<PAGE>
As Filed with the Securities and Exchange Commission on February 18, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PartMiner, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
New York 3651 13-3732238
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
432 Park Avenue South
New York, New York 10016
(212) 725-8884
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Michael R. Manley, Esq.
General Counsel
PartMiner, Inc.
432 Park Avenue South
New York, New York 10016
(212) 725-8884
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<CAPTION>
<S> <C>
Stephen R. Connoni, Esq. Julie M. Allen, Esq.
Kirkpatrick & Lockhart LLP Proskauer Rose LLP
1251 Avenue of the Americas 1585 Broadway
New York, New York 10020 New York, New York 10036
(212) 536-4040 (212) 969-3000
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, 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
under the Securities Act, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1)(2) Registration Fee
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock, $.0001 par value per share....... $75,000,000 $19,800
</TABLE>
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(1) Includes shares of common stock which may be purchased by the underwriters
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) and (o) under the Securities Act of 1933, as
amended.
---------------
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, as amended, or until the
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 it is not a solicitation of an offer to +
+buy these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 18, 2000
Shares
PartMiner Logo
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
$ and $ per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "PTMR."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 4.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions PartMiner
-------- ------------- -----------
<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 of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston Bear, Stearns & Co. Inc.
Robertson Stephens
The date of this prospectus is , 2000.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Special Note Regarding Forward-Looking
Statements........................... 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Consolidated Financial Data.. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................ 20
Business.............................. 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management......................... 38
Certain Relationships and Related
Transactions...................... 47
Principal Shareholders............. 49
Description of Capital Stock....... 51
Shares Eligible for Future Sale.... 55
Underwriting....................... 57
Notice to Canadian Residents ...... 59
Legal Matters...................... 60
Experts............................ 60
Change in Independent Accountants.. 60
Additional Information............. 61
Index to 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 in this document may only be accurate
on the date of this document.
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 dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to its unsold allotments or subscriptions.
i
<PAGE>
PROSPECTUS SUMMARY
You should read this prospectus summary together with the more detailed
information contained in the remainder of this prospectus carefully, including
the risk factors and the consolidated financial statements and notes, before
you decide to buy shares of our common stock.
PartMiner, Inc.
We are a leading provider of business-to-business procurement services to
the global electronic components industry. We provide proprietary Internet-
based applications to buyers of electronic components to facilitate the product
selection and purchasing process, and we act as a market maker in the
electronic components spot market. Buyers typically access the spot market to
purchase electronic components when their usual sources of supply fail, which
occurs on a regular basis due to market inefficiencies. The price that buyers
are willing to pay in the spot market is not dictated by the intrinsic value of
the needed component, but instead reflects opportunity costs that may include
costs associated with a potential interruption of the manufacturing process. We
address these inefficiencies and generate revenues in the spot market by
purchasing components against a customer's buy order and reselling these
components to the customer. We have developed an extensive electronic supplier
network which tracks pricing and availability of electronic components at over
4,000 suppliers worldwide. We have been a market maker in the electronic
components spot market since 1993, and in 1999 we had a customer base of over
5,000 customers in 52 countries.
In mid-1998, we began an initiative to move our business to the Internet
with the release of our Internet procurement agent, which allows users to
source electronic components of all types from multiple suppliers online and
facilitates the online purchase of these components from such suppliers. As of
December 31, 1999, there were over 80,000 registered users of our procurement
agent. We believe the success of our Internet procurement agent has created
significant awareness of our brand and services, and since its release we have
experienced a substantial increase in new customers.
To further automate transaction activity between buyers and sellers of
electronic components, we are developing the Free Trade Zone, an Internet
procurement platform which we expect to commercially launch in the second half
of 2000. Our Free Trade Zone will enable component buyers to use the Internet
to transact business with their preferred suppliers by transmitting requests
for quotation, receiving quotes, negotiating terms, and placing orders online.
The Free Trade Zone will automatically detect when these preferred suppliers
are unable to provide a requested component, and, in such event, we will source
the component and quote a price to the buyer. We intend to offer our Free Trade
Zone to users at no charge, and substantially all of our revenues will continue
to be generated from acting as a market maker in the spot market. We believe
that the supply and demand information we will obtain from activity on our Free
Trade Zone will significantly enhance our ability to source components for our
customers. Over time, we expect to fully automate our market making function as
part of the Free Trade Zone.
We also provide other services designed to further reduce inefficiencies in
the electronic components supply chain, including access to our online
CAPSXpert databases, which contain over 12,000,000 component part numbers; our
component and supplier management software and services; and our excess
inventory management solutions. We believe these services provide us with a
significant competitive advantage. We expect in the future to integrate these
services into our Free Trade Zone to provide additional value to our users and
further increase adoption of our Free Trade Zone.
1
<PAGE>
Our objective is to be the leading online provider of business-to-business
procurement services to the global electronic components industry. Our strategy
to achieve this objective includes the following key elements:
. establishing our Free Trade Zone as the leading procurement network for
the electronic components industry;
. expanding our brand awareness;
. leveraging our existing expertise and infrastructure; and
. pursuing strategic relationships and strategic acquisitions.
We were incorporated in New York on September 9, 1993. Our principal
executive offices are located at 432 Park Avenue South, New York, New York
10016 and our telephone number is (212) 725-8884. Our Web site is located at
www.partminer.com. Information contained on, or linked to, our Web site is not
part of this prospectus.
The Offering
<TABLE>
<S> <C>
Common stock offered................................ shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... For working capital and other
general corporate purposes,
including sales and marketing
activities, capital expenditures and
research and development.
Proposed Nasdaq National Market symbol.............. PTMR
</TABLE>
The number of shares to be outstanding after this offering is based on the
number of shares of common stock outstanding as of February 16, 2000 and
excludes:
. 2,164,800 shares of common stock issuable upon the exercise of
outstanding options at a weighted average exercise price of $2.81 per
share; and
. shares subject to outstanding options with an exercise price equal
to the initial public offering price.
Except as otherwise noted in this prospectus, all information contained in
this prospectus:
. assumes that the underwriters' over-allotment option is not exercised;
and
. reflects the automatic conversion of all outstanding shares of our
mandatorily redeemable convertible preferred stock into 20,915,105
shares of common stock upon the closing of this offering.
------------
PartMiner(R), Free Trade Zone(TM), PartMiner Free Trade Zone(TM), Electronic
Commerce Free Trade Zone(TM), Fast. Simple. Complete. Which part don't you
get?(TM), Market-Trak(TM), Accu-Trak(TM), Req-Trak(TM), CAPS(R), ItemQuest(R),
CAPSXpert(TM) and IQXpert (and design)(TM) are our trademarks and service
marks. This prospectus also includes the tradenames, service marks and
trademarks of other companies whose mention in this prospectus is with due
recognition of and without any intent to misappropriate such names or marks.
2
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
The following tables set forth summary consolidated historical financial
data and certain pro forma financial data for our business during the years and
as of the date indicated. The 1999 pro forma consolidated statement of
operations data gives effect to the acquisitions of Accurate Components Inc.
and its affiliate and of IQXpert Holdings Inc. as if these acquisitions had
been completed on January 1, 1999. Each acquisition was accounted for under the
purchase method of accounting.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
Pro forma
1995 1996 1997 1998 1999 1999
------- ------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Total revenues.......... $ 5,990 $8,389 $18,255 $ 20,655 $ 41,503 $ 76,144
Cost of revenues........ 4,079 5,821 12,737 14,711 29,669 49,811
------- ------ ------- -------- -------- --------
Gross profit............ 1,911 2,568 5,518 5,944 11,834 26,333
Total operating
expenses............... 1,545 2,853 5,094 6,074 28,251 73,579
------- ------ ------- -------- -------- --------
Income (loss) from
operations............. 366 (285) 424 (130) (16,417) (47,246)
Net income (loss)....... 315 (343) (117) (1,850) (17,931) (48,688)
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- -- -- (12,075) (12,075)
------- ------ ------- -------- -------- --------
Net income (loss)
applicable to common
shareholders........... $ 315 $ (343) $ (117) $ (1,850) $(30,006) $(60,763)
======= ====== ======= ======== ======== ========
Basic and diluted net
income (loss) per
common share........... $ 0.02 $(0.02) $ -- $ (0.06) $ (0.82) $ (1.28)
======= ====== ======= ======== ======== ========
Weighted average shares
used in computing basic
and diluted net income
(loss) per common
share.................. 20,000 20,000 24,219 30,000 36,676 47,400
======= ====== ======= ======== ======== ========
<CAPTION>
December 31, 1999
--------------------------------
Pro forma
Actual Pro forma as adjusted
-------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents...................... $ 5,063 $ 52,063
Working capital................................ 7,718 54,718
Total assets................................... 146,901 193,901
Long-term debt, net of current portion......... 4,331 1,331
Mandatorily redeemable securities.............. 68,038 --
Total shareholders' equity..................... 54,602 172,640
</TABLE>
The pro forma consolidated balance sheet data give effect to the following:
. the issuance of 10,302,905 shares of Series B mandatorily redeemable
convertible preferred stock for $50.0 million consummated on February
16, 2000;
. the repayment of $3.0 million of indebtedness outstanding at December
31, 1999 with a portion of the proceeds of such issuance;
. the termination of the mandatorily redeemable feature of our mandatorily
redeemable common stock upon the closing of this offering; and
. the automatic conversion of all outstanding shares of our Series A and B
mandatorily redeemable convertible preferred stock into 20,915,105
shares of common stock upon the closing of this offering.
The pro forma as adjusted data reflect our receipt of the estimated net
proceeds from our sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share after deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
3
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information
contained in this prospectus before deciding to invest in our common stock.
Risks Related to Our Business
Our limited operating history in e-commerce makes evaluating our future
prospects difficult.
Although we were founded in 1993, we began our e-commerce initiative only in
the second half of 1998. Our limited operating history as an e-commerce company
makes an evaluation of our future prospects very difficult. We currently derive
no direct revenues from any Internet or e-commerce activity. We have recently
changed our business strategy to focus on the Internet and expect to encounter
the types of risks, uncertainties and difficulties frequently encountered by
early-stage Internet companies. If we do not successfully address these risks,
our future business prospects will be significantly limited and, as a result,
the trading price of our common stock would be adversely affected.
We have experienced losses, expect to incur losses in the future and may never
achieve profitability.
We have experienced losses in the past, and as of December 31, 1999, we had
an accumulated deficit of approximately $42.9 million. We expect to incur
significant net losses in the future and may never achieve profitability as we
expand our operations and seek to complete the development and introduction of
our Free Trade Zone. We may not derive any revenues from such expansion
efforts. In addition, we intend to provide our CAPSXpert databases free of
charge to facilitate adoption of the Free Trade Zone by potential users.
Accordingly, we believe revenues from subscriptions to the CAPSXpert databases
will be significantly reduced or eliminated without any guarantee that these
users will adopt the Free Trade Zone and generate transactions that will
provide us with an offsetting source of revenues. We have had, and will
continue to have, substantial non-cash charges to our earnings, the net effect
of which will significantly reduce or eliminate future earnings or increase
future losses. These non-cash charges will include amortization of goodwill and
other intangible assets of approximately $36.6 million per year over each of
the next three years in connection with prior acquisitions made by us,
significant charges during the periods preceding the offering in connection
with the accretion and beneficial conversion of our mandatorily redeemable
convertible preferred stock and stock-based compensation charges in connection
with the issuance of certain stock options granted to employees.
Our quarterly operating results are volatile and difficult to predict. If we
fail to meet the expectations of securities analysts or investors, the market
price of our common stock may decrease significantly.
Our quarterly operating results have varied significantly in the past and
will likely vary significantly in the future. We believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as indicators of future performance. Our operating results may fall
below the expectations of securities analysts or investors in one or more
future quarters. Our failure to meet these expectations would adversely affect
the market price of our common stock.
Our quarterly operating results may vary depending on a number of factors,
including:
. the extent of use of our services, including our Free Trade Zone;
. our ability to develop, introduce and market enhancements to our
Internet offerings to support, attract and service large numbers of
participants and transactions;
. our ability to expand our sales and marketing operations and
infrastructure, including hiring additional personnel;
4
<PAGE>
. the amount and volume of our electronic components sales;
. market conditions in the electronic components industry;
. our ability to control costs; and
. technological changes in our markets.
We plan to significantly increase our operating expenses to expand our sales
and marketing operations, fund greater levels of research and development,
develop strategic partnerships, increase our services and support capabilities
and improve our operational and financial systems. If our revenues do not
increase at least at the rate of these expenses, our business, financial
condition, prospects and operating results could be seriously harmed and net
losses in a given quarter would be larger than expected. In addition, because
our expense levels are relatively fixed in the near term and are based in part
on expectations of our future revenues, any decline in our revenues to a level
that is below our expectations will have a disproportionately adverse impact on
our operating results.
Our e-commerce business model is not proven and may not be successful.
Our e-commerce business model is based on the development, successful
implementation and widespread adoption of our Free Trade Zone for purchases and
sales of electronic components. This business model is new and unproven and its
success, and our ability to generate revenues, depends upon, among other
things:
. attracting a large number of buyers and suppliers to conduct
transactions on our Free Trade Zone; and
. generating sufficient transaction volume as the default market maker in
the Free Trade Zone.
We may not successfully develop or implement our Free Trade Zone and, even
if developed and implemented, our Free Trade Zone may not gain commercial
acceptance. We do not intend to charge users of our Free Trade Zone any fees
and our primary source of revenues from the Free Trade Zone will result from
our role as its default market maker. Even if our Free Trade Zone attracts
buyers and sellers, we may not derive any significant revenues from it. We have
already spent a substantial amount of money in developing the Free Trade Zone
and expect to spend significant additional funds to finalize development,
commercially launch and provide enhancements to the Free Trade Zone. We may not
be able to realize a profit on such investment or to recover such investment.
Our business and prospects will be seriously harmed if we fail to introduce our
Free Trade Zone in a timely manner or if we introduce it with inadequate
functionality.
We are still in the process of developing our Free Trade Zone. We may fail,
for a variety of technical and other reasons, to implement our Free Trade Zone
on a timely basis, if at all. Even if we do implement our Free Trade Zone in a
timely manner, our Free Trade Zone as implemented may not have the
functionality needed to make it successful. We cannot be certain that the
features and functionality that we expect to offer in our Free Trade Zone, or
those that we may offer in future enhancements, will satisfy the requirements
or preferences of potential participants. If we fail to timely introduce our
Free Trade Zone, or if we introduce our Free Trade Zone with inadequate
functionality or without certain features, others may introduce an e-commerce
solution that achieves market acceptance and that could make the successful
introduction and broad adoption of our Free Trade Zone less likely. In such
event, our business, financial condition, prospects, and operating results
would be seriously harmed.
