<PAGE>
As filed with the Securities and Exchange Commission on February 23, 2000
Registration 333-93273
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 4
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>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Title Of Each Class Of Aggregate Amount Of
Securities To Be Registered Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.0001 par value........... $119,600,000 $31,575(2)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating
the amount of the registration fee.
(2) Previously paid.
---------------
The registrant hereby amends this registration statement on 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 23, 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.
Immediately following and conditioned upon the sale of the shares in the
initial public offering, we will sell $40.0 million worth of additional shares,
or, if greater, 2,666,666 shares, to Internet Capital Group in a private
placement at a price equal to the initial public offering price per share.
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
William Blair & Company
E*OFFERING
The date of this Prospectus is , 2000.
<PAGE>
ONVIA.com...THE SMALL BUSINESS EMARKETPLACE
"What do I need to set up my network?"
"I spend $500 per month on long distance, what's the best plan for me?"
"Help me find the right 401(k) plan"
"I need to set up payroll"
[ARTWORK]
[The artwork is a circle with an arrow pointing into the left side labeled
"buyer" and an arrow pointing into the right side labeled "seller." Outside of
the circle is a ring with arrows pointing counter-clockwise. The top of the ring
reads "Exchange Services and Products" and the bottom of the ring reads
"Exchange Information." The circle itself is divided into five equal segments
which read in a clockwise direction: "Request for Quotes," "Buy and Sell
Services and Products," "News and Advice," "Efficiency Tools" and "Additional
Transaction Types." The center of the circle reads "Small Businesses Save Time
and Make Money."]
Onvia.com is providing a single online resource where small businesses can buy
and sell services and products, and exchange valuable information.
<PAGE>
"How do I find qualified leads for my business?"
"Help me find new customers"
"How do I increase my company's revenue?"
"How do I expand geographically?"
Onvia.com aggregates a large and targeted audience of small businesses to
provide a powerful sales, distribution and marketing channel to small business
buyers.
<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................................................................. 30
Management............................................................... 44
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 an effective 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 20,000
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 offered in the concurrent private
placement.......................................... 3,333,333 shares,
assuming an initial
public offering price of
$12.00 per share
Common stock to be outstanding after the offering... 79,514,015 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 effected in
February 2000;
. our reincorporation into Delaware in February 2000;
. the filing of our amended and restated certificate of incorporation;
. the sale by us of 3,333,333 shares of our common stock at an assumed
initial public offering price of $12.00 per share to Internet Capital
Group in a private placement concurrent with this offering;
. 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 $166,448
Total assets................................................ 50,279 178,209
Long-term debt.............................................. 5,171 5,171
Total stockholders' equity.................................. 26,613 154,544
</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 in this offering and 3,333,333 shares of common stock to be
sold in the concurrent private placement 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.
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
7
<PAGE>
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.
Due to the new and rapidly evolving nature of the market in which we
compete, we believe that reliable and useful metrics for use in comparing us to
our competitors are not readily available. However, the following table lists
the percentage of U.S. home and workplace users who visited our web site and
the web sites of our current and potential competitors listed above during
December 1999, as reported in the Media Metrix World Wide Web Audience Ratings
Report:
<TABLE>
<CAPTION>
Percentage Home
Name and Work Reach
---- ---------------
<S> <C>
Onvia.com 0.4%
BizBuyer.com *
Digitalwork.com *
Works.com *
Beyond.com 4.0
Buy.com 7.5
Onsale.com *
America Online (including all sites) 65.9
Microsoft (includes all sites and LE Network) 80.0
NBCi 22.9
Yahoo! 65.1
AT&T Wireless 9.8
Circuit City 1.5
CompUSA 1.4
</TABLE>
- --------
*Not listed in report due to failure to reach a minimum of 0.2% penetration.
Although the table above includes some companies with broader target markets
than ours, it indicates that some of our competitors have significantly greater
market penetration than us. In addition, 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
8
<PAGE>
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.
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
9
<PAGE>
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.
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
10
<PAGE>
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.
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.
11
<PAGE>
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 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.
Success by John Meier in his action against us could negatively impact our
operating results and result in dilution to our stockholders
In February 2000, John Meier filed an action in the Supreme Court of British
Columbia, Canada asserting a claim against us and Glenn Ballman, our founder,
President and Chief Executive Officer. Mr. Meier's claim is based upon
allegations that he and Mr. Ballman had intentions to form a company similar to
ours and that Mr. Ballman's role in founding our company breached an alleged
partnership with Mr. Meier and fiduciary duties owed to him. In this action,
Mr. Meier asserts that he is entitled to 50% of Mr. Ballman's interest in
Onvia.com, as well as 50% of the assets and business of Onvia.com. Based upon
our investigation to date, we believe that the allegations against us are
wholly without merit and that the outcome of this action will not harm our
business. We believe that we have valid defenses to this claim and intend to
vigorously defend the action. Since the results of litigation proceedings are
inherently unpredictable, however, we are unable to provide assurance regarding
the outcome of this action or possible damages that may be incurred. Although
we believe that it is unlikely, if Mr. Meier were to prevail on his claim
against us in its entirety, this would severely harm our business. Any cash
award or settlement paid by us to Mr. Meier could negatively impact our
operating results and available liquidity. Any shares of common stock awarded
or issued to Mr. Meier by us would be dilutive to our stockholders. It is also
possible that defense of this claim will result in a significant diversion of
management attention. In the event that Mr. Meier is successful in his claim
against Mr. Ballman, it is possible that Mr. Meier could become one of our
principal stockholders and have an ability to exert influence over matters
submitted to our stockholders.
12
<PAGE>
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.
If we expand our international sales and marketing activities, our business
will be susceptible to numerous risks associated with international operations
Although we have no current plans to expand our international operations and
hire additional personnel outside of North America, we anticipate that we may
elect to do so in future. Therefore, in the future 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
13
<PAGE>
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.
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 and the concurrent private placement, our
officers, directors and stockholders with greater than 5% holdings will, in the
aggregate, beneficially own approximately 76.6% of our outstanding common
stock, or 75.4% 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. Following this offering and the concurrent private placement,
Internet Capital Group will beneficially own approximately 22.5% of our
outstanding common stock, or 22.1% if the underwriters' over-allotment option
is exercised in
14
<PAGE>
full. 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."
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 $10.06 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 "Management--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 and the 3,333,333 shares to be sold in the
concurrent private placement will be approximately $127.9 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 $141.3 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 and 3,333,333 shares of common stock in the concurrent
private placement 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 79,514,015 pro forma as adjusted...... 3 7 8
Additional paid in capital....................... 24,904 99,134 227,063
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 26,614 154,544
-------- -------- --------
Total capitalization........................... $ 31,784 $ 31,785 $159,715
======== ======== ========
</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.
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<PAGE>
DILUTION
Our net tangible book value as of December 31, 1999 was $26.6 million, or
approximately $0.91 per share. 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 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 and 3,333,333 shares of common stock in the concurrent private
placement 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 $154.5 million, or approximately $1.94 per share. This represents an
immediate increase in net tangible book value of $1.03 per share to existing
stockholders and immediate dilution of $10.06 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
Net tangible book value per share as of December 31, 1999.... $0.91
Increase per share attributable to new investors............. 1.03
-----
Adjusted net tangible book value per share after this
offering...................................................... 1.94
------
Dilution per share to new investors............................ $10.06
======
</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 85.6% $ 60,913,116 30.9% $ 0.90
New investors........... 11,333,333 14.4 135,999,996 69.1 12.00
---------- ----- ------------ -----
Total................. 78,808,951 100.0% $196,913,112 100.0% $ 2.50
========== ===== ============ =====
</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, as fees from sales of services constituted less than 1% of
our revenue. 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
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competitive prices, in some cases below cost and often with shipping discounts.
As a result of our aggressive 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 noncash stock-based
compensation expense. At December 31, 1999, unearned stock-based compensation
was $14.2 million, and we amortized $10.5 million of noncash 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. In December 1999, we entered into a one-year agreement
with CNET under which we pay CNET a fee each time a visitor
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clicks on a link from the CNET web site to our web site. We are required to
make minimum payments to CNET of $200,000 per month for the first six months
and $250,000 per month over the remainder of this agreement. In addition, our
subsidiary, Onvia.com Canada, entered into an agreement with Global Television
Network in May 1998 to pay 4% of Onvia.com Canada's gross sales to Global
Television Network in return for television advertisements. Either party may
cancel this agreement upon 30 days notice to the other party. 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.
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 of $1.8 million associated with the implementation of several
engineering projects performed for us by Oracle, and the use of contractors to
supplement technology and development staff. Most of these Oracle projects were
completed in the fourth quarter of 1999 and the first quarter of 2000, although
a few are still ongoing. 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.
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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.
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
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,
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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.
Net Loss
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 in 1999, including $10.5 million in noncash
stock-based compensation. Our operating expenses increased in 1999 as we hired
our staff, built our brand, expanded our customer base and improved our
operations and technological infrastructure.
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.
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. During 1998, SunCommerce Corporation, a
web-hosting company co-owned by Glenn Ballman, our founder, President and Chief
Executive Officer, advanced various payments and services to us, including
wages, benefits, management fees, office expenses and other miscellaneous
expenses. Through December 31, 1999, equity issuances have yielded gross
proceeds of $60.9 million and net proceeds of $58.5 million. Additionally, we
have issued subordinated notes and have entered into capital equipment term
loans to finance our
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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.
In February 2000, we entered into an agreement with Internet Capital Group,
or ICG, to sell to ICG shares of our common stock at the initial public
offering price per share in this offering in a private placement transaction.
This transaction will occur immediately following the closing of this offering,
although the sale of some or all of these shares to ICG may occur later,
pending clearance of the waiting period under the Hart Scott Rodino Antitrust
Improvements Act of 1976. In this transaction, ICG will purchase at least $40
million worth of common stock, although, if greater, ICG has agreed to purchase
2,666,666 shares, which equals 33.3% of the aggregate number of shares to be
issued in this offering, prior to any exercise of the underwriters' over-
allotment option. Assuming an initial public offering price of $12.00 per
share, ICG will purchase 3,333,333 shares of our common stock in this
transaction.
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.
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. In February 2000, we signed an agreement with America Online
that requires us to make substantial payments to America Online.
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
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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 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.
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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 an effective 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 across 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 20,000 service suppliers
at December 31, 1999. A key component of our strategy is to increase brand
awareness and our customer base through strategic relationships with small
business trade associations and co-branding relationships with other web sites.
In February 2000, we entered into a two-year strategic relationship with
America Online, or AOL, to provide AOL's customers with access to our services
and products through an interactive co-branded web site. As part of this
relationship, we will provide to AOL a web-based buying directory to act as the
engine for AOL's business-to-business ecommerce platform. We will receive a
percentage of the advertising revenue from the co-branded web site.
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.
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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, 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
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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 20,000 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 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 journalists, working in Seattle and
Washington, D.C., publish 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
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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 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 20,000 businesses that act as suppliers across 100 services in
our RFQ network;
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. 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.
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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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 will
pay a fixed fee of $202,000 for this exclusive license which expires in
September 2002. 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:
America Online. In February 2000, we entered into a two-year strategic
relationship with AOL to provide AOL's customers with access to our services
and products, including our RFQ services, through an interactive co-branded web
site. As part of this relationship, we will provide to AOL a web-based buying
directory to act as the engine for AOL's business-to-business ecommerce
platform. In addition, AOL will promote the co-branded site and our RFQ
services, which will be offered as part of AOL's aggregated RFQ site. We will
receive a percentage of the advertising revenue from the co-branded web site.
Under the terms of this agreement, we are required to make substantial payments
to AOL.
CNET. We have a relationship with CNET to provide us advertising services.
Under our one-year agreement with CNET, we pay CNET a fee each time a visitor
clicks on a link from the CNET web site to our web site. This agreement is
cancelable by either party after July 2000 upon 30 days notice and terminates
in December 2000. We are required to make minimum payments of $200,000 per
month for the first six months and $250,000 per month over the remainder of
this agreement.
VerticalNet. We have a relationship with VerticalNet to be a premier seller
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. In addition to a one-time fee
of $100,000, we are required to pay to VerticalNet 3% of qualifying revenue
generated by VerticalNet, with a minimum quarterly payment of $50,001. This
one-year agreement terminates in February 2001.
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.
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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 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. During 1999, we entered into 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. In addition to payments based on traffic and revenue, we
are required to pay to Dow Jones & Company a monthly fee of $25,000
under this month-to-month agreement.
. 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. We are
required to pay a monthly fee of $20,833 under this agreement which
expires in June 2001.
. 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. We are required to pay a monthly fee of $20,833 under
this agreement which expires in October 2000.
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. Average fees payable by us under the fixed-fee arrangements are
approximately $45,000 per year.
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.
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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
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
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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.
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.
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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.
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
42
<PAGE>
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.
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 123,636 square feet of office space, net of
space subleased, under three leases. These leases expire between 2001 and 2010.
Our Canadian subsidiary company in Vancouver, British Columbia also leases two
locations totaling approximately 5,271 square feet of office space, net of
space subleased, 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 $2,516,928 in 2000. We believe that these leased facilities will
be sufficient to meet our growth for the forseeable future.
Legal Proceedings
In February 2000, John Meier filed an action in the Supreme Court of British
Columbia, Canada asserting a claim against us and Glenn Ballman, our founder,
President and Chief Executive Officer. Mr. Meier's claim is based upon
allegations that he and Mr. Ballman had intentions to form a company similar to
ours and that Mr. Ballman's role in founding our company breached an alleged
partnership with Mr. Meier and fiduciary duties owed to him. In this action,
Mr. Meier asserts that he is entitled to 50% of Mr. Ballman's interest in
Onvia.com, as well as 50% of the assets and business of Onvia.com. Based upon
our investigation to date, we believe that the allegations against us are
wholly without merit and that the outcome of this action will not harm our
business. We believe that we have valid defenses to this claim and intend to
vigorously defend the action. Since the results of litigation proceedings are
inherently unpredictable, however, we are unable to provide assurance regarding
the outcome of this action or possible damages that may be incurred.
In addition, from time to time we are subject to various other legal
proceedings that arise in the ordinary course of our business. Although we can
not predict the outcomes of these proceedings with certainty, we do not believe
that the disposition of these matters will have a material adverse effect on
our financial position, results of operations or cash flows.
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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.,
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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 February 2000. From October 1997 to February 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
February 2000. From October 1999 to February 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, an Internet service provider,
from July 1999 to October 1999. From February 1998 to July 1999, Mr. Bridges
was an independent consultant in the direct mail industry and a principal in
ACOBA Technologies, Ltd., a 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 outerwear. From September 1979 to February 1995,
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Mr. Bridges held a number of positions with Eddie Bauer Co., including 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
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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 provide cash compensation to 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, assuming continuing service as a director. 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.
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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(1)............ 1999 $ 75,117 $20,000 600,000 $13,000
President and Chief Executive
Officer 1998 47,807 -- -- --
Mark T. Calvert(2)............. 1999 137,500 -- 971,120 --
Vice President, Chief
Financial Officer and 1998 -- -- -- --
Secretary
Kristen M. Hamilton(3)......... 1999 74,417 45,000 1,600,000 1,850
Vice President and Chief
Strategy Officer 1998 13,000 -- -- --
Douglas H. Kellam(4) .......... 1999 57,320 -- 500,000 53,950
Vice President of Marketing 1998 -- -- -- --
Robert D. Ayer(5) ............. 1999 78,333 25,000 -- 7,000
Vice President of Products and
Services 1998 14,400 -- -- --
</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.
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<PAGE>
Ms. Hamilton's salary on an annualized basis is $80,000. Ms. Hamilton's
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 from the fair market value on the date of grant
determined by us for accounting purposes. 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 as of the date of grant was determined
after the date of grant solely for financial accounting purposes taking into
consideration, with the benefit of hindsight, various factors including service
and product introductions, our operating results and cash position, competitive
developments, management team developments and the prices at which we issued
preferred stock. 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 $4,150,705 $10,518,700
Mark T. Calvert......... 140,000 1.2 0.0625 3/23/2009 34,778 88,134
286,000 2.5 0.0625 3/23/2009 71,046 180,045
545,120 4.8 0.125 4/21/2009 178,268 451,766
Kristen M. Hamilton..... 1,600,000 14.0 0.0625 3/23/2009 397,461 1,007,245
Douglas H. Kellam....... 500,000 4.4 0.375 8/30/2009 350,609 888,511
Robert D. Ayer.......... -- -- -- -- -- --
</TABLE>
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.
49
<PAGE>
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>
Glenn S. Ballman........ -- -- -- 600,000 -- $3,498,000
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 --
Robert D. Ayer.......... -- -- -- -- -- --
</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, 6,446,206 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.
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
50
<PAGE>
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.
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
51
<PAGE>
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 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
52
<PAGE>
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 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.
53
<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.
54
<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. 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. Accordingly, in connection with the exercise of options, Douglas H.
Kellam issued us a promissory note in the amount of $150,000 in December 1999
and Mr. Kellam, Kristen M. Hamilton, Arthur R. Paul and Glenn S. Ballman issued
us promissory notes in February 2000 in the amounts of $50,000, $100,000,
$100,000 and $75,000, respectively. Each of these notes is secured by shares of
our common stock and is due on the earlier of the following:
. five years after issuance;
. after a public offering of Onvia.com's common stock in which the officer
is a selling stockholder; and
. the expiration of any lock-up period imposed by contract or 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.
55
<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 30,000 --
</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.
56
<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 February
2000, we agreed to sell Internet Capital Group, Inc. shares of our common stock
in a private placement immediately following and conditioned upon the offering.
See "Description of Capital Stock--Concurrent Private Placement."
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.
57
<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 us in this offering and the
3,333,333 shares of common stock to be issued in the concurrent private
placement at an assumed initial public offering price of $12.00 per share, 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 68,180,762 shares of common stock
outstanding on an as converted basis, and 79,514,095 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>
Shares Beneficially
Owned Percentage of Ownership
--------------------- ------------------------
Prior to
This After This Prior to This After This
Offering Offering Offering Offering
---------- ---------- ------------- ----------
Name and Address of Beneficial
Owner
- ------------------------------
<S> <C> <C> <C> <C>
Entities affiliated with Mohr,
Davidow Ventures (1)........... 14,518,144 14,518,144 21.3% 18.3%
2775 Sand Hill Road, Suite 240
Menlo Park, California 94025
Internet Capital Group, Inc.
(2)............................ 14,518,144 17,851,477 21.3 22.5
44 Montgomery Street, Suite
3705
San Francisco, California 94014
GE Capital Equity Investments
(3)............................ 4,289,000 4,289,000 6.3 5.4
c/o Capital Equity Investments,
Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
Glenn S. Ballman................ 10,609,568 10,609,568 15.4 13.2
Robert D. Ayer (4).............. 5,785,000 5,785,000 8.5 7.3
Kristen M. Hamilton (5)......... 3,080,000 3,080,000 4.5 3.9
Mark T. Calvert (6)............. 1,012,574 1,012,574 1.5 1.3
Douglas H. Kellam............... 500,000 500,000 * *
Nancy J. Schoendorf (1)......... 14,518,144 14,518,144 21.3 18.3
c/o Mohr, Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, California 94025
Kenneth A. Fox (2).............. 14,518,144 17,851,477 21.3 22.5
c/o Internet Capital Group,
Inc.
44 Montgomery Street, Suite
3705
San Francisco, California 94014
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Owned Percentage of Ownership
--------------------- ------------------------
Prior to
This After This Prior to This After This
Offering Offering Offering Offering
---------- ---------- ------------- ----------
Name and Address of Beneficial
Owner
- ------------------------------
<S> <C> <C> <C> <C>
Steven D. Smith (3)............. 4,289,000 4,289,000 6.3 5.4
c/o Capital Equity Investments,
Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
Michael D. Pickett.............. 1,111,756 1,111,756 1.6% 1.4%
4640 Admiralty Way, Fifth Floor
Marina Del Ray, California
90292
William W. Ericson (7).......... 771,912 771,912 1.1 1.0
c/o Venture Law Group
4750 Carillon Point
Kirkland, Washington 98033
Jeffrey C. Ballowe.............. 120,000 120,000 * *
85 Estrada Calabasa
Santa Fe, New Mexico 87501
All directors and officers as a
group (17 persons) (8)......... 58,829,298 62,107,631 84.3% 76.6%
</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. Shares
beneficially owned and percentage of ownership after this offering include
3,333,333 shares to be purchased in the concurrent private placement,
assuming an initial public offering price of $12.00 per share.
(3) Mr. Smith is a director of Onvia.com and Managing Director of GE Equity, a
subsidiary of GE Capital. Mr. Smith disclaims beneficial ownership of
those shares except to the extent of his pecuniary interest in them.
(4) Consists of 5,545,000 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 1,600,000 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.
Registration Rights
Upon completion of this offering and the concurrent private placement, the
holders of approximately 71,504,095 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
60
<PAGE>
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, we are subject to Washington laws that could have the effect of
delaying, deferring or preventing the change of control of Onvia.com. Chapter
23B.19 of the Washington Business Corporation Act prohibits, with some
exceptions, a 10% or greater stockholder from engaging in any of the following
transactions, among others, without approval of our board of directors for five
years after date on which the individual or entity became a 10% stockholder:
. a merger or consolidation with us;
. the sale or lease of our assets to the 10% stockholder with a value
greater than the fair market value of 5% of our total assets or 5% of
our total outstanding capital stock; and
. the receipt by the 10% stockholder of a disproportionate benefit as a
stockholder.
After the five-year period, the transactions above may take place as long as
they comply with fair price provisions of Washington law. Chapter 23B.19 will
apply to us for so long as we maintain our principal offices in Washington, we
are a reporting company under the Securities Exchange Act of 1934 and specified
percentages or numbers of our employees, stockholders and assets are located in
Washington. We are not able to opt out of this statute.
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;
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<PAGE>
. 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.
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.
Concurrent Private Placement
In February 2000, we entered into a common stock purchase agreement with
Internet Capital Group, or ICG, one of our principal stockholders, under which
we agreed to sell to ICG shares of our common stock in a private placement
immediately following and conditioned upon the sale of shares in this offering.
The price of the shares in the concurrent private placement will be the same as
the initial public offering price per share. The number of shares we will sell
to ICG is equal to the greater of:
. $40 million worth of common stock priced at the initial public offering
price per share, or
. 2,666,666 shares, which equals 33.3% of the aggregate number of shares
to be issued in this offering, prior to any exercise of the
underwriters' over-allotment option.
The sale of these shares to ICG is conditioned upon the clearance of the
waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976.
To the extent this clearance is not obtained by the closing of this offering,
we will sell only that number of shares of common stock to ICG that would be
allowed prior to termination of this waiting period under the Hart Scott Rodino
Act. After the termination of this waiting period, we will sell the remainder
of the shares, if any.
Transfer Restrictions. ICG has agreed not to sell, transfer, encumber or
otherwise dispose of any of the shares of common stock acquired in the
concurrent private placement in a public or private sale for a period of 180
days following the closing of the offering.
Registration Rights. We have committed to grant ICG registration rights
relating to the shares of common stock they will purchase in the concurrent
private placement. See "--Registration Rights."
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.
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<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 79,514,095 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 71,514,095 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 approximately 14,544,170 shares will be eligible for sale
pursuant to Rule 144 after September 2000, an additional approximately
64,104 shares will be eligible for sale pursuant to Rule 144 after
October 2000, an additional approximately 3,379,402 shares will be
eligible for sale pursuant to Rule 144 after December 2000, and an
additional approximately 4,038,477 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 795,141 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
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<PAGE>
been our affiliate at any time during the three months preceding a sale and who
has beneficially owned the shares proposed to be sold for at least two years,
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.
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<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. .............................................
William Blair & Company, L.L.C. ...................................
E*OFFERING Corp. ..................................................
---------
Total............................................................ 8,000,000
=========
</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 1,200,000 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% of the 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,
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<PAGE>
existing stockholders and friends of Onvia.com. As a result, the number of
shares available for sale to the general public 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 web sites 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 web site.
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.
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<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.
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<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, William W. 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.
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<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, and 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, and for the
years ended December 31, 1998, and 1999, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Seattle, Washington
February 4, 2000 (February 22, 2000, as to Note 13)
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. During the years ended December 31, 1999 and
1998, foreign currency transaction losses were $0 and $82,426, respectively.
Commitments and contingencies
The Company is subject to various legal proceedings that arise in the
ordinary course of business. The Company provides for any anticipated losses at
the time an estimate can be made. While management believes that the
disposition of these matters will not have a material adverse effect on the
financial position, results of operations, or cash flows of the Company, the
ultimate outcome is inherently uncertain (see Note 13).
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
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
have been satisfied. Diluted net loss per share is computed by dividing net
loss by the weighted average number of common shares and dilutive potential
common shares outstanding during the period. For the years ended December 31,
1999 and 1998, 56,744,290 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 certain 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 CNET for
certain advertising services under which the Company must make payments each
time a visitor clicks on a link from the web page of CNET to the web page of
the Company. 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 and Preferred 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 $0.58 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,
Series B and Series C preferred stock would be converted upon an Offering at a
price of not less than $10.28 per share with aggregate proceeds of not less
than $30,000,000, or by the written consent of the holders of eighty percent of
the outstanding shares of Series B preferred stock. 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 $1.72 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.
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.
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
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.
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.
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 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 principal 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 in which the employee is a
selling stockholder. 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 833,352
shares of its common stock at $.0025 per share. The noncash value allocated
to these warrants was $241,853.
F-21
<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
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.
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 Company's
reincorporation in Delaware was effective on February 22, 2000 and included a
two-for-one split of the Company's outstanding shares of common stock and
preferred stock. Common and preferred stock issued and stock option information
in these financial statements have been restated to reflect this split.
On February 4, 2000, the Company entered into a common stock purchase
agreement with Internet Capital Group, an existing investor, where Internet
Capital Group agrees to purchase at the closing of an initial public offering
the greater of $40,000,000 or one-third of the number of shares sold to the
public. The shares will be valued at the offering price.
In February 2000, the Company entered into a strategic relationship with
America Online (AOL), under which AOL will provide its customers with access to
the Company's services and products, through an interactive co-branded web
site. As part of this relationship, the Company will provide to AOL a web-based
buying directory to act as the engine for AOL's business-to-business ecommerce
platform. In addition, AOL will promote the co-branded site and will pay a
percentage of the advertising revenue earned from the co-branded web site.
Under the terms of this agreement, the Company is required to make substantial
payments to AOL.
In February 2000, the Company received promissory notes from four employees
totaling $325,000 collateralized by 325,000 shares of the Company's common
stock. The notes bear interest at 6% per annum. The principal and interest are
payable upon demand at the earlier of February 2005 or the expiration of any
lock-up period after an Offering in which the employees are selling
stockholders. The notes become due if certain change of control events take
place.
