enter the
Building for such purpose, but Tenant shall have the right to have an employee
on the Premises for special and/or extraordinary cleaning as desired by Tenant
and at Tenant's expense. Tenant shall not cause unnecessary labor by reason of
Tenant's carelessness and indifference in the preservation of good order and
cleanliness.
4. Tenant shall not alter any lock or install a new or additional lock or any
bolt on any door of the Premises without first notifying Landlord and
immediately providing Landlord with a key for any new or changed lock. Tenant,
upon the termination of its tenancy, shall deliver to Landlord all keys and/or
security cards to doors in the Building and the Premises that shall have been
furnished to Tenant and in the event of loss of any keys and/or security cards
so furnished, shall pay Landlord for the lost keys and/or security cards and
changing of locks as a result of such loss.
5. The freight elevator shall be available for use by Tenant, subject to
reasonable scheduling as Landlord shall deem appropriate. The persons employed
by Tenant to move equipment or other items in or out of the Building must be
acceptable to Landlord. No safes or other objects larger or heavier than the
freight elevator of the Building is limited to carry shall be brought into or
installed on the Premises without Landlord's prior written consent. Heavy
objects shall, if considered necessary by Landlord, stand on wood strips of
thickness as is necessary to properly distribute the weight of those objects.
Landlord will not be responsible for loss of or damage to any property from any
cause, and all damage done to the Building by moving or maintaining Tenant's
property shall be repaired at the expense of Tenant. The moving of heavy objects
shall occur only between those hours as may be designated by and only upon
written notice to Landlord and the persons employed to move heavy objects in or
out of the Building must be acceptable to Landlord.
6. Excluding Tenant's use of the emergency generator addressed in Exhibit E,
---------
Tenant shall not use or keep in the Premises or the Building any kerosene,
gasoline or flammable or combustible fluid or materials or use any method of
heating or air conditioning other than that supplied by Landlord. Tenant shall
not sweep or throw or permit to be swept or thrown from the Premises any debris
or other substance into any of the corridors, halls or lobbies or out of the
doors or windows or into the stairways of the Building and Tenant shall not use,
keep or permit to be used or kept any foul or noxious gas or substance in the
Premises. Tenant shall not use, keep or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise,
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odors and/or vibrations, or interfere in any way with other tenants or those
having business in the Building.
7. During non-business hours and on holidays access to the Building, or to the
halls, corridors or stairways in the Building, or to the Premises, may be
refused unless the person seeking access is known to the Building and has a pass
or is properly identified. Landlord shall in no case be liable for damages for
the admission to or exclusion from the Building of any person whom Landlord has
the right to exclude under Rule 1 above. In case of invasion, mob, riot, public
excitement or other circumstances rendering that action advisable in Landlord's
opinion, Landlord reserves the right to prevent access to the Building during
the continuance of that activity by taking those actions that Landlord may deem
appropriate, including closing entrances to the Building.
8. Tenant shall see that the doors of the Premises are closed and securely
locked when Tenant's employees leave the Premises, after hours.
9. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, no
foreign substance of any kind whatsoever shall be deposited in any of them, and
any damage resulting to them from Tenant's misuse shall be paid for by Tenant.
10. Except with the prior written consent of Landlord, Tenant shall not sell, or
permit the sale from the Premises of newspapers, magazines, periodicals, theater
tickets or any other goods, merchandise or service, nor shall Tenant carry on,
or permit or allow any employee or other person to carry on, business in or from
the Premises for the service or accommodation of occupants of any other portion
of the Building, nor shall the Premises be used for manufacturing of any kind,
or for any business or activity other than that specifically provided for in
Tenant's Lease. No Tenant shall obtain for use upon the Premises ice, towel and
other similar services, or accept barbering or shoe polishing services in the
Premises, except from persons authorized by Landlord and at hours and under
regulations fixed by Landlord.
11. Except as set forth in Exhibit E, Tenant shall not install any radio or
---------
television antenna, loudspeaker or other device on the roof or exterior walls of
the Building.
12. Tenant shall not use in any space, or in the Common Areas of the Building,
any handtrucks except those equipped with rubber tires and side guards or other
material handling equipment as Landlord may approve. No other vehicles of any
kind shall be brought by Tenant into the Building or kept in or about the
Premises. All mail carts shall be equipped with rubber guards to protect
elevators, doors and hallways.
13. No sign, advertisement or notice visible from the exterior of the Premises
shall be inscribed, painted or affixed by Tenant on any part of the Building or
the Premises without the prior written consent of Landlord. If Landlord shall
have consented at anytime, whether before or after the execution of this Lease,
that consent shall in no way operate as a waiver or release of any of the
provisions of this Rule 13 or of this Lease, and shall be deemed to relate only
to the particular sign, advertisement or notice so consented to by Landlord and
shall not be construed as dispensing with the necessity of obtaining the
specific written consent of Landlord with respect to each and every such sign,
advertisement or notice other than the particular sign, advertisement or notice,
as the case may be, so consented to by Landlord.
14. Except as shown in the design plan approved by Landlord, the sashes, sash
doors, windows, glass relights, and any lights or skylights that reflect or
admit light into the halls or other places of the Building shall not be covered
or obstructed and, there shall be no hanging plants or other similar objects in
the immediate vicinity of the windows or placed upon the window sills or hung
from the window heads.