Our Free Trade Zone may not be successful if it is not adopted by a significant
number of buyers and suppliers.
Unless a significant number of buyers and suppliers use our Free Trade Zone,
our solution may not achieve widespread market acceptance and our business
prospects will be seriously limited. The Internet-based market for
5
<PAGE>
electronic components is at a relatively early stage of development. Our
success depends on a significant number of buyers linking with their suppliers
to source and purchase electronic components over our Free Trade Zone. Our
ability to attract participants to our Free Trade Zone will depend in large
part upon our success in developing and deploying a simple to use and secure
application that contains the features and functionality that participants
require or prefer in an e-commerce solution and that provides substantial value
to its users over traditional procurement methods. Even if we do complete and
commercially launch the Free Trade Zone, buyers may continue purchasing
products through their existing methods and may not adopt an Internet-based
purchasing solution or they may choose an alternative solution. Furthermore,
buyers may not participate in our Free Trade Zone if they do not perceive it as
a neutral marketplace that does not favor one participant over another
participant. The Free Trade Zone will collect and store data connected with
communications and transactions made over the Free Trade Zone. In the event
buyers do not want us to have their information due to privacy or other data-
related concerns, they may not use our Free Trade Zone which would limit growth
of our revenues.
Even if enterprises adopt our Free Trade Zone, we may not increase our revenues
if buyers within these enterprises do not use our market making services.
Even if we attract buyers to our Free Trade Zone, we may not realize any
revenues through the Free Trade Zone if buyers do not purchase components from
us when their preferred suppliers cannot supply the components requested over
the Free Trade Zone. Participants may use our Free Trade Zone, including our
CAPSXpert databases, only as a research and pricing tool and not attempt to
make any purchases over the Free Trade Zone. Since our primary source of
revenues will be generated from market failures of attempted purchases over our
Free Trade Zone, such use of our Free Trade Zone would limit our ability to
generate revenues. In addition, even if they use our Free Trade Zone, buyers
may purchase components from other market makers if they cannot purchase
components from their preferred suppliers over our Free Trade Zone.
Alternatively, our efforts to attract buyers and suppliers to the Free Trade
Zone may be so successful and the Free Trade Zone itself may be so efficient
that the spot market for electronic components, which will remain our sole
source of revenues, may be significantly reduced which would limit our ability
to generate revenues under our business model.
We will rely on a third party to host our Free Trade Zone.
Our Free Trade Zone will be hosted on the computer systems of Intira
Corporation. Intira's operations and systems maintenance will not be under our
control. Our Free Trade Zone may experience service outages as a result of the
failure of Intira's computer systems. Significant service delays or outages
could result in the inability of participants to consummate transactions over
our Free Trade Zone and the loss of participant confidence in our Free Trade
Zone, which could lead participants to choose alternative methods to purchase
their electronic components and seriously harm our business. Additionally, the
hosting of the CAPSXpert databases will be transferred to Intira Corporation on
a DEC Alpha platform, which is not supported by Intira. We will have the
responsibility of maintaining the DEC Alpha equipment and finding the
appropriate experts if repairs are needed, which may increase the possibility
that our CAPSXpert databases may be inaccessible to our users.
Users of our Free Trade Zone may experience certain delays and problems which
could seriously harm our business.
Our Free Trade Zone is complex and we may encounter various delays and
problems in its use. In particular:
. we may not be able to expand our Free Trade Zone to accommodate
additional users and increased transaction volume;
. the Free Trade Zone may contain undetected errors or defects when
introduced or subsequently used; and
. users of the Free Trade Zone may encounter various performance failures
and delays, particularly if there is a large volume of traffic.
6
<PAGE>
If any of these problems or delays occur and are not corrected by us in a
timely manner, participants on our Free Trade Zone may use other methods to
procure their electronic components on a temporary or permanent basis.
If we are unable to add to our infrastructure, or improve and implement new
systems, procedures and controls, our business may be harmed.
We are experiencing a period of significant expansion of our operations that
has placed a significant strain and additional demands upon our management
systems, infrastructure and resources. Our ability to compete effectively and
to manage future expansion of our operations, if any, will require us to
continue to add to our infrastructure, improve our financial and management
controls, reporting systems and procedures, and expand, train and manage our
workforce. If we are unable to manage our expansion, our level of service will
decline and we may lose customers and revenues.
Our business could be adversely affected as a result of our prior or future
acquisitions.
We have recently made acquisitions and, in order to remain competitive, we
may find it necessary to make additional acquisitions. If we identify an
appropriate acquisition candidate, we may not be able to negotiate the terms of
the acquisition successfully, finance the acquisition or integrate the acquired
business into our existing business. Further, completing a potential
acquisition and integrating an acquired business (including integrating our
recently acquired businesses) causes significant diversion of management time
and resources. Any acquisition involves the risk that the assets acquired may
be less valuable than expected and/or that we may assume unknown and unexpected
liabilities, costs and problems. This risk exists in connection with our recent
acquisitions of Accurate Components Inc., and its affiliate Market Trading
Concepts Inc., and IQXpert Holdings Inc. If we consummate one or more
significant acquisitions in which the consideration consists of stock or other
securities, your equity interest in our company could be significantly diluted.
If we were to proceed with one or more significant acquisitions in which the
consideration includes cash, we could be required to use a substantial portion
of our available cash, including net proceeds of this offering, to consummate
any such acquisition. Acquisition financing may not be available on favorable
terms, or at all. In addition, we will be required to amortize goodwill and
other intangible assets in connection with our prior acquisitions and may also
be required to amortize additional goodwill and other intangible assets in
connection with future acquisitions. This amortization will impact our future
earnings and could harm our business and the trading price of our common stock.
The electronics industry has historically experienced cycles and downturns
which could adversely affect our business.
The electronics industry has historically been affected by general economic
downturns and business cycles, which have had an adverse economic effect upon
component manufacturers, product manufacturers, distributors, as well as market
makers such as ourselves. In addition, the life-cycle of existing electronic
products and the timing of new product development and introduction can affect
demand for electronic components. Any slowdown in the electronics industry or
other indirectly related industries could reduce the amount of electronic
components purchased generally, or in the spot market in particular, which, in
turn, could harm our business, financial condition, prospects and operating
results.
We may not be able to maintain our historical gross profit margins.
Gross profit margins are affected by numerous factors, many of which are
beyond our control, including component supply, demand for components,
inventory levels held by electronic manufacturers and distributors, component
lead times, product sales mix and our ability to purchase components at
favorable prices. To the extent our gross profit margins decrease and our sales
volume does not correspondingly increase, or our cost of operations increases,
our business, financial condition, prospects and operating results could be
harmed.
7
<PAGE>
We face significant competition, and we may not be able to compete
successfully.
The market for e-commerce solutions in the electronic components industry,
although at an early stage of development, is intensely competitive, evolving
and subject to rapid technological and other change. We expect the intensity of
competition to increase in the future as the amount of e-commerce transacted
over the Internet grows. Increased competition may result in reduced margins
and loss of market share, either of which could seriously harm our business.
Our competitors vary in size and in the scope and breadth of the services
and features offered. Our competitors include:
. component manufacturers;
. distributors;
. other market makers;
. electronic components brokers;
. online catalog aggregators;
. online excess surplus auction companies;
. enterprise software companies;
. e-procurement providers; and
. vertical content providers.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, significantly greater name and brand recognition and a larger base
of customers than we have. In addition, many of our competitors have well
established relationships with our potential customers and extensive knowledge
of our industry. We may not be able to compete successfully against our current
and future competitors. If we are unable to compete successfully against any of
our competitors our business will be seriously harmed. In addition, we
currently conduct business, both buying from and selling to, some of our
potential competitors. If any of these potential competitors do not continue to
conduct business with us, our business may be adversely affected.
We may not be able to respond to technological changes.
In order to stay competitive, we will need to respond to technological
changes affecting our Free Trade Zone. We may:
. fail to respond to technological changes or evolving industry standards
in a timely or cost-effective manner; and
. encounter capabilities or technologies developed by others that render
our Free Trade Zone obsolete or uncompetitive.
Our inability to timely respond to technological changes could cause
participants of our Free Trade Zone to stop using the Free Trade Zone, which
would seriously harm our business.
If our brand does not rapidly achieve broad recognition, we may fail to attract
customers and become profitable.
We believe that we must achieve increased brand recognition to become
profitable. We have spent, and intend to continue to spend, significant amounts
on brand promotion. These efforts may not be successful or may not sufficiently
increase our revenues to cover our advertising and promotional expenses. In
addition, even if our brand recognition increases, the number of new
participants over our Free Trade Zone may not increase or we may not derive any
revenues from any such new participants.
8
<PAGE>
We could be subject to potential third party liability claims related to
products purchased directly from us or through any of our services.
The laws relating to the liability of providers of data or products and
services sold over the Internet for errors, defects or other performance
problems with respect to these products and services is currently unsettled. We
could be liable for any errors, defects or other performance problems relating
to products and services that we provide to our customers or are sold by other
suppliers to our users. We may not successfully avoid civil or criminal
liability for problems relating to the products sold by us or as a result of
our services. Any claims or litigation would require expenditures in terms of
management time and other resources to defend ourselves and could result in us
being required to pay damages to harmed persons. Liability of this sort could
require us to expend substantial resources, discontinue certain of our services
or take precautions to ensure that certain products are not available through
us, which could limit the attractiveness and use of our services including the
Free Trade Zone.
Our success depends on retaining our current key personnel and attracting
additional personnel.
Our future performance depends on the continued service of certain members
of our senior management team. The loss of the services of one or more of these
individuals could seriously harm our business. Our future success also depends
on our continuing ability to attract, hire, train and retain a substantial
number of highly skilled managerial, technical, sales, marketing and customer
support personnel. We are dependent on hiring additional personnel to promote
the awareness and use of our Free Trade Zone. Competition for qualified
personnel is intense, and we may fail to retain our key employees or to attract
or retain other highly qualified personnel. In addition, in the event we are
successful in hiring new employees, they may require extensive training before
they achieve desired levels of productivity.
If the protection of our intellectual property is inadequate, our competitors
may gain access to our technology and our business could be harmed.
We depend on our ability to maintain the proprietary aspects of our
technology and trade secrets. None of our proprietary rights with respect to
our procurement agent or other components of our Free Trade Zone may be of
value in the future because the validity, enforceability and type of protection
of proprietary rights in Internet-related industries are uncertain and still
evolving. We currently have no patents and, although we have two pending patent
applications, we may not be successful in obtaining any patents. Also, our
future patents, if any, may be successfully challenged or may not provide us
with any competitive advantage.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our Free Trade Zone or to obtain and use
information that we regard as proprietary. Policing unauthorized use of
proprietary information is difficult and it may be difficult and costly for us
to enforce any rights we do have. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States. Our means of protecting our proprietary rights may
not be adequate and our competitors may independently develop similar
technology, duplicate our Free Trade Zone or our other intellectual property,
or design around any patents issued to us.
There has been a substantial amount of litigation in the Internet industry
regarding intellectual property rights. It is possible that in the future,
third parties may claim that we or our services infringe their intellectual
property. We expect that providers of electronic commerce solutions will
increasingly be subject to infringement claims as the number of products and
services and competitors in our industry segment grows and the functionality of
products in different industry segments overlap. Any claims, with or without
merit, could be time-consuming, result in costly litigation, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all, which could seriously harm our business.
9
<PAGE>
We rely on the intellectual property of third parties.
We currently license or otherwise obtain needed access to intellectual
property of third parties and may continue to do so in the future. We currently
license from Cahners Business Information, a division of Reed Elsevier, Inc.,
certain content available on their e-inSITE network, and license from
International Business Machines, Inc., or IBM, a portion of our Free Trade
Zone's underlying code. We may not be able to obtain on favorable terms any
required third party intellectual property in the future.
We entered into a master agreement with IBM on May 20, 1999 covering
hardware, software, and services. IBM has granted us an irrevocable, non-
exclusive, perpetual license to use the code created by them that is
incorporated into the Free Trade Zone. Certain custom deliverables that have
been created during the Free Trade Zone development project with IBM are owned
by us, subject to a license granted to IBM to use and sublicense these custom
deliverables.
If IBM provided to third parties the code it licensed to us along with those
custom deliverables licensed by us to IBM, such third parties may introduce a
similar or competing e-commerce solution that achieves market acceptance, which
could make the success of our Free Trade Zone less likely. Many of these third
parties may be larger and more well established, and may have greater access to
financial and other resources than us. In such event, our business, financial
condition, prospects and operating results would be seriously harmed. We may
face a similar risk of competition with respect to other third party developers
from whom we may license intellectual property.
Our business is susceptible to numerous risks associated with international
operations.
A substantial portion of our current business is based upon international
sales (approximately $22 million for the year ended December 31, 1999). We
believe that our international sales will increase in the future. In addition,
we purchase a substantial amount of components from entities based in foreign
countries. We are subject to a number of risks and uncertainties associated
with these international business activities. These risks and uncertainties
generally include:
. currency exchange rate fluctuations;
. unexpected changes in regulatory requirements;
. tariffs, import and export controls and regulations and other trade
barriers;
. longer accounts receivable payment cycles and difficulties in collecting
accounts receivable;
. difficulties in managing and staffing international operations;
. compliance with applicable United States laws, especially import/export
requirements;
. potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
. the costs and burdens of complying with a wide variety of foreign laws
and differing trade customs and practices;
. political instability; and
. potential transportation delays.
Some of our prior sales were not in compliance with certain import/export
regulations and we may be liable for severe penalties.
In June 1999, we discovered that we were not in compliance with certain
United States import/export regulations relating to sales of approximately
$100,000 worth of electronic components to parties in a foreign country.
Violations of import/export regulations, in general, may result in denial of
export privileges, severe fines or imprisonment. Moreover, despite our efforts
to monitor compliance, further violations of such regulations may occur. See
"Business--Government Regulation."
10
<PAGE>
Risks Related to the Internet
If use of the Internet does not grow as anticipated, our business will be
seriously harmed.
The success of our online services, including our Free Trade Zone, depends
on the increased acceptance and use of the Internet as a medium of
communication and commerce. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use of the Internet may not continue to
develop at historical rates and a sufficiently broad base of buyers may not
adopt or continue to use the Internet as a medium of commerce. Demand and
market acceptance for recently introduced services and products over the
Internet are subject to a high level of risk and uncertainty.
Our business could be seriously harmed if:
. use of the Internet does not continue to increase or increases at a
slower rate than expected;
. the technology underlying the Internet does not effectively support any
expansion that may occur; or
. the Internet infrastructure is unable to support the demands placed on
it by continued growth.