F-22
<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 February 2000, a former associate of the chief executive officer of the
Company filed an action against the Company and the chief executive officer of
the Company alleging a breach of a partnership arrangement. In this action, the
plaintiff asserts that he is entitled to 50% of the chief executive officer's
interest in the Company and 50% of the assets and business of the Company.
Management is currently investigating the claims and believes that the claims
against the Company are without merit. Nevertheless, litigation is inherently
uncertain and should litigation ensue, there can be no assurance that the
Company would prevail in such a suit. Any cash award or settlement paid to the
plaintiff could negatively impact the Company's operating results and available
liquidity. Any shares of common stock awarded or issued to the plaintiff by the
Company would be dilutive to the Company's stockholders.
On February 8, 2000, the Company amended its corporate office facilities
lease. This amendment extended the original lease term from eight to ten years
and increased the lease payments to amounts ranging from $217,917 to $257,000
per month. Total lease obligations under this agreement aggregate to
$28,185,250 over the ten year lease period. The letter of credit requirements
in the lease were also increased from $2,000,000 to $3,000,000 and from
$2,500,000 to $3,500,000.
F-23
<PAGE>
The Onvia.com, Work. Wisely. logo appears at the top of the page. Below the
logo are three overlapping screen shots from Onvia.com's web page. The first
screen shot is labeled "Request for Quote" and shows Onvia.com's Request for
Quote page. The second screen shot is labeled "Seller Inbox" and shows an
example of a Request for Quote Seller Inbox. The third screen shot is labeled
"Buyer Inbox" and shows an example of a Request for Quote Buyer Inbox. On the
bottom of the page, the following sentence is written: "Onvia.com
Business-to-Business Emarketplace for Small Business Buyers and Sellers."
<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 options to purchase an aggregate of 12,579,532
shares of its common stock to 247 of its employees, directors and consultants
with exercise prices ranging from $0.0625 to $11.00 per share and has issued
and sold 29,562,343 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 of Onvia.com (proposed, post-
reincorporation into Delaware, pre-offering).
3.3* Bylaws of Onvia.com, as amended and restated.
3.4* Bylaws of Onvia.com (proposed, post reincorporation into Delaware).
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, as amended.
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* 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 18, 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 Amended and Restated Office Lease Agreement
between Onvia.com and Blume Yale Limited Partnership dated as of
February 8, 2000.
10.25* 2000 Employee Stock Purchase Plan.
10.26* 2000 Directors' Stock Option Plan.
10.27* Offer Letter dated October 14, 1999 with James R. Bridges.
10.28+ Interactive Marketing Agreement between America Online, Inc. and
Onvia.com dated as of February 4, 2000.
10.29* Common Stock Purchase Agreement between Internet Capital Group, Inc.
and Onvia.com dated as of February 4, 2000.
10.30* Form of Indemnification Agreement (Delaware).
10.31* General Security Agreement between Onvia.com and Imperial Bank dated
May 7, 1999.
10.32* Form of Secured Promissory Note (Officers).
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.
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
+ Confidential treatment has been requested as to certain portions of this
Exhibit.
(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.
II-5
<PAGE>
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 4 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 23, 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 23, 2000
____________________________________ Officer and Director
Glenn S. Ballman (Principal Executive
Officer)
/s/ Mark T. Calvert Vice President and Chief February 23, 2000
____________________________________ Financial Officer
Mark T. Calvert (Principal Financial and
Accounting Officer)
* Director February 23, 2000
____________________________________
Kenneth A. Fox
* Director February 23, 2000
____________________________________
Michael D. Pickett
* Director February 23, 2000
____________________________________
Nancy J. Schoendorf
* Director February 23, 2000
____________________________________
William W. Ericson
/s/ Steven D. Smith Director February 23, 2000
____________________________________
Steven D. Smith
* Director February 23, 2000
____________________________________
Jeffrey C. Ballowe
</TABLE>
/s/ Mark T. Calvert
*By: __________________________
Mark T. Calvert
Attorney-in-Fact
II-7
<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 of Onvia.com (proposed, post-
reincorporation into Delaware, pre-offering).
3.3* Bylaws of Onvia.com, as amended and restated.
3.4* Bylaws of Onvia.com (proposed, post reincorporation into Delaware).
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, as amended.
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* 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 18, 1999 with Clayton W. Lewis.
10.17* Common Stock Purchase Agreement with Glenn S. Ballman dated as of
January 9, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
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 Amended and Restated Office Lease Agreement
between Onvia.com and Blume Yale Limited Partnership dated as of
February 8, 2000.
10.25* 2000 Employee Stock Purchase Plan.
10.26* 2000 Directors' Stock Option Plan.
10.27* Offer Letter dated October 14, 1999 with James R. Bridges.
10.28+ Interactive Marketing Agreement between America Online, Inc. and
Onvia.com dated as of February 4, 2000.
10.29* Common Stock Purchase Agreement between Internet Capital Group, Inc.
and Onvia.com dated as of February 4, 2000.
10.30* Form of Indemnification Agreement (Delaware).
10.31* General Security Agreement between Onvia.com and Imperial Bank dated
May 7, 1999.
10.32* Form of Secured Promissory Note (Officers).
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.
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
+ Confidential treatment has been requested as to certain portions of this
Exhibit.
<PAGE>
EXHIBIT 1.1
8,000,000 Shares
ONVIA.COM, INC.
Common Stock, par value $0.0001 per share
UNDERWRITING AGREEMENT
----------------------
[____________], 2000
Credit Suisse First Boston Corporation
FleetBoston Robertson Stephens, Inc.
Hambrecht & Quist LLC
E*OFFERING Corp.
William Blair & Company, LLC.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Onvia.com, a Delaware corporation ("Company"), proposes
to issue and sell 8,000,000 shares ("Firm Securities") of its Common Stock, par
value $0.0001 per share ("Securities") and also proposes to issue and sell to
the Underwriters, at the option of the Underwriters, an aggregate of not more
than 1,200,000 additional shares ("Optional Securities") of its Securities as
set forth below. The Firm Securities and the Optional Securities are herein
collectively called the "Offered Securities." As part of the offering
contemplated by this Agreement, E*OFFERING Corp. (the "Designated Underwriter")
has agreed to reserve out of the Firm Securities purchased by it under this
Agreement, up to 400,000 shares, for sale to the Company's directors, officers,
employees and other parties associated with the Company (collectively,
"Participants"), as set forth in the Prospectus (as defined herein) under the
heading "Underwriters" (the "Directed Share Program"). The Firm Securities to
be sold by the Designated Underwriter pursuant to the Directed Share Program
(the "Directed Shares") will be sold by the Designated Underwriter pursuant to
this Agreement at the public offering price. Any Directed Shares not orally
confirmed for purchase by a Participant by the end of the business day on which
this Agreement is executed will be offered to the public by the Underwriters as
set forth in the Prospectus. The Company hereby agrees with the several
Underwriters named in Schedule A hereto ("Underwriters") as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-93273) relating to the Offered
Securities, including a form of prospectus, has been filed with the Securities
and Exchange Commission ("Commission") and either (i) has been declared
effective under the Securities Act of 1933 (the "Act") and is not proposed to be
amended or (ii) is proposed to be amended by amendment or post-effective
amendment. If such registration statement ("initial registration statement") has
been declared effective, either (i) an additional registration statement
("additional registration statement") relating to the Offered Securities may
have been filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)")
under the Act and, if so filed, has become effective upon filing pursuant to
such Rule and the Offered Securities all have been duly registered under the Act
pursuant to the initial registration statement and, if applicable, the
<PAGE>
additional registration statement or (ii) such an additional registration
statement is proposed to be filed with the Commission pursuant to Rule 462(b)
and will become effective upon filing pursuant to such Rule and upon such filing
the Offered Securities will all have been duly registered under the Act pursuant
to the initial registration statement and such additional registration
statement. If the Company does not propose to amend the initial registration
statement or if an additional registration statement has been filed and the
Company does not propose to amend it, and if any post-effective amendment to
either such registration statement has been filed with the Commission prior to
the execution and delivery of this Agreement, the most recent amendment (if any)
to each such registration statement has been declared effective by the
Commission or has become effective upon filing pursuant to Rule 462(c) ("Rule
462(c)") under the Act or, in the case of the additional registration statement,
Rule 462(b). For purposes of this Agreement, "Effective Time" with respect to
the initial registration statement or, if filed prior to the execution and
delivery of this Agreement, the additional registration statement means (i) if
the Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such registration
statement, or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared effective by
the Commission or has become effective upon filing pursuant to Rule 462(c), or
(ii) if the Company has advised the Representatives that it proposes to file an
amendment or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such amendment
or post-effective amendment, as the case may be, is declared effective by the
Commission. If an additional registration statement has not been filed prior to
the execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "Effective Time" with respect to
such additional registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule 462(b).
"Effective Date" with respect to the initial registration statement or the
additional registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its Effective Time,
including all information contained in the additional registration statement (if
any) and deemed to be a part of the initial registration statement as of the
Effective Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all information (if
any) deemed to be a part of the initial registration statement as of its
Effective Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is
hereinafter referred to as the "Initial Registration Statement". The additional
registration statement, as amended at its Effective Time, including the contents
of the initial registration statement incorporated by reference therein and
including all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule 430A(b), is
hereinafter referred to as the "Additional Registration Statement". The Initial
Registration Statement and the Additional Registration Statement are herein
referred to collectively as the "Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating to the Offered
Securities, as first filed with the Commission pursuant to and in accordance
with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter referred to as
the "Prospectus". No document has been or will be prepared or distributed in
reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the Effective Date
of the Initial Registration Statement, the Initial Registration Statement
conformed in all respects to the requirements of the Act and the rules and
regulations of the Commission ("Rules and Regulations") and did not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) on the Effective Date of the Additional Registration Statement (if any),
each Registration Statement conformed, or will conform, in all material respects
to the requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact and did
not omit, or will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (iii) on
the date of this Agreement, the Initial Registration Statement and, if the
Effective Time of the Additional Registration Statement is prior to the
-2-
<PAGE>
execution and delivery of this Agreement, the Additional Registration Statement
each conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all material respects
to the requirements of the Act and the Rules and Regulations, and neither of
such documents includes, or will include, any untrue statement of a material
fact or omits, or will omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. If the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the Prospectus
will conform in all material respects to the requirements of the Act and the
Rules and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
and no Additional Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions from a
Registration Statement or the Prospectus based upon written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only such
information is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole ("Material Adverse Effect").
(d) Other than Onvia.com, Inc., a Canadian corporation, the Company
has no "significant subsidiaries," as defined in paragraph (w) of Rule 1.02 of
Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(e) Each subsidiary of the Company has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus; and each
subsidiary of the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect; all of the issued and outstanding
capital stock of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable; and the capital stock of
each subsidiary owned by the Company, directly or through subsidiaries, is owned
free from liens, encumbrances and defects.
(f) The Offered Securities and all other outstanding shares of capital
stock of the Company have been duly authorized; all outstanding shares of
capital stock of the Company are, and, when the Offered Securities have been
delivered and paid for in accordance with this Agreement on each Closing Date
(as defined below), such Offered Securities will have been, validly issued,
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities.
(g) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the
-3-
<PAGE>
Company or any Underwriter for a brokerage commission, finder's fee or other
like payment in connection with this offering.
(h) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in the
securities registered pursuant to a Registration Statement or in any securities
being registered pursuant to any other registration statement filed by the
Company under the Act which have not been fully satisfied or waived.
(i) The Offered Securities have been approved for listing on The
Nasdaq Stock Market's National Market, subject to notice of issuance.
(j) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required to be obtained or made
by the Company for the consummation of the transactions contemplated by this
Agreement in connection with the issuance and sale of the Offered Securities by
the Company, except such as have been obtained and made under the Act and such
as may be required under state securities laws.
(k) The execution, delivery and performance of this Agreement, and the
issuance and sale of the Offered Securities will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any statute, any rule, regulation or order of any governmental agency or body or
any court, domestic or foreign, having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any agreement or
instrument to which the Company or any such subsidiary is a party or by which
the Company or any such subsidiary is bound or to which any of the properties of
the Company or any such subsidiary is subject, or the charter or by-laws of the
Company or any such subsidiary, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by this
Agreement.
(l) This Agreement has been duly authorized, executed and delivered by
the Company.
(m) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all other
properties and assets owned by them, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by them; and except as
disclosed in the Prospectus, the Company and its subsidiaries hold any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof by them.
(n) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(o) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that might
have a Material Adverse Effect.
(p) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property, including applications licensed directly from third
parties (collectively, "intellectual property rights") necessary to conduct the
business now operated by
-4-
<PAGE>
them, or presently employed by them, and have not received any notice of, any
infringement of or conflict with asserted rights of others with respect to any
intellectual property rights that, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect. The discoveries, inventions, products or processes of the
Company referred to in the Prospectus do not, to the Company's knowledge,
infringe or conflict with any intellectual property right of any third party.
(q) Except as disclosed in the Prospectus, neither the Company nor any
of its subsidiaries is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "environmental
laws"), owns or operates any real property contaminated with any substance that
is subject to any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any claim
relating to any environmental laws, which violation, contamination, liability or
claim would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to such a
claim.
(r) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, or any of its
subsidiaries or any of their respective properties that, if determined adversely
to the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Offered Securities; and no such actions, suits or proceedings are threatened or,
to the Company's knowledge, contemplated.
(s) The financial statements included in each Registration Statement
and the Prospectus present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of operations
and cash flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles in the
United States applied on a consistent basis and the schedules included in each
Registration Statement present fairly the information required to be stated
therein and the assumptions used in preparing the pro forma financial statements
included in each Registration Statement and the Prospectus provide a reasonable
basis for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma columns therein
reflect the proper application of those adjustments to the corresponding
historical financial statement amounts.
(t) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has been no
material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole, and, except as disclosed in or contemplated by the Prospectus, there
has been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(u) The execution and delivery of the Agreement and Plan of Merger
dated as of __________ ____, 2000 (the "Merger Agreement") between Onvia.com,
Inc., a Washington corporation (the "Washington Corporation"), and the Company,
effecting the reincorporation of the Washington Corporation under the laws of
the State of Delaware, was duly authorized by all necessary corporate action on
the part of each of the Washington Corporation and the Company. Each of the
Washington Corporation and the Company had all corporate power and authority to
execute and deliver the Merger Agreement, to
-5-
<PAGE>
file the Merger Agreement with the Secretary of State of Washington and the
Secretary of State of Delaware and to consummate the reincorporation
contemplated by the Merger Agreement, and the Merger Agreement at the time of
execution and filing constituted a valid and binding obligation of each of the
Washington Corporation and the Company.
(v) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940.
(w) The Company (i) has notified each holder of a currently
outstanding option issued under the Company's 1999 Stock Option Plan (the
"Option Plan"), and each person who has acquired Securities pursuant to the
exercise of any option granted under such option plans that pursuant to the
terms of such option plans, none of such options or shares may be sold or
otherwise transferred or disposed of for a period of 180 days after the date of
the initial public offering of the Offered Securities and (ii) has imposed a
stop-transfer instruction with the Company's transfer agent in order to enforce
the foregoing lock-up provision imposed pursuant to the Option Plan.
(x) Except as disclosed in the Prospectus, all outstanding Securities,
and all securities convertible into or exercisable or exchangeable for
Securities, are subject to valid and binding agreements (collectively, "Lock-up
Agreements") that restrict the holders thereof from selling, making any short
sale of, granting any option for the purchase of, or otherwise transferring or
disposing of, any of such Securities, or any such securities convertible into or
exercisable or exchangeable for Securities, for a period of 180 days after the
date of the Prospectus without the prior written consent of Credit Suisse First
Boston Corporation ("CSFBC").
(y) The Company (i) has notified each stockholder who is party to the
Amended and Restated Investors' Rights Agreement dated December 20, 1999 (the
"Rights Agreement"), that pursuant to the terms of the Rights Agreement, none of
the shares of the Company's capital stock held by such stockholder may be sold
or otherwise transferred or disposed of for a period of 180 days after the date
of the initial public offering of the Offered Securities and (ii) has imposed a
stop-transfer instruction with the Company's transfer agent in order to enforce
the foregoing lock-up provision imposed pursuant to the Rights Agreement.
(z) The Company has not offered, or caused the Underwriters to offer,
any offered Securities to any person pursuant to the Directed Share Program with
the specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business with the
Company or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
Furthermore, the Company represents and warrants to the Underwriters
that (i) the Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program,
and that (ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the securities
law and regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to
-6-
<PAGE>
purchase from the Company, at a purchase price of $[____] per share, the
respective numbers of shares of Firm Securities set forth opposite the names of
the Underwriters in Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, at the office of CSFBC, Eleven Madison Avenue,
New York, New York, against payment of the purchase price in Federal (same day)
funds by official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the order of the Company at the office of Venture
Law Group, a Professional Corporation ("Venture Law Group"), 4750 Carillon
Point, Kirkland, Washington, at 10:00 A.M., New York time, on
[__________________], 2000 or at such other time not later than seven full
business days thereafter as CSFBC and the Company determine, such time being
herein referred to as the "First Closing Date." For purposes of Rule 15c6-1
under the Exchange Act , the First Closing Date (if later than the otherwise
applicable settlement date) shall be the settlement date for payment of funds
and delivery of securities for all the Offered Securities sold pursuant to the
offering. The certificates for the Firm Securities so to be delivered will be in
definitive form, in such denominations and registered in such names as CSFBC
requests and will be made available for checking and packaging at the above
office of CSFBC in New York at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from time
to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date," which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, at the above
office of CSFBC in New York, against payment of the purchase price therefor in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to CSFBC drawn to the order of the Company at the
above office of Venture Law Group in Kirkland, Washington. The certificates for
the Optional Securities being purchased on each Optional Closing Date will be in
definitive form, in such denominations and registered in such names as CSFBC
requests upon reasonable notice prior to such Optional Closing Date and will be
made available for checking and packaging at the above office of CSFBC in New
York at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the several
Underwriters that:
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<PAGE>
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will file the
Prospectus with the Commission pursuant to and in accordance with subparagraph
(1) (or, if applicable and if consented to by CSFBC, subparagraph (4)) of Rule
424(b) not later than the earlier of (A) the second business day following the
execution and delivery of this Agreement or (B) the fifteenth business day after
the Effective Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as of
such execution and delivery, the Company will file the additional registration
statement or, if filed, will file a post-effective amendment thereto with the
Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00
P.M., New York time, on the date of this Agreement or, if earlier, on or prior
to the time the Prospectus is printed and distributed to any Underwriter, or
will make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend or
supplement the initial or any additional registration statement as filed or the
related prospectus or the Initial Registration Statement, the Additional
Registration Statement (if any) or the Prospectus and will not effect such
amendment or supplementation without CSFBC's consent; and the Company will also
advise CSFBC promptly of the effectiveness of each Registration Statement (if
its Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration Statement
or the Prospectus and of the institution by the Commission of any stop order
proceedings in respect of a Registration Statement and will use its best efforts
to prevent the issuance of any such stop order and to obtain as soon as possible
its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with sales by
any Underwriter or dealer, any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend the Prospectus to comply
with the Act, the Company will promptly notify CSFBC of such event and will
promptly prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an amendment
which will effect such compliance. Neither CSFBC's consent to, nor the
Underwriters' delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12 months
beginning after the Effective Date of the Initial Registration Statement (or, if
later, the Effective Date of the Additional Registration Statement) which will
satisfy the provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes such Effective
Date, except that, if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of each
Registration Statement (five of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a prospectus
relating to the Offered Securities is required to be delivered under the Act in
connection with sales by any Underwriter or dealer, the Prospectus and all
amendments and supplements to such documents, in each case in such quantities as
CSFBC requests. The Prospectus shall be so furnished
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on or prior to 3:00 P.M., New York time, on the business day following the later
of the execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC designates and
will continue such qualifications in effect so long as required for the
distribution.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a copy
of its annual report to stockholders for such year; and the Company will furnish
to the Representatives (i) as soon as available, a copy of each report and any
definitive proxy statement of the Company filed with the Commission under the
Exchange Act or mailed to stockholders, and (ii) from time to time, such other
information concerning the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the performance of
its obligations under this Agreement, for any filing fees and other expenses
(including fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities for sale under the laws of such
jurisdictions as CSFBC designates and the printing of memoranda relating
thereto, for the filing fee incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the National Association of Securities Dealers, Inc. of the Offered Securities,
for any travel expenses of the Company's officers and employees and any other
expenses of the Company in connection with attending or hosting meetings with
prospective purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, or file with
the Commission a registration statement under the Act relating to, any
additional shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of CSFBC, except issuances of
Securities pursuant to the conversion of convertible securities or the exercise
of warrants and options, in each case outstanding on the date hereof, grants of
stock options pursuant to the terms of a plan in effect on the date hereof,
issuances of Securities pursuant to the exercise of such options, the exercise
of any other stock options outstanding on the date hereof, or issuances of
Securities under the Company's employee stock purchase plan.
(j) The Company agrees to use its best efforts to cause (i) each of
its directors, officers and stockholders and (ii) each person who acquires
Securities of the Company pursuant to the exercise of any option or right
granted under the Option Plan to sign an agreement that restricts such person
from selling, making any short sale of, granting any option for the purchase of,
or otherwise transferring or disposing of, any of such Securities, or any such
securities convertible into or exercisable or exchangeable for Securities, for a
period of 180 days after the date of the Prospectus without the prior written
consent of CSFBC; and the Company will (i) enforce the terms of each such
agreement and (ii) issue and impose a stop-transfer instruction with the
Company's transfer agent in order to enforce the foregoing lock-up agreements.
(k) The Company will (i) enforce the terms of each Lock-up Agreement,
and (ii) issue stop-transfer instructions to the transfer agent for the
Securities with respect to any transaction or contemplated transaction that
would constitute a breach of or default under the applicable Lock-up
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Agreement. In addition, except with the prior written consent of CSFBC, the
Company agrees (i) not to amend or terminate, or waive any right under, any
Lock-up Agreement, or take any other action that would directly or indirectly
have the same effect as an amendment or termination, or waiver of any right
under any Lock-up Agreement, that would permit any holder of Securities, or any
securities convertible into, or exercisable or exchangeable for, Securities, to
make any short sale of, grant any option for the purchase of, or otherwise
transfer or dispose of, any such Securities or other securities, prior to the
expiration of the 180 days after the date of the Prospectus and (ii) not to
consent to any sale, short sale, grant of an option for the purchase of, or
other disposition or transfer of shares of Securities, or securities convertible
into or exercisable or exchangeable for Securities, subject to a Lock-up
Agreement.
(l) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of the effectiveness of the Registration Statement.
The Designated Underwriter will notify the Company as to which Participants will
need to be so restricted. The Company will direct the transfer agent to place
stop transfer instructions upon such securities for such period of time.
(m) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Share Program and
stamp duties, similar taxes or duties or other taxes, if any, incurred by the
underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants with the Underwriters that the
Company will comply with all applicable securities and other applicable laws,
rules and regulations in each foreign jurisdiction in which the Directed Shares
are offered in connection with the Directed Share Program.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the date
of delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall be on
or prior to the date of this Agreement (but in no event earlier than the
Effective Time) or, if the Effective Time of the Initial Registration Statement
is subsequent to the execution and delivery of this Agreement, shall be prior to
the filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of Deloitte &
Touche LLP confirming that they are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations thereunder
and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements included in the Registration Statements;
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(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused them
to believe that:
(A) the unaudited financial statements included in the
Registration Statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act
and the related published Rules and Regulations or any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally accepted
accounting principles;
(B) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of such letter, there
was any change in the capital stock or deferred revenue or any
increase in long-term debt, total or current liabilities or
stockholders' deficit, or any decrease in current assets or
total assets of the Company and its consolidated subsidiaries,
as compared with amounts shown on the latest balance sheet
included in the Prospectus; or
(C) for the period from the closing date of the latest
statement of operations included in the Prospectus to a
specified date not more than three business days prior to the
date of such letter, there were any decreases, as compared with
the corresponding period of the previous year and with the
period of corresponding length in the previous quarter, in total
revenues, or increases in loss from operations, comprehensive
loss or the total or per share amounts of basic net loss;
except in all cases set forth in clauses (B) and (C) above for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case to
the extent that such dollar amounts, percentages and other financial
and statistical information are derived from the general accounting
records of the Company and its subsidiaries subject to the internal
controls of the Company's accounting system or are derived directly
from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records
and other procedures specified in such letter and have found such
dollar amounts, percentages and other financial and statistical
information to be in agreement with such results, except as otherwise
specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "Registration Statements" shall mean the initial registration
statement as proposed to be amended by the amendment or post-effective amendment
to be filed shortly prior to its Effective Time, (ii) if the Effective Time of
the Initial Registration Statement is prior to the execution and delivery of
this Agreement but the Effective Time of the Additional Registration is
subsequent to such execution and delivery, "Registration Statements" shall mean
the Initial Registration Statement and the additional registration statement as
proposed to be filed or as proposed to be amended by
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the post-effective amendment to be filed shortly prior to its Effective Time,
and (iii) "Prospectus" shall mean the prospectus included in the Registration
Statements.
(b) If the Effective Time of the Initial Registration Statement is not
prior to the execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of this
Agreement or such later date as shall have been consented to by CSFBC. If the
Effective Time of the Additional Registration Statement (if any) is not prior to
the execution and delivery of this Agreement, such Effective Time shall have
occurred not later than 10:00 P.M., New York time, on the date of this Agreement
or, if earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have been
consented to by CSFBC. If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business, properties
or results of operations of the Company or its subsidiaries taken as one
enterprise which, in the judgment of a majority in interest of the Underwriters
including the Representatives, is material and adverse and makes it impractical
or inadvisable to proceed with completion of the public offering or the sale of
and payment for the Offered Securities; (ii) any downgrading in the rating of
any debt securities of the Company by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the Act), or
any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any material
suspension or material limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (iv) any banking moratorium declared
by U.S. Federal or New York authorities; or (v) any outbreak or escalation of
major hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the Underwriters
including the Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and payment for
the Offered Securities.