15. No tenant shall lay linoleum or other similar floor covering so that it is
affixed to the floor of the Premises in any manner except by a paste, or other
material which may easily be removed with water, the use of cement or other
similar adhesive materials being expressly prohibited. The method of affixing
2
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any linoleum or other similar floor covering to the floor, as well as the method
of affixing carpets or rugs to the Premises, shall be subject to approval by
Landlord. The expense of repairing any damage resulting from a violation of this
Rule 15 shall be borne by the Tenant by whom, or by whose agents, clerks,
employees or visitors, the damage shall have been caused.
16. All loading, unloading, and delivery of merchandise, supplies, materials and
furniture to the Premises shall be made during reasonable hours and in entryways
and elevators as Landlord shall designate. In its use of the building loading
dock, Tenant shall not obstruct or permit the obstruction of loading areas, and
at no time shall Tenant park vehicles in the loading areas except for loading
and unloading.
17. Canvassing, soliciting, peddling or distribution of handbills or any other
written material in the Building is prohibited and Tenant shall cooperate to
prevent these activities.
18. [Not Used].
19. Landlord may direct the use of all pest extermination and scavenger
contractors through-out the Building and/or Premises at intervals as Landlord
may require.
20. If Tenant desires telephone or telegraph connections, Landlord will direct
service technicians as to where and how the wires are to be introduced. No
boring or cutting for wires or otherwise shall be made without directions from
Landlord.
21. Tenant shall immediately, upon request from Landlord (which request need not
be in writing), reduce its lighting in the Premises for temporary periods
designated by Landlord, when required in Landlord's judgment to prevent
overloads of mechanical or electrical systems of the Building.
22. Subject to Section 21.19 of the Lease, Landlord reserves the right to select
-------------
the name of the Building and to change the name as it may deem appropriate from
time to time, and Tenant shall not refer to the Building by any name other than:
(a) the names as selected by Landlord (as that name may be changed from time to
time), or (b) the postal address, approved by the United States Post Office.
Tenant shall not use the name of the Building in any respect other than as an
address of its operation in the Building without the prior written consent of
Landlord.
23. The requirements of Tenant will be attended to only upon application by
telephone or in person at the office of the Building manager. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instruction from Landlord.
24. Landlord may waive any one or more of the Rules and Regulations for the
benefit of any particular tenant or tenants, but no waiver by Landlord shall be
construed as a waiver of the Rules and Regulations in favor of any other tenant
or tenants, nor prevent Landlord from thereafter enforcing any Rules and
Regulations against any or all of the tenants in the Building.
25. Wherever the word "Tenant" occurs in these Rules and Regulations, it is
understood and agreed that it shall mean Tenant's assigns, subtenants,
associates, agents, clerks, employees and visitors. Wherever the word "Landlord"
occurs in these Rules and Regulations, it is understood and agreed that it shall
mean Landlord's assigns, agents, clerks, employees and visitors.
26. These Rules and Regulations are in addition to, and shall not be construed
in any way to modify, alter or amend, in whole or part, the terms, covenants,
agreements and conditions of any Lease of Premises in the Building.
27. Landlord reserves the right to make additional rules and regulations as in
its judgment may from time to time be needed for the safety, care and
cleanliness of the Building, and for the preservation of good order therein.
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EXHIBIT E
ADDITIONAL PROVISIONS
1. Option to Extend Term.
1.1 Stage I Premises.Tenant shall have the right to extend the Stage I
Term of the Lease for the Stage I Premises for one (1) period of five (5) years
(the "Extension Period") on the same terms and conditions of the Lease except
for Basic Rent which shall be equal to the Market Rate as determined pursuant to
Section 2 of this Addendum; provided, however, that such option to extend may be
- --------- -----------------
exercised only in the event Tenant is not in default at the time the option
right is exercised or at the time the Extension Period is to commence. Tenant
shall deliver to Landlord a written notice of Tenant's exercise of its option to
extend hereunder not less than twelve (12) months prior to the expiration of the
initial Stage I Term.
1.2 Stage II Premises. Tenant shall have the right to extend the Stage
II Term of the Lease for the Stage II Premises for one (1) period of five (5)
years (the "Extension Period") on the same terms and conditions of the Lease
except for Basic Rent which shall be equal to the Market Rate as determined
pursuant to Section 2 of this Addendum; provided, however, that such option to
--------- -----------------
extend may be exercised only in the event Tenant is not in default at the time
the option right is exercised or at the time the Extension Period is to
commence. Tenant shall deliver to Landlord a written notice of Tenant's exercise
of its option to extend hereunder not less than twelve (12) months prior to the
expiration of the initial Stage II Term.