In addition, our Free Trade Zone will depend on the efficient operation of
Internet connections from customers to our system. These connections, in turn,
depend on the efficient operation of Internet service providers and Internet
backbone service providers, all of which have had periodic operational problems
or experienced outages. We cannot assure you that these businesses will provide
the necessary services to sustain effective use of the Internet for commercial
purposes. Additionally, there may be delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity.
Security risks and concerns may deter the use of the Internet for conducting
electronic commerce.
A significant barrier to the acceptance of the Internet as a medium to
conduct electronic commerce is the security of transmissions of confidential
information over public networks. If frequent and/or any well publicized
compromises of Internet security were to occur, it could have the effect of
substantially reducing the use of the Internet for commerce. In particular, if
anyone is able to breach our security systems, cause interruptions in our
services or obtain information about their competitor's communications,
transactions or planned purchases, it would seriously harm our business. Our
security measures may be inadequate to prevent security breaches, and our
business would be harmed if we do not prevent them. Computer viruses could be
introduced into our systems or those of our participants, which could disrupt
our Free Trade Zone or make it inaccessible to buyers or suppliers. We may be
required to expend significant capital and other resources to protect against
the threat of security breaches or to alleviate problems caused by breaches. To
the extent that our activities may involve the storage and transmission of
proprietary information, such as credit card information or bills of material,
security breaches could expose us to a risk of loss or litigation and possible
substantial liability.
The imposition of sales or other taxes on Internet sales could impair the
growth of electronic commerce over the Internet.
We do not expect, based on current United States Federal law, to collect
sales or other taxes on goods purchased through our Free Trade Zone, whether or
not sales are made directly by us, except for sales to customers in those
jurisdictions in which we have a physical presence and are required to do so.
However, one or more states or foreign jurisdictions may seek to impose sales
tax collection obligations on out-of-state companies like us that engage in or
facilitate electronic commerce. A number of proposals have been made at the
state and local level that would impose taxes on the sale of goods and services
over the Internet. These proposals, if adopted, could substantially impair the
growth of electronic commerce. Moreover, a successful assertion by one or more
states or any foreign country that we should collect sales or other taxes on
the exchange of goods and services through our Free Trade Zone could seriously
harm our business and our prospects. The taxes could generally inhibit the
appeal of electronic commerce or, in the alternative, make the Free Trade Zone
comparably more expensive as a venue in which to purchase goods.
11
<PAGE>
Current Federal law imposes a moratorium on the ability of the states to
impose taxes on Internet-based transactions. The moratorium is scheduled to end
in 2001. Failure to enact or renew or an invalidation of this legislation could
allow various states to impose taxes on electronic commerce.
Increasing government regulation could limit the market for products purchased
through our Free Trade Zone.
As Internet commerce evolves, we expect that Federal, state or foreign
agencies will continue to adopt laws and other requirements covering issues
such as sales, user privacy, pricing, content, taxation, copyright protection
and characteristics and quality of products and services. It is possible that
legislation could expose companies involved in electronic commerce to
liability, fines or penalties, which could limit the growth of electronic
commerce generally. Alternatively, legislation could empower customers or
others to be able to assert private rights of action in connection with
Internet commerce. In any such case, legislation could dampen the growth in
Internet usage and decrease its acceptance as a communications and commercial
medium. If enacted, these laws, rules or regulations could limit the market for
our Free Trade Zone and could have a material adverse effect on our business,
financial condition, prospects and operating results.
Risks Related to this Offering
We have broad discretion in how we use the proceeds from this offering.
We intend to use the net proceeds from this offering for working capital and
other general corporate purposes. We are not required to use the net proceeds
for any particular purposes or in any particular amounts. Accordingly, our
management will have significant flexibility in applying the net proceeds of
this offering. The failure of our management to use such funds effectively
could have a material adverse effect on our business, financial condition,
prospects and operating results.
Our ability to raise additional financing, if required, is uncertain.
We believe that the net proceeds of this offering, together with our current
cash and cash equivalents, will be sufficient to fund our operations for at
least the next 12 months. However, we may need to raise additional funds to
respond to business contingencies which may include the need to:
. further develop or enhance our services including our Free Trade Zone;
. fund additional marketing expenditures;
. fund more rapid expansion;
. enhance our operating infrastructure;
. hire more employees;
. respond to competitive pressures; or
. acquire businesses, assets or technologies.
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our shareholders will be reduced,
and these newly issued securities may have rights, preferences or privileges
senior to those of existing shareholders, including those acquiring shares in
this offering and may be at prices lower than the offering price of shares of
common stock in this offering. Moreover, additional financing may not be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund or
expand our operations, take advantage of opportunities, develop products or
services or otherwise respond to competitive pressures could be significantly
limited or delayed.
12
<PAGE>
Market prices of emerging Internet companies have been highly volatile, and the
market for our stock may exhibit volatility as well.
The stock market has experienced significant price and trading volume
fluctuations, and the market prices of technology companies, particularly
Internet-related companies, have been extremely volatile. Recent initial public
offerings by Internet companies have been accompanied by exceptional share
price and trading volume volatility in the first days and weeks after the
securities were released for public trading. Investors may not be able to
resell their shares at or above the initial public offering price, particularly
after periods of volatility because of the market's adverse reaction to such
volatility. There are several factors that could cause such volatility, many of
which are beyond our control, including:
. variations in our quarterly operating results;
. changes in securities analysts' estimates of our financial performance;
. changes in market valuations of similar companies;
. announcements by us or our present and future competitors of significant
acquisitions, strategic partnerships, joint ventures, technical
developments or capital commitments;
. concerns about the viability of e-commerce companies; and
. additions or departures of key personnel.
These factors may materially adversely affect the market price for our
common stock, regardless of our operating performance and other achievements.
In the past, following periods of volatility in the market price of a public
company's securities, securities class action litigation has often been
instituted against that company. Similar litigation could result in us
incurring substantial costs, liability to the company and diversion of
management's attention and resources.
The liquidity of our common stock is uncertain since it has not been publicly
traded.
Prior to this offering, there has not been a public market for our common
stock. We cannot predict the extent to which an active, liquid trading market
for our common stock will develop or be sustained. The initial public offering
price for the shares will be determined by negotiations between us and the
representatives of the underwriters based on several factors and may not be
indicative of prices that will prevail in the trading market. You may be unable
to sell your shares of common stock at or above the offering price.
Future sales of our common stock or the perception that such sales could occur
could cause our stock price to decline.
The market price for our common stock could decline as a result of resales
of a large number of shares of common stock in the public market after this
offering or the perception that such sales could occur. These factors also
could make it more difficult for us to raise funds through future offerings of
our equity securities. Future sales of our common stock, or even the
availability of such shares for future sale, could cause our stock price to
decline.
Investors in this offering will suffer immediate and substantial dilution.
Our existing shareholders paid substantially less for their shares of our
common stock than the initial public offering price. As a result, you will
suffer immediate and substantial dilution in pro forma net tangible book value
per share. To the extent outstanding options to purchase shares of common stock
are exercised, you will experience further dilution.
13
<PAGE>
Certain provisions could make it more difficult for a third party to acquire
us.
Provisions of our restated certificate of incorporation, including the
classification of our board of directors, as well as provisions of New York
corporate law, could make it more difficult for a third party to acquire us,
even if doing so might be beneficial to our shareholders.
Many of our corporate actions will be substantially controlled by our officers,
directors and principal shareholders regardless of the opposition of other
investors.
Our directors, executive officers and principal shareholders will
beneficially own, in the aggregate, approximately % of our outstanding
common stock after completion of this offering, and two of our shareholders,
Information Handling Services Inc. and Vulcan Securities Limited, who are
affiliated with each other, will own in the aggregate approximately % of
our outstanding common stock after completion of this offering. Our principal
shareholders, if they were to act together, would be able to exercise control
over all matters requiring approval by our shareholders. These matters include
the election of directors and the approval of mergers or other business
combination transactions. These actions may be taken even if they are opposed
by other shareholders, including those who purchase shares in this offering.
This concentration of ownership may also discourage, delay or prevent a third
party from acquiring us, which could have an adverse effect on our stock price.
14
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," contains forward-looking statements,
including statements regarding our Free Trade Zone and our strategy. These
statements relate to future events or our future financial performance, and
involve known and unknown risks, uncertainties, and other factors that may
cause our 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
risks and other factors include those listed under "Risk Factors" and elsewhere
in this prospectus. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "over time," "potential,"
"continue," or the negative of these terms or other comparable terminology.
These statements are only predictions. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
the risks outlined under "Risk Factors." These factors may cause our actual
results to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of
the forward-looking statements after the date of this prospectus to conform
these statements to actual results.
15
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the shares of common stock to be sold
by us in this offering are estimated to be approximately $ million, assuming
an initial public offering price of $ per share and after deducting
underwriting discounts and estimated offering expenses payable by us. If the
underwriters' over-allotment option is exercised in full, the net proceeds are
estimated to be approximately $ . The primary purposes of this offering are to
obtain additional equity capital, create a public market for our common stock
and facilitate future access to public markets.
We have no current specific allocations for the net proceeds from this
offering. We generally intend to use the net proceeds of this offering for
working capital and other general corporate purposes, including the following:
. expanding our sales and marketing activities;
. funding capital expenditures; and
. funding research and development activities.
In addition, we may use a portion of the net proceeds of this offering to
acquire or invest in other businesses, products, services or technologies,
through mergers, acquisitions, joint ventures or otherwise. However, we have no
specific agreements or commitments and are not currently engaged in any
negotiations with respect to any such transactions.
We have not yet determined our actual expected expenditures, and thus we
cannot estimate the amounts to be used for each purpose discussed above. The
amounts and timing of these expenditures will vary significantly depending on a
number of factors, including such factors as the amount, if any, of cash
generated by our operations and the market response to the introduction of our
Free Trade Zone. Pending such uses, the net proceeds will be primarily invested
in short-term, investment-grade instruments, certificates of deposit or direct
or guaranteed obligations of the United States.
DIVIDEND POLICY
We expect to retain any future earnings to support operations and to finance
the growth and development of our business and do not expect to pay any cash
dividends in the foreseeable future.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the issuance of 10,302,905 shares of Series
B mandatorily redeemable convertible preferred stock for $50.0 million
consummated on February 16, 2000, the repayment of $3.0 million of
indebtedness outstanding at December 31, 1999 with a portion of the proceeds
of such issuance, the termination of the mandatorily redeemable feature of
our mandatorily redeemable common stock upon the closing of this offering
and the automatic conversion of all of our outstanding shares of mandatorily
redeemable convertible preferred stock into 20,915,105 shares of common
stock upon the closing of this offering; and
. on a pro forma as adjusted basis to reflect our receipt of the net proceeds
from the sale by us of the shares of common stock being offered, at
an assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro forma
Actual Pro forma as adjusted
-------- --------- -----------
(In thousands, except share
and per share data)
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 5,063 $ 52,063 $
======== ======== ====
Long-term debt, net of current portion......... $ 4,331 $ 1,331 $
-------- -------- ----
Mandatorily redeemable securities:
Series A mandatorily redeemable convertible
preferred stock, $.01 par value; actual -
106,122 shares authorized, issued and
outstanding; pro forma and pro forma as
adjusted - no shares authorized, issued and
outstanding.................................. 24,434 --
Series B mandatorily redeemable convertible
preferred stock, $.01 par value; actual - no
shares authorized, issued and outstanding;
pro forma and pro forma as adjusted - no
shares authorized, issued and outstanding.... -- --
Mandatorily redeemable common stock, $.0001
par value; actual - 22,150,000 shares issued
and outstanding; pro forma and pro forma as
adjusted - no shares issued and outstanding.. 43,604 --
-------- -------- ----
Total mandatorily redeemable securities.... 68,038 --
Shareholders' equity:
Common stock, $.0001 par value; actual -
150,000,000 shares authorized and 24,403,700
shares issued and outstanding; pro forma -
150,000,000 shares authorized and 67,468,805
shares issued and outstanding; pro forma as
adjusted - 150,000,000 shares authorized and
shares issued and outstanding............ 2 7
Additional paid-in capital..................... 98,509 216,542
Deferred compensation.......................... (1,026) (1,026)
Accumulated other comprehensive loss........... (2) (2)
Accumulated deficit............................ (42,881) (42,881)
-------- -------- ----
Total shareholders' equity................. 54,602 172,640
-------- -------- ----
Total capitalization..................... $126,971 $173,971 $
======== ======== ====
</TABLE>
- --------
The share information set forth above excludes:
. shares subject to outstanding options with an exercise price equal to
the initial public offering price;
. 2,498,200 shares of common stock reserved for issuance under our 1999 Stock
Plan, of which options to purchase 2,164,800 shares at a weighted average
exercise price of $2.81 are outstanding; and
. 2,155,000 shares of common stock reserved for issuance under our 1999
Employee Incentive Stock Plan.
17
<PAGE>
DILUTION
If you invest in our common stock, your ownership interest will be diluted
to the extent of the difference between the public offering price per share of
our common stock and the pro forma net tangible book value per share of common
stock after this offering. Our pro forma net tangible book value as of December
31, 1999 was $62.4 million, or $0.92 per share of common stock. Pro forma net
tangible book value per share is equal to our total tangible assets less our
total liabilities, divided by the number of shares of common stock outstanding
as of December 31, 1999, after giving pro forma effect to the issuance of
10,302,905 shares of Series B mandatorily redeemable convertible preferred
stock for $50.0 million consummated on February 16, 2000, the repayment of $3.0
million of indebtedness with a portion of the proceeds of such issuance and the
automatic conversion of all of our outstanding shares of mandatorily redeemable
convertible preferred stock into 20,915,105 shares of common stock. Dilution in
pro forma net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of common stock in this
offering and the pro forma net tangible book value per share of common stock
immediately after completion of this offering. After giving effect to the sale
by us of shares of common stock in this offering at an assumed initial
public offering price of $ per share, and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma net tangible book value as of December 31, 1999 would have
been approximately $ million, or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing shareholders and an immediate dilution of $ per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $
Pro forma net tangible book value per share as of December 31, 1999... $
Increase per share attributable to new investors......................
---
Pro forma net tangible book value per share after this offering.........
---
Dilution per share to new investors..................................... $
===
</TABLE>
The following table sets forth, on a pro forma basis, as of December 31,
1999, the number of shares of common stock purchased from us, the total cash
consideration paid, and the average price per share paid by our existing
shareholders and by new investors assuming an initial offering price of $
per share, before deducting underwriting discounts and commissions and
estimated offering expenses payable by us:
<TABLE>
<CAPTION>
Shares
Purchased Total Consideration
--------------- --------------------- Average Price
Number Percent Amount Percent Per Share
------ -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... % $ % $
New investors..............