(d) The Representatives shall have received an opinion, dated such
Closing Date, of Venture Law Group, counsel for the Company, to the effect that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with corporate power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
and the Company is duly qualified to do business as a foreign
corporation in good standing the State of Washington;
(ii) The Offered Securities delivered on such Closing Date and
all other outstanding shares of the capital stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus; and the stockholders of the Company have no statutory or,
to our knowledge, preemptive rights with respect to the Securities;
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(iii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings known to such counsel between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Act which have not been
validly satisfied or waived;
(iv) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(v) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
made or obtained by the Company for the consummation of the
transactions contemplated by this Agreement in connection with the
issuance or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and such as may be
required under state securities laws;
(vi) The execution, delivery and performance of this Agreement
and the issuance and sale of the Offered Securities will not result in
a material breach or violation of any of the terms and provisions of,
or constitute a material default under, any statute, any rule,
regulation or, to our knowledge, order of any governmental agency or
body or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any material
agreement or instrument known to us to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary
is bound or to which any of the properties of the Company or any such
subsidiary is subject, or the charter or by-laws of the Company or any
such subsidiary, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by
this Agreement;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The execution and delivery of the Merger Agreement,
effecting the reincorporation of the Washington Corporation under the
laws of the State of Delaware, was duly authorized by all necessary
corporate action on the part of each of the Washington Corporation and
the Company;
(ix) Such opinion shall also contain a statement to the effect
that such counsel has no reason to believe that any part of a
Registration Statement or any amendment thereto, as of its effective
date or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement
thereto, as of its issue date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statements and
Prospectus of statutes, legal and governmental proceedings
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<PAGE>
and contracts and other documents are accurate in all material
respects and fairly present in all material respects the information
required to be shown; and such counsel does not know of any legal or
governmental proceedings required to be described in a Registration
Statement or the Prospectus or to be filed as exhibits to a
Registration Statement which are not described and filed as required;
it being understood that such counsel expresses no opinion as to the
financial statements and other financial or statistical data derived
therefrom contained in the Registration Statements or the Prospectus.
(e) The Representatives shall have received from Wilson Sonsini
Goodrich & Rosati, counsel for the Underwriters, such opinion or opinions, dated
such Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectus and other related matters as the
Representatives may require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to pass
upon such matters.
(f) The Representatives shall have received a certificate, dated such
Closing Date, of the President or any Vice President and a principal financial
or accounting officer of the Company in which such officers, to the best of
their knowledge after reasonable investigation, shall state that: the
representations and warranties of the Company in this Agreement are true and
correct; the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs (1)
and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
prior to the time the Prospectus was printed and distributed to any Underwriter;
and, subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
(g) The Representatives shall have received a letter, dated such
Closing Date, of Deloitte & Touche LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred to in
such subsection will be a date not more than three days prior to such Closing
Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed copies of
such opinions, certificates, letters and documents as the Representatives
reasonably request. CSFBC may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations of the
Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating
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<PAGE>
or defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the information described as such in subsection (b) below.
The Company agrees to indemnify and hold harmless the Designated
Underwriter and each person, if any, who controls the Designated Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act (the "Designated Entities"), from and against all and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants in
connection with the Directed Share Program or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed Shares
that the Participant agreed to purchase, or (iii) related to, arising out of, or
in connection with the Directed Share Program, other than losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company, its directors and officers and each person, if any
who controls the Company within the meaning of Section 15 of the Act, against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the following information in the Prospectus furnished on behalf of each
Underwriter: (i) the concession and reallowance figures appearing in the fourth
paragraph under the caption "Underwriting," (ii) the information regarding sales
to discretionary accounts contained in the sixth paragraph under the caption
"Underwriting," (iii) the information relating to over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids contained in
fourteenth paragraph under the caption "Underwriting", and (iv) the information
relating to the distribution by E*OFFERING Corp. contained in the ninth
paragraph under the caption "Underwriting."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent
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that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. Notwithstanding anything contained herein to the
contrary, if indemnity may be sought pursuant to the last paragraph in Section
7(a) hereof in respect of such action or proceeding, then in addition to such
separate firm for the indemnified parties, the indemnifying party shall be
liable for the reasonable fees and expenses of not more than one separate firm
(in addition to any local counsel) for the Designated Underwriter for the
defense of any losses, claims, damages and liabilities arising out of the
Directed Share Program, and all persons, if any, who control the Designated
Underwriter within the meaning of the either Section 15 of the Act of Section 20
of the Exchange Act. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement (i) includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and
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conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company
will reimburse the Underwriters for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department--
Transactions Advisory Group, or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at 1000 Dexter Avenue, Suite 400,
Seattle, Washington 98109, Attention: Chief Financial Officer; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
-17-
<PAGE>
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7, and no other person
will have any right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
-18-
<PAGE>
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
Onvia.com, Inc.
-----------------------------------
By:
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above
written.
Credit Suisse First Boston Corporation
FleetBoston Robertson Stephens, Inc.
E*OFFERING Corp.
Hambrecht & Quist LLC
William Blair & Company, LLC
Acting on behalf of themselves and as the
Representatives of the several
Underwriters
By: Credit Suisse First Boston Corporation
By:
------------------------------
Title: Managing Director
---------------------------
-19-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Underwriter Firm Securities
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation..........................
---------------
Total...........................................
</TABLE>
-20-
<PAGE>
Exhibit 10.24
- --------------------------------------------------------------------------------
MERCER YALE BUILDING
AMENDED AND RESTATED
OFFICE LEASE AGREEMENT
Landlord: BLUME YALE LIMITED PARTNERSHIP
Tenant: ONVIA.COM INC.
Date: February 8, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <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...........................................1
Section 2.1 Permitted Uses...................................................1
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.......................................................3
Section 4.2 Operating Expenses...............................................3
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...............................................................7
Section 6.1 Personal Property Taxes..........................................7
Section 6.2 Business Taxes...................................................7
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..........................................................9
Section 8.1 Use; Rate........................................................9
Section 8.2 Liability Insurance..............................................9
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...............................................10
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...............................12
ARTICLE 10. INDEMNITY AND WAIVER.............................................12
Section 10.1 Indemnity......................................................12
Section 10.2 Waiver.........................................................13
ARTICLE 11. DELAYS...........................................................13
Section 11.1 Delays.........................................................13
ARTICLE 12. ASSIGNMENT, SUBLEASE AND SUCCESSION..............................13
Section 12.1 Consent Required...............................................13
Section 12.2 Landlord's Consent.............................................14
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 12.3 Terms of Assignment or Sublease; Profit on Approved Assignment.14
Section 12.4 General Conditions.............................................15
ARTICLE 13. SURRENDER OF POSSESSION..........................................16
Section 13.1 Surrender......................................................16
Section 13.2 Condition at Time of Surrender.................................16
ARTICLE 14. HOLDING OVER.....................................................16
Section 14.1 Holding Over...................................................16
ARTICLE 15. ENTRY BY LANDLORD................................................16
Section 15.1 Entry by Landlord..............................................16
Section 15.2 Failure to Surrender...........................................17
ARTICLE 16. SUBORDINATION....................................................17
Section 16.1 Lease Subordinate To Mortgages.................................17
Section 16.2 Estoppel Certificates..........................................17
ARTICLE 17. DEFAULT AND REMEDY................................................17
Section 17.1 Events of Tenant's Default.....................................17
Section 17.2 Remedies.......................................................18
Section 17.3 Reletting......................................................19
Section 17.4 Default of Landlord............................................19
Section 17.5 Non-Waiver.....................................................19
Section 17.6 Mortgagee Protection...........................................19
ARTICLE 18. LIMITATION OF LIABILITY..........................................20
Section 18.1 Limitation of Landlord's Liability.............................20
Section 18.2 Applicability..................................................20
ARTICLE 19. NOTICES..........................................................20
Section 19.1 Notices........................................................20
ARTICLE 20. HAZARDOUS SUBSTANCES.............................................20
Section 20.1 Presence and Use of Hazardous Substances.......................20
Section 20.2 Landlord Indemnification.......................................20
Section 20.3 Cleanup Costs, Default and Indemnification.....................20
ARTICLE 21. MISCELLANEOUS....................................................21
Section 21.1 Headings.......................................................21
Section 21.2 Amendments.....................................................21
Section 21.3 Time of the Essence............................................21
Section 21.4 Entire Agreement...............................................21
Section 21.5 Language.......................................................21
Section 21.6 Invalidity.....................................................21
Section 21.7 Late Charges...................................................21
Section 21.8 [Not Used].....................................................21
Section 21.9 Computation of Time............................................21
Section 21.10 Applicable Law................................................21
Section 21.11 Attorneys' Fees...............................................21
Section 21.12 Termination...................................................22
Section 21.13 Broker's Commission...........................................22
Section 21.14 Signs or Advertising..........................................22
Section 21.15 Transfer of Landlord's Interest...............................22
Section 21.16 Counterparts..................................................22
Section 21.17 Quiet Enjoyment...............................................22
Section 21.18 Authority.....................................................22
Section 21.19 Name of Building..............................................22
Section 21.20 Rules and Regulations.........................................22
Section 21.21 Consents......................................................22
Section 21.22 Agency Disclosure.............................................23
Section 21.23 Lease Summary, Addendum and Exhibits..........................23
Section 21.24 Survival......................................................23
Section 21.25 Additional Provisions.........................................23
Section 21.26 Amendment and Restatement.....................................23
</TABLE>
ii
<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
AMENDED AND RESTATED
OFFICE LEASE AGREEMENT
THIS AMENDED AND RESTATED OFFICE LEASE AGREEMENT is made as of this 8th day
of February, 2000, 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
Section 1.1 The Building
<TABLE>
<C> <S>
(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, Stage II
Premises and Stage III 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
Stage III Premises
(a) Total Rentable Area: 28,000 square feet
(b) Floor Location: First and Plaza
</TABLE>
Section 2.1 Use of Premises and
Tenant's Trade Name
(a) Tenant's Trade Name: Onvia.com
(b) Use of Premises: General Office
Section 3.1 Lease Term
(a) One Hundred Twenty (120) months
(b) Target Lease Commencement Date: March 1, 2000.
Section 4.1 Basic Rent
Rent Per Rentable
1
<PAGE>
<TABLE>
<CAPTION>
Month(s) Monthly Rent Installment Sq. Ft. Per Year
-------- ------------------------ ----------------
<C> <C> <S>
1 - 24 $217,916.66 $24.00 (Stage I); $26.00 (Stage II; III)
25 - 48 $226,625.00 $25.00 (Stage I); $27.00 (Stage II; III)
49 - 72 $235,333.33 $26.00 (Stage I); $28.00 (Stage II; III)
73 - 84 $239,687.50 $26.50 (Stage I); $28.50 (Stage II; III)
85 - 96 $244,041.66 $27.00 (Stage I); $29.00 (Stage II; III)
97 -108 $248,291.66 $28.00 (Stage I); $29.00 (Stage II; III)
109-120 $257,000.00 $29.00 (Stage I); $30.00 (Stage II; III)
</TABLE>
Subject to Section 4.1.2 below.
Section 4.2 Operating Expenses
(a) Tenant's Proportionate Share: 100.00%
Section 5.1 Prepaid Rent
(a) Prepaid Rent: $662,458.32
(b) Month(s) to which the
Prepaid Rent is applied: Month 01 ($157,250.00)
May 1, 2000 ($60,666.66)
Month 13 ($217,916.66)
Month 25 ($226,625.00)
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: Two Hundred Thirty (230).
Section 21.13 Broker's
(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
2
<PAGE>
(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
3
<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"). For convenience purposes, portions of the Premises are sometimes
referred to herein as the "Stage I Premises", which includes the Third and
Fourth Floors of the Building, the "Stage II Premises", which includes the
Second Floor of the Building, and the "Stage III Premises", which includes the
First Floor and the Plaza.
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.
1
<PAGE>
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 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.
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. RENT
Section 4.1 Basic Rent.
4.1.1 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, with the Monthly Rent Installment attributable to each
month of the Lease Term payable on or before the 25th day of the preceding
month. The first Monthly Rent Installment shall be due on or before 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.
4.1.2 Notwithstanding the foregoing, Tenant shall pay to Landlord
the Basic Rent shown in the Lease Summary for Month 01 of the Term for the Stage
III Premises (i.e., $26.00 per RSF per month) on or before April 25, 2000
(respecting the Basic Rent corresponding to the month commencing May 1, 2000),
regardless of whether the Lease Commencement Date occurs before or after May 1,
2000.
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). The monthly installment of Additional Rent attributable to each month
during the Lease Term shall be due and payable on the 25th day of the
immediately preceding month. Notwithstanding anything herein to the contrary,
Tenant shall in no event pay less than the Basic Rent in any calendar year.
3
<PAGE>
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
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;
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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);
4.2.6.6 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;
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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 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 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
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
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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 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, Additional Rent or the amounts payable for the
Stipulated Parking Spaces, all as the same may be adjusted by the terms of this
Lease. Failure by Tenant to pay any sum of Rent as defined under this Article 4
shall 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 25th day of the calendar month preceding the month to which the
particular item comprising the Rent relates, 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 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. TAXES
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.
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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 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.
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.
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 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
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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 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.
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. INSURANCE
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.
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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 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.
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
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 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
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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 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 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.
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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 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 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.
ARTICLE 10. INDEMNITY 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
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
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Areas, or Building, Tenant's obligation to indemnify Landlord as set forth in
this Section 10.1 shall be limited to the extent of 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 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.
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 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
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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 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 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
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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.
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 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 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
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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.
ARTICLE 13. SURRENDER OF POSSESSION
Section 13.1 Surrender. Upon the 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 Premises to Landlord.
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 Term. 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 LANDLORD
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
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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
Premises upon the expiration of the Term or 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.
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.
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 eight (8) 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
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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 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,
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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
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
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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.
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)
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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.
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 ten (10) 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
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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.
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.
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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).
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.
Section 21.26 Amendment and Restatement. This Lease amends and restates
in its entirety the Office Lease Agreement executed by Landlord and Tenant dated
December 9, 1999 ("Original Lease"). It is understood that as of the date of
execution of this Amended and Restated Office Lease, Landlord and Tenant have
been proceeding with the design and installation of the tenant improvements
described in Exhibit C to the Original Lease, and the repetition in Exhibit C of
dates which precede the date of execution of this Amended and Restated Lease in
intentional considering the fact that the schedule provided for in Exhibit C is
in progress as of the date hereof.
IN WITNESS WHEREOF, this Lease Agreement is executed on the day and year
first written above.
TENANT: ONVIA.COM INC.,
a Washington corporation
By: /s/
-----------------------------------------
Its:
----------------------------------------
LANDLORD: BLUME YALE LIMITED PARTNERSHIP,
a Washington limited partnership
By : /s/
------------------------------------
Its:
------------------------------------
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EXHIBIT 10.28
Confidential Treatment Requested
Execution Copy
CONFIDENTIAL
Confidential
INTERACTIVE MARKETING AGREEMENT
-------------------------------
This Interactive Marketing Agreement (the "Agreement"), dated as of
February 4, 2000 (the "Effective Date"), is between America Online, Inc.
("AOL"), a Delaware corporation, with offices at 22000 AOL Way, Dulles, Virginia
20166, and Onvia.com, Inc. ("Onvia"), a Washington corporation, with offices at
1000 Dexter Ave. N., 4th Floor, Seattle, WA 98109-3574. AOL and Onvia may be
referred to individually as a "Party" and collectively as the "Parties."
INTRODUCTION
------------
To the extent set forth herein, AOL and Onvia each desires to enter into an
interactive marketing relationship whereby AOL will provide Onvia with
distribution across certain AOL properties via promotion of an interactive site
referred to (and further defined) herein as the Co-Branded Site, and Onvia will
build a web-based buying directory by leveraging Netscape's programming,
services and tools with Onvia's expertise. This Agreement describes the
relationship more fully below and sets forth additional material terms and
conditions. Defined terms used but not defined in the body of the Agreement
will be as defined on Exhibit B attached hereto.
TERMS
-----
1. PROMOTION, DISTRIBUTION AND MARKETING.
1.1. AOL Promotion of Co-Branded Site. AOL will provide Onvia with the
promotions for the Co-Branded Site described on Exhibit A attached
hereto (however, the parties recognize that AOL does not have the
authority to bind AOL Canada, and carriage thereon is subject to AOL
Canada's agreement, provided that AOL will use commercially
reasonable efforts to enter into an agreement with AOL Canada before
Onvia's carriage thereon is scheduled to begin, and if such an
agreement cannot be entered into, AOL will provide Onvia comparable
promotional placements in appropriate alternative areas of the AOL
Network). Subject to Onvia's approval not to be unreasonably
withheld, AOL will have the right to fulfill its promotional
commitments with respect to any of the foregoing by providing Onvia
comparable promotional placements in appropriate alternative areas of
the AOL Network. In addition, if AOL is unable to deliver any
particular Promotion, AOL will work with Onvia to provide Onvia a
mutually agreed comparable promotional placement, which if so
provided shall constitute Onvia's sole remedy. If the Parties cannot
mutually agree on a comparable placement despite good faith efforts
to do so, then the Parties will attempt to resolve any disagreement
in accordance with the provisions of Section 7 hereof. AOL reserves
the right to redesign or modify the organization, structure, "look
and feel," navigation and other elements of the AOL Network at any
time. In the event such redesigns or modifications materially and
adversely affect any specific Promotion, AOL will work with Onvia to
provide Onvia a comparable promotional placement as soon as is
commercially reasonable, and if so provided such comparable placement
shall constitute Onvia's sole remedy. Notwithstanding anything to the
contrary herein, with respect to any Integrated Impressions set forth
on Exhibit A, the Parties expressly acknowledge and agree that any
reference anywhere herein to `comparable placements' for such
Integrated Impressions shall be calculated at a [* * *] rate.
1.2. Impressions Commitment. During the Term, AOL shall deliver [* * *]
Impressions to the Co-Branded Site through the Promotions (the
"Impressions Commitment"), except as otherwise set forth herein
(e.g., Section 3.4 hereof with respect to the Integrated
Impressions). With respect to the Impressions targets specified on
Exhibit A, AOL will not be obligated to provide in excess of any
Impressions target amounts in any year, subject to the make-good
commitment set forth below in this Section 1.2. In the event there is
(or will be in AOL's reasonable judgment) a shortfall in Impressions
as of the end of the Initial Term (including with respect to the
Integrated Impressions) (a "Final Shortfall"), AOL will
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provide Onvia, as its sole remedy (other than the pro rata refund
provided for later in this Section 1.2), with an extension of its
existing promotional obligations hereunder (i.e. promoting the Co-
Branded Site consistent with the terms hereof, e.g., Exhibit A
hereto) until the Impressions Commitment has been satisfied, up to a
maximum of six (6) months (and Onvia shall not be required to pay
additional carriage fees for such an extension). In the event that
the Impressions Commitment still has not been satisfied at the end of
such six month extension period, AOL will provide Onvia, as its sole
remedy, with a refund of a pro rata percentage of the total Fixed
Payment Amount paid by Onvia pursuant to Section 3.1 hereof, to the
extent that AOL has actually received such payments from Onvia and
such payments remain unearned at the time of refund (i.e., a
proportionate percentage of the Impressions Commitment has not been
delivered at the time of termination). Except as otherwise set forth
herein or otherwise mutually agreed, after the Co-Branded Site has
been created and launched in accordance with this Agreement, AOL will
use good faith efforts, on a quarterly basis, to distribute
Impressions to standard, non-integrated, rotating buttons and banners
(excluding any fixed or permanent placements) reasonably consistently
over the course of the Initial Term, provided that the Parties
understand that such consistency may be affected by such factors as
seasonality and special offers. In addition, with respect to all the
Promotions hereunder (i.e., not only the standard, non-integrated,
rotating buttons and banners discussed in the previous sentence), AOL
will use good faith efforts to deliver approximately [* * *] of the
Impressions Commitment during the first six months of the Term,
approximately [* * *] of the Impressions Commitment during the first
full year of the Term, and one hundred percent (100%) of the
Impressions Commitment during the entire Term; provided that if AOL
fails to achieve any such percentage target despite good faith
efforts to do so, such failure shall not constitute a breach hereof,
but AOL shall use commercially reasonable efforts to make up a
shortfall in either of the first two percentage targets in the
following six month period.
1.3. Content of Promotions. Except as otherwise set forth herein, the
Promotions will link only to the Co-Branded Site and will promote
only the Onvia Products described (and to the extent permitted) on
Exhibit D. The specific Onvia Content to be contained within the
Promotions described in Exhibit A (the "Promo Content") will be
determined by Onvia, subject to AOL's technical limitations, the
terms of this Agreement and AOL's then-applicable policies relating
to advertising and promotions. Onvia will submit in advance to AOL
for its review a quarterly online marketing plan with respect to the
Co-Branded Site. The Parties will meet in person or by telephone at
least monthly to review operations and performance hereunder,
including a review of the Promo Content to ensure that it is designed
to maximize performance, and use good faith efforts to attempt to
optimize performance. Onvia will consistently update the Promo
Content no less than twice per week. Except to the extent expressly
described herein, the specific form, placement, duration and nature
of the Promotions will be as determined by AOL in its reasonable
editorial discretion (consistent with the editorial composition of
the applicable screens).
1.4. Onvia Promotion of Co-Branded Site and AOL. To the extent set forth
in Exhibit C, Onvia will provide AOL with certain contextually
relevant promotions and placement. Under all circumstances, Onvia
will promote AOL as a preferred access provider to the content and
services as contemplated herein.
2. CO-BRANDED SITE.
2.1. Creation of Co-Branded Site. Onvia will create a customized, co-
branded version of Onvia's Standard Site as the Co-Branded Site (to
the extent consistent with the terms hereof), including distinct
versions of the Co-Branded Site for each applicable property of the
AOL Network (i.e., each brand in which Onvia has carriage hereunder,
except for AOL Canada) as set forth in Exhibit H hereto (e.g., one
for linking from the AOL Service which is co-branded with the AOL
brand, one for linking from the CompuServe Service which is co-
branded with the CompuServe brand, etc., except for AOL Canada, in
which case, the
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site(s) linked to therefrom shall not include any AOL co-branding,
but all other requirements in this Agreement relating to the Co-
Branded Site shall apply to such site(s)). Onvia will use
commercially reasonable efforts to include certain distinct Content
within each such distinct version of the Co-Branded Site, tailored
and targeted to the applicable audience as mutually agreed (the
"Brand Specific Content"). Onvia will comply with AOL's and its
affiliates' then generally applicable customization standards and
design guideline templates for each property with respect to headers,
footers, co-branding and URLs, by way of example as set forth on
Exhibit H attached hereto. Each page of the Co-Branded Site shall (i)
have AOL or AOL affiliate branded headers and footers, (ii) be
located on a co-branded URL with the appropriate AOL affiliate as the
primary domain (e.g., www.onvia.aol.com or www.onvia.netscape.com,
except as otherwise expressly set forth in Section 2.3) such that AOL
receives credit for traffic thereto, in each case in accordance with
AOL's (or the applicable AOL affiliate's) then-current generally
applicable standards, and (c) contain navigational links to the
appropriate property of the AOL Network. AOL agrees to make
reasonable efforts to work with Onvia to enable the two then-most
widely quoted, nationally-recognized third party Internet traffic
measurement and reporting services (such as Media Metrix or Neilson
Net Rating) (the "Ratings Agencies") to attribute secondary credit f
or traffic to the Co-Branded Site to Onvia (e.g., through a
syndicated report or such other report developed by the Ratings
Agencies) as part of Onvia's overall network (i.e., so that if and
where Onvia is mentioned in any publicly announced traffic
measurements or reports (other than the Top 50 Reports as defined
below) of the Ratings Agencies regarding [* * *], such measurements
or reports will combine as part of a single total the traffic of [* *
*] (as the case may be) to the Standard Site and Co-Branded Site
(collectively, the "Onvia Desired Result"), by, if and to the extent
necessary to achieve such Onvia Desired Result, (a) issuing a duly
authorized letter to the Rating Agencies requesting such credit for
Onvia (the "Traffic Letter"); and (b) if issuance of the Traffic
Letter does not achieve such Onvia Desired Result in [* * *], as
Onvia's sole remedy, locating the one main home/entry page of the Co-
Branded Site on an Onvia owned URL that includes appropriate AOL
branding to the left of the Onvia domain (e.g., www.aol.onvia.com)
(but expressly not any other pages of the Co-Branded Site, which
shall all remain on an AOL URL as set forth above). So long as AOL
satisfies the express requirements of this section, failure to
achieve the Onvia Desired Result shall not be considered a breach of
this Agreement by AOL. The Parties acknowledge and agree that the
Onvia Desired Result cannot currently be accomplished with respect to
reports or measurements by the Ratings Agencies of the top 50
Internet sites (the "Top 50 Reports"), and that if traffic of unique
visitors to the Co-Branded Site and Standard Site in the aggregate
reaches a level which otherwise would qualify those sites together as
a top 50 Internet site, AOL and Onvia will work in good faith to
discuss a mutually acceptable means of attributing such traffic to
Onvia and AOL. AOL shall have the right to change or modify its
design guideline templates and co-branding requirements during the
Term, to conform to general changes made to the AOL Network or
portions thereof, so long as it does not impair Onvia's ability to
receive credit for traffic in accordance with this Section 2.1. In
the event that any such changes result in significant redesign costs
or reduction in placement value, the Parties will work together in
good faith to attempt to minimize such financial impact. Within a
reasonable amount of time following the Effective Date (Onvia shall
make commercially reasonable efforts to ensure that such amount of
time does not exceed sixty (60) days, and in no event shall it exceed
ninety (90) days), Onvia will integrate into the Co-Branded Site,
AOL's tools and technology for Quick Checkout. In addition, within a
reasonable amount of time following the Effective Date (Onvia shall
make commercially reasonable efforts to ensure that such amount of
time does not exceed sixty (60) days, and in no event shall it exceed
ninety (90) days), Onvia shall use commercially reasonable efforts to
integrate into the Co-Branded Site, AOL's tools and technology for
Shopping Cart and Search, if and as applicable and commercially
reasonable in each case, plus such other tools and technology as the
Parties may further mutually agree. Notwithstanding the foregoing,
the Parties acknowledge that Onvia shall have a reasonable amount of
time (Onvia shall make
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commercially reasonable efforts to ensure that such amount of time
does not exceed thirty (30) days, and in no event shall it exceed
sixty (60) days) from and after the execution hereof to build the Co-
Branded Site, including the Co-Branded Site Buying Directory, during
which such time AOL may elect to instead link to the Standard Site,
and during which such time, Onvia will ensure that the Standard Site
does not promote any Interactive Service other than AOL.
2.2. Content and Programming. Onvia will make available through the Co-
Branded Site (and the AOL Buying Directory and the RFQ/RFI
Promotional Area) the comprehensive offering of Products and related
Content described on Exhibit D in accordance with the terms thereof.