2. Market Rent Determination. The term "Market Rent" shall mean the greater
of (a) Basic Rent during the final year of the initial Term for the Stage I
Premises and Stage II Premises, respectively, or (b) rent obtained for
comparable space in comparable buildings in the Central Business District of
Seattle ("CBD") as of the date such determination is made, and comparable space
shall mean similar sized space located upon floors approximately the same height
from the ground level as the Premises, with similar tenant improvements
installed and with suitable adjustments for (i) length of lease terms, (ii)
credit quality of tenants, and (iii) other relevant factors affecting
comparability of various rental rates. For purposes of determining Market Rent,
the total Rentable Area of the Premises shall be used. Landlord and Tenant shall
use their best efforts to negotiate Market Rent within thirty (30) days after
exercise by Tenant of its option to extend. If Landlord and Tenant cannot agree
on the Market Rent, the parties shall submit the determination of Market Rent to
be resolved by arbitration ("Arbitration"), in accordance with the following
procedure. Landlord and Tenant shall mutually agree to appoint one (1)
arbitrator, who shall be appointed within sixty (60) days after exercise by
Tenant of its option to extend. Failing such agreement, either Landlord or
Tenant shall have the right to petition for the appointment of the arbitrator by
the Presiding Judge of the Superior Court of King County. Within thirty (30)
days after the appointment of the arbitrator, Tenant and Landlord shall each
submit to the arbitrator (and one another) their written opinion regarding
Market Rent, as defined above. Within ten (10) days after the arbitrator's
receipt of the last such opinion, the arbitrator shall decide which of the two
opinions most accurately reflects Market Rent. Such selected opinion shall be
the Market Rent for purposes of this Section 2 and the selection by the
---------
arbitrator shall be final and binding upon the parties. The arbitrator must
select one of the two alternative opinions and may not select any other
alternatives. The cost of the arbitrator shall be split equally between Landlord
and Tenant. The foregoing procedure shall be applicable separately with respect
to the Stage I Premises and the Stage II Premises.
3. Building Signage. Tenant, at its sole cost and expense, and subject to
all applicable laws, ordinances and regulations, shall have the right to install
one (1) sign on the exterior of the Building. The location and appearance of the
sign shall be subject to Landlord's approval.
4. Parking. During the term of the Lease, Landlord shall make available to
Tenant the number of vehicle parking spaces identified in the Lease Summary
("Stipulated Parking Spaces"). The Stipulated Parking Spaces shall be available
as unreserved and undesignated spaces. Tenant shall pay Landlord (or the parking
operator if Landlord so requests) monthly rent for each Stipulated Parking Space
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provided hereunder at the monthly parking rate for similar spaces in the Parking
Garage established from time to time by Landlord or the parking operator, which
shall not exceed the Maximum Agreed Rate. The term "Maximum Agreed Rate" means
$125.00 (plus sales tax) during the first Lease Year ("Base Rate"), and in any
subsequent Lease Year, the Base Rate increased by five percent (5%) per Lease
Year subsequent to the first Lease Year; provided, however, upon the
-------- -------
commencement of any Extension Term, Landlord may adjust the monthly rate to the
generally prevailing market rate for parking spaces in the vicinity of the
Building. Tenant's use of parking spaces shall be subject to the terms and
conditions of the Parking Agreement attached hereto as Exhibit H.
---------
5. Installation of Generator. Tenant may install an emergency back-up
generator in a location to be approved by Landlord. Tenant shall indemnify,
defend and hold Landlord harmless from and against any loss, liability, damage
or expense associated with the presence or use of such facility by Tenant. The
location and particularities regarding the installation of the generator shall
be included in the plans submitted as part of the Tenant Improvements set forth
in Exhibit C. The granting of Landlord's approval may be conditioned by Landlord
---------
on the execution by Tenant of such instruments as Landlord may reasonably
request to ensure the safe operation of such facilities and the protection of
the Building and the occupants thereof.
6. Storage; Bicycle Storage. Landlord shall provide a maximum of 1,000
square feet of area on the upper parking level for Tenant's use as dead storage.
The installation of any improvements to accommodate such storage shall be
subject to Landlord's prior approval and shall be at Tenant's sole cost and
expense. Landlord shall have no responsibility for any damage or destruction to
Tenant's property stored in such area. Additionally, Landlord shall provide an
area not exceeding 400 square feet on the same level of the parking garage for
storage and parking of bicycles of Tenant's employees.
7. Letter of Credit.
7.1 On or before the date hereof, Tenant shall deposit with Landlord a
clean, irrevocable and unconditional letter of credit in a form acceptable to
Landlord in its sole discretion ("Letter of Credit") issued by a bank approved
by Landlord in its sole judgment (hereinafter referred to as the "Bank") in
favor of Landlord, in the Stipulated Amount, as security for the faithful
performance and observance by Tenant of the terms, conditions and provisions of
this Lease, including without limitation the surrender of possession of the
Premises to Landlord as herein provided. The Letter of Credit shall have a term
which expires no sooner than the Stage II Termination Date, or Tenant may
deliver a one (1) year unconditional and irrevocable Letter of Credit which by
its terms automatically, for the remainder of the Stage II Term, renews for
successive one (1) year periods unless the Bank provides no less than thirty
(30) days written notice to Landlord that such Letter of Credit shall not be
renewed, in which event Landlord shall have the right to draw down the entire
amount of the Letter of Credit unless Tenant substitutes, prior to the
expiration of such letter of Credit, a new Letter of Credit which meets the
requirements of this Paragraph 7. If Tenant defaults in respect of any of the
-----------
terms, conditions or provisions of this Lease including, but not limited to, the
payment of Rent, and Tenant fails to cure any such default after any required
notice and within any applicable cure period hereunder (i) Landlord shall have
the right to require the Bank to make payment to Landlord or its designee of the
entire proceeds of the Letter of Credit, and (ii) Landlord may, at the option of
Landlord (but Landlord shall not be required to) apply or retain the whole or
any part of such sum so paid to it by Tenant or the Bank to the extent required
for the payment of any Rent or any other sum as to which Tenant is in default,
and (iii) Landlord shall hold the remainder of such sum paid to it by the Bank
or Tenant, if any, for Landlord's benefit, as security for the faithful
performance and observance by Tenant of the terms, covenants, and conditions of
this Lease on Tenant's part to be observed and performed, with the same rights
as hereinabove set forth to apply or retain the same in the event of any further
default by Tenant under this Lease, including without limitation the obligations
(whether accrued and unaccrued, contingent or otherwise) of Tenant to Landlord
described in Section 17 of the Lease. If Landlord applies or retains any part of
----------
the proceeds of the Letter of Credit or the cash amount deposited by Tenant,
Tenant shall, within five (5) business days after demand, deposit with Landlord
or its designee the amount so applied or retained so that Landlord or its
designee shall have the full deposit on hand at all times during the Term of
this Lease (and any
2
<PAGE>
extension). Tenant's failure to do so within ten (10) days of receipt of such
demand shall constitute a breach of this Lease.