---- ----- -------- ----------
Total.................... 100.0% $ 100.0%
==== ===== ======== ==========
</TABLE>
The foregoing table and calculations assume no exercise of any options and
excludes:
. shares subject to outstanding options with an exercise price equal
to the initial public offering price;
. 2,498,200 shares of common stock reserved for issuance under our 1999
Stock Plan, of which options to purchase 2,164,800 shares at a weighted
average exercise price of $2.81 are outstanding; and
. 2,155,000 shares of common stock reserved for issuance under our 1999
Employee Incentive Stock Plan.
To the extent outstanding options are exercised in the future, there will be
further dilution to new investors.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following selected consolidated financial data and selected pro forma
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated
financial statements and related notes included elsewhere in this prospectus.
The 1999 pro forma consolidated statement of operations data gives effect to
the acquisitions of Accurate Components Inc. and its affiliate and of IQXpert
Holdings Inc. as if these acquisitions had been completed on January 1, 1999.
Each acquisition was accounted for under the purchase method of accounting. The
consolidated statements of operations data for the years ended December 31,
1997, 1998 and 1999 and the consolidated balance sheet data as of December 31,
1998 and 1999 have been derived from our audited consolidated financial
statements included elsewhere in this prospectus. The consolidated balance
sheet data at December 31, 1997 was derived from our audited consolidated
financial statements, which are not included in this prospectus. The
consolidated statements of operations data for the years ended December 31,
1995 and 1996 and the consolidated balance sheet data as of December 31, 1995
and 1996, have been derived from our unaudited financial statements. In the
opinion of management, such statements were prepared in accordance with
generally accepted accounting principles on a basis consistent with our audited
financial statements and provide a fair presentation of our financial position
and results of operations at and for such years. Historical results are not
necessarily indicative of the results of operations to be expected for future
periods.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
Pro forma
1995 1996 1997 1998 1999 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
Product............... $ 5,990 $ 8,389 $ 18,255 $ 20,655 $ 40,328 $ 59,563
Other................. -- -- -- -- 1,175 16,581
--------- --------- --------- --------- --------- --------
Total revenues...... 5,990 8,389 18,255 20,655 41,503 76,144
Cost of revenues........ 4,079 5,821 12,737 14,711 29,669 49,811
--------- --------- --------- --------- --------- --------
Gross profit............ 1,911 2,568 5,518 5,944 11,834 26,333
--------- --------- --------- --------- --------- --------
Operating expenses:
Selling and
marketing............ 906 1,566 2,950 3,500 11,081 18,231
General and
administrative....... 639 1,287 2,144 2,395 6,967 10,705
Technology and
development.......... -- -- -- 173 1,812 3,422
Stock-based
compensation......... -- -- -- -- 4,565 4,565
Amortization of
intangibles.......... -- -- -- 6 3,826 36,656
--------- --------- --------- --------- --------- --------
Total operating
expenses........... 1,545 2,853 5,094 6,074 28,251 73,579
--------- --------- --------- --------- --------- --------
Income (loss) from
operations............. 366 (285) 424 (130) (16,417) (47,246)
Other expense, net...... 22 50 470 1,758 451 379
Provision (benefit) for
income taxes........... 29 8 71 (38) 33 33
--------- --------- --------- --------- --------- --------
Income (loss) before
extraordinary item..... 315 (343) (117) (1,850) (16,901) (47,658)
Extraordinary item,
net.................... -- -- -- -- (1,030) (1,030)
--------- --------- --------- --------- --------- --------
Net income (loss)....... 315 (343) (117) (1,850) (17,931) (48,688)
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- -- -- (12,075) (12,075)
--------- --------- --------- --------- --------- --------
Net income (loss)
applicable to common
shareholders........... $ 315 $ (343) $ (117) $ (1,850) $ (30,006) $(60,763)
========= ========= ========= ========= ========= ========
Basic and diluted income
(loss) per common
share:
Income (loss) before
extraordinary item..... $ 0.02 $ (0.02) $ -- $ (0.06) $ (0.79) $ (1.26)
Extraordinary item...... -- -- -- -- (0.03) (0.02)
--------- --------- --------- --------- --------- --------
Basic and diluted net
income (loss) per
common share........... $ 0.02 $ (0.02) $ -- $ (0.06) $ (0.82) $ (1.28)
========= ========= ========= ========= ========= ========
Weighted average shares
used in computing basic
and diluted net income
(loss) per common
share.................. 20,000 20,000 24,219 30,000 36,676 47,400
========= ========= ========= ========= ========= ========
<CAPTION>
December 31,
----------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $ 17 $ 110 $ 218 $ 127 $ 5,063
Working capital
(deficit).............. 225 (332) 2,078 1,517 7,718
Total assets............ 931 1,911 4,864 5,203 146,901
Long-term debt, net of
current portion........ 69 45 3,288 4,638 4,331
Mandatorily redeemable
securities............. -- -- -- -- 68,038
Total shareholders'
equity (deficit)....... 326 (129) (314) (2,244) 54,602
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and related notes thereto included elsewhere
in this prospectus.
Overview
We are a leading provider of business-to-business procurement services to
the global electronic components industry. We were incorporated in New York in
September 1993.
We act as a market maker to buyers of electronic components in the spot
market by maintaining an electronic network of suppliers worldwide from whom we
purchase components on behalf of our customers, largely when their usual
sources of supply fail. In mid-1998, we began moving our business to the
Internet with the release of our Internet procurement agent, which allows users
to source electronic components on the Internet and facilitates the online
purchase of electronic components from multiple suppliers. We believe our
procurement agent has significantly increased awareness of our brand, and since
its release we have experienced a substantial increase in new customers. We are
developing our Free Trade Zone in order to further automate transaction
activity between buyers and sellers of electronic components and expand our
online business. We expect to commercially launch the Free Trade Zone in the
second half of 2000.
To date, we have derived substantially all of our revenues from sales of
electronic components as a market maker in the spot market. We purchase
components from our suppliers, take possession of the components, perform
quality checks on the components, and resell the components to our customers.
We recognize revenues on sales of electronic components, net of any discounts,
when the products are shipped and the customer takes ownership and assumes risk
of loss. We generally purchase components at the time of and in response to a
customer order for those components, although we also purchase some components
without matching orders.
We have also recognized limited revenues from other sources. As a result of
our recent acquisition of IQXpert, we began to derive revenues from the sale of
subscriptions to the CAPSXpert databases. Revenues from the sale of
subscriptions is recognized ratably over the term of the subscription period,
which is generally 12 months. We intend to integrate the CAPSXpert databases'
content and search functionality into the Free Trade Zone and make it available
to our users at no cost. Consequently, we do not expect to derive meaningful
subscription revenues in future periods.
In addition, as part of our acquisition of IQXpert, we began to derive
revenues from the licensing of software and related services, including
maintenance and consulting services. Revenues from software license agreements
are generally recognized over the software implementation period, using the
percentage of completion method, if collection is probable, the fee is fixed or
determinable, and vendor-specific objective evidence exists to allocate the
total fee to all elements of the arrangement. Revenues from maintenance
services are recognized ratably over the term of the contract, typically one
year. Consulting revenues are primarily related to implementation services
performed on a time-and-materials basis under separate services arrangements.
Revenues from consulting services are recognized as services are performed.
In future periods, we expect our revenues to continue to be derived
primarily from the sale of electronic components as a market maker. We
currently provide our procurement agent, and intend to provide the Free Trade
Zone, including the CAPSXpert databases and search capabilities, at no cost to
our users. In addition, we do not currently, and do not presently intend in the
future to, collect fees based on transactions facilitated by our online
services in which we do not act as a market maker.
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<PAGE>
Upon the closing of this offering, we will record deferred compensation as a
reduction in shareholders' equity to reflect the grant of stock options to
employees at prices below fair market value of our common stock on the date of
grant. This deferred compensation will be amortized as stock-based compensation
expense on an accelerated method over the vesting period of the related
options. We will also record an embedded dividend representing the beneficial
conversion feature associated with the Series B mandatorily redeemable
convertible preferred stock, which will be added to our net loss in the
calculation of net loss applicable to common shareholders in the first quarter
of 2000. At an assumed initial offering price of $ , we will record
deferred compensation of $ million and the beneficial conversion feature
will be $ million.
Recent Acquisitions
Acquisition of Accurate Components Inc.
On November 12, 1999, we acquired all of the capital stock of Accurate
Components Inc. and its affiliate, or Accurate, for cash of approximately $6.5
million. Accurate is an ISO 9002 certified market maker, which we believe will,
in addition to adding customers and increasing our revenues, enhance our
infrastructure to support the logistics demands of our rapidly growing
business. The purchase agreement requires the payment of additional
consideration contingent on future operating results of Accurate through
December 31, 2000. The maximum total contingent consideration is $1.7 million.
Contingent consideration of $510,000 was recorded as additional goodwill and
accrued expenses on December 31, 1999 in connection with a payment due under
the contingent payment arrangement. Payments under the contingent payment
arrangement during the year ended December 31, 2000, if any, will similarly
increase goodwill. The maximum contingent consideration payable for the year
ending December 31, 2000 is approximately $1.2 million. The acquisition was
accounted for using the purchase method of accounting and, accordingly, the
results of the acquired business have been included in our financial statements
from the date of acquisition. We have recorded goodwill on this acquisition in
the amount of $5.1 million which will be amortized over a period of 10 years,
or an amount of approximately $500,000 per year.
Acquisition of IQXpert Holdings Inc.
Pursuant to an agreement dated November 30, 1999, we acquired all of the
capital stock of IQXpert Holdings Inc. in exchange for approximately 11.7
million common shares of our common stock. IQXpert is engaged in the design and
development of software and database systems relating to enterprise
client/server software products and electronic components information,
including the CAPSXpert databases and the ItemQuest software. The acquisition
was accounted for using the purchase method of accounting, and accordingly, the
results of the acquired businesses have been included in our financial
statements from the date of acquisition. We have recorded intangible assets as
a result of this acquisition in the amount of approximately $108.2 million, and
this amount will be amortized over a period of three years, or an amount of
approximately $36.1 million per year.
Results of Operations
Year ended December 31, 1999 compared with year ended December 31, 1998
Revenues
Revenues increased to $41.5 million in 1999 from $20.7 million in 1998.
Revenues in 1999 benefited from the acquisitions of Accurate and IQXpert, which
occurred in the fourth quarter of 1999. Excluding revenues of approximately
$4.3 million attributable to Accurate and $1.2 million attributable to IQXpert,
our revenues in 1999 increased approximately 74%, or $15.4 million, over the
prior year period. We believe this increase in our revenues was primarily
attributable to the successful deployment of our procurement agent, which
increased our visibility among electronic components buyers and generated a
significant number of new customers for us. We also benefited in 1999 from
favorable industry conditions, as suppliers experienced shortages of certain
components.
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<PAGE>
Cost of revenues
Cost of revenues consists primarily of the cost of electronic components,
freight charges and obsolete inventory charges deemed necessary. Cost of
revenues increased to $29.7 million, or 71.5% of our revenues, in 1999 from
$14.7 million, or 71.2% of our revenues, in 1998. This increase in cost of
revenues was primarily due to the increase in revenues in 1999.
Selling and marketing expenses
Selling and marketing expenses consist primarily of employee costs relating
to sales, purchasing and marketing, travel and related costs, advertising and
promotional expenses, bad debt expenses, and an allocation for certain overhead
costs. Selling and marketing expenses increased to $11.1 million, or 26.7% of
our revenues, in 1999 from $3.5 million, or 16.9% of our revenues, in 1998.
This increase was due in part to increased advertising expenses of $2.1 million
and increased employee costs of $2.3 million attributable to the hiring of 39
additional sales and marketing employees during 1999. These increases in
advertising and personnel expenditures were incurred in 1999 to promote
awareness of our brand and services and to support our growth in new customers
and transactions. We expect to continue to increase our selling and marketing
expenses to promote awareness of our brand and services.
General and administrative expenses
General and administrative expenses consist primarily of employee costs,
facilities expenses, distribution costs and professional service fees. General
and administrative expenses increased to $7.0 million, or 16.8% of our
revenues, in 1999 from $2.4 million, or 11.6% of our revenues, in 1998. This
increase was primarily due to increased personnel and other professional
services and additional facility leasing costs needed to support our growth. We
expect that our general and administrative expenses will increase as we expand
our operations.
Technology and development expenses
Technology and development expenses consist primarily of payroll and
operating expenses relating to the information technology group, database
content development costs, and all costs associated with our Web site,
including design, development and third party hosting. Technology and
development expenses increased to $1.8 million, or 4.4% of our revenues, in
1999 from $173,000, or 0.8% of our revenues, in 1998. This increase was
primarily due to increased Web site development expenses of approximately
$628,000, and the remaining increase was attributable to additional headcount
and supplies. We expect our technology and development expenses to increase
significantly as we continue to expand our information technology group and
enhance our Web site. In addition, we currently capitalize our expenditures
associated with the development of the Free Trade Zone. Once the Free Trade
Zone is ready for its intended use, we will begin amortizing these capitalized
expenditures over a three year period, which will further increase our
technology and development expenses.
Stock-based compensation
Stock-based compensation primarily consists of non-cash expenses relating to
stock options granted to employees at prices below the fair market value of our
common stock on the date of grant and a transaction between certain principal
shareholders. Stock-based compensation increased to $4.6 million, or 11.0% of
our revenues, in 1999. There was no stock-based compensation expense in 1998.
This increase was primarily due to a charge of $565,000 for the grant of
1,286,700 options to key executives hired in 1999 and a $4.0 million charge
related to the cancellation of an option agreement between certain of our
shareholders.
Amortization of intangibles
Amortization of intangibles consists primarily of amortization of goodwill
and other intangibles associated with our recently completed acquisitions. The
amortization of intangibles expense increased to $3.8 million, or 9.2% of our
revenues, in 1999 from approximately $6,000 in 1998. This increase was
primarily due to the amortization of the intangibles associated with the
acquisitions of IQXpert and Accurate of $3.0 million and $43,000, respectively,
as well as $709,000 related to the amortization of a license agreement with
Information Handling Services, Inc. from March 1999 through November 1999.
22
<PAGE>
Net loss
The net loss applicable to common shareholders increased to $30.0 million in
1999 from $1.9 million in 1998. This increase was primarily due to the
increased loss from operations of $16.3 million, an extraordinary charge
relating to early extinguishment of debt of $1.0 million and accretion of
mandatorily redeemable convertible preferred stock of $12.1 million offset by a
decrease in other expenses, primarily interest expense, of $1.3 million.
Year ended December 31, 1998 compared with year ended December 31, 1997
Revenues
Revenues increased to $20.7 million in 1998 from $18.3 million in 1997. This
increase in revenues was primarily attributable to additional sales staff hired
during 1997 and 1998.