Except as mutually agreed in writing by the Parties, the Co-Branded
Site will contain only Content that is directly related to the Onvia
Products listed on Exhibit D. Notwithstanding the foregoing, Onvia
may promote, sell, offer or otherwise distribute products through its
"Request for Quote" services (by which a business can specify a
request for products or services and obtain responses from merchants
interested in satisfying such requests) existing as of the Effective
Date and as updated from time to time in accordance with this
Agreement (the "RFQ Services") or "Request for Information" services
(by which a business can specify a request for information and obtain
responses from providers interested in satisfying such requests)
existing as of the Effective Date and as updated from time to time in
accordance with this Agreement (the "RFI Services") on any page of
the Co-Branded Site if and to the extent permitted by Exhibit D
hereto. Onvia will review, delete, edit, create, update and otherwise
manage all Content available on or through the Co-Branded Site in
accordance with the terms of this Agreement. Onvia will ensure that
the Content of the Promotions and the Co-Branded Site do not in any
respect promote, advertise, market or distribute the products,
services or content of any other Interactive Service, and that the
Content of the Promotions does not in any respect promote any entity
reasonably construed to be in competition with any third party with
which AOL has an exclusive or premier relationship, as identified by
the Restricted Categories and Prohibited Categories of Exhibit D
hereto. Onvia will provide AOL and the Co-Branded Site with the
programming, content, and services set forth on Exhibit A-1. AOL will
integrate Onvia's content, programming and services in the manner and
areas set forth in Exhibit A-1.
2.3. Production Work. Except as agreed to in writing by the Parties
pursuant to the "Production Work" section of the Standard Online
Commerce Terms & Conditions attached hereto as Exhibit F, and except
as otherwise expressly set forth herein, Onvia will be responsible
for all hosting and production work associated with the Co-Branded
Site (including the Co-Branded Site Buying Directory), including all
related costs and expenses. Onvia will provide, maintain, and support
all necessary software and hardware. Onvia will modify links within
the Co-Branded Site, where appropriate, to re-circulate users to the
appropriate AOL property. Onvia will ensure that all AOL users in the
Co-Branded Site (including the Co-Branded Site Buying Directory) will
not be able to access any additional links to the Standard Site,
except as expressly stated in this Agreement. Except as otherwise
expressly set forth herein, the AOL Buying Directory shall reside
within the AOL Network (but be provided to AOL and managed in
accordance with the terms hereof by Onvia), such that AOL shall be
responsible for hosting such AOL Buying Directory (except the results
pages thereof, which shall be hosted by Onvia) and the AOL Aggregated
RFQ Area, and Onvia shall be responsible for production and
operation/management thereof, in accordance with the terms hereof. In
addition, for a period of 60 days from and after the Effective Date
hereof, the Parties shall discuss in good faith the possibility of
AOL hosting the results page of the AOL Buying Directory rather than
Onvia, and if so the terms and conditions applicable thereto (e.g.,
the costs and charges Onvia would pay to AOL in return therefor).
2.4. Technology. Onvia will optimize the performance of the AOL Buying
Directory, Co-Branded Site Buying Directory, RFQ/RFI Promotional
Areas and the Co-Branded Site for
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integration on the AOL properties (e.g., without limitation, by
taking all commercially reasonable steps necessary to conform its
promotion and sale of Products through the Co-Branded Site to the
then-existing technologies identified by AOL which are optimized for
the AOL Service, provided that Onvia shall have a reasonable time in
which to do so following notice from AOL). AOL will be entitled to
require reasonable changes to the Content (including, without
limitation, the features or functionality) within any linked pages of
the Co-Branded Site to the extent such Content will, in AOL's
reasonable good faith judgment, adversely affect any operational
aspect of any portion of the AOL Network. AOL reserves the right to
review and test the Co-Branded Site from time to time to determine
whether the site is compatible with AOL's then-available client and
host software and the AOL Network.
2.5. Product Offering. Onvia will ensure that the Products and other
Content offered on the Co-Branded Site shall, in all material
respects, be substantially equivalent to or better than all of the
Products and other Content (including, without limitation, any
features, offers, contests, functionality or technology) that are
then made available by or on behalf of Onvia through any Additional
Onvia Channel; provided, however, that (i) the inclusion of certain
Products or Content will not be required where it is commercially or
technically impractical to either Party (i.e., inclusion would cause
either Party to incur substantial incremental costs); and (ii) the
specific changes in scope, nature and/or offerings required by such
inclusion will be subject to AOL's review and reasonable approval and
the terms of this Agreement.
2.6. Pricing and Terms. Onvia will ensure that: (i) on the whole, the
prices (and any other required consideration) for Products in the Co-
Branded Site do not generally exceed the prices for the Products or
substantially similar Products offered by or on behalf of Onvia
through any Additional Onvia Channel; and (ii) the terms and
conditions related to Products in the Co-Branded Site are generally
no less favorable than the terms and conditions for the Products or
substantially similar Products offered by or on behalf of Onvia
through any Additional Onvia Channel.
2.7. Exclusive Offers/Member Benefits. Onvia will generally promote
through the Co-Branded Site any program of special or promotional
offers made available by or on behalf of Onvia through any Additional
Onvia Channel. In addition, Onvia shall promote through the Co-
Branded Site on a reasonably regular and consistent basis special
offers exclusively available to AOL Users (the "AOL Exclusive
Offers"). The AOL Exclusive Offers made available by Onvia shall
provide a substantial member benefit to AOL Users (but may be by
means other than price (e.g., product enhancement, free shipping,
unique service benefit or other special feature)). Onvia will use
good faith efforts to provide AOL with reasonable prior notice of AOL
Exclusive Offers so that AOL can market the availability of such AOL
Exclusive Offers in the manner AOL deems appropriate in its editorial
discretion reasonably exercised.
2.8. Operating Standards. Onvia will ensure that the Co-Branded Site
complies at all times with the standards set forth in Exhibit E. To
the extent site standards are not established in Exhibit E with
respect to any aspect or portion of the Co-Branded Site (or the
Products or other Content contained therein), Onvia will provide such
aspect or portion at a level of accuracy, quality, completeness, and
timeliness which meets or exceeds prevailing standards in the
business-to-business industry. In the event Onvia fails to comply
with any material terms of this Agreement or any Exhibit attached
hereto, AOL will have the right (in addition to any other remedies
available to AOL hereunder) to decrease the promotion it provides to
Onvia hereunder (and to decrease or cease any other contractual
obligation hereunder) until such time as Onvia corrects its non-
compliance (and in such event, AOL will be relieved of the
proportionate amount of any promotional commitment made to Onvia by
AOL hereunder corresponding to such decrease in promotion) and any
revenue
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threshold(s) set forth in Section 3 will each be adjusted
proportionately to correspond to such decrease in promotion and other
obligations during the period of non-compliance.
2.9. Advertising Sales. AOL will own and manage all Co-Branded Site
Advertising Inventory. AOL will have the exclusive right to license
and/or sell all Advertisements in the Co-Branded Site Advertising
Inventory. Except for advertising inventory sold in the Co-Branded
Site Buying Directory pages (including any Co-Branded Site Buying
Directory category pages, sub-category pages, or results pages, and
related pages), AOL agrees not to sell such Co-Branded Site
Advertising Inventory to any of the entities listed in Schedule 2.9
hereto. Onvia may not incorporate or link to any Advertisement or
other commercial elements without AOL's prior written approval,
except as otherwise expressly stated herein.
2.10. Traffic Flow. Onvia will take reasonable efforts to ensure that AOL
traffic is either kept within the Co-Branded Site or channeled back
into the AOL Network (with the exception of advertising links sold
and implemented pursuant to the Agreement). The Parties will work
together on implementing mutually acceptable links from the Co-
Branded Site back to the AOL Service. In the event that AOL points to
the Co-Branded Site or any other Onvia Interactive Site or otherwise
delivers traffic to such site hereunder, Onvia will ensure that
navigation back to the AOL Network from such site, whether through a
particular pointer or link, the "back" button on an Internet browser,
the closing of an active window, or any other return mechanism, shall
not be interrupted by Onvia through the use of any intermediate
screen or other device not specifically requested by the user,
including without limitation through the use of any html popup window
or any other similar device. Rather, such AOL traffic shall be
pointed directly back to the AOL Network as designated by AOL. Onvia
will modify links within the co-branded pages, where appropriate, to
re-circulate users to the appropriate AOL property. Onvia will ensure
that all AOL Users in the co-branded areas will not be able to access
any additional links to Onvia's Standard Site, except that links to
certain mutually agreed newsfeed ("Newsfeed"), forms and proprietary
tutorial content areas therein shall be permitted if and only to the
extent that the Content in such areas is provided by third parties
which forbid Onvia to sublicense the right to display such Content
("Permitted Third Party Unbranded Content"); provided, however, that
such links shall link only and directly to the Permitted Third Party
Unbranded Content (e.g., a particular news story) and the pages
containing the Permitted Third Party Unbranded Content shall not
contain any unrelated Content or Advertising preceding or framing
such Permitted Third Party Unbranded Content (and the editorial
content of such pages shall not contain promotions for Interactive
Services other than AOL, it being understood that the editorial
content within any such Newsfeeds (i.e., the text of the news story)
shall not be deemed such a promotion). The number of pages containing
Permitted Third Party Unbranded Content may not exceed five percent
(5%) of the Content of the Co-Branded Site.
3. PAYMENTS.
3.1. Guaranteed Payments. Onvia will pay AOL [* * *] (the "Fixed Payment
Amount"), payable as follows:
(i) [* * *] within [* * *] of [* * *]; and
(ii) [* * *] on the [* * *] of [* * *] until fully paid;
provided however, if during the Term, Onvia engages in any debt
equity, or other financing arrangement or series of arrangements
raising proceeds equal to or in excess of [* * *] ("Funding Event"),
then [* * *] of the then total remaining payments (excluding any past
due amounts, which shall still be fully due and payable) will be due
and payable to AOL on such Funding Event date and any further payment
balance amounts still owing
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thereafter will be payable to AOL on a straight-lined basis over the
balance of the term in quarterly payments until the total placement
fee has been paid. In addition to the foregoing, if no such Funding
Event occurs within sixty (60) days of execution hereof, then Onvia
shall pay AOL [* * *] no later than five (5) days after that sixtieth
day. Such payment shall take the place of the installment payment
which was to have been paid on the eighteen (18) month anniversary of
the date of execution hereof, and all other terms of this Section 3.1
shall remain unchanged. The Fixed Payment Amount provided for herein
shall be refundable if and to the extent called for by Sections 1.2
and 5.4 hereof.
3.2. Sharing of Transaction Margins. During the Initial Term, Onvia shall
retain [* * *] of the Transaction Margins generated by Onvia in the
Co-Branded Site.
3.3. Sharing of Advertising Revenues. AOL shall own the rights to
Advertising Revenues generated through the Co-Branded Site
Advertising Inventory, including without limitation in the Co-Branded
Site Buying Directory, subject to the restrictions set forth in
Section 2.9. AOL will pay to Onvia, [* * *] of Advertising Revenues
received by AOL for such Advertisements in the Co-Branded Site
Advertising Inventory, including without limitation in the Co-Branded
Site Buying Directory, as described herein on a quarterly basis.
3.4. Performance Revenue. Attached as Schedule 3.4 is a list of
aspirational quarterly targets ("New Customer Targets") of users
transacting for products or services (including registering for RFQ
Services or RFI Services, entering into transactions in the Co-
Branded Site Buying Directory, or registering for paid enhanced
content or services) via the Co-Branded Site or otherwise directly
via any Promotion hereunder ("New Customers"). For each quarter
during the Term, if the number of New Customers meets or exceeds such
quarter's applicable New Customer Target as so listed on Schedule
3.4, then for each New Customer beyond such New Customer Target (up
to an aggregate maximum of [* * *] New Customers above such targets
during the Term), Onvia shall pay to AOL an amount equal to [* * *]
of the average cost to Onvia per New Customer, as calculated by
dividing [* * *] [* * *] of the Fixed Payment Amount) by the total
number of New Customers for such quarter (the "Performance Revenue").
The Performance Revenue attributable to a particular quarter shall be
paid to AOL within thirty (30) days following the close of that
quarter. In addition, if at the time which is eighteen (18) months
from and after the Effective Date, AOL achieves the aggregate New
Customer Target amount of New Customers for such 18 month period,
then AOL shall have no more Impressions or other promotional
obligations or commitments with respect to the AOL Buying Directory
and the AOL Aggregated RFQ Area thereafter. If any New Customer
Target is not achieved in any quarter, such event shall not
constitute a breach hereof.
3.5. Late Payments; Wired Payments. All amounts owed hereunder not paid
when due and payable will bear interest from the date such amounts
are due and payable at the prime rate in effect at such time. All
payments required hereunder will be paid in immediately available,
non-refundable U.S. funds wired to the "America Online" account,
Account Number [* * *] at The Chase Manhattan Bank, 1 Chase Manhattan
Plaza, New York, NY 10081 (ABA: [* * *]).
3.6. Auditing Rights. (a) Onvia will maintain complete, clear and
accurate records of all expenses, revenues and fees in connection
with the performance of this Agreement. For the sole purpose of
ensuring compliance with this Agreement, AOL (or its representative)
will have the right to conduct a reasonable and necessary inspection
of portions of the books and records of Onvia which are relevant to
Onvia's performance pursuant to this Agreement. Any such audit may be
conducted after twenty (20) business days prior written notice to
Onvia. AOL shall bear any and all of the reasonable, direct, out-of-
pocket costs and expenses of any audit conducted pursuant to this
Section 3.6 unless such audit shows an error in AOL's favor amounting
to a deficiency to AOL in excess of five percent (5%) of the actual
amounts paid and/or payable to AOL hereunder, in which
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event Onvia shall bear the reasonable expenses of the audit. Onvia
shall pay AOL the amount of any deficiency discovered by AOL within
thirty (30) days after receipt of notice thereof from AOL. (b) For
the sole purpose of ensuring compliance with Sections 3.3 and 3.9 of
this Agreement, Onvia will have the right to a reasonable and
necessary inspection to be conducted by an independent third party
selected in good faith by AOL, of portions of the books and records
of AOL which are relevant to AOL's performance pursuant to those
sections. Such right may not be exercised more than two times per
year. AOL shall select such third party auditor within twenty (20)
business days of Onvia's written notice to AOL of its desire for such
audit, and the audit shall begin within a reasonable amount of time
following such selection. Onvia shall bear any and all of the
reasonable, direct, out-of-pocket costs and expenses of any audit
conducted pursuant to this Section 3.9 unless such audit shows an
error in Onvia's favor amounting to a deficiency to Onvia in excess
of five percent (5%) of the actual amounts paid and/or payable to
Onvia hereunder, in which event AOL shall bear the reasonable
expenses of the audit.
3.7. Taxes. Onvia will collect and pay and indemnify and hold AOL
harmless from, any sales, use, excise, import or export value added
or similar tax or duty not based on AOL's net income, including any
penalties and interest, as well as any costs associated with the
collection or withholding thereof, including reasonable attorneys'
fees.
3.8. Reports.
3.8.1 Sales Reports. Onvia will provide AOL in an automated manner
with reports in an AOL-designated format, detailing the
following activity in such period (and any other information
mutually agreed upon by the Parties or reasonably required for
measuring revenue activity by Onvia through the Co-Branded
Site): (i) summary sales information by day (i.e., date,
number of Products, number of orders, total Transaction
Margins); and (ii) detailed sales information (i.e., e-mail
address or screenname, category of service provided (e.g., RFQ
Services, RFI Services, etc.), and, if and to the extent Onvia
categorizes its services into vertical market segments, then
the applicable vertical market segment) (in information in
clauses (i) and (ii), "Sales Reports"). If and to the extent
required to comply with this section, Onvia shall tailor its
privacy policy for the Standard Site for use with the Co-
Branded Site. Onvia shall use commercially reasonable efforts
to provide such reports monthly or as otherwise requested by
AOL, and shall in any event provide them at least quarterly.
AOL will be entitled to use the Sales Reports in its business
operations, subject to the terms of this Agreement. AOL
acknowledges that such reports may contain Confidential
Information as defined herein. More generally, each payment to
be made by Onvia pursuant to this Section will be accompanied
by a report containing information which supports the payment,
including information identifying (i) gross Transaction
Margins and all items deducted or excluded from gross
Transaction Margins to produce Transaction Margins, including,
without limitation, chargebacks and credits for returned or
canceled goods or services (and, where possible, an
explanation of the type of reason therefor, e.g., bad credit
card information, poor customer service, etc.); (ii) any
applicable Advertising Revenues; and (iii) any Performance
Revenue, including the basis for the calculation thereof
(including each New Customer, and the means by which such New
Customer was acquired (e.g., nature of transaction). AOL will
ensure that its use of the information obtained from Onvia
users by virtue of their use of the Co-Branded Site as
contemplated under the Agreement complies with the applicable
privacy policy on the Co-Branded Site, provided that AOL shall
have reasonable input as to the privacy policy applicable to
the Co-Branded Site.
3.8.2 Usage Reports. AOL shall provide Onvia with standard usage
information related to the Promotions (e.g. a schedule of the
Impressions delivered by AOL at such
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time) which is similar in substance and form to the reports
provided by AOL to other interactive marketing partners
similar to Onvia. Onvia acknowledges that such information may
be Confidential Information as defined herein.
3.8.3 Fraudulent Transactions. To the extent permitted by
applicable laws, Onvia will provide AOL with monthly reports
of all fraudulent orders, including the date, screenname or
email address and amount associated with such order, following
Onvia obtaining knowledge that such orders are, in fact,
fraudulent.
3.9 Integration Revenue. During the Initial Term, AOL shall pay to Onvia
[* * *] of the revenue received by it for integration of third parties
into the AOL Buying Directory by Onvia to the extent received by AOL
from its third party merchant partners for such integration into such
directory by Onvia at AOL's request in accordance with Exhibit I
hereof (and including only such portion of the total revenues from
such third parties directly attributable to such integration as set
forth in more detail in this Section 3.9) (the "Integration Revenue").
More specifically, the Integration Revenue shall consist only of all
cash actually paid to (to the extent actually collected by) AOL by
such third parties for integration into the AOL Buying Directory by
Onvia, at such time as such cash is recognized as revenue attributable
to such integration by AOL in accordance with applicable generally
accepted account principles, less (i) actual third party commissions,
(ii) AOL sales expenses not to exceed fifteen percent (15%) of such
aggregate amount, (iii) all other amounts, fees and revenues received
by AOL that are not attributed to third party integration into the AOL
Buying Directory by Onvia, including without limitation, license fees,
web design fees, fees for any other promotions by AOL of the same
third party (e.g., unrelated carriage within the AOL Network other
than in the AOL Buying Directory or for standard (non-integrated)
promotional carriage in the traditional advertising space on the AOL
Buying Directory), and revenues from software sales, and (iv) any
amounts not collected by AOL and/or more than ninety (90) days past
due.
4. [Intentionally Omitted]
5. TERM; RENEWAL; TERMINATION.
5.1. Term. Unless earlier terminated as set forth herein, the initial
term of this Agreement will be twenty-four (24) months from and after
the Effective Date (the "Initial Term").
5.2. Renewal. (a) Upon conclusion of the Initial Term, AOL will have the
right to renew the Agreement for a one-year renewal term (the
"Renewal Term" and together with the Initial Term, the "Term"),
provided that: (1) during such Renewal Term: (i) there shall be no
Impressions Commitment, (ii) Onvia shall not be obligated to pay an
additional carriage fee, (iii) AOL shall not be obligated to provide
any promotions provided for hereunder (e.g., as set forth in Exhibit
A hereto), (iv) AOL may, at its option, remove any links to, or
promotion or mention of, the RFQ Services and/or RFI Services
(including but not limited to the RFQ/RFI Promotional Area) from the
AOL Network following the expiration of the Term, unless mutually
agreeable terms for retaining such links and promotion can be agreed
upon; and (v) Onvia shall pay AOL the greater of (x) [* * *] of all
Transaction Margins arising from the sale of any products (e.g.,
regardless of whether such products are produced by Onvia or are
provided to Onvia by a third party merchant) on the Co-Branded Site
during the Renewal Term, but not services (unless mutually agreed),
or (y) the most preferable rates offered under Onvia's then current
affiliate program (in either case, payment must be made on a
quarterly basis within forty-five (45) days following the end of the
quarter in which the Transaction Margins were generated); and (2) if,
during the final quarter of the Initial Term, Onvia consistently
experiences substantial costs of maintaining and upgrading the Co-
Branded Site and AOL Buying Directory due to the requirements of this
Agreement, separate and apart from the costs incurred by Onvia in
maintaining and upgrading the other Onvia Interactive Sites, the
Parties will negotiate in good faith to arrive at renewal terms which
reduce those costs (provided that if alternative renewal terms cannot
be agreed upon, AOL shall have the right to renew this Agreement as
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otherwise set forth herein). The Renewal Term shall automatically
commence following the expiration of the Initial Term (or prior
Renewal Term, as the case may be), provided that AOL shall be
entitled to terminate any such Renewal Term with thirty (30) days
prior written notice to Onvia. The Parties may mutually agree to
extend the Agreement for multiple additional Renewal Terms. (b) In
addition to the foregoing, at least sixty (60) days before the end of
the Initial Term, the Parties shall discuss in good faith the
possibility of agreeing on an alternative Impressions Commitment,
carriage plan, carriage fee, and related items which will control
during the Renewal Term instead of the terms set forth in subpart
(a)(1) above. (c) At the end of the Term when the AOL Buying
Directory is to be no longer maintained by Onvia hereunder, there
will be a reasonable transition period (the "Transition Period") of
mutually agreeable duration (not to be less than ninety (90) days)
during which the Parties' rights and obligations with respect to the
AOL Buying Directory shall survive and during which such period the
Parties will cooperate to facilitate the migration of AOL's third
party merchant partners that have been integrated into the AOL Buying
Directory, and AOL's AOL Buying Directory customers obtained during
the Term, to a different tool selected by AOL.
5.3. Continued Links. Upon expiration of the Term, AOL may, at its
discretion, continue to promote one or more "pointers" or links from
the AOL Network to the Standard Site and continue to use Onvia's
trade names, trade marks and service marks in connection therewith
(collectively, a "Continued Link"). So long as AOL maintains a
Continued Link, (a) Onvia shall pay AOL the most preferable rates
offered under Onvia's then current affiliate program (within thirty
(30) days of the end of each quarter during which the Continued Link
is maintained), or if no such affiliate program is then in effect,
Onvia shall pay AOL [* * *] of all Transaction Margins arising from
the sale of any products (e.g., regardless of whether such products
are produced by Onvia or are provided to Onvia by a third party
merchant) on the Standard Site (on a quarterly basis within forty-
five (45) days following the end of the quarter in which the
Transaction Margins were generated); (b) Sections 3.5, 3.6 and 3.7
along with the terms of Exhibit G hereto shall continue to apply with
respect to the Continued Link and any transactions arising therefrom;
(c) Onvia will continue to promote the Keyword Search Term provided
to it hereunder in accordance with the requirements of this
Agreement; and (d) all of AOL's rights with respect to the area on
which the AOL Buying Directory resides shall continue as they existed
during the Term.
5.4. Termination for Breach. Except as expressly provided elsewhere in
this Agreement, either Party may terminate this Agreement at any time
in the event of a material breach of the Agreement by the other Party
which remains uncured after thirty (30) days written notice thereof
to the other Party (or such shorter period as may be specified
elsewhere in this Agreement); provided that AOL will not be required
to provide notice to Onvia in connection with Onvia's failure to make
any payment to AOL required hereunder, and the cure period with
respect to any scheduled payment will be fifteen (15) days from the
date for such payment provided for herein. Notwithstanding the
foregoing, in the event of a material breach of a provision that
expressly requires action to be completed within an express period
shorter than 30 days, either Party may terminate this Agreement if
the breach remains uncured after written notice thereof to the other
Party. In the event of a material breach of this Agreement by AOL,
AOL may refund a pro rata percentage of the carriage fee paid by
Onvia pursuant to Section 3.1 hereof, to the extent that AOL has
actually received such payments from Onvia and such payments remain
unearned at the time of refund (i.e., a proportionate percentage of
the Impressions Commitment has not yet been delivered).
5.5. Termination for Bankruptcy/Insolvency. Either Party may terminate
this Agreement immediately following written notice to the other
Party if the other Party (i) ceases to do business in the normal
course, (ii) becomes or is declared insolvent or bankrupt, (iii) is
the subject of any proceeding related to its liquidation or
insolvency (whether voluntary or
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involuntary) which is not dismissed within ninety (90) calendar days
or (iv) makes an assignment for the benefit of creditors.
5.6. Termination on Change of Control.
(a) (i) Onvia shall promptly notify AOL in writing in the event that Onvia
enters into any agreement with any Interactive Service intending to
consummate or to potentially consummate any Change of Control of Onvia or
which could reasonably result in an Interactive Service controlling Onvia
(other than a Qualifying Investor (as defined below)), notifying AOL of the
existence of such agreement and the nature of the transaction contemplated
thereby (subject to any applicable confidentiality provisions therein and
any applicable securities laws) (and in any event, such notice shall occur
no later than one (1) day following any press release or other public
announcement thereof by Onvia). For purposes hereof, a "Qualifying
Investor" shall mean any current investor in Onvia which is listed on
Schedule 5.6 hereto, if and to the extent that either, (1) such investor is
not an Interactive Service or (2) if such investor is an Interactive
Service, at any time, then such investor only so qualifies because of a
distinctly operating subsidiary of the same parent (each, a "Distinct
Affiliate"), in which case, such investor shall be considered a Qualified
Investor only if and to the extent that the Distinct Affiliate(s) which
cause it to qualify as an Interactive Service are (and are planned in the
foreseeable future by such investor to be) held and operated separately
from the operations of Onvia as contemplated by this Agreement (in which
case, neither Onvia nor such investor may cause or permit AOL User data or
Confidential Information to be shared between Onvia and such other Distinct
Affiliate). Such notice shall be referred to herein as the "Agreement
Notice". In negotiating such an agreement, Onvia shall use commercially
reasonable efforts to avoid confidentiality provisions which would restrict
its ability to provide AOL with the Agreement Notice as described herein.
However, if Onvia is restricted from providing such Agreement Notice
immediately upon entering into such an agreement due to applicable
confidentiality restrictions of such agreement or applicable securities
laws, then Onvia shall notify AOL of the existence and nature of such
agreement as soon as such restrictions no longer prevent it from doing so.
(ii) Onvia also shall provide prompt written notice to AOL of the
occurrence of the Change of Control (such notice to be referred to herein
as the "Consummation Notice"). (iii) In the event that Onvia enters into an
agreement with an Interactive Service as contemplated in this section, AOL
shall have the right to terminate this Agreement on or after the date that
is the earlier of (a) six (6) months after the date of the Agreement
Notice, or (b) the date of the Change of Control; provided, however, that
AOL must give Onvia thirty (30) days prior written notice of its intent to
terminate.