7.2 Tenant, at any time during the term hereof (including any extension
and including prior to the Commencement Date), but at least sixty (60) days
prior to the expiration of the Letter of Credit, may deposit with Landlord the
equivalent cash amount as security hereunder in lieu of the Letter of Credit.
Landlord shall have all of the same rights with respect to such cash security as
Landlord has hereunder with respect to the Letter of Credit, and Tenant shall
have the same obligations with respect to the deposit of additional funds with
Landlord if Landlord applies or retains all or any portion of such cash security
as provided in the previous subsection. Landlord shall not be required to
deposit such cash in a segregated, interest bearing account.
7.3 In the event of a transfer, sale or lease of Landlord's interest in
the Building, Landlord shall transfer or cause to be transferred either the cash
or Letter of Credit or any sums collected thereunder by Landlord, together with
any other sums then held by Landlord or its designee as such security, to the
transferee, vendee or lessee, and Landlord thereupon shall be released by Tenant
from all liability under this Paragraph. Tenant agrees to look solely to the new
landlord for the return of the cash or Letter of Credit or any sums collected
thereunder and any other security, and it is agreed that the provisions hereof
shall apply to every transfer or assignment made of the Letter of Credit or any
sums collected thereunder and any other security to a new landlord. Tenant
further covenants that it shall not assign or encumber, or attempt to assign or
encumber, any part of such security and that neither Landlord nor its successors
or assigns shall be bound by any such assignment, encumbrance, attempted
assignment, or attempted encumbrance. Landlord shall not be required to exhaust
its remedies against Tenant before having recourse to the Letter of Credit or
such cash security held by Landlord. Recourse by Landlord to the Letter of
Credit or such security shall not affect any remedies of Landlord which are
provided in this Lease or which are available to Landlord in law or equity.
7.4 In the event that Tenant shall fully and faithfully comply with all
of the terms, provisions, covenants and conditions of this Lease, the Letter of
Credit and/or cash, except as the same may have been applied by Landlord in
accordance with this Lease, shall be returned to Tenant promptly after the
expiration of this Lease.
7.5 As used herein, the term "Stipulated Amount" means, prior to the LC
Increase Date, the sum of Two Million and 00/100 Dollars ($2,000,000.00), and,
after the LC Increase Date, the sum of Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000.00). The term "LC Increase Date" means the earlier of
-------
(a) the date which is six (6) months after the date appearing on the cover page
to this Lease as the date of this Lease or (b) the date the Tenant delivers its
Notice to Commence Stage II Improvements, as defined in Exhibit C to the Lease.
---------
In the event Tenant fails to deliver to Landlord a substitute Letter of Credit
in the increased Stipulated Amount by the LC Increase Date, Tenant shall be in
default of its obligations under the Lease and Landlord may exercise any and all
remedies available to Landlord hereunder, and Landlord may require the Bank to
make payment to Landlord or its designee the entire proceeds of the Letter of
Credit then held by Landlord pursuant to Paragraph 7.1.
-------------
8. Installation of Telecommunications Equipment. Tenant, at its sole cost
and expense, shall have the non-exclusive right (it being understood that
Landlord may grant, extend or renew similar rights to others) to install,
maintain, and from time to time replace a satellite antenna or dish
(collectively, "Dish") on the roof of the Building, provided that prior to
commencing any installation or maintenance, Tenant shall (i) obtain Landlord's
prior approval of the proposed size, weight and location of the Dish and method
for fastening the Dish to the roof, (ii) such installation and/or replacement
shall comply strictly with all applicable laws, ordinances and regulations and
the conditions of any bond or warranty maintained by Landlord on the roof, (iii)
use the Dish solely for its internal use, (iv) not grant any right to use of the
Dish to any other party, and (v) obtain, at Tenant's sole cost and expense, any
necessary federal, state, and municipal permits, licenses and approvals, and
deliver copies thereof to Landlord. Landlord may supervise or perform any roof
penetration related to the installation of a Dish, and Landlord may charge the
cost thereof to Tenant. Tenant agrees that all installation, construction and
maintenance shall be performed in a neat, responsible, and workmanlike manner,
using generally acceptable construction
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standards, consistent with such reasonable requirements as shall be imposed by
Landlord. Tenant further agrees to label each cable or wire placed by Tenant in
the telecommunications pathways of the Building, with identification information
as required by Landlord. Tenant shall repair any damage to the Building caused
by Tenant's installation, maintenance, replacement, use or removal of the Dish.