Cost of revenues
Cost of revenues increased to $14.7 million, or 71.2% of our revenues, in
1998 from $12.7 million, or 69.8% of our revenues, in 1997. This increase was
primarily due to the increase in revenues.
Selling and marketing expenses
Selling and marketing expenses increased to $3.5 million, or 16.9% of our
revenues, in 1998 from $2.9 million, or 16.2% of our revenues, in 1997. This
increase was primarily due to increased payroll and related expenses, trade
shows, promotions and advertising incurred to promote the initial release of
our procurement agent.
General and administrative expenses
General and administrative expenses increased to $2.4 million, or 11.6% of
our revenues, in 1998 from $2.1 million, or 11.7% of our revenues, in 1997.
This increase was primarily due to the increased employee costs.
Net loss
The net loss applicable to common shareholders increased to $1.9 million in
1998 from $117,000 in 1997. This increase was primarily due to the increased
loss from operations of $554,000 and increased interest expense of $1.1 million
relating to redeemable stock purchase warrants.
Liquidity and Capital Resources
Since 1997, we have financed our operations primarily through the issuance
of debt and equity securities. In July 1997, we raised a total of $3.0 million
from the sale of a senior subordinated note and warrants to purchase our common
stock. In March 1999, we raised $10.0 million from the issuance of our
mandatorily redeemable convertible preferred stock and approximately $7.2
million in cash proceeds from the sale of our mandatorily redeemable common
stock. In September 1999, we raised $10.0 million from the issuance of our
mandatorily redeemable common stock. In February 2000, we raised $50.0 million
from the issuance of our mandatorily redeemable convertible preferred stock. We
have also financed our operations through borrowings under credit facilities,
none of which are currently outstanding. At December 31, 1999, we had cash and
cash equivalents totaling approximately $5.1 million.
For the year ended December 31, 1999, net cash used in operations was $9.6
million as compared to cash used in operations of $1.2 million in 1998 and $1.1
million in 1997. The increase in net cash used in operating activities is
primarily due to an increase in our net loss to $17.9 million in 1999 from $1.9
million in 1998 and a higher level of accounts receivable. Working capital at
December 31, 1999 was $7.7 million as compared to $1.5 million at December 31,
1998.
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<PAGE>
For the year ended December 31, 1999, net cash used in investing activities
was $13.4 million, primarily reflecting net capital expenditures of $8.1
million and the acquisition of Accurate for $5.3 million, net of cash acquired.
Of the $8.1 million in net capital expenditures, $7.1 million was used in the
development of the Free Trade Zone. We estimate that our 2000 capital
expenditures will increase substantially primarily due to the further
development of the Free Trade Zone. For the years ended December 1998 and 1997,
net cash used in investing activities were approximately $151,000 and $232,000,
respectively, primarily related to net capital expenditures.
For the year ended December 31, 1999, net cash provided by financing
activities was $27.9 million, primarily resulting from proceeds received from
the issuance of mandatorily redeemable securities of $25.8 million, proceeds
received from the issuance of debt of $5.2 million offset by debt repayments of
$1.7 million and redemption of common stock of approximately $850,000. Net cash
provided by financing activities was $1.3 million for the year ended December
31, 1998 primarily reflecting issuance of short-term debt. Net cash provided by
financing activities was $1.5 million for the year ended December 31, 1997
reflecting proceeds from the issuance of a note payable and warrants of $3.0
million offset by certain financing costs and repayment of short-term debt.
Since 1996, we have experienced net losses and negative cash flows from our
operations. For the foreseeable future we expect to experience significant net
losses and negative cash flows. On February 16, 2000, we issued shares of
mandatorily redeemable convertible preferred stock to investors, resulting in
proceeds to us of approximately $50.0 million. We believe that the proceeds
from this offering, together with current cash and cash equivalents, will be
sufficient to fund our operations for at least the next 12 months. However, our
future capital needs, and the timing of those needs, are subject to substantial
uncertainty. In the event the proceeds of this offering, together with other
available resources and cash generated by operations, are insufficient to
satisfy our long-term liquidity requirements, we may seek to raise additional
capital by selling debt or equity securities. These securities may have rights
and preferences superior to those of our common stock, and our shareholders may
experience dilution. In addition, financing may not be available to us on
acceptable terms, if at all.
Recent Accounting Pronouncements
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivatives
and Hedging Activities" which establishes accounting and reporting standards
for derivative instruments including certain derivative instruments embedded in
other contracts and for hedging. In July 1999, SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities Deferral of the Effective Date of
Financial Accounting Standards Board Statement No. 133" was issued. SFAS 137
deferred the effective date of SFAS 133 from fiscal years beginning after June
15, 1999 to all fiscal years beginning after June 15, 2000. We have no
derivative instruments and the adoption of SFAS 133 should have no impact on
our financial condition or results of operations.
Year 2000 Compliance
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used in many systems. Most
reports to date, however, have indicated that computer systems are functioning
normally and the compliance and remediation work accomplished leading up to
2000 was effective to prevent any problems. However, computer experts have
warned that there may still be residual consequences of the change in
centuries. It is also possible that errors or defects may remain undetected, or
that dates other than January 1, such as February 29, 2000, may trigger Year
2000 type problems. As a result, although we have not experienced any Year 2000
problems, it is possible that we could face problems or disruptions during
2000. Any Year 2000 problems could cause difficulties accessing partminer.com
and freetradezone.com thereby resulting in decreased sales of our products and
services to our customers and damage to our reputation.
24
<PAGE>
Market Risks
Interest Rate Risk
To date, we have not utilized derivative financial instruments or derivative
commodity instruments. We invest our cash in money market funds, which are
subject to minimal credit and market risk. We believe the market risks
associated with these financial instruments are immaterial.
Foreign Currency Risk
A majority of our revenues and cost of revenues are transacted in United
States dollars. However, we have entered into sales or purchase agreements in
certain local currencies, primarily the Euro. The effect of foreign exchange
rate fluctuations was not material for the year ended December 31, 1999. As we
expand our foreign sales organization and transact more business in local
currencies, our foreign exchange rate exposure may increase. We will monitor
this risk going forward and will utilize any such financial instruments we deem
necessary in order to minimize any material exposures.
In addition, we are also exposed to foreign exchange rate fluctuations,
primarily with respect to the Euro and the Israeli Shekel, as the financial
results of foreign subsidiaries are translated into United States dollars for
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact net income (loss) and overall
profitability. The effect of foreign exchange rate fluctuation for the year
ended December 31, 1999 was not material.
25
<PAGE>
BUSINESS
Overview
We are a leading provider of business-to-business procurement services to
the global electronic components industry. We provide proprietary Internet-
based applications to buyers of electronic components in order to facilitate
their product selection and purchasing processes, and we act as a market maker
in the electronic components spot market. Buyers typically access the spot
market for the purchase of electronic components when their usual sources of
supply fail. As a market maker, we source immediately needed components from
our extensive electronic network of over 4,000 suppliers worldwide. We generate
substantially all of our revenues in the spot market by purchasing components
against a customer's buy order and reselling the components to the customer. We
also serve as a spot market clearinghouse for our customers, providing quality
assurance and consolidation services. We provide other services to reduce
inefficiencies in the supply chain, including electronic components databases,
component supplier management software and excess inventory management. We have
been in operation since 1993, and in 1999 had a customer base of over 5,000
customers in 52 countries.
In mid-1998, we began moving our business to the Internet with the release
of our proprietary Internet procurement agent at no cost. Our procurement agent
allows users to source electronic components on the Internet and facilitates
the online purchase of electronic components of all types from multiple
suppliers. As of December 31, 1999, there were over 80,000 registered users of
our procurement agent. To accommodate our rapid growth and further accelerate
our transition to the Internet, we recently completed two acquisitions that
provided us with additional customers as well as added infrastructure and
extensive proprietary Internet-based electronic component databases.
Our current Internet products facilitate the selection, sourcing and
procurement of electronic components online, and act as a gateway to our market
making services which are currently processed offline. In order to further
automate the procurement process we are developing the Free Trade Zone, an
online procurement platform for the electronic components industry, which we
expect to commercially launch in the second half of 2000. In addition to the
current functionality provided by our Internet products, our Free Trade Zone
will enable component buyers to use the Internet to transact business with
their preferred suppliers by transmitting requests for quotation, or RFQs,
receiving quotes, negotiating terms and placing orders online. The Free Trade
Zone will automatically detect when a preferred supplier cannot satisfy the
terms of a RFQ, and, in such event, we will source and quote a price on the
requested component or offer a quote on an alternative component with similar
functions. We believe that the supply and demand information we will obtain
with respect to RFQs and responses on our Free Trade Zone will significantly
enhance our ability to source components for our customers and act as a market
maker in the spot market. We expect that, over time, we will fully automate our
market making services as part of our Free Trade Zone. We intend to migrate our
existing users to the Free Trade Zone and make the Free Trade Zone accessible
to the entire electronic components purchasing community at no cost.
Industry Background
The Internet Business-to-Business Opportunity
The Internet provides companies the opportunity to conduct business with
other companies directly and more efficiently. Business-to-business, or B2B, e-
commerce over the Internet is projected to accelerate in the next five years.
Forrester Research forecasts that online business trade will grow from an
estimated $406 billion in 2000 to $2.7 trillion in 2004. As B2B e-commerce
continues to grow, industry-specific, or vertical, marketplaces are achieving
increasing acceptance. These vertical marketplaces bring together buyers,
sellers, and information in online marketplaces that automate complex business
processes and supply chains. We believe that B2B e-commerce marketplaces are
most likely to be successful in industries characterized by:
. large numbers of buyers and sellers;
. a high degree of fragmentation among buyers, sellers or both;
26
<PAGE>
. complex supply chains;
. significant dependence on information exchange;
. large transaction volume; and
. large product selection.
The Electronic Components Industry
The electronic components industry is composed mainly of electronic
component manufacturers, franchised distributors and independent distributors
on the supply side and product manufacturers, such as original equipment
manufacturers and contract manufacturers, on the demand side. Component
manufacturers sell components directly to large product manufacturers and also
distribute their products through contractual relationships with franchised
distributors. Product manufacturers in the computer, telecommunications,
medical equipment, military, consumer electronics and other industries rely on
component manufacturers and distributors for the constant supply of electronic
components used in their products. According to industry sources, electronic
components represented a $220 billion global market in 1999, which is expected
to grow to $440 billion by 2004.
In order to achieve economies of scale and manufacturing efficiencies,
electronic component manufacturers generally require significant lead-time in
manufacturing their products. Therefore, product manufacturers are typically
required to order their electronic components weeks or even months in advance
of production, based on expected demand and other factors. Accordingly, product
manufacturers satisfy the majority of their electronic component needs by
placing advance orders with their preferred suppliers. When a product
manufacturer is required to purchase components closer to, or at the time of
production, it typically will first attempt to purchase the needed components
from its usual sources of supply for those components. If these usual sources
of supply cannot meet the demand, product manufacturers typically seek to
purchase components in the spot market.
Inefficiencies in the Electronic Components Industry
Limited Access to Product Information. Millions of electronic components are
produced by thousands of suppliers worldwide. A component produced by a
particular manufacturer may provide the same functionality as other parts
produced by other manufacturers, but each will generally have its own
manufacturer-specific part number. An engineer or buyer who wishes to identify
or compare components is required to engage in a time-consuming and expensive
process of obtaining data sheets and other information on the components. This
process limits the ability of engineers and buyers to realize cost and
efficiency savings by comparing a broader range of components based on cost and
functionality.
Inefficient Procurement Process. In order to source and purchase components,
buyers generally begin by obtaining price and availability quotes from multiple
suppliers. This process is usually conducted by sending a RFQ, to each supplier
by phone, fax, or e-mail. The RFQ typically will include a list of the
components, requested delivery dates, and other relevant information. Suppliers
generally respond to RFQs by phone, fax, or e-mail, and the buyer then collects
this information in some manner, often in an electronic spreadsheet, in order
to compare the responses. Once the buyer chooses a particular supplier, or
suppliers, the buyer again communicates with the supplier by phone, fax, or e-
mail and eventually completes the purchase. This process, which generally
requires multiple discrete contacts with multiple suppliers, is time-consuming
and costly.
Inefficient Enterprise-Wide Supplier Management. In many large enterprises,
components are sourced and purchased independently at numerous operating units,
and in many cases these independent units do not coordinate with each other
regarding their component selection and procurement processes. As a result, it
is
27
<PAGE>
common for operating units within the same enterprise to duplicate the product
selection process for certain components, and, in addition, these units may
purchase similar components from different suppliers at disparate costs. These
inefficiencies prevent the enterprise from consolidating their selection and
purchasing processes and benefiting from associated volume discounts and cost
savings processes.
Inefficiencies in the Supply Chain. There is often an imbalance between
supply and demand for components, resulting in shortages of some components and
surpluses of others. Shortages occur as a result of a variety of factors
including:
. Supply Side Causes. Component manufacturers and distributors may
experience difficulty or delay in supplying required parts to product
manufacturers for a variety of reasons. Changes in market conditions may
require component manufacturers to reallocate manufacturing capacity to
other products. Manufacturers may encounter unexpected delays in the
manufacturing process, and both manufacturers and distributors may
experience logistical, distribution or delivery problems. Additionally,
manufacturers and distributors may disparately allocate their inventory
among geographic regions or specific customers.
. Demand Side Causes. Product manufacturers may underestimate consumer
demand for their finished goods and as a result schedule orders for fewer
components than are actually needed. By the time product manufacturers
realize that a need exists, they may be unable to obtain timely supply from
the component manufacturer or distributor due to required lead times.
. Demand for Obsolete Components. Product manufacturers may be unable or
unwilling to incorporate newer components in their manufacturing process
and may continue to use discontinued components. In addition, obsolete
components are also needed for the repair of existing products. Obsolete
components are often unavailable through traditional channels and must be
purchased in the spot market.
. Proprietary Supplier Channel Conflicts. Product manufacturers often
source electronic components from franchised distributors and other
intermediaries. These distribution channel intermediaries often are bound
by contractual arrangements that discourage or prevent them from selling
similar products manufactured by competing component manufacturers. In
addition, franchised distributors generally are not permitted to purchase
components from any source, including other distributors, other than the
component manufacturer, and they generally are not permitted to sell
components outside their franchised geographic territory. As a result of
these channel conflicts, buyers may experience shortages despite supply in
the market.
When shortages occur and a product manufacturer is unable to source
sufficient quantities of a required component through its primary supply chain,
the product manufacturer may incur high costs associated with an interruption
of the manufacturing process. These costs are measured by the direct costs of
shutting down a factory and the indirect costs of not delivering the finished
goods to a customer in a timely manner, which adversely affects the
manufacturer's brand name and reputation. Consequently, in the event of a
shortage of a needed component, the price that a product manufacturer is
willing to pay is no longer dictated by the intrinsic value of the component,
but rather reflects the opportunity costs associated with interrupting a
manufacturing process. In this situation, product manufacturers generally
source and purchase the needed components in the spot market.