(b) In the event of a Change of Control of AOL (other than the
consummation, in any form, of AOL's planned acquisition of, or merger or
consolidation with, Time Warner Inc., which was announced to the public on
January 10, 2000), AOL may terminate this Agreement by providing sixty (60)
days prior written notice of such intent to terminate.
5.7. Press Releases. Each Party will submit to the other Party, for its prior
written approval, which will not be unreasonably withheld or delayed, any
press release or any other public statement regarding the transactions
contemplated hereunder ("Press Release"). The Parties shall obey all
applicable securities laws (e.g., governing any applicable "quiet period"
relating to any securities filings). Notwithstanding the foregoing, either
Party may issue Press Releases and other disclosures as required by law
without the consent of the other Party and in such event, the disclosing
Party will provide at least three (3) business days prior written notice
of such disclosure. The failure by one Party to obtain the prior written
approval of the other Party prior to issuing a Press Release (except as
required by law) shall be deemed a material breach of this Agreement.
Because it would be difficult to precisely ascertain the extent of the
injury caused to the non-breaching party, in the event of such material
breach under this Section 5.7, the non-breach party may elect to either
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(a) terminate this Agreement immediately upon notice to the other Party,
or (b) as liquidated damages, elect to modify the Impression commitment
hereunder by fifteen percent (15%) (either an increase in Impressions if
AOL has materially breached the Agreement or a decrease in Impressions if
Onvia has materially breached the Agreement). The Parties agree that the
liquidated damages set forth are a reasonable approximation of the injury
that would be suffered by the non-breaching Party.
6. NETSCAPE TOOLS, UTILITIES & PROGRAMMING.
6.1. Netscape Business Directory. Onvia will make commercially reasonable
efforts to integrate the Netscape Business Directory into
contextually relevant areas of its Standard Site. Onvia's business
users shall have access to and use of the Netscape Business Directory
(subject to all generally applicable terms thereof, as available
online). If mutually agreed, Onvia and its business users integrated
into the Netscape Business Directory will qualify for specific
Netscape "members only" reduced-price and/or enhanced value products
and services. In addition, if mutually agreed, Onvia business users
will be able to search for and find buyers and sellers and to
leverage Netscape generally available value-added business-to-
business e-commerce hosted services such as auctions, catalog buying,
and bid-quote. Onvia understands and agrees that the Netscape
Business Directory product may be structured by AOL to be provided by
Netscape or by a third party, and that, if provided by a third party,
AOL shall not be required to force such third party to accept the
terms of this Section 6.1, and Onvia may not be able to so
participate.
6.2. Netscape Business Card. Onvia will evaluate in good faith whether it
will agree to its integration into a co-branded Netscape Business
Card (with any such integration to be subject to all generally
applicable terms thereof), enabling Onvia to provide specific photos
and programming related to its products and services and leverage
Netscape generally available value-added business-to-business e-
commerce services. If mutually agreed, Onvia and Netscape will use
good faith efforts to enable Onvia to customize content and
programming into a Netscape Business Card. If mutually agreed, Onvia
will offer to its partners and users accessing Onvia's generally
available web sites, the opportunity to be integrated into a co-
branded Netscape Business Card (subject to all generally applicable
terms thereof).
6.3. Netscape Programming. Netscape will provide Onvia with content and
programming targeted at its business users through co-branded areas.
Onvia will use commercially reasonable efforts to integrate
Netscape's content and programming in contextually relevant areas of
the Onvia web based applications, and to provide navigational links
within contextually relevant areas of the Onvia web based
applications to the co-branded areas containing the Netscape
programming. The Parties will mutually agree upon the nature of
Netscape content and programming to be integrated on the Onvia web
based applications and the carriage/integration plan for such content
and programming. Any and all such programming shall appear only in
the Co-Branded Site or, if on the Standard Site, then only on a co-
branded screen or screens thereof (a "Co-Branded Area of the Standard
Site") upon terms to be mutually agreed.
6.4. AOL Buying Directory. Onvia will build, operate and provide to AOL a
best-of-breed, ingredient-branded buying directory in a manner set
forth herein (including without limitation in this Section 6.4,
Exhibit A-1 and Exhibit I) (the "AOL Buying Directory").
6.4.1. Clickstream. Subject to AOL's right to redesign (or modify,
etc.) elements of the AOL Network pursuant to Section 1.1
hereof, the AOL Buying Directory will be linked to as
follows: (i) the [* * *] page (or substantively similar area)
within Netcenter (initially, and later within the [* * *]),
will contain an [* * *] link to, among other areas, a
Netcenter [* * *] area (or substantively similar area); (ii)
which will
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contain [* * *] links to, among other areas, the AOL Buying
Directory, and the AOL Aggregated RFQ Area; (iii) with
respect to the AOL Buying Directory, the directory products
and services categories space shall be approximately [* * *]
of the programmable page, with [* * *] placement; (iv) with
respect to the AOL Aggregated RFQ Area page, Onvia shall
have, on the [* * *] of the page, a total of [* * *] of the
aggregate available partner page real estate (including an
area constituting [* * *] of the area above the fold and an
area constituting [* * *] of the area below the fold), to
provide its RFQ/RFI Promotional Area in accordance herewith,
with the exact placement on such page to be mutually agreed;
(v) with respect to the AOL Buying Directory sub-category
page, to the extent such page is deemed advisable by AOL, the
sub-categories space shall be up to [* * *] of the
programmable page, with [* * *] placement; (vi) the results
page of the AOL Buying Directory shall contain an [* * *]
link to the RFQ Services on the Co-Branded Site; (vii) for [*
* *] from and after the date on which the Co-Branded Site
first launches, there shall be [* * *] on the [* * *] to the
[* * *] and [* * *] to the [* * *] (and prior to launch of
such areas, AOL shall instead link directly to the relevant
portion of the [* * *]); and (viii) with respect to the AOL
Buying Directory search results page, the search results
space shall be approximately [* * *] of the programmable
page, and at least one Onvia search result shall be placed [*
* *] (no [* * *] than other general [* * *] merchant partner
search results (standard page type size, font, etc. to be
determined by AOL)) (subject to Onvia's having a directly
relevant product); AOL controls the order of the search
results, but initially, the list of products or services
shall be sorted by the following criteria: default is by [* *
*], and/or by [* * *] (e.g., [* * *] to AOL), but could also
be sorted by, e.g., [* * *]; provided, AOL shall have the
right to (a) add up to [* * *] additional sort criteria and
(b) change the sort order up to [* * *] times during the
Term, unless otherwise agreed to by the Parties. Additional
links also may be integrated throughout the [* * *] (or a
comparable area if the [* * *] is not launched).
Notwithstanding anything to the contrary herein, any
reference in this Agreement to placement on any search and/or
results page or area shall in each case be subject to
qualification under the parameters of such search or result.
6.4.2. Management; Operations. The AOL Buying Directory will enable
AOL Users to search across Onvia's inventory of products and
services along with such other third-party inventory
integrated into the AOL Buying Directory in accordance
Exhibit A-1 and Exhibit I hereto. AOL will have design
approval rights for user interface and display elements of
the AOL Buying Directory and results pages (e.g., the manner
in which results pages will list AOL third party partner
inventory as well as Onvia inventory). As long as Onvia's
products and services are directly relevant to the queried
item or service, AOL will list at least one of Onvia's
products or services [* * *] on the first results page. Upon
AOL's request, Onvia will integrate into the AOL Buying
Directory (including without limitation the results pages
thereof), third-party services and products, in a manner
specified by AOL and in accordance with the schedule set
forth in Exhibit A-1 and Exhibit I hereto. The products and
services of Onvia to be integrated into the AOL Buying
Directory are limited to the categories of products and
services set forth in Exhibit D hereto but shall include a
comprehensive offering of such categories as set forth on
Exhibit A-1. Although the AOL Buying Directory may reside
within the AOL Network rather than the Co-Branded Site, all
express obligations, representations and warranties of Onvia
herein with respect to the Co-Branded Site (e.g., management,
quality, competitiveness, etc.), shall apply equally with
respect to the AOL Buying Directory (except as otherwise
expressly set forth in this Section 6.4). Notwithstanding
anything to the contrary, AOL owns, operates and controls all
areas on which the AOL Buying Directory resides, including
the Advertising inventory therein; provided that Onvia
retains any existing ownership of (i) any proprietary
underlying technology related to the AOL Buying Guide as
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provided by Onvia to AOL, and (ii) the Co-Branded Site Buying
Directory (defined below), subject to the terms hereof. In
addition to the other operational requirements of this
Agreement, Onvia shall ensure that the AOL Buying Directory
performs searches and displays results at least as quickly as
the buying directory then-currently available on the Standard
Site. Such results shall be displayed in a manner designated
by AOL from time to time, which may include two columns. If
and when (in AOL's discretion) AOL launches the B2B Area,
then Onvia shall promptly make the AOL Buying Directory
available to AOL for integration therein as set forth in
Exhibits A-1 and I, and Onvia shall cooperate with AOL to
assist in such integration.
6.4.3. Co-Branded Site Buying Directory. In addition to the AOL
Buying Directory (which shall incorporate certain AOL
merchant partners and be located within the AOL Network, to
the extent set forth herein, including as set forth in
Exhibits A-1 and I), Onvia shall also provide and operate the
same (or a substantially similar version of the same) or
substantially similar buying directory within the Co-Branded
Site (subject to all requirements applicable to the Co-
Branded Site, including without limitation, co-branding
thereof), which such version of such directory may or may not
also incorporate AOL's merchant partners therein as required
for the AOL Buying Directory (the "Co-Branded Site Buying
Directory").
6.4.4. [* * *] Buying Directory. Subject to Onvia's continued
compliance with the terms hereof (including without
limitation by supplying a consistently "best-of-breed" buying
directory product and satisfying other performance
requirements in compliance with the terms of Exhibit A-1, E
and J as to the AOL Buying Directory), AOL shall not [* * *]
buying directory as the [* * *] buying directory in the [* *
*] during the [* * *]. Notwithstanding anything to the
contrary herein, AOL may, even within the [* * *], (i) sell
Advertisements to, and otherwise promote, any providers of
similar directories, (ii) promote any [* * *] related buying
guides and any [* * *] buying guide, and (iii) promote any [*
* *] directory in any [* * *] communities (e.g., a [* * *]
industry [* * *] directory or an [* * *] industry [* * *]
directory) in the [* * *] (even if such [* * *] directory
includes traditional [* * *] products (e.g., a printer, even
if sold within a [* * *] industry [* * *] directory)).
6.5 RFQ Services and RFI Services. Onvia will build, operate and provide
to AOL best-of-breed areas for the RFQ Services and RFI Services in a
manner set forth herein, to be operated via the Co-Branded Site, but
promoted via links and related promotional and/or explanatory content
in the AOL Network (such promotional areas, linking to such services
in the Co-Branded Site, the "RFQ/RFI Promotional Areas"), for AOL to
incorporate non-exclusively into the AOL Network (including without
limitation in any B2B Area (including without limitation in any AOL
owned and operated RFQ and RFI area(s) programmed by AOL in its
discretion) aggregating third party RFQ and/or RFI partners of AOL)
(the "AOL Aggregated RFQ Area")). AOL will have design approval
rights for user interface and display elements of the entire AOL
Aggregated RFQ Area, including without limitation in the RFQ/RFI
Promotional Areas. Although the RFQ/RFI Promotional Areas may reside
within the AOL Network rather than the Co-Branded Site, all express
obligations, representations and warranties of Onvia herein with
respect to the Co-Branded Site (e.g., management, quality,
competitiveness, etc.) shall apply equally with respect to the RFQ/RFI
Promotional Areas (except as otherwise expressly set forth in this
Section 6.5). In addition to the other operational requirements of
this Agreement, Onvia shall ensure that the RFQ/RFI Promotional Areas
perform at least as quickly as the comparable areas then-currently
available on the Standard Site and such results are displayed in a
manner reasonably designated by AOL from time to time. If and when
AOL launches the B2B Area, then Onvia shall promptly make the RFQ/RFI
Promotional Areas available to AOL for integration therein as set
forth on Exhibits A-1 and I, and Onvia shall cooperate with AOL to
assist in such integration. Onvia will provide data for AOL's then-
standard API
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(e.g., an HTTP application interface which accepts as input the user's
screenname and returns the following data items in XML encoded form:
user ID, RFQ (or RFI) number, number of bids, low bid, high bid, and
any other applicable information) within the RFQ/RFI Promotional Area,
with Onvia's consent (not to be unreasonably withheld or delayed), and
any other mutually agreeable location.
7. MANAGEMENT COMMITTEE/ARBITRATION.
7.1. Management Committee. The Parties will act in good faith and use
commercially reasonable efforts to promptly resolve any claim,
dispute, claim, controversy or disagreement (each a "Dispute") between
the Parties or any of their respective subsidiaries, affiliates,
successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the
transactions contemplated hereby. If the Parties cannot resolve the
Dispute within such time frame, the Dispute will be submitted to the
Management Committee for resolution. For ten (10) days following
submission of the Dispute to the Management Committee, the Management
Committee will have the exclusive right to resolve such Dispute;
provided further that the Management Committee will have the final and
exclusive right to resolve Disputes arising from any provision of the
Agreement which expressly or implicitly provides for the Parties to
reach mutual agreement as to certain terms. If the Management
Committee is unable to amicably resolve the Dispute during the ten-day
period, then the Management Committee will consider in good faith the
possibility of retaining a third party mediator to facilitate
resolution of the Dispute. In the event the Management Committee
elects not to retain a mediator, the dispute will be subject to the
resolution mechanisms described below. "Management Committee" will
mean a committee made up of a senior executive from each of the
Parties for the purpose of resolving Disputes under this Section 7 and
generally overseeing the relationship between the Parties contemplated
by this Agreement. Neither Party will seek, nor will be entitled to
seek, binding outside resolution of the Dispute unless and until the
Parties have been unable amicably to resolve the Dispute as set forth
in this Section 7 and then, only in compliance with the procedures set
forth in this Section 7.
7.2. Arbitration. Except for Disputes relating to issues of (i)
proprietary rights, including but not limited to intellectual property
and confidentiality, and (ii) any provision of the Agreement which
expressly or implicitly provides for the Parties to reach mutual
agreement as to certain terms (which will be resolved by the Parties
solely and exclusively through amicable resolution as set forth in
Section 7.1), any Dispute not resolved by amicable resolution as set
forth in Section 7.1 will be governed exclusively and finally by
arbitration. Such arbitration will be conducted by the American
Arbitration Association ("AAA") in Washington, D.C. and will be
initiated and conducted in accordance with the Commercial Arbitration
Rules ("Commercial Rules") of the AAA, including the AAA Supplementary
Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules will be in effect on the date of delivery
of a demand for arbitration ("Demand"), except to the extent that such
rules are inconsistent with the provisions set forth herein.
Notwithstanding the foregoing, the Parties may agree in good faith
that the Complex Procedures will not apply in order to promote the
efficient arbitration of Disputes where the nature of the Dispute,
including without limitation the amount in controversy, does not
justify the application of such procedures.
7.3. Selection of Arbitrators. The arbitration panel will consist of three
arbitrators. Each Party will name an arbitrator within ten (10) days
after the delivery of the Demand. The two arbitrators named by the
Parties may have prior relationships with the naming Party, which in a
judicial setting would be considered a conflict of interest. The third
arbitrator, selected by the first two, should be a neutral
participant, with no prior working relationship with either Party. If
the two arbitrators are unable to select a third arbitrator within ten
(10) days, a third neutral arbitrator will be appointed by the AAA
from the panel of commercial
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arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have
commenced, the remaining arbitrator or arbitrators may not continue
with the hearing and determination of the controversy, unless the
Parties agree otherwise.
7.4. Governing Law. The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and
not state law, will govern the arbitrability of all Disputes. The
arbitrators will allow such discovery as is appropriate to the
purposes of arbitration in accomplishing a fair, speedy and cost-
effective resolution of the Disputes. The arbitrators will reference
the Federal Rules of Civil Procedure then in effect in setting the
scope and timing of discovery. The Federal Rules of Evidence will
apply in toto. The arbitrators may enter a default decision against
any Party who fails to participate in the arbitration proceedings.
7.5. Arbitration Awards. The arbitrators will have the authority to award
compensatory damages only. Any award by the arbitrators will be
accompanied by a written opinion setting forth the findings of fact
and conclusions of law relied upon in reaching the decision. The
award rendered by the arbitrators will be final, binding and non-
appealable, and judgment upon such award may be entered by any court
of competent jurisdiction. The Parties agree that the existence,
conduct and content of any arbitration will be kept confidential and
no Party will disclose to any person any information about such
arbitration, except as may be required by law or by any governmental
authority or for financial reporting purposes in each Party's
financial statements.
7.6. Fees. Each Party will pay the fees of its own attorneys, expenses of
witnesses and all other expenses and costs in connection with the
presentation of such Party's case (collectively, "Attorneys' Fees").
The remaining costs of the arbitration, including without limitation,
fees of the arbitrators, costs of records or transcripts and
administrative fees (collectively, "Arbitration Costs") will be borne
equally by the Parties. Notwithstanding the foregoing, the
arbitrators may modify the allocation of Arbitration Costs and award
reasonable Attorneys' Fees in those cases where fairness dictates a
different allocation of Arbitration Costs between the Parties and an
award of reasonable Attorneys' Fees to the prevailing Party as
determined by the arbitrators.
7.7. Non Arbitratable Disputes. Any Dispute that is not subject to final
resolution by the Management Committee or to arbitration under this
Section 7 or by law (collectively, "Non-Arbitration Claims") will be
brought in a court of competent jurisdiction in the Commonwealth of
Virginia. Each Party irrevocably consents to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the
federal courts situated in the Commonwealth of Virginia, over any and
all Non-Arbitration Claims and any and all actions to enforce such
claims or to recover damages or other relief in connection with such
claims.
8. iPLANET. Netscape and Onvia will use good faith efforts to evaluate a
relationship with iPlanet for transaction and commerce related applications
and enterprise software on terms to be mutually agreed upon by the Parties.
The Parties will use good faith efforts to develop a specifications
requirements document. Netscape will dedicate sufficient resources to
develop and customize such a solution in accordance with the terms hereof.
9. MISCELLANEOUS. Onvia will approach AOL and allow AOL to commence timely,
meaningful, mutual discussions regarding the opportunity for AOL to
participate in future small business, SOHO, vertical trading community
activities provided by Onvia, including, without limitation, access,
vertical trading community platforms, and trading systems, before having
extensive discussions or entering into agreements or commitments with any
Interactive Service other than AOL regarding the same. If Onvia approaches
AOL regarding the possibility of a reasonably potential business
relationship with respect to a new business-to-business product or service
to
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be offered by AOL on the AOL Network, AOL will use good faith efforts to
discuss the possibility of such a relationship with Onvia.
10. STANDARD TERMS. The Standard Online Commerce Terms & Conditions set forth
on Exhibit F attached hereto and Standard Legal Terms & Conditions set
forth on Exhibit G attached hereto are each hereby made a part of this
Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.
AMERICA ONLINE, INC. ONVIA.COM, INC.
By: _______________________________ By: _______________________________
Name Name:
Title: Title:
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EXHIBIT A
Placement/Promotion
-------------------
I. Carriage Plan
<TABLE>
<CAPTION>
AREA DESCRIPTION
- ---------------------------------------------------------------------------------------------------
Level 1 Promotions [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
1 Netscape Netcenter - Business/Business Rotational Banners
Toolkit Articles
- ---------------------------------------------------------------------------------------------------
2 Netscape Netcenter - Business/Business Rotational Banners
Toolkit Articles
- ---------------------------------------------------------------------------------------------------
3 Netscape Netcenter - Business /Small Rotational Banners and text links
Business - Main
- ---------------------------------------------------------------------------------------------------
4 Netscape Netcenter - Small Business Rotational Banners
/Office Supplies - Sponsorship
- ---------------------------------------------------------------------------------------------------
5 Netscape Netcenter - Business/Business - Rotational Text
Daily News
- ---------------------------------------------------------------------------------------------------
6 Netscape Netcenter - Web Site Garage Tune Rotational Banners
- Up
- ---------------------------------------------------------------------------------------------------
7 Netscape Netcenter - Business/E Business: Rotational Banners
Online Essentials Step 5 (improve your
site) Sponsorship
- ---------------------------------------------------------------------------------------------------
8 Netscape Netcenter - Site Central - Rotational Text
Business
- ---------------------------------------------------------------------------------------------------
9 AOL Service - Business News Center Rotational Banners
- ---------------------------------------------------------------------------------------------------
10 AOL Service - Industry - Computers & Rotational Banners
Technology
- ---------------------------------------------------------------------------------------------------
11 AOL Service - AOL Workplace Rotational Banners
- ---------------------------------------------------------------------------------------------------
12 AOL.com - Business & Careers/ Office Rotational Banners
Supplies Directory
- ---------------------------------------------------------------------------------------------------
13 CompuServe - Business/Business - Main Rotational Banners
- ---------------------------------------------------------------------------------------------------
14 CompuServe - Business/Forum - Business Rotational Banners
- ---------------------------------------------------------------------------------------------------
3 Cross Brands - Classifieds Plus - AOL.com Rotational Banners
- Business Services
- ---------------------------------------------------------------------------------------------------
4 Cross Brands - Search 2000: Business Main Rotational Banners
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Level 2 Promotions [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
1 Netscape Netcenter - Tech/Computing - Run Rotational Banner and text links
of Netscape Channel
- ---------------------------------------------------------------------------------------------------
2 Netscape Netcenter - Tech/Computing - Rotational Banners
Computing - Smart Update
- ---------------------------------------------------------------------------------------------------
3 Netscape Netcenter - Tech/Computing - Run Rotational Banners and text links
of Computing and Internet
- ---------------------------------------------------------------------------------------------------
4 Netscape Netcenter - Site Central Rotational Banners
Business - Run of Site Central: Computing
- ---------------------------------------------------------------------------------------------------
5 Netscape Netcenter - Tech/Computing - Rotational Banners
DevEdge sponsorship
- ---------------------------------------------------------------------------------------------------
6 AOL Service - Business/Business Newswire Rotational Banners
Press Release
- ---------------------------------------------------------------------------------------------------
7 AOL Service - Business Newswire Press Rotational Banners
Release
- ---------------------------------------------------------------------------------------------------
8 AOL Service - Business News / News Feeds Rotational Banners
- ---------------------------------------------------------------------------------------------------
9 AOL Service - Business/Market Day Report Rotational Banners
- ---------------------------------------------------------------------------------------------------
10 AOL Service - Business Week / Cover Story Rotational Banners
- ---------------------------------------------------------------------------------------------------
11 AOL Service - Market Player Sponsorship/ Rotational Banners
Market Player Button
- ---------------------------------------------------------------------------------------------------
12 AOL Service - Market Player Sponsorship/ Rotational Banners
Market Player Badge
- ---------------------------------------------------------------------------------------------------
13 AOL Service - Computing/Search & Explore Rotational Banners
AOL Computing Permanent Sponsorship
- ---------------------------------------------------------------------------------------------------
14 AOL Service - Computing/ Run of Computing Rotational Banners
- ---------------------------------------------------------------------------------------------------
15 AOL.com - Business & Careers/ Yellow Rotational Banners
Pages - Computers/Software
- ---------------------------------------------------------------------------------------------------
16 CompuServe - Business/Forum - Computing Rotational Banners
Support
- ---------------------------------------------------------------------------------------------------
17 CompuServe - Run of Computing Rotational Banners
- ---------------------------------------------------------------------------------------------------
18 [* * *] Rotational Banners
- ---------------------------------------------------------------------------------------------------
19 [* * *] Rotational Banners
- ---------------------------------------------------------------------------------------------------
20 [* * *] Rotational Banners
- ---------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Level 3 Promotions: [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
1 Netscape Netcenter - Run of Personal Rotational Banners and Text links
Finance
- ---------------------------------------------------------------------------------------------------
2 Netscape Netcenter - Site Central/Run of Rotational Banners and Text links
Site Central
- ---------------------------------------------------------------------------------------------------
3 AOL Service - Market Player Rotational Banners
Sponsorship/Personal Finance Stock Quotes
- ---------------------------------------------------------------------------------------------------
4 AOL Service - Market Player Rotational Banners
Sponsorship/Run of Personal Finance
- ---------------------------------------------------------------------------------------------------
5 AOL.com - Computing/Run of Computing Rotational Banners
- ---------------------------------------------------------------------------------------------------
6 CompuServe - Run of Personal Finance Rotational Banners
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Level 4 Promotions: [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
1 Netscape Netcenter - Homepage integration Integrated Banner
- ---------------------------------------------------------------------------------------------------
2 Netscape Netcenter - Homepage Rotational Banners
- ---------------------------------------------------------------------------------------------------
3 AOL.com - Run of Yellow Pages Rotational Banners
- ---------------------------------------------------------------------------------------------------
4 [* * *] Rotational Banners
- ---------------------------------------------------------------------------------------------------
5 Cross Brands - Run of Calendar Rotational Banners
- ---------------------------------------------------------------------------------------------------
6 Cross Brands - Run of Classifieds Plus Rotational Banners
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Level 5 Promotions: [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
1 Netscape Netcenter - Run of Service Rotational Textlinks
textlinks
- ---------------------------------------------------------------------------------------------------
2 AOL Service - Run of Service Rotational Banners
- ---------------------------------------------------------------------------------------------------
3 AOL Service - Run of Email in-box Rotational Banners
- ---------------------------------------------------------------------------------------------------
4 CompuServe - Run of Compuserve.com Rotational Banners
- ---------------------------------------------------------------------------------------------------
5 CompuServe - Run of CompuServe
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Level 6 Promotions: [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
1 [* * *] Rotational Banners
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
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Integrated Impressions:
<TABLE>
<CAPTION>
Integrated Impressions per Section 3.4: [* * *] Impressions (over 18 months)
- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
1 AOL Buying Directory* Fixed Placement on [* * *] page as
[* * *] by [* * *]
- ---------------------------------------------------------------------------------------------------
2 AOL Aggregated RFQ Area* Fixed Placement
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Prior to launch of the AOL Buying Directory or the AOL Aggregated RFQ Area,
Impressions linking to the Co-Branded Site Buying Directory, or to the RFQ
Services or RFI Services within the Co-Branded Site, shall count as such
Integrated Impressions.