The Dish shall remain the property of Tenant, and Tenant may remove the Dish at
its cost at any time during the Term. Tenant shall remove the Dish at Tenant's
cost and expense upon the expiration or termination of this Lease. Tenant agrees
that the Dish, and any wires, cables or connections relating thereto, and the
installation, maintenance and operation thereof shall in no way interfere with
the use and enjoyment of the Building, or the operation of communications
(including, without limitation, other satellite dishes) or computer devices by
Landlord or by other tenants or occupants of the Project. If such interference
shall occur, Landlord shall give Tenant written notice thereof and Tenant shall
correct the same within twenty-four (24) hours of receipt of such notice.
Landlord reserves the right to disconnect power to any Dish if Tenant fails to
correct such interference within twenty-four (24) hours after such notice.
Landlord makes no warranty or representation that the Building or any portions
thereof are suitable for the use of a Dish, it being assumed that Tenant has
satisfied itself thereof. Tenant shall protect, defend, indemnify and hold
harmless Landlord and Landlord's agents from and against claims, damages,
liabilities, costs and expenses of every kind and nature, including attorneys'
fees, incurred by or asserted against Landlord arising out of Tenant's
installation, maintenance, replacement, use or removal of the Dish.
9. Financial Statements. Upon Landlord's request, Tenant shall deliver to
Landlord the audited financial statements of Tenant (including internally
prepared statements for interim periods following the end of the last fiscal
year for which annual statements are available) for Tenant's last three (3)
fiscal years, prepared or compiled by a certified public accountant, including a
balance sheet and profit and loss statement for the most recent prior year, all
prepared in accordance with generally accepted accounting principles
consistently applied. All such financial statements shall be held in confidence
by Landlord for Landlord's internal purposes and may be disclosed by Landlord to
Landlord's prospective lenders, purchasers and partners for purposes of
financing, sale and partnership arrangements.
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EXHIBIT F
ESTOPPEL CERTIFICATE
(FORM)
- ------------------------------------
- ------------------------------------
(the
- ------------------------------------
"Agent"), for itself and as agent
for certain lenders ("Lenders")
BLUME YALE LIMITED PARTNERSHIP
a Washington limited partnership ("Landlord")
OFFICE TENANT ESTOPPEL CERTIFICATE
Re: Lease Dated: ________________________________
Commencement Date: ________________________________
Termination Date: ________________________________
Landlord: BLUME YALE LIMITED PARTNERSHIP
Tenant: ________________________________
Premises: Approximately ____ sq. ft. located
at Suite ____, Mercer Yale Building,
______________, Seattle, Washington
("Premises")
Tenant under the above-described lease (the "Lease") hereby certifies to
Agent and to Landlord as follows:
1. Attached hereto is a true, correct and complete copy of the Lease, the
Premises of which are more particularly described in the Lease. The Lease
represents the entire agreement between the parties as to the Premises and is
now in full force and effect. All provisions of the Lease and the amendments
thereto (if any) referred to above are hereby ratified.
2. The term of the Lease commenced on _________________, ____. Rent commenced to
accrue on _____________________, ____.
3. Tenant entered into occupancy of the Premises on or about
________________________, ____. Tenant opened for business at the Premises on or
about ____________________, ____.
4. The initial term of the Lease shall expire on _____________________, 20__,
with _______________ (_____) renewal option(s) of a period of
_____________________ (_____) years each.
5. The Lease has not been amended, modified, supplemented, extended, renewed or
assigned, except as follows:________________________________________________
____________________________________________________________________________
____________________________________________________________________________.
(if none, so state)
6. All conditions of the Lease to be performed by Landlord thereunder and
necessary to the enforceability of the Lease have been satisfied, except as
follows: ______________________________________________________________________
_______________________________________________________________________________
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_______________________________________________________________________________
(if none, so state)
7. Tenant acknowledges that the Lease has been (or will be) assigned to Agent.
Tenant has not received any notice of any other sale, pledge, transfer or
assignment of the Lease or of the rentals thereunder by Landlord.
8. The amount of fixed monthly rent is currently $_________________.
9. The amount of the security deposit (if any) deposited by Tenant is
$______________. No other security deposits have been made.
10. Tenant is paying the full rental under the Lease, which rental has been paid
in full as of the date hereof. No rental under the Lease has been paid for more
than thirty (30) days in advance of its due date.
11. There are no defaults on the part of Landlord under the Lease, and there are
no events currently existing (or with the passage of time, giving of notice or
both, would exist) which give Tenant the right to cancel or terminate the Lease.
12. Tenant has no defense as to its obligations under the Lease and claims no
setoff or counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies, except as
provided in the Lease.
14. There are no actions, whether voluntary or otherwise, pending against the
undersigned or any guarantor of Tenant's obligations under the Lease pursuant to
the bankruptcy or insolvency laws of the United States or any state thereof.
15. Tenant represents and warrants that it has not used, generated, released,
discharged, stored or disposed of any hazardous waste, hazardous substances,
toxic waste, toxic substances or related materials (collectively, "Hazardous
Materials") on, under, in or about the Premises, or transported any Hazardous
Materials to or from the Premises, other than Hazardous Materials used in the
ordinary and commercially reasonable course of Tenant's business in compliance
with all applicable laws.
16. Tenant acknowledges that the present Landlord of the Premises is
____________________, the owner of the property which includes the Premises.
17. Tenant's address for notices under the terms of the Lease is:
-----------------------------
-----------------------------
-----------------------------
18. Tenant acknowledges that Landlord is relying on the representations made
herein.