Inefficient Spot Market. The spot market is primarily served by a highly
fragmented group of independent distributors, brokers, trading companies and
market makers, which operate without the contractual limitations concerning
buying and selling components that limit franchised distributors. They provide
a critical source for electronic components not available through a product
manufacturer's primary distribution channels
28
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at any given point in time. Companies operating in this independent channel
range in size from thousands of small firms worldwide to larger multi-million
dollar corporations.
The spot market has historically exhibited a variety of deficiencies,
including:
Industry Fragmentation. Thousands of small companies worldwide engage in
some form of market making. These companies are largely operated as small
businesses and in many cases are unknown to potential customers.
Lack of Information. There is limited centralized information regarding
available supply in the spot market. Thus, spot market makers must expend a
disproportionate amount of time and money in order to source and procure
products for their customers.
Lack of Automation. Most existing spot market makers lack the resources
and scale necessary to automate their work-flow processes by integrating
with their supply chain or customers. Accordingly, product manufacturers
may find transactions with these companies to be slow and inefficient.
The PartMiner Solution
We provide online electronic component procurement services that, along with
our market making and other services, address many of the inefficiencies in the
electronic components industry. Our Free Trade Zone, which we expect to
commercially launch in the second half of 2000, will incorporate our current
online services as well as additional functionality, and is designed to provide
our customers with a comprehensive procurement solution. We believe our
solution provides the following benefits:
Benefits to Product Manufacturers
Improved Access to Electronic Components Data. Our CAPSXpert databases
contain information on more than 12,000,000 discrete electronic component part
numbers and includes sophisticated search capabilities which allow users to
search the databases based on a variety of component characteristics. The
CAPSXpert databases give engineers and buyers access to critical design and
purchasing information, allowing them to reduce costs and enhance functionality
at the component level through a broader range of product selection. In
addition, our CAPSXpert databases give buyers who have not been able to source
a given component the ability to identify substitute components with the same
functionality which may be available in the market.
Streamlined Procurement Process. The current procurement process requires
buyers to contact multiple sources independently, usually by phone, fax or e-
mail. Our procurement agent allows users to source electronic components on the
Internet and facilitates the online purchase of electronic components of all
types from multiple suppliers, reducing the time and cost associated with
traditional procurement methods. Our Free Trade Zone will further streamline
this process by allowing buyers to use the Internet to transact business with
their preferred suppliers by sending RFQs, receiving quotes, negotiating terms
and placing orders online.
More Efficient Supplier Management. Our ItemQuest software provides
component and supplier management solutions enabling searching and
classification of product, supplier, commodity, and component information from
disparate systems across an extended supply chain of an enterprise. By using
this service our customers are able to determine, among other things, if less
expensive substitute components are available, if consolidated purchases are
more cost-effective, and if they should continue sourcing from certain
suppliers. Our supply chain management service enables our customers to
continuously improve their component procurement process.
Enhanced Product Availability. In the event a buyer is unable to obtain
components from its preferred suppliers, our market maker service enables
customers to source components through us from a broader group of components
suppliers. We maintain an electronic network of more than 4,000 suppliers
worldwide and internal databases that track availability and pricing of more
than 8,000,000 electronic component part
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numbers. As a result, a buyer is more likely to locate a needed component,
reducing the risk of a production shutdown. Buyers are also able to achieve
cost savings by outsourcing their procurement to us, reducing the number of
vendors with whom they deal directly, the number of orders which are processed
and the number of shipments they receive. When a buyer uses our Free Trade Zone
to source components from its preferred suppliers, and those suppliers are
unable to meet this demand, we will source the components from our extensive
network of suppliers and provide the buyer with a quote for the component.
Reduced Inventory Carrying Costs. Current options available to product
manufacturers for the disposition of surplus component inventory are limited
and often result in significant costs for write-offs. Our inventory management
services enable product manufacturers to reduce surplus inventory at a lower
cost by offering such inventory to our online users, who represent a much
larger targeted group of potential buyers.
Benefits to Component Suppliers
Enhancement of Existing Relationships. Unlike some online solutions
addressing the electronic components market that seek to displace or compete
with existing suppliers, our solution is intended to enhance existing
relationships between buyers and sellers of electronic components. We intend to
provide a quote to buyers using our Free Trade Zone only after the buyer has
sent a RFQ to its preferred suppliers and those suppliers have been unable to
provide the needed components.
Greater Ability to Service Customers. Because of the improved efficiencies
associated with communicating over the Internet rather than through traditional
methods, we believe our services allow suppliers to better serve their
customers, in particular smaller customers whose transaction volume might not
justify the costs associated with traditional methods of communication.
Our Strategy
Our objective is to be the leading online provider of business-to-business
procurement services to the global electronic components industry. Our strategy
to achieve this objective includes the following key elements:
Establish the Free Trade Zone as the Leading Procurement Network for the
Electronic Components Industry. We believe that the Free Trade Zone will over
time provide a comprehensive procurement solution and serve as the leading
online marketplace to the entire electronic components industry. We intend to
promote its use to our current customers and users of our Internet products.
After the Free Trade Zone is launched, users of our procurement agent will be
directed to enter the Free Trade Zone when they sign on to use our procurement
agent. Over time, we intend to transition our current traditional relationships
with component manufacturers, distributors and buyers into online relationships
on our Free Trade Zone by educating them about its benefits and efficiencies.
We also intend to provide free access to our CAPSXpert databases, which we
believe will attract new users to the Free Trade Zone. Over time, we expect to
incorporate additional features into the Free Trade Zone to make it more
attractive to participants. For example, we intend to integrate our surplus
inventory management services into the Free Trade Zone.
Expand Brand Awareness. We intend to increase industry awareness of our
brand and the capabilities of our Free Trade Zone. We plan to accomplish this
through targeted marketing efforts, advertisements in industry publications,
participation in industry trade shows and through our relationships with
component manufacturers, distributors and buyers. We also intend to leverage
our strategic relationship with Cahners Business Information, one of the
largest business-to-business information providers. We intend to hire
additional business development professionals to actively encourage the
adoption of the Free Trade Zone by product manufacturers, component
manufacturers, buyers, and suppliers on an enterprise wide basis. We believe
that the benefits offered by our Free Trade Zone will further enhance our
recognition as a leading global market maker to the electronics components
industry.
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Leverage Our Existing Expertise and Infrastructure. We have been engaged as
a market maker in the electronic components spot market since 1993. We have
substantial experience and know-how in sourcing components globally for the
spot market and completing purchase and sale transactions. We intend to
capitalize on our industry relationships and expertise to provide a
comprehensive procurement solution and value proposition to our customers.
Pursue Strategic Relationships and Strategic Acquisitions. We intend to
continue to pursue strategic relationships to expand our customer base and
further extend our solutions for electronic components buyers. For example, we
intend to offer our CAPSXpert databases for inclusion in third party solutions,
including other marketplaces, exchanges, purchasing applications and enterprise
resource planning solutions, in exchange for becoming the exclusive market
maker to those solutions. We will also pursue strategic acquisitions and joint
ventures, as appropriate.
Explore Opportunities in Related Vertical Markets. We believe the technology
embedded in our Free Trade Zone may be adapted to other vertically integrated
industries. Eventually, we may explore opportunities to adapt the technology
underlying our Free Trade Zone and our experience in creating an electronic
marketplace in the electronic components industry to develop similar e-commerce
solutions and marketplaces in other vertically integrated industries.
Our Services
We provide electronic component procurement services, including Internet
procurement, market making services, surplus inventory management, and
component and supplier management. We intend to integrate these services into
our Free Trade Zone.
Market Making. We conduct reverse auctions on behalf of our customers for
components in the spot market. Upon receipt of a request for a component from a
customer, we search our internal databases to determine price and availability
of the component. Our network of over 4,000 suppliers worldwide, supported by
our internal databases, allows us to track the pricing, availability and other
data of over 8,000,000 component part numbers. Upon confirmation of available
product, we provide our customer with a quote. If the customer accepts our
quote, we buy the component for resale to the customer. The purchased component
is then shipped to us and inspected. We provide quality assurance and
consolidation services by maintaining a logistics infrastructure that serves as
a clearinghouse for our customers.
Internet Procurement. The electronic component procurement process can be
complex and time consuming for buyers. Selecting, sourcing and purchasing
multiple components from multiple suppliers is typically accomplished using
phone, fax and e-mail. Our procurement agent allows users to source electronic
components on the Internet and facilitates the online purchase of electronic
components of all types from multiple suppliers. A component buyer can enter an
entire bill of materials into our procurement agent and obtain price and
availability information from multiple distributors, data sheets from thousands
of manufacturers and other relevant information on millions of components. Our
Internet procurement services replace the fragmented and time consuming process
of searching through paper-based components catalogs and visiting dozens of Web
sites to conduct individual searches for parts.
Our Internet procurement agent currently is based on client server
technology, requiring a user to download a file, complete a user registration
form, and install the software on a local computer. Our procurement agent
allows the user to enter a series of part numbers or import a bill of materials
from an external application. The user then can execute a search to extract
component data from multiple Web sites. This component data may include
manufacturer part number, description, price, quantity available, manufacturer
and data sheet where available. A user can export this component data to a
spreadsheet for analysis. Users can also select a line item related to a
specific component and our procurement agent will transport the user to the
supplier's Web site. The user may then purchase the component online to the
extent the supplier's Web site is capable of executing transactions.
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When commercially launched, our Free Trade Zone will provide users with
additional procurement functionality which allows them to send RFQs to their
preferred suppliers. The system will automatically route RFQs to the selected
suppliers, who will be able to respond directly to the requesting user through
the Free Trade Zone. The user will also be able to negotiate online with the
supplier and once the parties have reached agreement on terms, the user can
generate a purchase order online.
Our Free Trade Zone is designed to monitor all communications in the
marketplace. We will participate in the Free Trade Zone as the market maker if
the Free Trade Zone detects that a market failure has occurred because no
preferred supplier has indicated that it can satisfy the terms of a RFQ. In the
event of a market failure, we will source the component or an alternative
component, determine price and availability, and then respond to the user's
RFQ. If the participant accepts our response, we will purchase the product and
resell it to the customer.
Content Delivery. Our CAPSXpert databases are recognized as the most
comprehensive aggregation of electronic components data in the world. Access to
these databases is now available through the Internet and these databases
contain information on more than 12,000,000 discrete component part numbers
produced by over 1,800 component manufacturers. The CAPSXpert databases
facilitate the identification, comparison and selection process of components.
Surplus Inventory Management. In addition to managing the procurement of
electronic components for buyers, we also offer our customers surplus component
inventory management services. Our surplus inventory management services enable
sellers to maximize prices received for inventories by making these inventories
available to our global network of buyers, assessing market conditions for best
available pricing and demand characteristics and facilitating the marketing and
sale of this inventory. We intend to automate these services and incorporate
them into our Free Trade Zone.
Supply Chain Management. We enable our customers to improve their electronic
component usage and procurement processes, reducing costs associated with these
functions. Our ItemQuest software and related services provide component and
supplier management solutions that enable searching and classification of
product, supplier, commodity, and component information from disparate systems
across an extended supply chain of an enterprise. Using this service enables
our customers to determine if less expensive substitute components are
available, if consolidated purchases are more cost-effective, and if buyers
should continue sourcing from certain suppliers. Our supply chain management
service enables our customers to continuously improve their component
procurement processes.
Customers
We have an extensive customer base which includes many of the world's
largest original equipment manufacturers, contract manufacturers, and
distributors. During 1999, we had a customer base of over 5,000 customers in 52
countries. Some of the largest customers of our market making service include
British Aerospace, Infos, Lucent, Motorola, Nortel and Solectron. Our recent
acquisition of IQXpert provided us with another large, complementary customer
base. In 1999, approximately 2,000 customers representing over 20,000 users or
seats paid for subscriptions to the CAPSXpert databases. The largest customers
of the CAPSXpert databases in 1999 included Boeing, Lockheed Martin, Seagate
Technology, Solectron, Sony and TRW.
In 1999, our largest 20 customers accounted for $16.0 million of our total
$41.5 million in sales, our largest 50 customers accounted for $22.3 million of
our total $41.5 million in sales, and our top 100 customers accounted for $27.2
million of our total $41.5 million in sales. In 1999, British Aerospace
accounted for approximately 6% of our total sales. No other customer accounted
for more than 5% of our total sales in 1999.
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Distribution and Fulfillment
We operate two distribution and fulfillment centers in the United States and
one in Denmark. Our United States facilities are located in Palisades Park, NJ
and in Bohemia, NY. We provide a complete set of services including receiving,
incoming inspection, verification, quality check, order tracking,
consolidation, repackaging, export documentation and shipping in each facility.
The facility in Bohemia, NY is an ISO 9002 certified facility, indicating the
achievement of a high level of process documentation and control.
The goal of our distribution and fulfillment activity is to provide our
customers with rapid turnaround, on-time and accurate fulfillment, and an
overall high level of service. We actively monitor our performance and work
closely with our customers and suppliers to address any problems that may
occur.
Sales and Marketing
We currently market our services through 11 domestic offices and four
foreign offices. In addition, we maintain relationships with sales
representatives located in four additional foreign offices. Our sales force
targets buyers and engineers at product manufacturers.
After the Free Trade Zone is commercially operational, users of our
procurement agent will be directed to enter our Free Trade Zone when they sign
on to use the procurement agent. We will also utilize a direct sales force,
telemarketing efforts, and strategic relationships to promote the adoption and
use of our Free Trade Zone. We intend to conduct marketing programs designed to
create brand awareness for the Free Trade Zone and educate potential
participants as to its functionality and efficiency. In addition, we will
advertise and conduct direct mail, public relations and event marketing
campaigns. We also expect to be active at industry trade shows and other
available public forums.
We recently entered into a three-year agreement with Cahners Business
Information Inc., or Cahners, for the creation of interfaces between our online
products and Cahners' e-inSITE online network of Web sites. Cahners is one of
the largest business-to-business information providers with more than 125
targeted print magazines, 140 Web sites, research databases and CD-ROMs serving
16 markets. Cahners is an affiliate of Cahners Information Holdings, Inc., one
of our principal shareholders. Cahners' EDN magazine is a provider of printed
information concerning complex design problems, product announcements, industry
news and events to over 215,000 design and development engineers and
engineering managers. EDN Access, Cahners' Web site for the industry, offers
online access to information provided in EDN and has attracted over 75,000
users during the past two years. Under the agreement, Cahners has agreed to
promote us as its exclusive e-commerce business partner for electronic
components to the electronic original equipment market on e-inSITE and in
Cahners' publications. In return, we have agreed to use Cahners as the
exclusive advertising agent for our procurement agent and our Free Trade Zone
to electronic component distributors and manufacturers.