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AOL Canada Carriage:
<TABLE>
<CAPTION>
AREA DESCRIPTION
- ---------------------------------------------------------------------------------------------------
Netscape.ca Promotions [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
1 Netscape.ca - Founding Co-Sponsor: Small Rotational Banners
Business Channel
- ---------------------------------------------------------------------------------------------------
2 Netscape.ca - Small Business/Main page - Permanent Placement
Tip of the Day - Permanent placement
- ---------------------------------------------------------------------------------------------------
3 Netscape.ca - Small Business/Business Rotational Banners
Finance - Banner rotation
- ---------------------------------------------------------------------------------------------------
4 Netscape.ca - Small Business/ Best of Rotational Banners
E-commerce for small business - banner
rotation
- ---------------------------------------------------------------------------------------------------
5 Netscape.ca - Homepage Rotational Banners & Text links
- ---------------------------------------------------------------------------------------------------
6 Netscape.ca - Smart Update Rotational Banners
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
AOL.ca Promotions [* * *] Impressions
- ---------------------------------------------------------------------------------------------------
1 AOL.ca - Homepage: Branded Button - Permanent Placement
Permanent Placement
- ---------------------------------------------------------------------------------------------------
2 AOL.ca/Onvia - Co-branded Small Business Onvia creating separate linking URL for
Channel - AOL.ca members that leads directly to
Oniva's Canadian content. This will be
linked to from AOL.ca homepage and
provide Onvia with permanent, integrated
placement.
- ---------------------------------------------------------------------------------------------------
</TABLE>
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Tier Exchange. Except for any Promotions identified as permanent
placements (e.g., Anchor Tenancies), Onvia may elect to redistribute
Promotions among the tier levels listed herein in accordance with the
procedures set forth herein and AOL's then-current guidelines for re-
allocating promotions. The exchange value of a new Promotion (with respect
to the number of Impressions received by Onvia for such new Promotion)
shall be based upon AOL's then current rate card rate for such new
Promotion in comparison to AOL's then-current rate card rate for the
replaced Promotion. All redistribution of Promotions shall be subject to
availability (including without limitation, availability limited by AOL
exclusivity and other preferential commitments) as reasonably determined by
AOL. Unless AOL otherwise consents in writing, in no event may Onvia: (i)
exchange Level 2, Level 3, Level 4 or Level 5 Impressions for Level 1 or
Level 6 Impressions; (ii) exchange Impressions within the AOL Canada
Carriage for other Impressions, or vice versa; or (iii) exchange Integrated
Impressions for other Impressions, or vice versa. Impressions may be
exchanged in blocks of a minimum of [* * *] Impressions. All exchanges of
Promotions and Impressions shall be permitted only for Promotions or
Impressions within the same AOL property (e.g., exchanges of Promotions
within the AOL Service may be made only for other Promotions within the AOL
Service). Requests by Advertiser to redistribute Impressions may be placed
no more frequently than twice per quarter, unless AOL otherwise agrees in
writing. No such request may be made until more than forty five (45) days
have elapsed since the commercial launch of the Co-Branded Site in
accordance with Section 2.1. For any reallocation of Impressions between
or among Levels which Onvia chooses to make pursuant hereto, Onvia agrees
and acknowledges that the reallocated Impressions may be delivered
differently than as originally described herein.
II. During the Term, subject to the terms and conditions hereof, Onvia shall
have the right to use the following Keyword Search Term on the AOL Service
(and the "Go Word" on CompuServe): "Onvia", linking to the Co-Branded Site.
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EXHIBIT A-1
Products, Services, Programming, Applications and Integration Plan
------------------------------------------------------------------
A. Programming. Onvia shall deliver, update on a regular and consistent basis
(e.g., at least twice per day), and keep accurate and reasonably
competitive, the following products, services, programming and other
Content (the "Programming"), for use in the Co-Branded Site, or, upon AOL's
reasonable request, for promotion (e.g., promotions of special offers (as
described in Section 2.7) from time to time as determined by AOL) in whole
or in part, in the AOL Network (including without limitation in the B2B
Area), as determined by AOL in its reasonable discretion (except to the
extent otherwise set forth herein):
1. Tools. The best-of-breed (i) AOL Buying Directory, and (ii) RFQ/RFI
Promotional Area (including the RFQ Services and RFI Services);
2. RFQ Service. a comprehensive offering of RFQ Service products,
services, programming and other Content, including the following:
Seller Activity, Seller Inbox Description, How to become a Seller, How
the system works, Buyer Activity, View Buyer Inbox, Submit Quote
Request, Billing Information, Shipping Information, Order Tracking,
View Past Orders;
3. RFI Service. a comprehensive offering of RFI Service products,
services, programming and other Content, including the following:
Seller Activity, Seller Inbox Description, How to become a Seller, How
the system works, Buyer Activity, View Buyer Inbox, Submit Quote
Request, Billing Information, Order Tracking, View Past Orders;
4. Other B2B Products and Services. a comprehensive offering of additional
small business or business-to-business targeted products, services,
programming and other Content, including the following: The Onvia
Community, Success Toolkit, Road To Success, Expert Advice, Forms,
Worksheets, & How-To's, Networking, Finance, Marketing, Management,
Human Resources, Office Technology, Legal, Training, Databank, Links,
Databases, Cover Story, Charting small-business success in the new
economy, Breaking News, Up-to-the-minute reporting of major business
events, SOHO Corner, Small Business Today, Washington Wire, Quick
Clicks, and any other products and services offered on the Standard
Site as reasonably requested by AOL from time to time; and
5. AOL Buying Directory Listings. the following additional products,
services, programming and other Content with respect to the AOL Buying
Directory: Access to Onvia's approximately 25,000 business products,
including computer hardware, software, office supplies, business
machines, and best in class business services.
B. The AOL Buying Directory. The AOL Buying Directory (including without
limitation, the category page, any sub-category pages, any results pages,
and any pages related thereto) shall reside within the AOL Network
(including without limitation in the B2B Area), except as otherwise
expressly set forth herein, and not in the Co-Branded Site. Onvia shall
use commercially reasonable efforts to build the AOL Buying Directory
within ninety (90) days from and after the execution hereof (and in no
event shall such period exceed one hundred twenty (120) days). Until the
AOL Buying Directory has been completed and is operational, including but
not limited to the integration of AOL's third party merchant partners
according to the schedule set forth herein, AOL may elect to link to the
Co-Branded Site Buying Directory (or, if the Co-Branded Site Buying
Directory is not completed and operational in accordance with the terms
hereof, to the corresponding buying directory on the Standard Site, which
shall appear to AOL Users with the branded headers and footers described in
Section 2.1 hereof). Onvia shall program the AOL Buying Directory such
that, if a user of the AOL Buying Directory clicks on an AOL merchant
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partner's result on a search results page, such user shall be linked
directly to such AOL merchant partner's Interactive Site and the relevant
product detail page therein. The Parties expressly acknowledge and agree
that, as set forth in further detail in Section 6.4 (and subject to Onvia's
ownership rights expressly set forth in such Section 6.4), as between AOL
and Onvia, AOL owns and controls the AOL Network (and all portions thereof,
including without limitation the areas on which the AOL Buying Directory
and the AOL Aggregated RFQ Area reside), and AOL shall have editorial
discretion over the content on the AOL Buying Directory (including without
limitation, the category page, any sub-category pages and any results
pages) and shall own the advertising inventory therein.
1. Clickstream and Placement. AOL and Onvia further agree that a
`clickstream' path to access the AOL Buying Directory or the AOL
Aggregated RFQ Area shall be as set forth in Section 6.4 hereof.
2. Ingredient Branding. The AOL Buying Directory shall be branded as AOL
determines in its reasonable discretion (but may only include
secondary "ingredient branding" of Onvia, which such secondary
attribution may be significantly less prominent than AOL's primary
branding (e.g. "AOL's Buying Directory -- powered by Onvia.com"),
e.g., in a relative level of prominence similar to PersonaLogic's
ingredient branding AOL Auto Center New Car Guide area or AOL Cats for
Kids areas as of the Effective Date, as available at:
http://www021.personalogic.aol.com/pl/system/pl.qanda?pl_sid=c46q
4sgv-1l31mwx-5480k&info=aol%2CSILVER%2Cautocenter&product=cars%
2Caol%2Cautocenter
or
http://www025.personalogic.aol.com/pl/system/pl.qanda?pl_sid=c46q
6gv0-1l31mwy-60xlq&info=aol%2CSILVER%2Ckids&product=cats%2Caol%
2Ckids
respectively (and as also shown on the following pages).
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[NOTE: replace this page with print-out of following site]
http://www021.personalogic.aol.com/pl/system/pl.qanda?pl_sid=c46q4sgv-1l31mwx-
5480k&info=aol%2CSILVER%2Cautocenter&product=cars%2Caol%2Cautocenter
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[NOTE: replace this page with print-out of following site]
http://www025.personalogic.aol.com/pl/system/pl.qanda?pl_sid=c46q6gv0-1l31mwy-
60xlq&info=aol%2CSILVER%2Ckids&product=cats%2Caol%2Ckids
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EXHIBIT B
Definitions
The following definitions will apply to this Agreement:
Additional Onvia Channel. Any other distribution channel (e.g., an Interactive
Service other than AOL) through which Onvia makes available an offering
comparable in nature to the Co-Branded Site.
Advertising Revenues. Aggregate amounts collected by AOL or its agents, as the
case may be, arising from the license or sale of Advertisements that appear
within the Co-Branded Site Advertising Inventory in accordance with Section 2.9
of this Agreement, less AOL's Advertising Sales Commissions. Advertising
Revenues do not include amounts arising from Advertisements on any screens or
forms preceding, framing or otherwise directly associated with the Co-Branded
Site, which such screens and forms are owned and controlled exclusively by AOL.
Advertising Sales Commission. (i) Actual amounts paid as commission to third
party agencies by either buyer or seller in connection with sale of the
Advertisement or (ii) [* * *], in the event the Party has sold the Advertisement
directly and will not be deducting any third party agency commissions.
Advertisements. (a) Any advertisements, links, pointers, sponsorships, buttons,
banners, navigation, or any other placements or promotions; or (b) any other
services or rights to the extent generally recognized and used as a medium for
advertisements (including without limitation `affiliate programs' or referral
sales), in each case, whether for a fixed placement fee or a bounty based on
sales.
AOL Aggregated RFQ Areas. As defined in Section 6.5.
AOL Buying Directory. As defined in Section 6.4.
AOL Canada. The standard AOL Canada branded Canadian version of the AOL
Service, which is optimized for narrow-band distribution, specifically excluding
(a) AOL.com, Netcenter or any other AOL Interactive Site, (b) the America Online
brand service and the international versions of the America Online service
(other than the Canadian version thereof) (e.g., AOL Japan), (c) the
CompuServe(R) brand service and any other CompuServe products or services (d)
"Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital
City," "NetMail(TM)," "Electra," "Thrive," "Real Fans", "Love@AOL",
"Entertainment Asylum," "AOL Hometown," "My News" or any similar independent
product, service or property which may be offered by, through or with the
Canadian version of the America Online(R) brand service, (e) any programming or
Content area offered by or through the Canadian version of the America Online(R)
brand service over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through the
Canadian version of the America Online(R) brand service, and (g) any other
version of an America Online service which is materially different from the
standard narrow-band Canadian version of the America Online(R) brand service, by
virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded version of the service or any
version distributed through any broadband distribution platform or through any
platform or device other than a desktop personal computer, provided, however,
that Onvia's rights herein, if any, in relation to any property, feature,
product or service which AOL or its affiliates may acquire subsequent to the
Effective Date and which then become part of AOL Canada, will be subject to
preexisting agreements to which AOL or any of its affiliates is bound as a
result of such acquisition
AOL Interactive Site. Any Interactive Site which is managed, maintained, owned
or controlled by AOL or its agents.
AOL Look and Feel. The elements of graphics, design, organization,
presentation, layout, user interface, navigation and stylistic convention
(including the digital implementations thereof) which are generally associated
with AOL Interactive Sites.
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AOL Member. Any authorized user of the AOL Service or CompuServe, including any
sub-accounts using the AOL Service under an authorized master account.
AOL Network. (i) The AOL Service, (ii) AOL.com, (iii) CompuServe, (iv) Digital
City, (v) Netcenter, (vi) the B2B Area, (vii) AOL Canada, and (viii) any other
product or service owned, operated, distributed or authorized to be distributed
by or through AOL or its affiliates worldwide (and including those properties
excluded from the definitions of the AOL Service or AOL.com), and including the
AOL Buying Directory and the AOL Aggregated RFQ Area (including the RFQ/RFI
Promotional Area therein), but excluding the Co-Branded Site (including the Co-
Branded Site Buying Directory). It is understood and agreed that the rights of
Onvia relate only to the AOL properties to the extent expressly set forth herein
and not generally to the AOL Network.
AOL Purchaser. Any person or entity who enters the Co-Branded Site from the AOL
Network including, without limitation, from any third party area therein (to the
extent entry from such third party area is traceable through both Parties'
commercially reasonable efforts), and generates Transaction Margins (regardless
of whether such person or entity provides an e-mail address during registration
or entrance to the Co-Branded Site which includes a domain other than an
"AOL.com" domain), and provided that any person or entity who has previously
satisfied the definition of AOL Purchaser will remain an AOL Purchaser, and any
subsequent purchases by such person or entity (e.g., as a result of e-mail
solicitations or any off-line means for receiving orders requiring purchasers to
reference a specific promotional identifier or tracking code) will also give
rise to Transaction Margins hereunder (and will not be conditioned on the person
or entity's satisfaction of clauses (i) or (ii) above).
AOL Service. The standard narrow-band U.S. version of the America Online brand
service, specifically excluding (a) AOL.com, Netcenter or any other AOL
Interactive Site, (b) the international versions of an America Online service
(e.g., AOL Japan), (c) the CompuServe(R) brand service and any other CompuServe
products or services (d) "Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant
Messenger(TM)," "Digital City," "NetMail(TM)," "Electra", "Thrive", "Real Fans",
"Love@AOL", "Entertainment Asylum," "AOL Hometown," "My News" or any similar
independent product, service or property which may be offered by, through or
with the U.S. version of the America Online brand service, (e) any programming
or Content area offered by or through the U.S. version of the America Online
brand service over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through the
U.S. version of the America Online brand service, and (g) any other version of
an America Online service which is materially different from the standard
narrow-band U.S. version of the America Online brand service, by virtue of its
branding, distribution, functionality, Content or services, including, without
limitation, any co-branded version of the service or any version distributed
through any broadband distribution platform or through any platform or device
other than a desktop personal computer; provided, however, that Onvia's rights
herein, if any, in relation to any property, feature, product or service which
AOL or its affiliates may acquire subsequent to the Effective Date and which
then become part of the AOL Service, will be subject to preexisting agreements
to which AOL or any of its affiliates is bound as a result of such acquisition.
AOL User. Any user of the AOL Service, AOL.com, CompuServe, Digital City,
Netcenter, or the AOL Network.
AOL.com. AOL's primary Internet-based AOL Interactive Site marketed under the
"AOL.COM(TM)" brand, specifically excluding (a) the AOL Service, (b) Netcenter,
(c) any international versions of such site, (d) "ICQ," "AOL NetFind(TM)," "AOL
Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My News" or any similar
independent product or service offered by or through such site or any other AOL
Interactive Site, (e) any programming or Content area offered by or through such
site over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any programming or Content area offered by or through such
site which was operated, maintained or controlled by the former AOL Studios
division (e.g., Electra), (g) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by
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or through such site or any other AOL Interactive Site, and (h) any other
version of an AOL Interactive Site which is materially different from AOL's
primary Internet-based Interactive Site marketed under the "AOL.COM(TM)" brand,
by virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions or any version
distributed through any broadband distribution platform or through any platform
or device other than a desktop personal computer; provided, however, that
Onvia's rights herein, if any, in relation to any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the Effective Date
and which then become part of AOL.com, will be subject to preexisting agreements
to which AOL or any of its affiliates is bound as a result of such acquisition.
B2B Area. The targeted, special purpose, business-to-business area, owned and
controlled by AOL (which may be linked to from other areas of the AOL Network in
AOL's sole discretion), and which is the area expected to initially be a sub-
channel within the Small Business channel of Netcenter (and, at a later point,
possibly may, at AOL's option, form the entirety of the content of the Small
Business channel or be made into a Netcenter channel separate from the Small
Business channel, or may be an independently [* * *] area). The term "B2B Area"
specifically excludes: (a) the AOL Service, (b) other areas within Netcenter,
(c) any international versions of such site, (d) "ICQ," "AOL NetFind(TM)," "AOL
Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My News" or any similar
independent product or service offered by or through such site or any other AOL
Interactive Site, (e) any programming or Content area offered by or through such
site over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any programming or Content area offered by or through such
site which was operated, maintained or controlled by the former AOL Studios
division (e.g., Electra), (g) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through such
site or any other AOL Interactive Site, and (h) any other version of an AOL
Interactive Site which is materially different from AOL's primary Internet-based
Interactive Site marketed under the "AOL.COM(TM)" brand, by virtue of its
branding, distribution, functionality, Content or services, including, without
limitation, any co-branded versions or any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer; provided, however, that Onvia's rights herein, if
any, in relation to any property, feature, product or service which AOL or its
affiliates may acquire subsequent to the Effective Date and which then become
part of the B2B Area, will be subject to preexisting agreements to which AOL or
any of its affiliates is bound as a result of such acquisition.
Co-Branded Site. The specific customized area or web site to be promoted and
distributed by AOL hereunder through which Onvia will market and complete
transactions regarding its Products or services, as more fully described in
Section 2.
Co-Branded Site Advertising Inventory. Traditional advertising space
(including standard banners, buttons, text links, pointers, and sponsorships) in
the Co-Branded Site (including in the Co-Branded Site Buying Directory). Co-
Branded Site Advertising Inventory expressly excludes (i) any fully integrated
promotions (e.g., not banners or buttons), and (ii) any promotions for Onvia's
merchant partners which link to other areas within the Co-Branded Site (rather
than to a third party site) (e.g., where Onvia grants "premiere" status to
certain merchants). Co-Branded Site Advertising Inventory also shall be deemed
to exclude any and all advertising inventory on the AOL Network (which such
inventory is owned by AOL), including without limitation the B2B Area, AOL
Buying Directory (including the category pages, subcategory pages, and results
pages therein), and the AOL Aggregated RFQ Area (including the RFQ/RFI
Promotional Area).
Co-Branded Site Buying Directory. As defined in Section 6.4.
Change of Control. (a) The consummation of a reorganization, merger,
consolidation, sale or other disposition of substantially all of the assets of a
party (other than for the sole purpose of changing the party's jurisdiction of
incorporation) or (b) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1933, as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i)
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the then outstanding shares of common stock of such party; or (ii) the combined
voting power of the then outstanding voting securities of such party entitled to
vote generally in the election of directors.
CompuServe. The standard, narrow-band U.S. version of the CompuServe brand
service, specifically excluding (a) any international versions of such service,
(b) any web-based service including "compuserve.com", "cserve.com" and "cs.com",
or any similar product or service offered by or through the U.S. version of the
CompuServe brand service, (c) Content areas owned, maintained or controlled by
CompuServe affiliates or any similar "sub-service," (d) any programming or
Content area offered by or through the U.S. version of the CompuServe brand
service over which CompuServe does not exercise complete or substantially
complete operational control (e.g., third-party Content areas), (e) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content and (f) any co-branded or private label branded version of the U.S.
version of the CompuServe brand service, and (g) any version of the U.S. version
of the CompuServe brand service which offers Content, distribution, services
and/or functionality materially different from the Content, distribution,
services and/or functionality associated with the standard, narrow-band U.S.
version of the CompuServe brand service, including, without limitation, any
version of such service distributed through any platform or device other than a
desktop personal computer; provided, however, that Onvia's rights herein, if
any, in relation to any property, feature, product or service which AOL or its
affiliates may acquire subsequent to the Effective Date and which then become
part of CompuServe, will be subject to preexisting agreements to which AOL or
any of its affiliates is bound as a result of such acquisition.
Confidential Information. Any information relating to or disclosed in the
course of the Agreement, which is or should be reasonably understood to be
confidential or proprietary to the disclosing Party, including, but not limited
to, the material terms of this Agreement, information about AOL Members, AOL
Users, AOL Purchasers and Onvia users, technical processes and formulas, source
codes, product designs, sales, cost and other unpublished financial information,
product and business plans, projections, and marketing data. "Confidential
Information" will not include information (a) already lawfully known to or
independently developed by the receiving Party, (b) disclosed in published
materials consistent with this Agreement, (c) generally known to the public, or
(d) lawfully obtained from any third party.
Content. Text, images, video, audio (including, without limitation, music used
in synchronism or timed relation with visual displays) and other data, products,
services, advertisements, promotions, URLs, links, pointers and software,
including any modifications, upgrades, updates, enhancements and related
documentation.
Digital City. The standard, narrow-band U.S. version of Digital City's local
content offerings marketed under the Digital City brand name, specifically
excluding (a) the AOL Service, AOL.com, Netcenter, or any other AOL Interactive
Site, (b) any international versions of such local content offerings, (c) the
CompuServe(R) brand service and any other CompuServe products or services (d)
"Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital
City," "NetMail(TM)," "Electra", "Thrive", "Real Fans", "Love@AOL",
"Entertainment Asylum," "AOL Hometown," "My News" or any similar independent
product, service or property which may be offered by, through or with the
standard narrow band version of Digital City's local content offerings, (e) any
programming or Content area offered by or through such local content offerings
over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through such local content
offerings, (g) any other version of a Digital City local content offering which
is materially different from the narrow-band U.S. version of Digital City's
local content offerings marketed under the Digital City brand name, by virtue of
its branding, distribution, functionality, Content or services, including,
without limitation, any co-branded version of the offerings or any version
distributed through any broadband distribution platform or through any platform
or device other than a desktop personal computer, and (i) Digital City- branded
offerings in any local area where such offerings are not owned or operationally
controlled by America Online, Inc. or DCI (e.g., Chicago, Orlando, South
Florida, and Hampton Roads); provided, however, that Onvia's rights herein, if
any, in relation to any property, feature, product or service which AOL or its
affiliates may acquire subsequent to the Effective Date and
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which then become part of Digital City, will be subject to preexisting
agreements to which AOL or any of its affiliates is bound as a result of such
acquisition.
Impression. User exposure to the applicable Promotion, as such exposure may be
reasonably determined and measured by AOL in accordance with its standard
methodologies and protocols.
Interactive Service. An entity, other than Onvia (subject to the product and
services restrictions in this Agreement), which is or offers one or more of the
following: (i) online or Internet connectivity services (e.g., an Internet
service provider ("ISP")); (ii) any Portal; and (iii) communications software
capable of serving as the principal means through which a user creates, sends
and receives electronic mail or real time online messages; provided, however,
that an entity otherwise satisfying one or more of these criteria shall not be
considered an Interactive Service if and to the extent that major divisions or
subsidiaries of such entity offer products and services which, if offered by an
unrelated entity, would not make such entity an Interactive Service (e.g., an
entity which offers an ISP service or which serves as a Portal would not be
considered an Interactive Service if and only to the extent that separate major
divisions or subsidiaries thereof offer products and services unrelated to the
ISP service (e.g., such that the Co-Branded Site could promote laser printers
offered by a separate division or subsidiary of such ISP or Portal, but not the
ISP or Portal services themselves)), provided, however, that any entity which is
primarily an Interactive Service (e.g., a reasonably significant portion of its
products or services satisfy one or more of the three criteria above) shall not
be excluded from the definition of Interactive Service regardless of the product
or service in question (e.g., even laser printers from Yahoo! would fall outside
the scope of this exception, and may not be promoted in the Co-Branded Site).
Interactive Site. Any interactive site or area, including, by way of example and
without limitation, (i) a site on the World Wide Web portion of the Internet or
(ii) a channel or area delivered through a "push" product such as the Pointcast
Network or interactive environment such as Microsoft's Active Desktop.
Keyword Search Terms. (a) The Keyword online search terms made available on the
AOL Service, combining AOL's Keyword online search modifier with a term or
phrase specifically related to Onvia (and determined in accordance with the
terms of this Agreement), and (b) the Go Word online search terms made available
on CompuServe, combining CompuServe's Go Word online search modifier with a term
or phrase specifically related to Onvia and determined in accordance with the
terms of this Agreement).
Licensed Content. All Content offered through the Co-Branded Site, plus the AOL
Buying Directory, the RFQ/RFI Promotional Areas (including the the RFQ Services
and the RFI Services), and the Programming, pursuant to this Agreement or
otherwise provided by Onvia or its agents in connection herewith (e.g., offline
or online promotional Content, Promotions, AOL "slideshows" , etc.), including
in each case, any modifications, upgrades, updates, enhancements, and related
documentation.
Netcenter. Netscape Communications Corporation's primary Internet-based
Interactive Site marketed under the "Netscape Netcenter" brand, specifically
excluding (a) the AOL Service, (b) AOL.com, (c) any international versions of
such site, (d) "ICQ," "AOL Netfind," "AOL Instant Messenger," "NetMail," "AOL
Hometown," "My News," "Digital City," or any similar independent product or
service offered by or through such site or any other AOL Interactive Site, (e)
any programming or Content area offered by or through such site over which AOL
does not exercise complete operational control (including, without limitation,
Content areas controlled by other parties and member-created Content areas), (f)
any programming or Content area offered by or through the U.S. version of the
America Online brand service which was operated, maintained or controlled by the
former AOL Studios division (e.g., Electra), (g) any yellow pages, white pages,
classifieds or other search, directory or review services or Content offered by
or through such site or any other AOL Interactive Site, and (h) any other
version of an AOL or Netscape Communications Corporation Interactive Site which
is materially different from Netscape Communications Corporation's primary
Internet-based Interactive Site marketed under the "Netscape Netcenter" brand,
by virtue of its branding, distribution, functionality, Content or services,
including, without limitation, any co-branded versions and any version
distributed through any broadband distribution platform or through any platform
or device other than a desktop personal computer (e.g. Custom NetCenters built
specifically for
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third parties); provided, however, that Onvia's rights herein,
if any, in relation to any property, feature, product or service which AOL or
its affiliates may acquire subsequent to the Effective Date and which then
become part of Netcenter, will be subject to preexisting agreements to which AOL
or any of its affiliates is bound as a result of such acquisition.
Portal. Any interactive site or service, other than Onvia (subject to the
product and services restrictions in this Agreement), providing links to or
aggregation of (e.g., a portal such as Yahoo! or MSN.com), or search or
navigation of (e.g., a search engine such as Excite or Lycos), interactive sites
or services, in each case consolidating a broad selection of aggregated third
party interactive content or marketing a broad selection of multiple third party
product lines and/or services across numerous industries (e.g., by way of
example only, a commerce site which sells or promotes books, flowers, candy,
music and t-shirts from various third parties). However, the term "Portal"
shall not include a commerce or content provider, no matter how large, if only
in one vertical industry and market (e.g., by way of example only: (1) a news
content provider, such as Reuters, whose focus is just to provide news reports,
even though such reports may be numerous and far reaching across a variety of
topics (e.g., financial news, technology news, and international news; or (2) an
online bookstore, whose focus is just to sell books, even though such books may
be numerous and far reaching across a variety of topics (e.g., children's books,
reference books, and mystery books)).