19. Tenant acknowledges that Lenders intend to continue to finance the
indebtedness of Landlord or its partners, to be secured by the property of which
the Premises are a part, that Landlord intends to collaterally assign the Lease
to Agent in connection with such financing, and that Lenders are relying upon
the representations made herein.
20. Tenant confirms that ___________________________ continues to be the
Landlord under the Lease. Tenant will continue to pay all rents and other
amounts due thereunder to ___________________ in accordance with notices
delivered or to be delivered by __________________________.
2
<PAGE>
DATED: _______________________, ______.
TENANT: __________________________________________ ,
a ________________________________________
By _______________________________________
its____________________________________
ACCEPTED AND AGREED THIS
________ day of ____________, _____.
LANDLORD:
BLUME YALE LIMITED PARTNERSHIP,
a Washington limited partnership
By: ______________________
Its: ______________________
Exhibit A - Lease
3
<PAGE>
EXHIBIT G
SUBORDINATION AGREEMENT
(FORM)
SUBORDINATION, ATTORNMENT,
NOTICE AND NON-DISTURBANCE AGREEMENT
THIS AGREEMENT is made as of the _____ day of ______________, ____, by and
between ____________________________________________ ("Tenant"), and
___________________________ (the "Agent"), for itself and as agent of certain
lenders ("Lenders").
R E C I T A L S:
A. Tenant entered into a certain lease (the "Lease"), dated the _____ day of
_________________, ____, with BLUME YALE LIMITED PARTNERSHIP, a Washington
limited partnership ("Landlord"), pertaining to certain improvements (the
"Improvements") constructed on land located in King County, Washington,
described on Exhibit A (the land and the improvements are hereafter called "the
---------
Property").
B. Lenders continue to provide financing (the "Loans") which is secured by a
Deed of Trust, Security Agreement and Financing Statement from Landlord recorded
in the records of King County, Washington, creating a valid first lien on the
Property and a valid Deed of Trust (the Deed of Trust and all renewals,
modifications, substitutions, extensions and replacements thereof, including
increases in the indebtedness secured thereby, are hereafter collectively called
the "Deed of Trust").
C. Lenders have required that Tenant subordinate its interest in the Lease to
the Deed of Trust and agree to attorn to Lenders as a condition precedent to the
making of the Loans.
NOW, THEREFORE, in consideration of the foregoing facts and the mutual
covenants set forth herein, Tenant and Agent hereby agree as follows,
notwithstanding anything contained in the Lease to the contrary;
1. Tenant agrees that the Lease and the rights of Tenant thereunder are
and shall remain subordinate to the Deed of Trust and all renewals, extensions,
and modifications thereof.
2. Lenders agree that they will not disturb the possession of Tenant
under the Lease upon any judicial or nonjudicial foreclosure of the Deed of
Trust, or upon acquiring title to the Property by deed in lieu of foreclosure if
Tenant is not then in default under the Lease or hereunder, and agree further
that, so long as Tenant is not in default under the Lease or hereunder, Lenders
thereafter will (a) accept the attornment of Tenant, (b) recognize all renewal
rights set forth in the Lease, and (c) undertake and perform all obligations as
Landlord under the Lease.
3. In the event of the foreclosure of the Deed of Trust, judicially or
nonjudicially, or if title to the Property is conveyed by deed in lieu of
foreclosure, Tenant agrees to attorn to and accept the purchaser(s) at the
foreclosure sale(s) conducted pursuant to the Deed of Trust or the grantee(s) in
such deed(s) in lieu of foreclosure and his or its (or their) heirs, legal
representatives, successors and assigns as Landlord under the Lease for the
balance then remaining of the term thereof, subject to all terms and conditions
of the Lease; provided, however, that in no event shall any such purchaser (or
-------- -------
grantee) of the Property or the holder of the Deed of Trust be; (i) liable for
obligations or acts of Landlord occurring or arising prior to the date of such
foreclosure or deed on lieu of foreclosure, (ii) liable for any rent paid in
advance by Tenant for any period beyond the month in which Lender succeeds to
the interest of Borrower under the Lease, (iii) subject to any offsets or
defenses which Tenant may have against any prior
1
<PAGE>
Landlord, except for on-going non-monetary obligations of the Landlord under
this Lease, (iv) bound by any previous amendment or modification of the Lease or
any waiver or forbearance by Landlord unless the same was approved in writing by
Lender.
4. Tenant agrees that with respect to any written notice required to be
given to Landlord under the Lease, a copy of such notice shall be delivered to
Agent. Tenant also agrees to give Agent notice of each default of Landlord and
any successor landlord under the Lease and thirty (30) days to cure such default
prior to the exercise by Tenant of any right to terminate the Lease; provided
that, if such default is of a nature that it is not capable of being cured
within a 30-day period, Tenant shall not exercise any such right to terminate
the Lease if Agent is diligently pursuing such cure. With respect to a default
which is personal to Landlord such as bankruptcy and thus not capable of being
cured by Agent or a default which is not capable of being cured without
possession of the Property, Agent shall be deemed to be curing such default if,
within such 30-day period, Agent commences and thereafter pursues (subject to
any judicial stays, injunctions, or other delays) foreclosure proceedings with
respect to the Property.
5. Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered, whether actually received or not, when deposited in the
United States Mail, postage prepaid, registered or certified mail, return
receipt requested, addressed to the parties hereto at the respective addresses
set out opposite their names below, or such other addresses as they have
heretofore specified by written notice delivered in accordance herewith:
Tenant: __________________________________
__________________________________
__________________________________
Agent: __________________________________
__________________________________
__________________________________
6. Tenant shall not pay rental under the Lease for more than one month
in advance.
7. Tenant acknowledges that as of the date of execution of this
Agreement, there is no default by the Landlord under the terms of the Lease and
the Lease is in full force and effect.
8. Nothing in this Agreement shall be construed to require Agent to see
to the application of the proceeds of the Loan, and Tenant's agreement set forth
herein shall not be impaired on account of any modifications of the documents
evidencing and securing the Loans.
9. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and to their successors and assigns.
EXECUTED as of the date set out above and all documents attached hereto
will be effective on the date stated above.
TENANT: _________________________________________
a _______________________________________
By: ____________________________________
Its: ______________________________
2
<PAGE>
AGENT: _________________________________________
By: ____________________________________
Its: ______________________________
ACCEPTED AND AGREED THIS
______ day of _______________, _____.
LANDLORD:
BLUME YALE LIMITED PARTNERSHIP,
a Washington limited partnership
By: _____________________________
Its: _____________________________
Exhibit A - Legal Description
3
<PAGE>
(FORM)
TENANT ACKNOWLEDGEMENT (CORPORATE)
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this _____ day of _______________, _____, before me, a Notary Public in
and for the State of Washington, personally appeared ____________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that _____ was
authorized to execute the instrument, and acknowledged it as the _______________
of _________________________ to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this day
and year first above written.
______________________________________________________
Notary Public in and for the State of _______________,
residing at___________________________________________
My commission expires:________________________________
______________________________________________________
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
4
<PAGE>
AGENT ACKNOWLEDGEMENT
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this _____ day of _______________, _____, before me, a Notary Public in
and for the State of Washington, personally appeared ____________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that _____ was
authorized to execute the instrument, and acknowledged it as the _______________
of _________________________________, to be the free and voluntary act and deed
of said corporation for the uses and purposes therein mentioned in the
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this day
and year first above written.
_____________________________________________________
Notary Public in and for the State of Washington,
residing at___________________________________________
My commission expires:________________________________
______________________________________________________
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
5
<PAGE>
LANDLORD ACKNOWLEDGEMENT
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this _____ day of _______________, ______, before me, a Notary Public in
and for the State of Washington, personally appeared ______________________,
personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person who signed the instrument; on oath stated that he was
authorized to execute this instrument as the General Partner of BLUME YALE
LIMITED PARTNERSHIP, a Washington limited partnership, the limited partnership
that executed the instrument; acknowledged the said instrument to be the free
and voluntary act and deed of said limited partnership for the uses and purposes
therein mentioned, and on oath stated that he was duly elected, qualified, and
acting as said general partner of the limited partnership; and that said
instrument was the free and voluntary act and deed of said limited partnership
for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
______________________________________________________
Notary Public in and for the State of Washington,
residing at___________________________________________
My commission expires:________________________________
______________________________________________________
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
6
<PAGE>
EXHIBIT H
PARKING AGREEMENT
Unless terminated as set forth herein, so long as the lease to which this
Parking Agreement is attached (hereinafter the "Lease") remains in effect, and
so long as the Rules and Regulations adopted by Landlord are not violated,
Tenant hereby rents from Landlord, and Landlord hereby rents to Tenant, for use
by Tenant or Tenant's employees who normally occupy the Building, on a
non-reserved and non-exclusive basis, the Stipulated Parking Spaces (as defined
in the Lease) in the parking garage comprising a part of the Building
(hereinafter "Garage") at the current monthly market rate which shall be
established by Landlords' Parking Operator (hereinafter "Operator") and adjusted
from time to time and applicable to monthly parking spaces. Tenant may validate
visitor parking by such methods or methods as Operator may approve, at the
validation rate and from time to time generally applicable to visitor parking.
Landlord expressly reserves the right to designate parking areas and to modify
the parking structure for other uses or to any extent. Tenant may terminate
Tenant's rental of one or more of the parking spaces by giving Landlord fifteen
(15) days advance written notice thereof. Unless Tenant terminates the rental of
the parking spaces, Tenant shall be responsible for paying rent on all parking
space for the entire term of the Lease. If Tenant terminates the rental of one
or more parking spaces, Tenant shall not have the right to reinstate the parking
spaces terminated unless Landlord determines, in its sole discretion, that
sufficient parking spaces are available.
The following Rules and Regulations, including the sticker, Secard or other
identification system (hereinafter "Parking Identification") established by
operator, are in effect until notice is given to Tenant of any change. Landlord
reserves the right to modify and/or adopt such other reasonable and
non-discriminatory Rules and Regulations for the Garage as it deems necessary
for the operation of the Garage. Landlord may refuse to permit any person who
violates the Rules and Regulations to park in the Garage, and any violation of
these Rules and Regulations may result, in the operator's full discretion, in
the violator's vehicle being barreled at a charge of $15.00 and/or removed at
the violator's expense. In either of said events, the Parking Identification
supplied by Landlord may be requested by Landlord and must then be returned to
Landlord.
RULES AND REGULATIONS
1. Garage hours are posted at the entrance and exits of the Garage. Landlord
reserves the right to adjust such hours.