Technology and Systems
Our Information Systems department is responsible for internal
infrastructure as well as software development. Infrastructure encompasses all
of our internal technology and systems, including networks and desktops,
internal application support, internal help desk, data acquisition and
management and external customer support. Software development is responsible
for the design, creation, development and maintenance of the Free Trade Zone.
The Free Trade Zone application, database, Internet connectivity and
physical environment require considerable resources, maintenance, monitoring
and support. The Free Trade Zone will be hosted on IBM RS/6000 equipment at a
hosting site in New York City owned and operated by Intira Corporation. Intira
specializes in the physical operation of large-scale Web sites and has been
chosen by us to operate and manage the physical platform in their secure
facilities with multiple, high-speed connections to the Internet, dual
connections to power grid, and redundant environmental control systems.
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The CAPSXpert databases operate on a DEC Alpha platform. Presently, the
CAPSXpert databases reside at a hosting site in Denver, CO owned and operated
by Information Handling Services, Inc., one of our principal shareholders. We
intend to move the CAPSXpert databases to the Intira hosting site and integrate
them with the Free Trade Zone. In addition, we intend to increase the service
level so that the CAPSXpert databases can accommodate the increase in traffic
expected from making the databases free of charge to users of the Free Trade
Zone.
The Free Trade Zone will include connectivity to an environment similar in
function to an EDI Value Added Network or VAN, except that it will support
multiple document formats and is entirely free to all users. The system will
provide secure communication links into the Free Trade Zone for the
transmission of EDI, XML and other document formats between buyers and sellers.
Competition
The markets in which we operate are characterized by intense competition
from several types of companies, including but not limited to component
manufacturers, distributors, market makers, brokers, online catalog
aggregators, online excess surplus auction companies, enterprise software
companies, e-procurement providers and vertical content providers. Many of
these companies have created strategic alliances which may create additional
competitive product and service offerings. We expect there are or will be other
types of potential competitors that we have not identified.
We expect to face further competition from new entrants to the market not
yet known, as well as from alliances between competitors in the future. Many of
our current and potential future competitors have greater financial, technical,
market and other resources than us and may have deeper strategic relations with
a broader supply and customer base than we do. As a result, these competitors
may be able to provide a more competitive solution, respond more quickly to new
or emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sales of their services than we
can. We may not be able to compete successfully with existing or new
competitors and competition may have a material adverse effect on our business,
financial condition, prospects and operating results.
Intellectual Property
Our intellectual property is very important to our business. We rely on a
combination of contractual provisions, employee and third-party nondisclosure
agreements, and copyright, trademark, service mark, trade secret and patent
laws to establish and protect the proprietary rights of our software and
services.
Our efforts to protect our intellectual property may not be adequate. Our
competitors may independently develop similar technology or duplicate our
software and services. Intellectual property laws provide limited protection.
Moreover, the laws of some foreign countries do not offer the same level of
protection for intellectual property as the laws of the United States. We may
be unable to detect some unauthorized use of our intellectual property. We may
have to resort to litigation to enforce our intellectual property rights, or to
determine the validity and scope of the proprietary rights of others. Any such
litigation may be expensive and time-consuming.
We could be subject to intellectual property infringement claims. Defending
against these claims, even if not meritorious, could be expensive and divert
our attention from operating our company. If we become liable to third parties
for infringing upon their intellectual property rights, we could be required to
pay substantial damage awards and be forced to develop noninfringing
technology, obtain a license or cease using the applications that contain the
infringing technology or content. We may be unable to develop noninfringing
technology or content or obtain a license on commercially reasonable terms, or
at all.
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We have registered trademarks in the United States for "PartMiner," "CAPS,"
and "ItemQuest." We have pending service mark applications for the registration
of "Free Trade Zone," "PartMiner Free Trade Zone," "Electronic Commerce Free
Trade Zone," "Fast. Simple Complete. Which part don't you get?," "CAPSXpert,"
and "IQXpert" (and design), and have also used "Market-Trak," "Accu-Trak," and
"Req-Trak" in the course of our business. In addition, we currently have two
pending patent applications in the United States, one relating to the Free
Trade Zone's business model and one relating to our ItemQuest software. We may
not be successful in obtaining the patents or service mark registrations for
which we have applied. Even if we are issued a patent, it is possible that
others may be able to challenge such patent and/or that no competitive
advantage will be gained from such patent.
We license certain components of our technology from third parties. These
licenses from third parties may not be available to us on commercially
reasonable terms in the future. The loss of these licenses could delay release
of our software until equivalent technology could be licensed, developed or
otherwise obtained. Any such delay could have a material adverse effect on our
business.
We cannot determine whether future patent, service mark or trademark
applications, if any, will be granted. No certainty exists as to whether our
current intellectual property, or any future intellectual property that we may
develop, will be challenged, invalidated or circumvented or will provide us
with any competitive advantage.
We currently license a portion of our Free Trade Zone's underlying code from
IBM. Among the considerations made in selecting IBM to assist us in the initial
development of the Free Trade Zone was IBM's ability to incorporate certain
preexisting resources into the Free Trade Zone. Our contractual arrangements
with IBM provide that IBM will continue to own these preexisting resources
subject to IBM having granted us an irrevocable, non-exclusive, perpetual
license to use these preexisting resources. We will own all custom deliverables
that have been created during this development project but are required to
grant IBM a license to use certain of our custom deliverables.
We believe that we own or have the right to use all intellectual property
necessary for the commercial acceptance and success of the Free Trade Zone.
However, if IBM were to provide its preexisting resources along with those
custom deliverables for which they have a license to other IBM customers, many
of whom may be larger, more well established and have greater access to
resources than we do, such customers may introduce a similar or competing e-
commerce solution that achieves market acceptance, which could make the success
of our Free Trade Zone less likely. In such event, our business, financial
condition, prospects and operating results would be seriously harmed.
Government Regulation
Export Controls. We derive revenues from sales of goods and technology to
customers in countries other than the United States. The United States
government controls the export of goods and technology through rules and
regulations promulgated and enforced by the Department of Commerce, the
Department of the Treasury, and the Department of State. Export licenses for
the shipment of goods and technology may be required for some items sold to
certain foreign customers or to all customers in certain countries. In
addition, export of all goods and technology may be forbidden from the United
States to certain countries. The need for export licenses could disrupt some
sales due to the inability to obtain licenses in a timely manner or the
inability to ship to some customers or countries because of export law
restrictions. Failure to obtain an export license when one is required or other
violations of export laws and regulations may result in civil and/or criminal
penalties and fines. The civil fines and penalties imposed are assessed at the
discretion of the authorized government agency and may include monetary fines
of up to $10,000 per violation (or up to $100,000 per violation involving
national security controls), and/or denial of export privileges. Penalties may
also include seizure and forfeiture of subject items. The criminal penalties
for willful violations may include fines of either five times the value of the
export involved or $50,000, whichever is greater, or imprisonment of
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not more than five years, or both. For willful violations involving controls
for foreign policy purposes or military or intelligence gathering purposes,
penalties may include fines of not more than five times the value of the export
involved or $1,000,000, whichever is greater; and in the case of an individual,
a fine of not more than $250,000, or imprisonment of not more than 10 years, or
both.
Internet Regulation. There are an increasing number of laws and regulations
pertaining to the Internet. In addition, a number of legislative and regulatory
proposals are under consideration by federal, state, local and foreign
governments and agencies. Laws or regulations may be adopted with respect to
the Internet relating to the liability for information retrieved from or
transmitted over the Internet, on-line content regulation, user privacy,
taxation and the quality of products and services. Moreover, it may take years
to determine whether and how existing laws such as those governing issues
relating to intellectual property ownership and infringement, privacy, libel,
copyright, trademark, trade secret, taxation and the regulation of the sale of
other specified goods and services apply to the Internet. The requirement that
we comply with any new legislation or regulation, or any unanticipated
application or interpretation of existing laws, may decrease the use of the
Internet, which could in turn decrease the demand for our service, increase our
cost of doing business or otherwise have a material adverse effect on our
business, results of operations and financial condition.
Internet Taxation. A number of legislative proposals have been made at the
Federal, state and local level, and by foreign governments, that would impose
additional taxes on the sale of goods and services over the Internet and
certain states have taken measures to tax Internet-related activities. Although
in October 1998 Congress enacted a three-year moratorium on state and local
taxes on Internet access or on discriminatory taxes on electronic commerce,
existing state or local laws were expressly excepted from this moratorium. Once
this moratorium is lifted, some type of federal and/or state taxes may be
imposed upon Internet commerce. Similar risks relating to the taxation of the
Internet exist with respect to foreign jurisdictions. Such legislation or other
attempts at regulating commerce over the Internet may substantially impair the
growth of commerce on the Internet and, as a result, adversely affect our
opportunity to derive financial benefit from such activities.
Regulation of Communications Facilities. To some extent, the rapid growth of
the Internet in the United States has been due to the relative lack of
government intervention in the marketplace for Internet access. Lack of
intervention may not continue in the future. For example, several
telecommunications carriers are seeking to have telecommunications over the
Internet regulated by the Federal Communications Commission in the same manner
as other telecommunications services. Additionally, local telephone carriers
have petitioned the Federal Communications Commission to regulate Internet
service providers in a manner similar to long distance telephone carriers and
to impose access fees on such providers. Some Internet service providers are
seeking to have broadband Internet access over cable systems regulated in much
the same manner as telephone services, which could slow the deployment of
broadband Internet access services. Because of these proceedings or others, new
laws or regulations could be enacted which could burden the companies that
provide the infrastructure on which the Internet is based, thereby slowing the
rapid expansion of the medium and its availability to new users.
Facilities
Our headquarters are located in New York, NY in an office consisting of
approximately 9,000 square feet of office space. We lease approximately 18,000
square feet in Denver, CO that serves as the main office of IQXpert. We lease
approximately 17,500 square feet in Bohemia, NY and 6,200 square feet in
Palisades Park, NJ for sales and warehouse functions. In addition, we also
lease foreign sales offices in Denmark, Israel, Singapore and the United
Kingdom, as well as domestic sales offices in California, Georgia,
Massachusetts and North Carolina. We lease all of our facilities with terms
expiring in 2001 through 2004. We expect to require additional space to meet
our needs in the next 12 months, and we are currently evaluating additional
space. We believe that suitable additional facilities will be available as
needed on commercially reasonable terms.
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Employees
As of January 31, 2000, we had a total of 334 full-time employees. Of the
total employees, 44 were in finance and administration, 21 in operations and
fulfillment, 151 in purchasing, sales and marketing, 37 in information systems,
74 in content development and seven in business development. None of our
employees are represented by a labor union or subject to any collective
bargaining agreements. We consider our relations with our employees to be good.
Legal Proceedings
We are party to routine litigation incidental to our business. We do not
believe that any legal proceedings to which we are a party or to which any of
our property is subject will have a material adverse effect on our business,
financial condition, prospects or operating results.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and their respective ages and positions
as of January 31, 2000 are set forth below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Daniel Nissanoff............ 34 President and Chief Executive Officer;
Chairman of the Board of Directors
Earle Zucht................. 45 Chief Operating Officer; Executive Vice
President--Business Development
William R. Engles, Jr. ..... 41 Chief Financial Officer
William E. Barron........... 39 Chief Marketing Officer
Mark A. Schenecker.......... 39 Chief Technology Officer
Kimberly Hibler............. 41 Senior Vice President--Sales and Purchasing
Richard P. Sobel............ 37 Senior Vice President--Strategic Planning
and Development
Michael R. Manley........... 33 Vice President--General Counsel; Secretary
Terri L. Pike............... 37 Vice President--Corporate Controller
Bruce M. Friedman........... 34 Director; Executive Vice President--
International Operations
L. Christopher Meyer........ 52 Director
Eben S. Moulton............. 53 Director
Brian Nairn................. 51 Director
Gerhard Schulmeyer.......... 61 Director
James M. Wilson............. 47 Director
</TABLE>
Daniel Nissanoff is our founder and has served as President, Chief Executive
Officer and Chairman of our Board of Directors since our inception in 1993.
Prior to founding our company, Mr. Nissanoff was an associate attorney in the
corporate reorganization department of the law firm of Weil, Gotshal & Manges
from August 1992 to October 1993.
Earle Zucht has served as Executive Vice President--Business Development
since April 1999 and Chief Operating Officer since October 1999. From January
1997 to February 1999, Mr. Zucht served as senior vice president of
semiconductor marketing at Wyle Electronics, a large franchised distributor of
electronic components, and as senior vice president of corporate sales from
March 1994 to January 1997.
William R. Engles, Jr. has served as Chief Financial Officer since January
2000. From April 1992 to January 2000, Mr. Engles was employed with Bear,
Stearns & Co. Inc., most recently as a managing director in the investment
banking department, where he principally advised companies in the electronic
components and contract manufacturing sectors.
William E. Barron has served as Chief Marketing Officer since January 1999.
From November 1997 to December 1998, Mr. Barron served as publishing director
of CMP Media Inc.'s electronics group, from January 1996 to October 1997, as
publisher of Electronic Buyer's News, and from August 1994 to December 1995, as
Associate Publisher of Electronic Engineering Times.
Mark A. Schenecker has served as Chief Technology Officer since May 1999.
From October 1998 to May 1999, Mr. Schenecker served as vice president of
electronic commerce strategies at Doculabs where he provided analysis and
strategic advisory services to companies considering the use of the Internet as
a business application platform for conducting commerce. From March 1994 to
September 1998, Mr. Schenecker served as vice president of research and
development for Optika Inc.
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Kimberly Hibler has served as Senior Vice President--Sales and Purchasing
since December 1999 and served as Vice President of Strategic Alliances from
June 1999 through December 1999. From March 1994 to June 1999, Ms. Hibler was
employed with Wyle Electronics, as marketing director from September 1998 to
June 1999, as vice president of Atlas Services from March 1998 to September
1998, as vice president-operations from June 1997 to March 1998 and as vice
president of the southwest region from March 1994 to June 1997.
Richard P. Sobel has served as a consultant to us since December 1999 and as
Senior Vice President-- Strategic Planning and Development since February 2000.
From July 1992 to December 1999, Mr. Sobel served in various venture capital
and financial advisory positions with CIBC Oppenheimer, ING Barings, and the
European Bank for Reconstruction and Development.
Michael R. Manley has served as Vice President--General Counsel and
Secretary since May 1999. From April 1993 to May 1999, Mr. Manley was an
attorney at the law firm of Gould & Wilkie LLP, where he was responsible for
developing the firm's New Media practice.