Product. Any product, good or service which Onvia (or others acting on its
behalf or as distributors) offers, sells, provides, distributes or licenses to
AOL Users directly or indirectly through (i) the Co-Branded Site (including
through any Interactive Site linked thereto), (ii) any Onvia Interactive Site
(including through any Interactive Site linked thereto), (iii) any other
electronic means directed at AOL Users (e.g., e-mail offers), or (iv) an
"offline" means (e.g., toll-free number) for receiving orders related to
specific offers within the Co-Branded Site or any Onvia Interactive Site
requiring purchasers to reference a specific promotional identifier or tracking
code, including, without limitation, products sold through surcharged downloads
(to the extent expressly permitted hereunder).
Promotions. The promotions described on Exhibit A, any comparable promotions
delivered by AOL in accordance with Section 1.1, and any additional promotions
of the Co-Branded Site provided by AOL (including, without limitation,
additional Keyword Search Terms and other navigational tools).
Remnant Inventory. Advertising inventory which is unsold at the end of the
business day prior to the day on which that inventory will run. If Onvia has
purchased Remnant Inventory, Onvia's creative will be slotted into such unsold
inventory by AOL from time to time in accordance with internal AOL policies.
AOL does not guarantee that Remnant Inventory Impressions will be delivered on
any particular day(s) or that such Impressions will be delivered evenly over the
Term. Further, AOL does not guarantee placement on any particular screen or
group of screens (except that Channel level Remnant Inventory will be run only
within the specified Channel).
RFI Services. As defined in Section 2.2.
RFQ/RFI Promotional Areas. As defined in Section 6.5.
RFQ Services. As defined in Section 2.2.
Run of Service Inventory or ROS. A collection of inventory made up of all areas
of the relevant AOL property or service. If Advertiser has purchased Run of
Service Inventory, AOL will place Advertiser's creative in different locations
throughout the relevant property or service in accordance with AOL internal
policies. Advertiser may not control placement within a Run of Service
Inventory purchase and AOL does not guarantee placement on any particular screen
or group of screens (except that run of channel Inventory will be run only in
the specified channel).
Standard Site. Onvia's generally available web site, currently located at URL
http://www.onvia.com, or any successor thereto or replacement thereof.
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Transaction Margins. Aggregate amounts paid by AOL Purchasers in connection
with the sale, licensing, distribution or provision of any products, including,
in each case, handling, shipping, service charges (except to the extent that
such handling, shipping and service charges reflect Onvia's actual costs), and
excluding, in each case, (a) amounts collected for sales or use taxes or duties,
(b) credits and chargebacks for returned or canceled goods or services, and (c)
cost of goods sold and similar costs or expenses directly related thereto.
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EXHIBIT C
Onvia Cross-Promotion
---------------------
A. Within the Standard Site, Onvia shall include the following (the "AOL
Promos"): a continuous promotional banner, button or text link (with such
banner or button to be at least 90 x 30 pixels or 70 x 70 pixels in size, or
other size if mutually agreed) appearing prominently within any areas
promoting internet access or connectivity products or services , to promote
AOL Internet access or connectivity products or services as AOL may
designate (for example, the America Online brand service, the CompuServe
brand service, etc.) and, at AOL's option, download or order the then-
current version of client software for such products or services. AOL will
provide the creative content to be used in the AOL Promos (including
designation of links from such content to other content pages), subject to
Onvia's reasonable approval, not to be unreasonably withheld or delayed.
Onvia shall use commercially reasonable efforts to post (or update, as the
case may be) the creative content supplied by AOL within the spaces for the
AOL Promos within five days of its receipt of such content from AOL. Without
limiting any other reporting obligations of the Parties contained herein,
Onvia shall use commercially reasonable efforts to provide AOL with monthly
written reports specifying the number of impressions to the pages containing
the AOL Promos during the prior month, and in any event shall provide such
reports no less frequently than quarterly. In the event that AOL elects to
serve the AOL Promos in accordance with this paragraph to the Standard Site
from an ad server controlled by AOL or its agent, Onvia shall take all
reasonable operational steps necessary to facilitate such ad serving
arrangement including, without limitation, inserting HTML code designated by
AOL on the pages of the Standard Site on which the AOL Promos will appear.
In addition, within the Standard Site, Onvia shall provide prominent
promotion for the keywords granted to Onvia hereunder. Onvia may participate
in the standard, generally applicable `Affiliate Program', if any exists
from the corresponding AOL brand. Onvia will need to comply with any general
program guidelines relating to any such Affiliate Program as set forth by
the applicable AOL brand. Information about AOL's generally applicable
Affiliate Program is currently located at:
http://affiliate.aol.com/affiliate/welcome.html. When promoting AOL as
contemplated herein, Onvia will promote AOL as the preferred access provider
through which a user can access the Standard Site, and Onvia shall not
implement or authorize any other promotions on behalf of any third parties
which are inconsistent herewith.
B. In Onvia's television advertisements, radio advertisements of at least 30
seconds in length, print advertisements and outdoor advertisements (e.g.,
buses and billboards), and in any publications, programs, features or other
forms of media over which Onvia exercises at least partial editorial
control, except (1) when promoting a Prohibited Category (as set forth in
Exhibit D) and (2) to the extent otherwise permitted by this Agreement where
Onvia is promoting an Interactive Service other than AOL (which promotions
will not account for more than five percent (5%) of the total advertising
covered by this section), Onvia will include specific references or mentions
(verbally where possible) of the availability of the Co-Branded Site through
the AOL Network, which are at least as prominent as any references that
Onvia makes to the Standard Site (by way of site name, related company name,
URL or otherwise), and will promote AOL as a preferred access provider
content aggregator. Without limiting the generality of the foregoing,
Onvia's listing of the "URL" for the Standard Site (other than any
customized or co-branded sites tailored for use with a third party
Interactive Service) will be accompanied by an equally prominent listing of
the "keyword" term on AOL for the Co-Branded Site. This will be done with
the following treatment: "America Online Keyword: Onvia" or another AOL
approved method.
C. In any area on the Standard Site promoting internet connectivity services
(including without limitation connectivity via ISP or DSL), Onvia will
integrate all of AOL's connectivity services (e.g., AOL TV, AOL Service, and
CompuServe) to an extent no less favorable than that for other providers of
such services on the same site. To the extent that Onvia offers or promotes
any products or services for sale which are similar to any Component
Products (as defined herein), Onvia will use commercially reasonable efforts
to provide equal or greater promotions for such AOL-designated products. In
addition to the above, Onvia will include links to other AOL products or
services from the Standard Site. Moreover, to the extent that Onvia
integrates functionality similar to a Component Product in its Standard
Site, Onvia shall discuss in good faith the possibility of using AOL's
version of such
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Component Product. For purposes of this Agreement, the term "Component
Products" shall mean any of the following products or services: Internet
connectivity (e.g., dial-up or DSL), instant messaging, chat, voice-
activated chat, voice message, IP telephony, e-mail, search engines,
navigation services, homesteading/personal web publishing, calendar
functions, or "You've Got Pictures" or other similar photographic services.
D. The Parties will discuss in good faith the possibility of expanding the
cross-promotional relationships and programs contemplated in this Exhibit C,
on terms to be mutually agreed.
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EXHIBIT D
Description of Products and Other Content
-----------------------------------------
Permitted Categories:
Onvia Products and Content on the Co-Branded Site will include only items
falling within the following categories of small business targeted products,
services, or content available via the Internet, to the extent that such
products, services or content actually are targeted to small business users (the
"Permitted Categories"):
. RFQ Services
. RFI Services
. The Co-Branded Site Buying Directory
. News and advice
Restricted Categories:
If and to the extent that any of the above Permitted Categories include any
products, services or content pertaining to the following categories (as may be
updated by AOL no more than once per quarter during the Term (but any such
additions shall not retroactively affect Onvia's then existing promotions and
services)) (the "Restricted Categories"), then Onvia shall ensure that such
products, services or content pertaining to the Restricted Categories shall not
be permitted to appear within the Promo Content or the first page of the Co-
Branded Site directly linked to from the AOL Network (i.e., not within one
"click" of the AOL Network):
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
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Prohibited Categories:
Notwithstanding anything to the contrary herein, products, services and content
pertaining to the following categories (as may be updated by AOL no more than
once per quarter during the Term (but any such additions shall not retroactively
affect Onvia's then existing promotions and services)) shall be excluded from
the Promo Content and all pages of the Co-Branded Site:
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]
. [* * *]; provided that, for a period of 120 days from and after the Effective
Date, the Parties shall discuss in good faith their respective plans for
barter activities.
Additional Functionality:
Onvia may add individual new products, services and content at any time without
AOL's prior written consent to the extent that such products, services and
content generally fall within the categories listed in and are consistent with
the terms and scope of this Exhibit D. If Onvia wants to add products, services
or content which do not fall within the categories listed in this Exhibit D, the
Parties will, on a case-by-case basis, work together in good faith to discuss
the terms and conditions, if any, upon which such products, services or content
may be permitted, if and to the extent mutually agreed.
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EXHIBIT E
Operations
----------
1. General. Onvia will use commercially reasonable best efforts to ensure that
the Co-Branded Site (including the Products and other Content contained therein)
is in the top three (3) in the business-to-business industry, as determined by
each of the following methods: (a) based on a cross-section of third-party
reviewers who are recognized authorities in such industry and (b) with respect
to all material quality averages or standards in such industry, including each
of the following: (i) pricing of Products, (ii) scope and selection of Products
(except to the extent that Onvia is limited to offering certain Products
pursuant to the terms of this Agreement), (iii) quality of Products, (iv)
customer service and fulfillment associated with the marketing and sale of
Products and (v) ease of use. In addition, the Co-Branded Site will, with
respect to each of the measures listed above, be competitive in all respects
with that which is offered by any Onvia competitors.
2. Co-Branded Site Infrastructure. Onvia will be responsible for all
communications, hosting and connectivity costs and expenses associated with the
Co-Branded Site. Onvia will provide all hardware, software, telecommunications
lines and other infrastructure necessary to meet traffic demands on the Co-
Branded Site from the AOL Network. Onvia will design and implement the network
between the AOL Service and Co-Branded Site such that (i) no single component
failure will have a materially adverse impact on AOL Members seeking to reach
the Co-Branded Site from the AOL Network and (ii) no single line under material
control by Onvia will run at more than 70% average utilization for a 5-minute
peak in a daily period. In this regard, Onvia will provide AOL, upon request,
with a detailed network diagram regarding the architecture and network
infrastructure supporting the Co-Branded Site. In the event that Onvia elects
to create a custom version of the Co-Branded Site in order to comply with the
terms of this Agreement, Onvia will bear responsibility for all aspects of the
implementation, management and cost of such customized site.
3. Optimization; Speed. Onvia will use commercially reasonable efforts to
ensure that: (a) the functionality and features within the Co-Branded Site are
optimized for the client software then in use by AOL Members; and (b) the Co-
Branded Site is designed and populated in a manner that minimizes delays when
AOL Users attempt to access such site. At a minimum, Onvia will ensure that the
Co-Branded Site's data transfers initiate within fewer than fifteen (15) seconds
on average on a typical day. Prior to commercial launch of any material
promotions described herein, Onvia will permit AOL to conduct performance and
load testing of the Co-Branded Site (in person or through remote
communications), with such commercial launch not to commence until such time as
AOL is reasonably satisfied with the results of any such testing.
4. User Interface. Onvia will maintain a graphical user interface within the
Co-Branded Site that is reasonably competitive in all material respects with
interfaces of other similar sites based on similar form technology. AOL
reserves the right to review and reasonably approve the user interface and site
design prior to launch of the Promotions and to conduct focus group testing to
assess compliance with respect to such consultation and with respect to Onvia's
compliance with the preceding sentence.
5. Technical Problems. Onvia agrees to use commercially reasonable efforts to
address material technical problems (over which Onvia exercises control)
affecting use by AOL Users of the Co-Branded Site (a "Onvia Technical Problem")
promptly following notice thereof. In the event that Onvia is unable to
promptly resolve an Onvia Technical Problem following notice thereof from AOL
(including, without limitation, infrastructure deficiencies producing user
delays), AOL will have the right to regulate the promotions it provides to Onvia
hereunder until such time as Onvia corrects the Onvia Technical Problem at
issue.
6. Monitoring. Onvia will ensure that the performance and availability of the
Co-Branded Site is monitored on a continuous basis. Onvia will provide AOL with
contact information (including e-mail, phone, pager and fax information, as
applicable, for both during and after business hours) for Onvia's principal
business and technical representatives, for use in cases when issues or problems
arise with respect to the Co-Branded Site.
7. Telecommunications. Where applicable Onvia will utilize encryption
methodology to secure data communications between the Parties' data centers.
The network between the Parties will be configured such that no single component
failure will significantly impact AOL Users. The network will be sized such
that no single line over which the Onvia has material control runs at more than
70% average utilization for a 5-minute peak in a daily period.
8. Security. Onvia will utilize Internet standard encryption technologies
(e.g., Secure Socket Layer - SSL) to provide a secure environment for conducting
transactions and/or transferring private member information (e.g. credit card
numbers, banking/financial information, and member address information) to and
from the Co-Branded Site. Onvia will facilitate periodic reviews of the Co-
Branded Site by AOL in order to evaluate the security risks of such site. Onvia
will promptly remedy any security risks or breaches of security as may be
identified by AOL's Operations Security team.
9. Technical Performance.
i. Onvia will design the Co-Branded Site to support the AOL-client
embedded versions of the Microsoft Internet Explorer 3.XX and 4.XX
browsers (Windows and Macintosh) (and above) and the Netscape Browser
4.XX (and above) and make commercially reasonable efforts to support
all other AOL browsers listed at: "http://webmaster.info.aol.com."
ii. To the extent Onvia creates customized pages on the Co-Branded Site
for AOL Members, Onvia will develop and employ a methodology to detect
AOL Members (e.g. examine the HTTP User-Agent field in order to
identify the "AOL Member-Agents" listed at: "http://webmaster.
info.aol.com)."
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iii. Onvia will periodically review the technical information made
available by AOL at http://webmaster.info.aol.com.
iv. Onvia will design its site to support HTTP 1.0 or later protocol as
defined in RFC 1945 and to adhere to AOL's parameters for refreshing
or preventing the caching of information in AOL's proxy system as
outlined in the document provided at the following URL:
http://webmaster.info.aol.com. Onvia is responsible for the
manipulation of these parameters in web-based objects so as to allow
them to be cached or not cached as outlined in RFC 1945.
v. Prior to releasing material, new functionality or features through
the Co-Branded Site ("New Functionality"), Onvia will use
commercially reasonable efforts to (i) test the New Functionality to
confirm its compatibility with AOL Service browser/client software
and (ii) provide AOL with written notice of the New Functionality so
that AOL can perform tests of the New Functionality to confirm its
compatibility with the AOL Service client software; provided that if
Onvia's notice specifies a commercially reasonable amount of time in
which to perform such tests and AOL fails to do so within the
specified time, then Onvia shall have the right to release the New
Functionality provided that it is in compliance with the other
requirements hereof. Should any new material, new functionality or
features through the Co-Branded Site be released without notification
to AOL, AOL will not be responsible for any adverse member experience
until such time that compatibility tests can be performed and the new
material, functionality or features is qualified for the AOL Service.
10. AOL Internet Services Onvia Support. AOL will provide Onvia with access to
the standard online resources, standards and guidelines documentation, technical
phone support, monitoring and after-hours assistance that AOL makes generally
available to similarly situated web-based partners. AOL support will not, in
any case, be involved with content creation on behalf of Onvia or support for
any technologies, databases, software or other applications which are not
supported by AOL or are related to any Onvia area other than the Co-Branded
Site. Support to be provided by AOL is contingent on Onvia providing to AOL
demo account information (where applicable), a detailed description of the Co-
Branded Site's software, hardware and network architecture and access to the Co-
Branded Site for purposes of such performance and load testing as AOL elects to
conduct.
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EXHIBIT F
Standard Online Commerce Terms & Conditions
-------------------------------------------
1. AOL Network Distribution. Onvia will not authorize or permit any third
party to distribute or promote the Products or any Onvia Interactive Site other
than the Co-Branded Site through the AOL Network absent AOL's prior written
approval. The Promotions and any other promotions or advertisements purchased
from or provided by AOL will link only to the Co-Branded Site, will be used by
Onvia solely for its own benefit and will not be resold, traded, exchanged,
bartered, brokered or otherwise offered to any third party.
2. Provision of Other Content. In the event that AOL notifies Onvia that (i) as
reasonably determined by AOL, any Content within the Co-Branded Site violates
AOL's then-standard Terms of Service (as set forth on the America Online brand
service at Keyword term "TOS"), for the AOL Service or any other AOL property
through which the Co-Branded Site is promoted, the terms of this Agreement or
any other standard, written AOL policy or (ii) AOL reasonably objects to the
inclusion of any Content within the Co-Branded Site (provided, however, that any
specific items of Content (e.g., Products) which are expressly identified in
this Agreement as provided by Onvia (e.g., as listed in Exhibits A-1 and D) may
not be objected to by AOL pursuant to this section if such Content otherwise
complies with the terms of this Agreement), then Onvia will take commercially
reasonable steps to block access by AOL Users to such Content using Onvia's
then-available technology. In the event that Onvia cannot, through its
commercially reasonable efforts, block access by AOL Users to the Content in
question, then Onvia will provide AOL prompt written notice of such fact. AOL
may then, at its option, restrict access from the AOL Network to the Content in
question using technology available to AOL. Onvia will use commercially
reasonable best efforts to cooperate with AOL's reasonable requests to the
extent AOL elects to implement any such access restrictions.
3. Contests. Onvia will take all steps necessary to ensure that any contest,
sweepstakes or similar promotion conducted or promoted through the Co-Branded
Site (a "Contest") complies with all applicable federal, state and local laws
and regulations.
4. Navigation. AOL will be entitled to establish navigational icons, links and
pointers connecting the Co-Branded Site (or portions thereof) with other content
areas on or outside of the AOL Network (e.g., as set forth in Section 2.1 of the
main body of this Agreement). Additionally, in cases where an AOL User performs
a search for Onvia through any search or navigational tool or mechanism that is
accessible or available through the AOL Network (e.g., Promotions, Keyword
Search Terms, or any other promotions or navigational tools), AOL shall have the
right to direct such AOL User to the Co-Branded Site, or the Standard Site
determined by AOL in its reasonable discretion.
5. Disclaimers. Upon AOL's request, Onvia agrees to include within the Co-
Branded Site a product disclaimer (the specific form and substance to be
mutually agreed upon by the Parties) indicating that transactions are solely
between Onvia and AOL Users purchasing Products from Onvia.
6. AOL Look and Feel. Onvia acknowledges and agrees that AOL will own all
right, title and interest in and to the elements of graphics, design,
organization, presentation, layout, user interface, navigation and stylistic
convention (including the digital implementations thereof) which are generally
associated with online areas contained within the AOL Network, subject to
Onvia's ownership or other rights in any of Onvia trademarks or copyrighted
material within the Co-Branded Site or the Licensed Content.
7. Management of the Co-Branded Site. Onvia will manage, review, delete, edit,
create, update and otherwise manage all Content available on or through the Co-
Branded Site, in a timely and professional manner and in accordance with the
terms of this Agreement. Onvia will use commercially reasonable best efforts to
ensure that the Co-Branded Site is current, accurate and well-organized at all
times. Onvia warrants that the Products and other Licensed Content : (i) will
not infringe on or violate any copyright, trademark, U.S. patent or any other
third party right, including without limitation, any music performance or other
music-related rights; (ii) will not violate AOL's then-applicable Terms of
Service for the AOL Service and any other AOL property through which the Co-
Branded Site will be promoted or any other standard, written AOL policy which
has been delivered to Onvia; and (iii) will not violate any applicable law or
regulation, including those relating to contests, sweepstakes or similar
promotions. Additionally, Onvia represents and warrants that it owns or has a
valid license to all rights to any Licensed Content used in AOL "slideshow" or
other formats embodying elements such as graphics, animation and sound, free and
clear of all encumbrances and without violating the rights of any other person
or entity. Onvia also warrants that a reasonable basis exists for all Product
performance or comparison claims appearing through the Co-Branded Site. Except
as otherwise set forth in this Agreement, Onvia shall not in any manner,
including, without limitation in any Promotion, the Licensed Content or the
Promotional Materials state or imply that AOL recommends or endorses Onvia or
Onvia's Products (e.g., no statements that Onvia is an "official" or "preferred"
provider of products or services for AOL). AOL will have no obligations with
respect to the Products available on or through the Co-Branded Site, including,
but not limited to, any duty to review or monitor any such Products.
8. Duty to Inform. Onvia will promptly inform AOL of any information related
to the Co-Branded Site which could reasonably lead to a material claim, demand,
or liability of or against AOL and/or its affiliates by any third party.
9. Customer Service. It is the sole responsibility of Onvia to provide
customer service to persons or entities purchasing Products through the Co-
Branded Site or Standard Site ("Customers"). Onvia will bear full responsibility
for all customer service, including without limitation, order processing,
billing, fulfillment, shipment, collection and other customer service associated
with any Products offered, sold or
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licensed through the Co-Branded Site, and AOL will have no obligations
whatsoever with respect thereto. Onvia will receive all emails from Customers
via a computer available to Onvia's customer service staff and generally respond
to such emails within one business day of receipt. Onvia will receive all orders
electronically and generally process all orders within one business day of
receipt, provided Products ordered are not advance order items. Onvia will
ensure that all orders of Products are received, processed, fulfilled and
delivered on a timely and professional basis. Onvia will offer AOL Users who
purchase Products through such Co-Branded Site a satisfaction guarantee. Onvia
will bear all responsibility for compliance with federal, state and local laws
in the event that Products are out of stock or are no longer available at the
time an order is received. Onvia will also comply with the requirements of any
federal, state or local consumer protection or disclosure law. Payment for
Products will be collected by Onvia directly from customers. Onvia's order
fulfillment operation will be subject to AOL's reasonable review.
10. Production Work. In the event that Onvia requests AOL's additional
production assistance (other than as expressly set forth herein) in connection
with (i) ongoing programming and maintenance related to the Co-Branded Site,
(ii) a redesign of or addition to the Co-Branded Site (e.g., a change to an
existing screen format or construction of a new custom form), (iii) production
to modify work performed by a third party provider or (iv) any other type of
production work, Onvia will work with AOL to develop a detailed production plan
for the requested production assistance (the "Production Plan"). Following
receipt of the final Production Plan, AOL will notify Onvia of (i) AOL's
availability to perform the requested production work, (ii) the proposed fee or
fee structure for the requested production and maintenance work and (iii) the
estimated development schedule for such work. To the extent the Parties reach
agreement regarding implementation of the agreed-upon Production Plan, such
agreement will be reflected in a separate work order signed by the Parties. To
the extent Onvia elects to retain a third party provider to perform any such
production work, work produced by such third party provider must generally
conform to AOL's standards & practices (as provided on the America Online brand
service at Keyword term "styleguide"). The specific production resources which
AOL allocates to any production work to be performed on behalf of Onvia will be
as determined by AOL in its sole discretion. With respect to any routine
production, maintenance or related services which AOL reasonably determines are
necessary for AOL to perform in order to support the proper functioning and
integration of the Co-Branded Site ("Routine Services"), Onvia will pay the
then-standard fees charged by AOL for such Routine Services.
11. Overhead Accounts. To the extent AOL has granted Onvia any overhead
accounts on the AOL Service, Onvia will be responsible for the actions taken
under or through its overhead accounts, which actions are subject to AOL's
applicable Terms of Service and for any surcharges, including, without
limitation, all premium charges, transaction charges, and any applicable
communication surcharges incurred by any overhead Account issued to Onvia, but
Onvia will not be liable for charges incurred by any overhead account relating
to AOL's standard monthly usage fees and standard hourly charges, which charges
AOL will bear. Upon the termination of this Agreement, all overhead accounts,
related screen names and any associated usage credits or similar rights, will
automatically terminate. AOL will have no liability for loss of any data or
content related to the proper termination of any overhead account.
12. Navigation Tools. Any Keyword Search Terms to be directed to the Co-
Branded Site shall be (i) subject to availability for use by Onvia and (ii)
limited to the combination of the Keyword search modifier combined with a
registered trademark of Onvia (e.g. "AOL keyword: XYZ Company Name"). AOL
reserves the right to revoke at any time Onvia's use of any Keyword Search Terms
which do not incorporate registered trademarks of Onvia. Onvia acknowledges that
its utilization of a Keyword Search Term will not create in it, nor will it
represent it has, any right, title or interest in or to such Keyword Search
Term, other than the right, title and interest Onvia holds in Onvia's registered
trademark independent of the Keyword Search Term. Without limiting the
generality of the foregoing, Onvia will not: (a) attempt to register or
otherwise obtain trademark or copyright protection in the Keyword Search Term;
or (b) use the Keyword Search Term, except for the purposes expressly required
or permitted under this Agreement. To the extent AOL allows AOL Users to
"bookmark" the URL or other locator for the Co-Branded Site, such bookmarks will
be subject to AOL's control at all times. Upon the termination of this
Agreement, Onvia's rights to any Keyword Search Terms and bookmarking will
terminate.
13. Merchant Certification Program. Onvia will participate in any generally
applicable "Certified Merchant" program operated by AOL or its authorized agents
or contractors. Such program may require merchant participants on an ongoing
basis to meet certain reasonable, generally applicable standards relating to
provision of electronic commerce through the AOL Network (including, as a
minimum, use of 40-bit SSL encryption and if requested by AOL, 128-bit
encryption) and may also require the payment of certain reasonable certification
fees to the applicable entity operating the program. Each Certified Merchant in
good standing will be entitled to place on its affiliated Interactive Site an
AOL designed and approved button promoting the merchant's status as an AOL
Certified Merchant.
14. Reward Programs. On the Co-Branded Site, Onvia shall not offer, provide,
implement or otherwise make available any promotional programs or plans that are
intended to provide customers with rewards or benefits in exchange for, or on
account of, their past or continued loyalty to, or patronage or purchase of, the
products or services of Onvia or any third party (e.g., a promotional program
similar to a "frequent flier" program), unless such promotional program or plan
is provided exclusively through AOL's "AOL Rewards" program, accessible on the
AOL Service at Keyword: "AOL Rewards." Notwithstanding the foregoing, on the Co-
Branded Site Onvia may have its own loyalty program for discounts on products
and services. In such event, Onvia shall use commercially reasonable efforts to
also use AOL's rewards program.