2. Vehicles must be parked entirely within stall lines painted on the floor.
3. Monthly parkers may park in any open space not designated "reserved",
"handicapped" or "no parking".
4. All directional signs and arrows must be observed.
5. The speed limit shall be 5 miles per hour.
6. Parking is prohibited:
a. In areas not striped for parking;
b. In aisles;
c. Where "no parking" signs are posted;
d. In cross-hatched areas;
e. In such other areas as may be designated by operator;
f. In compact stalls by oversized vehicles.
1
<PAGE>
7. The Parking Identification supplied by Landlord or operator shall remain
the property of Landlord. Such Parking Identification must be displayed as
requested and may not be mutilated in any manner. The serial number of the
Parking Identification may not be obliterated. Parking Identification may
be transferable upon prior authorization by Operator, but any Parking
Identification in the possession of an unauthorized holder will be void.
8. The monthly rate for rental of parking spaces is payable in advance and
must be paid on or before the first day of each month. Failure to do so
will automatically cancel parking privileges and a reinstatement fee may be
charged. No deductions or allowances from the monthly rate will be made for
days the designated parker does not use the Garage.
9. Parking managers or attendants are not authorized to make or allow any
exceptions to these Rules and Regulations.
10. Every designated parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles or persons while in the Garage is
assumed by the designated parker.
11. Loss or theft of Parking Identification from vehicles must be reported to
the Operator immediately.
a. Any Parking Identification reported lost or stolen found on any
unauthorized vehicle will be confiscated and the holder will be
subject to prosecution.
b. Any Parking Identification found by the user must be reported to the
Operator immediately to avoid confusion.
12. Spaces rented to persons are for the express purpose of parking one vehicle
per space. Washing, waxing, cleaning or servicing of any vehicle by the
designated parker and/or his agents is prohibited.
13. Parking shall be for motor vehicles only. Trailers, or similar transport
vehicles designed to be towed by a motor vehicle, shall be prohibited.
14. Operator reserves the right to refuse the sale of monthly stickers or other
Parking. Identification to any Tenant or person and/or his agents or
representatives who willfully refuse to comply with the above Rules and
Regulations and all posted city, state or federal ordinances, or laws or
agreements.
15. Tenant shall acquaint all persons to whom Tenant assigns parking spaces of
these Rules and Regulations.
16. Landlord shall not be responsible for any theft and/or vandalism to
designated parker's vehicle or its contents while in the Garage.
17. If designated parker forgets Parking Identification and a daily ticket is
pulled, that ticket must be presented for validation to the Operator the
same day prior to exiting the Garage or otherwise, the posted daily parking
rate will apply.
18. Parking privileges shall be on an unassigned or executive valet basis as
designated by Operator.
Monthly parking is available twenty-four (24) hours, seven (7) days a week.
Tenants and their visitors shall have priority use of all parking areas. Garage
monthly parking charges may be adjusted from time to time by Landlord.
Upon receipt of payment, a fully completed signed parking application, and this
Agreement, by operator, the designated parker will be issued Parking
Identification to be used to gain access to the Garage. Only one
2
<PAGE>
Parking Identification will be issued and it is the responsibility of the
designated parker to transfer the Parking Identification if they have more than
one vehicle. Payment of the monthly parking is the responsibility of the Tenant.
Parking access may be restricted depending on the parking area selected. Monthly
parkers taking tickets to gain access to a restricted area will be responsible
for payment of the posted parking rate upon exiting.
Monthly parking fees are due and payable in advance on the first day of the
month. If the monthly parking fee is not paid by the fifth working day of the
month, Operator will terminate the monthly parking privileges and have the
designated parker's Parking Identification, if applicable, deleted from the
system, denying access to the parking areas. If the fifth of the month falls on
a weekend or holiday, the next business day will apply.
MONTHLY PARKING IS PAYABLE WITHOUT THE SUBMISSION OF AN INVOICE OR STATEMENT AND
A REINSTATEMENT FEE OF $15.00 WILL BE IMPOSED FOR PAYMENTS RECEIVED AFTER 2:00
P.M. ON THE FIFTH WORKING DAY OF EACH MONTH.
There are no refunds granted for monthly parking for any reason.
Proration to one-half (1/2) month's monthly parking fee will be observed only
after the 16th day of each month.
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 38,517,985 44,659
<SECURITIES> 0 0
<RECEIVABLES> 509,055 47,072
<ALLOWANCES> 0 0
<INVENTORY> 1,359,926 65,204
<CURRENT-ASSETS> 41,801,563 159,147
<PP&E> 6,176,791 20,925
<DEPRECIATION> 1,142,033 2,158
<TOTAL-ASSETS> 50,278,832 180,072
<CURRENT-LIABILITIES> (18,494,072) (972,504)
<BONDS> 0 0
0 0
74,232,444 0
<COMMON> 2,933 800
<OTHER-SE> 10,553,859 9,270
<TOTAL-LIABILITY-AND-EQUITY> (50,278,832) (180,072)
<SALES> 27,177,082 1,037,271
<TOTAL-REVENUES> 27,177,082 1,037,271
<CGS> (31,574,214) (1,082,448)
<TOTAL-COSTS> (38,427,704) (623,345)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,075,233) (3,608)
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (57,373,391) (672,130)
<EPS-BASIC> (4.59) (0.08)
<EPS-DILUTED> (4.59) (0.08)
</TABLE>