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15. Search Terms. To the extent this Agreement sets forth any mechanism by
which the Co-Branded Site will be promoted in connection with specified search
terms within any AOL product or service, Onvia hereby represents and warrants
that Onvia has all consents, authorizations, approvals, licenses, permits or
other rights necessary for Onvia to use such specified search terms.
Notwithstanding the foregoing, AOL shall have the right to suspend the use of
any search term if AOL has a reasonable belief that continued use may subject
AOL to liability or other adverse consequences.
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EXHIBIT G
Standard Legal Terms & Conditions
---------------------------------
11. Promotional Materials. In addition to the requirements of Section 5.7 of
the main body of this Agreement (relating to Press Releases), each Party will
submit to the other Party, for its prior written approval, which will not be
unreasonably withheld or delayed, any marketing, advertising, or other
promotional materials (excluding Press Releases) related to the Co-Branded Site
and/or referencing the other Party and/or its trade names, trademarks, and
service marks (the "Promotional Materials"); provided, however, that either
Party's use of screen shots of the Co-Branded Site for promotional purposes will
not require the approval of the other Party so long as America Online(R) is
clearly identified as the source of such screen shots; and provided further,
however, that, following the initial public announcement of the business
relationship between the Parties in accordance with the approval and other
requirements contained herein, either Party's subsequent factual reference to
the existence of a business relationship between the Parties in Promotional
Materials, will not require the approval of the other Party. Each Party will
solicit and reasonably consider the views of the other Party in designing and
implementing such Promotional Materials. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the Co-Branded Site and the content contained therein and reused for such
purpose until such approval is withdrawn with reasonable prior notice. In the
event such approval is withdrawn, existing inventories of Promotional Materials
may be depleted.
12. License. Onvia hereby grants AOL a non-exclusive worldwide license to
market, license, distribute, reproduce, display, perform, transmit and promote
(but not to sublicense or reverse engineer any software) the Licensed Content
(or any portion thereof, except the source code of any software) through such
areas or features of the AOL Network as AOL deems appropriate. Onvia
acknowledges and agrees that the foregoing license permits AOL to distribute
portions of the Licensed Content in synchronism or timed relation with visual
displays prepared by Onvia or AOL (e.g., as part of an AOL "slideshow"). In
addition, AOL Users will have the right to access and use the Co-Branded Site.
Onvia reserves any rights not expressly granted to AOL hereunder.
13. Trademark License. In designing and implementing the Materials and subject
to the other provisions contained herein, Onvia will be entitled to use the
following trade names, trademarks, and service marks of AOL: the "America
Online" brand service, "AOL" service/software and AOL's triangle logo; and AOL
and its affiliates will be entitled to use the trade names, trademarks, and
service marks of Onvia for which Onvia holds all rights necessary for use in
connection with this Agreement (collectively, together with the AOL marks listed
above, the "Marks"); provided that each Party: (i) does not create a unitary
composite mark involving a Mark of the other Party without the prior written
approval of such other Party; and (ii) displays symbols and notices clearly and
sufficiently indicating the trademark status and ownership of the other Party's
Marks in accordance with applicable trademark law and practice.
14. Ownership of Trademarks. Each Party acknowledges the ownership right of
the other Party in the Marks of the other Party and agrees that all use of the
other Party's Marks will inure to the benefit, and be on behalf, of the other
Party. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title, or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
15. Quality Standards. Each Party agrees that the nature and quality of its
products and services supplied in connection with the other Party's Marks will
conform to reasonable quality standards set by the other Party. Each Party
agrees to supply the other Party, upon reasonable request, with a reasonable
number of samples of any Materials publicly disseminated by such Party which
utilize the other Party's Marks. Each Party will comply with all applicable
laws, regulations, and customs and obtain any required government approvals
pertaining to use of the other Party's marks.
16. Infringement Proceedings. Each Party agrees to promptly notify the other
Party of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party will have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party
with its reasonable cooperation and assistance with respect to any such
infringement proceedings.
17. Representations and Warranties. Each Party represents and warrants to the
other Party that: (i) such Party has the full corporate right, power and
authority to enter into this Agreement and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this Agreement
will constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms; and (iv) such Party
acknowledges that the other Party makes no representations, warranties or
agreements related to the subject matter hereof that are not expressly provided
for in this Agreement. Onvia hereby represents and warrants that it possesses
all authorizations, approvals, consents, licenses, permits, certificates or
other rights and permissions necessary to sell the Products.
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18. Confidentiality. Each Party acknowledges that Confidential Information may
be disclosed to the other Party during the course of this Agreement. Each Party
agrees that it will take reasonable steps, at least substantially equivalent to
the steps it takes to protect its own proprietary information, during the term
of this Agreement, and for a period of three years following expiration or
termination of this Agreement, to prevent the duplication or disclosure of
Confidential Information of the other Party, other than by or to its employees
or agents who must have access to such Confidential Information to perform such
Party's obligations hereunder, who will each agree to comply with this section.
Notwithstanding the foregoing, either Party may issue a press release or other
disclosure containing Confidential Information without the consent of the other
Party, to the extent such disclosure is required by law, rule, regulation or
government or court order. In such event, the disclosing Party will provide at
least five (5) business days prior written notice of such proposed disclosure to
the other Party. Further, in the event such disclosure is required of either
Party under the laws, rules or regulations of the Securities and Exchange
Commission or any other applicable governing body, such Party will (i) redact
mutually agreed-upon portions of this Agreement to the fullest extent permitted
under applicable laws, rules and regulations and (ii) submit a request to such
governing body that such portions and other provisions of this Agreement receive
confidential treatment under the laws, rules and regulations of the Securities
and Exchange Commission or otherwise be held in the strictest confidence to the
fullest extent permitted under the laws, rules or regulations of any other
applicable governing body.
19. Limitation of Liability; Disclaimer; Indemnification.
9.1 Liability. UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES), ARISING FROM BREACH OF THE AGREEMENT,
THE SALE OF PRODUCTS, THE USE OR INABILITY TO USE THE AOL NETWORK, THE
AOL SERVICE, AOL.COM OR THE CO-BRANDED SITE, OR ARISING FROM ANY OTHER
PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS (COLLECTIVELY,
"DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY WILL REMAIN LIABLE TO
THE OTHER PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A
THIRD PARTY AND ARE SUBJECT TO INDEMNIFICATION PURSUANT TO SECTION
9.3. EXCEPT AS PROVIDED IN SECTION 9.3 OF THIS EXHIBIT G OR SECTION
5.7 OF THE MAIN BODY OF THIS AGREEMENT, (I) LIABILITY ARISING UNDER
THIS AGREEMENT WILL BE LIMITED TO DIRECT, OBJECTIVELY MEASURABLE
DAMAGES, AND (II) THE MAXIMUM LIABILITY OF ONE PARTY TO THE OTHER
PARTY FOR ANY CLAIMS ARISING IN CONNECTION WITH THIS AGREEMENT WILL
NOT EXCEED THE AGGREGATE AMOUNT OF FIXED GUARANTEED PAYMENT
OBLIGATIONS OWED BY ONVIA HEREUNDER IN THE YEAR IN WHICH THE EVENT
GIVING RISE TO LIABILITY OCCURS; PROVIDED THAT EACH PARTY WILL REMAIN
LIABLE FOR THE AGGREGATE AMOUNT OF ANY PAYMENT OBLIGATIONS OWED TO THE
OTHER PARTY PURSUANT TO THE AGREEMENT.
9.2 No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
REGARDING THE AOL NETWORK, THE AOL SERVICE, AOL.COM OR THE CO-BRANDED
SITE, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING THE
PROFITABILITY OF THE CO-BRANDED SITE.
9.3 Indemnity. Either Party will defend, indemnify, save and hold
harmless the other Party and the officers, directors, agents,
affiliates, distributors, franchisees and employees of the other Party
from any and all third party claims, demands, liabilities, costs or
expenses, including reasonable attorneys' fees ("Liabilities"),
resulting from the indemnifying Party's material breach of any duty,
representation, or warranty of this Agreement.
9.4 Claims. If a Party entitled to indemnification hereunder (the
"Indemnified Party") becomes aware of any matter it believes is
indemnifiable hereunder involving any claim, action, suit,
investigation, arbitration or other proceeding against the Indemnified
Party by any third party (each an "Action"), the Indemnified Party
will give the other Party (the "Indemnifying Party") prompt written
notice of such Action. Such notice will (i) provide the basis on which
indemnification is being asserted and (ii) be accompanied by copies of
all relevant pleadings, demands, and other papers related to the
Action and in the possession of the Indemnified Party. The
Indemnifying Party will have a period of ten (10) days after delivery
of such notice to respond. If the Indemnifying Party elects to defend
the Action or does not respond within the requisite ten (10) day
period, the Indemnifying Party will be obligated to defend the Action,
at its own expense, and by counsel reasonably satisfactory to the
Indemnified Party. The Indemnified Party will cooperate, at the
expense of the Indemnifying Party, with the Indemnifying Party and its
counsel in the defense and the Indemnified Party will have the right
to participate fully, at its own expense, in the defense of such
Action. If the Indemnifying Party responds
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within the required ten (10) day period and elects not to defend such
Action, the Indemnified Party will be free, without prejudice to any
of the Indemnified Party's rights hereunder, to compromise or defend
(and control the defense of) such Action. In such case, the
Indemnifying Party will cooperate, at its own expense, with the
Indemnified Party and its counsel in the defense against such Action
and the Indemnifying Party will have the right to participate fully,
at its own expense, in the defense of such Action. Any compromise or
settlement of an Action will require the prior written consent of both
Parties hereunder, such consent not to be unreasonably withheld or
delayed.
10. Acknowledgment. AOL and Onvia each acknowledges that the provisions of
this Agreement were negotiated to reflect an informed, voluntary allocation
between them of all risks (both known and unknown) associated with the
transactions contemplated hereunder. The limitations and disclaimers related
to warranties and liability contained in this Agreement are intended to limit
the circumstances and extent of liability. The provisions of this Section 10
will be enforceable independent of and severable from any other enforceable or
unenforceable provision of this Agreement.
20. Solicitation of AOL Users. During the term of the Agreement and for a
eighteen month period thereafter, Onvia will not use the AOL Network (including,
without limitation, the e-mail network contained therein) to solicit AOL Users
on behalf of another Interactive Service. More generally, Onvia will not send
unsolicited, commercial e-mail (i.e., "spam") or other online communications
through or into AOL's products or services, absent a Prior Business
Relationship. For purposes of this Agreement, a "Prior Business Relationship"
will mean that the AOL User to whom commercial e-mail or other online
communication is being sent has voluntarily either (i) engaged in a transaction
with Onvia or (ii) provided information to Onvia through a contest,
registration, or other communication, which included clear notice to the AOL
User that the information provided could result in commercial e-mail or other
online communication being sent to that AOL User by Onvia or its agents. Any
commercial e-mail or other online communications to AOL Users which are
otherwise permitted hereunder, will (a) include a prominent and easy means to
"opt-out" of receiving any future commercial communications from Onvia, and (b)
shall also be subject to AOL's then-standard restrictions on distribution of
bulk e-mail (e.g., related to the time and manner in which such e-mail can be
distributed through or into the AOL product or service in question), subject to
paragraph 12, clause (b)(i), of this Exhibit G. Any e-mail or other online
communications permitted under this paragraph may inform AOL Users of areas
within the Co-Branded Site which may be of interest to them, in order to provide
for a better user experience.
21. AOL User Communications. To the extent that Onvia is permitted to
communicate with AOL Users under this Exhibit G, in any such communications to
AOL Users on or off the Co-Branded Site (including, without limitation, e-mail
solicitations), Onvia will not encourage AOL Users who have visited the Co-
Branded Site during the Term (but excluding such AOL Users who have transacted
with Onvia prior to the Term) to take any action inconsistent with the scope and
purpose of this Agreement. Further, Onvia shall not encourage AOL Users to (i)
bookmark Interactive Sites, or (ii) change the default home page on the AOL
browser. Further still Onvia shall not encourage AOL Users who have visited the
Co-Branded Site during the Term (but excluding such AOL Users who have
transacted with Onvia prior to the Term), to (a) use any Interactive Site other
than the Co-Branded Site for the purchase of Products, or (b) use Content other
than the Licensed Content. Additionally, with respect to such AOL User
communications, in the event that Onvia encourages an AOL User to purchase
products through such communications, Onvia shall ensure that, during the Term,
(x) the AOL Network is promoted as the primary means through which the AOL User
can access the Co-Branded Site and (y) any link to the Co-Branded Site will link
to a page which indicates to the AOL User that such user is in a site which is
affiliated with the AOL Network.
22. Collection and Use of User Information. Onvia shall ensure that its
collection, use and disclosure of information obtained from AOL Users under this
Agreement ("User Information") complies with (i) all applicable laws and
regulations and (ii) AOL's standard privacy policies, available on the AOL
Service at the keyword term "Privacy" (or, in the case of the Co-Branded Site,
Onvia's standard privacy policies so long as such policies are prominently
published on the site and provide adequate notice, disclosure and choice to
users regarding Onvia's collection, use and disclosure of user information).
Onvia will not disclose User Information collected hereunder to any third party
in a manner that identifies AOL Users as end users of an AOL product or service
or use Member Information collected under this Agreement to market another
Interactive Service. Notwithstanding anything to the contrary herein, (a) if
end users are required to register to access certain features within the Co-
Branded Site (including the Co-Branded Site Buying Directory), or the AOL Buying
Directory, the Parties will use commercially reasonable best efforts to ensure
that such registration processes will be seamlessly integrated with Netscape's
"Universal Registration" or AOL's "SNAP" system (or such other registration
system developed by AOL) and be consistent with the respective brand's then-
current privacy policy; (b) AOL will continue to own all end user data
previously owned by it which is passed on to Onvia via universal registration or
any other means in conjunction with the use of the Co-Branded Site and the AOL
Buying Directory, and (c) that in cases where a user registers or transacts for
Onvia's products and services on the Co-Branded Site, the User Information
collected therefrom will be jointly owned by AOL and Onvia, subject to any
express limitations herein. AOL and Onvia may promote products and services to
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the user base shared by them, provided that such promotions may not be for any
Interactive Service and may not be inconsistent with the scope and terms of this
Agreement.
23. Excuse. Neither Party will be liable for, or be considered in breach of or
default under this Agreement on account of, any delay or failure to perform as
required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
24. Independent Contractors. The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or employee of the other
Party. Neither Party will have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement will not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.
25. Notice. Any notice, approval, request, authorization, direction or other
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname
"[email protected]" in the case of AOL) or by confirmed facsimile; (ii) on the
delivery date if delivered personally to the Party to whom the same is directed;
(iii) one business day after deposit with a commercial overnight carrier, with
written verification of receipt; or (iv) five business days after the mailing
date, whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of Onvia, except as otherwise specified herein, the notice address will be the
address for Onvia set forth in the first paragraph of this Agreement, with the
other relevant notice information, including the recipient for notice and, as
applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
26. Launch Dates. In the event that any terms contained herein relate to or
depend on the commercial launch date of the Co-Branded Site contemplated by this
Agreement (the "Launch Date"), then it is the intention of the Parties to record
such Launch Date in a written instrument signed by both Parties promptly
following such Launch Date; provided that, in the absence of such a written
instrument, the Launch Date will be as reasonably determined by AOL based on the
information available to AOL.
27. No Waiver. The failure of either Party to insist upon or enforce strict
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement will not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same will be
and remain in full force and effect.
28. Return of Information. Upon the expiration or termination of this
Agreement, each Party will, upon the written request of the other Party, return
or destroy (at the option of the Party receiving the request) all Confidential
Information, documents, manuals and other materials specified the other Party.
29. Survival. Section 5.3 of the body of the Agreement, Sections 8 through 30
of this Exhibit, and any payment obligations accrued prior to termination or
expiration will survive the completion, expiration, termination or cancellation
of this Agreement.
30. Entire Agreement. This Agreement sets forth the entire agreement and
supersedes any and all prior agreements of the Parties with respect to the
transactions set forth herein. Neither Party will be bound by, and each Party
specifically objects to, any term, condition or other provision which is
different from or in addition to the provisions of this Agreement (whether or
not it would materially alter this Agreement) and which is proffered by the
other Party in any correspondence or other document, unless the Party to be
bound thereby specifically agrees to such provision in writing.
31. Amendment. No change, amendment or modification of any provision of this
Agreement will be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment, and in the case of AOL, by an
executive of at least the same standing to the executive who signed the
Agreement.
32. Further Assurances. Each Party will take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by any other Party for the implementation or continuing
performance of this Agreement.
33. Assignment. With the exception of (a) an assignment or succession of
interest relating solely to a change in jurisdiction of incorporation, or (b) of
a Change of Control (other than a Change of Control of Onvia to an Interactive
Service, which shall be governed by Section 5.6 of the main body of this
Agreement): Onvia will not assign this Agreement or any right, interest or
benefit under this Agreement, without the prior written consent of AOL. In
either instance, AOL's consent shall not be unreasonably withheld or delayed.
Subject to the foregoing, this Agreement will be fully binding upon, inure to
the benefit of and be enforceable by the Parties hereto and their respective
successors and assigns.
34. Construction; Severability. In the event that any provision of this
Agreement conflicts with the law under which this Agreement is to be construed
or if any such provision is held
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invalid by a court with jurisdiction over the Parties to this Agreement, (i)
such provision will be deemed to be restated to reflect as nearly as possible
the original intentions of the Parties in accordance with applicable law, and
(ii) the remaining terms, provisions, covenants and restrictions of this
Agreement will remain in full force and effect.
35. Remedies. Except where otherwise specified, the rights and remedies
granted to a Party under this Agreement are cumulative and in addition to, and
not in lieu of, any other rights or remedies which the Party may possess at law
or in equity; provided that, in connection with any dispute hereunder, Onvia
will be not entitled to offset any amounts that it claims to be due and payable
from AOL against amounts otherwise payable by Onvia to AOL.
36. Applicable Law. Except as otherwise expressly provided herein, this
Agreement will be interpreted, construed and enforced in all respects in
accordance with the laws of the Commonwealth of Virginia except for its
conflicts of laws principles.
37. Export Controls. Both Parties will adhere to all applicable laws,
regulations and rules relating to the export of technical data and will not
export or re-export any technical data, any products received from the other
Party or the direct product of such technical data to any proscribed country
listed in such applicable laws, regulations and rules unless properly
authorized.
38. Headings. The captions and headings used in this Agreement are inserted
for convenience only and will not affect the meaning or interpretation of this
Agreement.
39. Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original and all of which together will constitute one
and the same document.
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EXHIBIT H
Co-Branding
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Except as otherwise expressly stated in this Agreement or otherwise mutually
agreed by the Parties in writing, each distinct version of the Co-Branded Site
shall be designed as a "cul de sac" site containing no links outside of the Co-
Branded Site other than to (a) the applicable AOL business brand, (b) other AOL
or third party Content determined by AOL, or (c) advertisements permitted under
this Agreement. Except as otherwise expressly stated in this Agreement or as
otherwise mutually agreed, Onvia shall eliminate the use of "pop-up" windows,
screens and similar types of functionality in connection with the display of
advertising, promotions or sponsorships on the Co-Branded Site. Except as
expressly set forth in this Agreement, AOL shall have the right to change or
modify its generally applicable design guideline templates and co-branding
requirements during the Term, to conform to general changes made to the AOL
Network or portions thereof. Such customization may, at AOL's discretion,
further include, without limitation:
(i) the inclusion of an AOL (or its applicable affiliated business brand,
e.g., CompuServe) co-branded toolbar, running the full width of the page,
at the top and bottom of each page of the Co-Branded Site, which, among
other things, will provide navigation back to the AOL Network, and which
shall contain an AOL search box (e.g., Netfind) and two (2) promotional
spaces to be programmed by AOL (the parameters, specifications and format
of which such toolbars are further displayed on the mock-up below);
(ii) various additional co-branding elements to be specified, as reasonably
required for consistency throughout the AOL Network and throughout AOL's
network of merchant partners in light of changes to or modifications of
the AOL Network (or portions thereof) or AOL's design guideline templates
or co-branding requirements during the Term; and
(iii) the creation of links in connection with communication services on the Co-
Branded Site to the corresponding or equivalent communication services or
areas of the Co-Branded Site of the appropriate AOL Property (e.g., chat
from the Co-Branded Site of the AOL Service will link to the chat area on
the AOL Service).
CONFIDENTIAL
[* * *] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT I
Third party integration schedule and standards
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General:
As set forth in more detail in this Agreement (e.g., in Section 6.4 and Exhibit
A-1), AOL may require Onvia to integrate up to [* * *] additional of AOL's
selected merchant partners and their products and services into the AOL Buying
Directory per month (provided that the Parties initially shall cooperate to
integrate one such merchant partner as a test case).
Schedule:
Onvia shall use commercially reasonable efforts to integrate any third party as
reasonably requested by AOL (and to the extent consistent with the terms hereof,
e.g., with respect to such third party's data exchange standards) within 30 days
of the date of such request, and in any event shall integrate any complying
third party within 60 days of such request. Onvia shall initially so integrate
(upon AOL's request) [* * *] (e.g., procurement engine, catalog, or similar
functionality), as well as any other complying entities as set forth in more
detail under "Data Exchange" below.
Taxonomy:
Onvia and AOL will mutually agree upon an initial product category taxonomy,
using taxonomy in existence on the Standard Site as of the Effective Date as an
initial starting point, within 30 days of the Effective Date, and shall
cooperate to update such taxonomy on a regular and consistent basis, as mutually
agreed. Third parties will map from such third parties' proprietary taxonomy to
Onvia taxonomy prior to being integrated into the AOL Buying Directory. Onvia
will extend taxonomy to incorporate additional items and product types not in
current taxonomy within a reasonable time frame.
Data Exchange:
Third parties which AOL wishes to have integrated into the AOL Buying Directory
shall (it being acknowledged and agreed that this is outside the control of AOL)
meet XML (eXtensible Markup Language), or any other mutually agreed standard
data exchange standards published by Onvia (and the Parties shall so mutually
agree on at least one standard prior to the completion of the AOL Buying
Directory); provided that, in the event they do not meet such standards, Onvia
shall use commercially reasonable efforts to integrate them based on other
reasonable and applicable standards. Third parties also shall (it being
acknowledged and agreed that this is outside the control of AOL) maintain
appropriate XML (or other applicable) data quality standards as established
through generally applicable standard policy by Onvia; provided that, in the
event they do not meet such standards, Onvia shall use commercially reasonable
efforts to work with such party based on other reasonable and applicable
standards. Third Parties will retain QA responsibility for all data transferred
for use in the AOL Buying Directory. Any additional items and product types
will require expanded data to be provided to Onvia by third parties in formats
to be defined based on requirements. Any data transmissions by third parties to
Onvia should be delivered via FTP and, if mutually agreed, shall meet currently
available compression and encryption standards; provided that, in each case, in
the event they do not meet such standards (FTP, or compression and encryption),
Onvia shall use commercially reasonable efforts to work with such party based on
other reasonable and applicable standards.
Merchant Data Ownership:
Onvia shall be entitled to use any information provided by AOL's merchant
partners in connection herewith only to the extent required for Onvia's
compliance with the terms hereof, and only during the Term. Notwithstanding
anything to the contrary herein, AOL (and not Onvia) shall own all data and
other information provided by AOL's merchant partners (including without
limitation, any product databases, product information, taxonomy, exchange
information and technology), whether or not used by Onvia during the Term,
subject to any applicable confidentiality provisions herein, and, at the end of
the Term, Onvia shall return any and all such AOL merchant information to AOL
and shall no longer retain any rights to use such AOL merchant information.
CONFIDENTIAL
[* * *] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Schedule 2.9
Competitive Entities*
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The Parties expressly acknowledge and agree that this schedule only applies to
Section 2.9 and only with respect to Advertising sold by AOL to be served into
the Co-Branded Site, and does not in any way limit AOL's ability to sell
Advertising to any entity, including any competitor of Onvia, anywhere within
the AOL Network (or to any other third party areas, e.g., dr koop).
Notwithstanding anything to the contrary herein, AOL may, on the AOL Network
(including without limitation the B2B Area, the AOL Buying Directory and the AOL
Aggregated RFQ Area), sell Advertisements to, or otherwise promote, any of the
entities listed on this Schedule 2.9 or added hereto from time to time in
accordance with the terms hereof.
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CONFIDENTIAL
[* * *] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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*Each of the listed entities shall be considered competitive to Onvia only to
the extent that it maintains an online, small-business targeted presence and
continues to predominantly focus on business-to-business products and services.
Onvia may add a Qualifying Entity (or Qualifying Entities) (as defined below) to
this list once per quarter (to a maximum of [* * *] additional Qualifying
Entities per year during the Term) with thirty (30) days' advance written notice
to AOL, provided, however, that the restrictions applicable to each Qualifying
Entity shall be subject to contractual commitments of AOL in existence as of the
date on which such Qualifying Entity is named by Onvia. For purposes hereof, a
"Qualifying Entity" shall mean any other company to the extent they primarily
offer products, services and content falling within the Permitted Categories
listed in Exhibit D.
CONFIDENTIAL
[* * *] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Schedule 3.4
New Customer Targets
(listed by each quarter of Term)
<TABLE>
<CAPTION>
q1 q2 q3 q4 q5 q6 q7 q8
- ------------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
[* * *] [* * *] [* * *] [* * *] [* * *] [* * *] [* * *] [* * *]
- ------------------ ------- ------- ------- ------- ------- ------- -------
</TABLE>
CONFIDENTIAL
[* * *] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Schedule 5.6
Onvia Investors
Shareholder
- -----------
Glenn Ballman
Rob Ayer
VLG Investments 99
Mohr, Davidow Ventures, L.P.
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
Internet Capital Group, Inc.
GE Capital Equity Investments Inc.
RIT Ventures I LLC
ATGF II (Amerindo)
Vertex Capital II (Amerindo)
Van Wagoner (Funds + Partners)
Aman Ventures
Credit Suisse First Boston
Robertson Stephens (Bayview I)
Robertson Stephens (Bayview II)
Hambrech & Quist - California
Hambrech & Quist - California
H&Q Employee Venture Fund
Access Technology Partners Fund
Access Technology Partners Brokers Fund
William Blair & Company
E-Offering
Comdisco, Inc.
Madrona Investment Group
Oki Enterprises
Grosvernor Select LP
Jumpstart Group
CONFIDENTIAL
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 4 to this Registration Statement
No. 333-93273 of Onvia.com, Inc. on Form S-1 of our report dated February 4,
2000 (February 22, 2000, as to Note 13), appearing in the Prospectus, which is
part of this Registration Statement and to the reference to us under the
headings "Selected Consolidated Financial Data" and "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Seattle, Washington
February 22, 2000