Terri L. Pike has served as Vice President--Corporate Controller since
December 1999 and as controller from May 1999 through November 1999. From
November 1997 to May 1999, Ms. Pike was employed with TLC Beatrice
International Holdings, Inc., as vice president--controller from November 1998
to May 1999, as controller from July 1993 to October 1998, as assistant
controller from July 1992 to July 1993. Ms. Pike was also employed by Inter-Act
Systems from June 1997 to October 1997 as controller. During her employment
with Inter-Act Systems, Ms. Pike worked on a limited, as-needed basis for TLC
Beatrice International Holdings, Inc.
Bruce M. Friedman has served as Director and Executive Vice President--
International Operations since March 1999 and served as our Chief Operating
Officer from November 1996 to December 1998. From November 1995 to November
1996, Mr. Friedman served as a consultant to us. From January 1993 to December
1995, Mr. Friedman was president of Certified Industries International Inc.
L. Christopher Meyer has served as a Director since March 1999. He has
served as a member of the compensation committee since March 1999 and as a
member of the audit committee since September 1999. Mr. Meyer has served as
president and chief operating officer at Information Handling Services Inc.
since June 1996 and as executive vice president and chief financial officer
from June 1989 to June 1996.
Eben S. Moulton has served as a Director since March 1999. He has served as
a member of the compensation committee since March 1999 and as a member of the
audit committee since September 1999. Mr. Moulton has served as the senior
managing director of Seacoast Capital Corporation since November 1994.
Mr. Moulton also serves as a director of IEC Electronics Corp.
Brian Nairn has served as a Director and a member of the compensation
committee since September 1999. In September 1996, Mr. Nairn joined Cahners
Business Information as executive vice president in charge of business
publications and was promoted to chief operating officer in September 1999.
From January 1991 to August 1996, Mr. Nairn was employed by Advanstar
Communications where he held a number of senior positions and was promoted to
president of the publishing division in 1994.
Gerhard Schulmeyer has served as a Director since December 1999. Mr.
Schulmeyer has served as president and chief executive officer of Siemens
Corporation since January 1999. From July 1994 until December 1998, Mr.
Schulmeyer served as president and chief executive officer of Siemens Nixdorf.
Mr. Schulmeyer also serves as a director of Alcan Aluminum Limited, Korn/Ferry
International, FirePond, Inc. and Ingram Micro, Inc.
James M. Wilson has served as a Director since March 1999. He has served as
a member of the compensation committee since March 1999 and as a member of the
audit committee since September 1999. Mr. Wilson has served as managing
director of Boston Ventures Limited Partnership V since its formation in 1996.
Mr. Wilson has been a partner in each of Boston Ventures prior four investment
funds beginning in 1983.
39
<PAGE>
Our Board of Directors consists of seven members. Four of our Directors are
affiliated with certain of our principal shareholders. All of our Directors
have been elected to such positions pursuant to a stockholders agreement with
us. This stockholders agreement will terminate upon the closing of this
offering. Our officers serve at the discretion of our Board of Directors,
subject to the terms of any employment agreements.
Classes of our Board of Directors
Our Board of Directors is divided into four classes that serve staggered
four-year terms as follows:
<TABLE>
<CAPTION>
Expiration
Class of Term Member(s)
----- ---------- -----------------------------------
<S> <C> <C>
Class I....................... 2000 Gerhard Schulmeyer
Class II...................... 2001 Brian Nairn, L. Christopher Meyer
Class III..................... 2002 Eben S. Moulton, James M. Wilson
Class IV...................... 2003 Daniel Nissanoff, Bruce M. Friedman
</TABLE>
Committees of our Board of Directors
Our Board has two standing committees, an audit committee and a compensation
committee. Our audit committee currently consists of L. Christopher Meyer, Eben
S. Moulton, Brian Nairn and James M. Wilson. This committee is responsible for
choosing and interacting with our independent accountants, reviewing the scope
and results of our audits with our independent accountants and raising any
issues with management and the full Board of Directors and evaluating the
adequacy of our internal accounting and control procedures. Our compensation
committee currently consists of L. Christopher Meyer, Eben S. Moulton, Brian
Nairn and James M. Wilson. This committee is responsible for the design,
review, recommendation and approval of compensation arrangements, including
salaries and bonuses, for our directors, executive officers and key employees.
In addition, it is responsible for the administration of our stock plans,
including the approval of grants under such plans to consultants and other non-
employees.
Director Compensation
Non-employee Directors are entitled to receive a fee of up to $15,000 per
year, or such other amounts as the Board of Directors may deem advisable, and
all Directors are entitled to reimbursement of his or her related expenses.
Compensation Committee Interlocks and Insider Participation
Prior to the establishment of our compensation committee, Daniel Nissanoff,
our President, Chief Executive Officer and Chairman of our Board of Directors,
participated in deliberations of our Board of Directors concerning executive
officer compensation.
40
<PAGE>
Executive Compensation
The following table sets forth certain compensation information for fiscal
year 1999 in respect of our Chief Executive Officer and our four other most
highly compensated executive officers whose total annual salary and bonus
exceeded $100,000 for services rendered in all capacities to us and our
subsidiaries during 1999. We refer to these executive officers as our "named
executive officers" in various parts of this prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------
Securities
Underlying All Other
Name and Principal Position Salary Bonus Options/SARs (#) Compensation
- --------------------------- ---------- ------------------------- ------------
<S> <C> <C> <C> <C>
Daniel Nissanoff............ $ 334,427 $ 3,125 -- $ 547(5)
President and Chief
Executive Officer
William E. Barron(1)........ $222,917 -- 600,000 --
Chief Marketing Officer
Bruce M. Friedman(2)........ $199,792 $ 1,875 -- $21,302(6)
Executive Vice President--
International Operations
Mark A. Schenecker(3)....... $121,282 -- 214,800 --
Chief Technology Officer
Earle Zucht(4).............. $121,043 -- 414,800 --
Chief Operating Officer and
Executive Vice President--
Business Development
</TABLE>
- --------
(1) Mr. Barron was hired in January 1999 at an annual base salary of $250,000.
(2) Mr. Friedman's employment agreement, dated March 16, 1999, provides for an
annual base salary of $225,000.
(3) Mr. Schenecker was hired in May 1999 at an annual base salary of $200,000.
(4) Mr. Zucht was hired in April 1999 at an annual base salary of $150,000. His
annual base salary was increased to $200,000 as of September 1999.
(5) Reflects our matching contributions to the PartMiner, Inc. 401(k) Plan, as
allowable under Section 401(k) of the Internal Revenue Code of 1986, as
amended.
(6) Reflects personal expenses paid by us in the amount of $20,722 and our
matching contributions to the PartMiner, Inc. 401(k) Plan in the amount of
$580.
In January 2000, we hired William R. Engles, Jr. as our Chief Financial
Officer. Pursuant to his employment agreement, Mr. Engles is entitled to an
annual base salary of $200,000 and was granted options to purchase 570,000
shares of common stock, subject to vesting requirements.
41
<PAGE>
Option Grants
The following table contains information concerning the stock option grants
which were made to our named executive officers in fiscal year 1999. Only three
of such officers were granted options. These options may terminate before their
expiration dates if the optionee's status as an employee is terminated or upon
the optionee's death or disability.
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option
Individual Grants Term
--------------------------------- --------------
Number of % of Total Fair
Shares Options Market
Underlying Granted to Exercise Value
Options Employees Price on Date of Expiration
Name Granted in 1999(1) (per share) Grant Date 0% 5% 10%
- ---- ---------- ---------- ----------- ---------- ---------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. Barron....... 600,000 -- $0.50 $0.91 1/26/09 -- -- --
Mark A. Schenecker...... 214,800 17 $1.16 $1.16 7/29/09
Earle Zucht............. 214,800 17 $1.16 $1.16 7/12/09
Earle Zucht............. 200,000 16 $2.10 $3.66 10/01/09
</TABLE>
- --------
(1) Mr. Barron holds an option to purchase 600,000 shares of common stock. To
the extent Mr. Barron exercises all or a portion of these options, Mr.
Nissanoff and Seacoast Capital Partners Limited Partnership, two of our
existing shareholders, are required to contribute common stock to us to
satisfy these options. Therefore, this amount was not included in this
column for calculating these percentages.
The potential realizable value is calculated based on the ten-year term of
the option at time of grant. Stock price appreciation at 5% and 10% annual
rates is assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent our prediction of our stock price
performance. The potential realizable value at 5% and 10% appreciation is
calculated by assuming that the estimated value on the date of this offering
(based on the initial public offering price of $ per share) appreciates at
the indicated rates for the entire term of the option and that the option is
exercised at the exercise price and the shares sold on the last day of its term
at the appreciated prices.
Fiscal Year-End Option Values
The following table sets forth information concerning the year-end number
and value of unexercised options with respect to three of our named executive
officers. The other two named executive officers did not hold any options as of
the end of fiscal year 1999 to acquire common stock from us. No options were
exercised in fiscal year 1999 by any of our named executive officers. No stock
appreciation rights were exercised by the named executive officers in fiscal
year 1999 or were outstanding at the end of that year. There was no public
trading market for our common stock as of December 31, 1999. Accordingly, the
values set forth below have been calculated on the basis of the assumed initial
public offering price of $ per share, less the applicable exercise price
per share, multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
at Fiscal Year-End (#) Fiscal Year-End ($)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William E. Barron........... 200,000 400,000
Mark A. Schenecker.......... 71,600 143,200
Earle Zucht................. 71,600 343,200
</TABLE>
In addition, Bruce Friedman held options to purchase from Daniel Nissanoff
3,171,200 shares of our common stock for an exercise price of approximately
$0.15 per share. Subsequently, Daniel Nissanoff contributed to us 2,796,175
shares of common stock and we thereafter granted options to Mr. Friedman
covering such shares.
42
<PAGE>
Employment Agreements
We have employment agreements with all of our named executive officers. Each
of Daniel Nissanoff and Bruce M. Friedman's employment agreement has an initial
five-year term expiring on March 16, 2004 and each may be extended beyond the
initial term with the prior written agreement of Mr. Friedman or Mr. Nissanoff,
respectively, and us.
Mr. Nissanoff's employment agreement provides for his employment as our
President and Chief Executive Officer at a base salary of $300,000 per year and
an additional amount of $2,000 per month to be used to pay for, in his
discretion, an automobile, parking, health insurance or other similar fringe
benefit. Mr. Friedman's employment agreement provides for his employment as an
executive officer at a base salary of $225,000 per year.
If we terminate either of Messrs. Nissanoff or Friedman's employment without
cause (as cause is defined in such employment agreements), we must continue to
pay their base salaries and benefits for two years or until the scheduled terms
of their employment agreements expire, whichever period is shorter. If we
terminate Mr. Nissanoff's or Mr. Friedman's employment without cause or decide
not to renew or extend the term of either of their employment agreements or if
either terminates their employment for good reason, (as defined in such
agreements), they have the right to require us to repurchase their shares of
common stock at the fair market value. This repurchase provision expires upon
an initial public offering of our common stock with net proceeds of at least
$30,000,000 to us.
William E. Barron's employment agreement provides for his employment as our
Chief Marketing Officer for a term ending on February 15, 2001. Mr. Barron has
a base salary of $250,000 per year. If we terminate Mr. Barron's employment
without cause, we must continue to pay his base salary and provide his benefits
until February 15, 2001 and all of Mr. Barron's stock options will immediately
vest. If Mr. Barron's employment is terminated due to death or disability, all
of his options shall immediately vest.
Mark A. Schenecker's employment agreement provides for his employment as our
Chief Technology Officer for a term ending on May 24, 2001. Mr. Schenecker has
a base salary of $200,000 per year under his agreement.
Earle Zucht's employment agreement provides for his employment as our
Executive Vice President-Business Development for a term ending on April 5,
2001. Mr. Zucht has a base salary of $150,000 per year under his agreement. His
annual salary was increased to $200,000 as of September 1999. If we terminate
Mr. Zucht's employment without cause or if Mr. Zucht terminates his employment
for good reason, we must continue to pay his health insurance and other
benefits (not including salary) for a period of 12 months from the date of
termination.
William R. Engles, Jr.'s employment agreement provides for his employment as
our Chief Financial Officer for a term ending on January 30, 2002. Mr. Engles
has a base salary of $200,000 per year under his agreement. If we terminate Mr.
Engles's employment without cause or if Mr. Engles terminates his employment
for good reason, we must pay a lump sum payment equal to the net present value
of his base salary for the remainder of his employment term provided that we
have cash available to make such a payment and all of his options shall
immediately vest. If we do not have the cash to make the payment, we must pay
him continuing payments of base salary and benefits in accordance with our
regular payroll practice until we are capable of making the balance of the lump
sum payment.
All of our named executive officers are entitled to participate in our
benefit plans, to reimbursement of reasonable expenses incurred in the
performance of their duties and, in the case of Messrs. Nissanoff and Friedman,
the provision of life insurance benefits. In addition, all of our named
executive officers have agreed to restrictions on their ability to compete with
us and to keep certain information confidential.
43
<PAGE>
In addition to the employment agreements with our named executive officers,
we have entered into employment and/or severance agreements or arrangements
providing for total annual salary and bonus over $100,000 with several of our
other executive officers. We also have arrangements with several of our
employees, including some of our named executive officers, in which we provide
and pay for corporate apartments for such employees in New York City and pay
for round-trip weekly airfare from the locations of their primary residence to
New York City.
1999 Stock Plans
1999 Stock Plan. In May 1999, our Board of Directors established the 1999
Stock Plan to enable our directors, officers and key employees to participate
in our future and to enable us to attract and retain such persons by offering
them stock options, stock appreciation rights and/or restricted stock in our
company. Our shareholders adopted this plan in May 1999. The plan will be
administered by the Board or the Board's compensation committee. Our Board
selects participants of the plan who, in its judgment, are in a position to
contribute materially to our continued growth, development and long-term
financial success.
The total number of shares of our common stock subject to issuance under the
plan may not exceed 2,498,200 shares (subject to appropriate adjustment upon a
stock split and other similar events). The plan will remain in effect until all
the shares of common stock subject to it have been purchased or acquired. No
stock options or restricted stock may be granted under the plan on or after the
plan's tenth anniversary.
Our Board has complete discretion, subject to the provisions of the plan, in
determining the terms and conditions of any stock option grant, including
whether to grant stock options, the number of stock options to grant, the
exercise price, the term, any vesting requirements and whether the stock option
is to be an incentive stock option or a nonstatutory stock option. Each stock
option award must be made pursuant to an option agreement. Each stock option
will expire at an expiration date determined by the Board and no later than 10
years from the grant date. The exercise price for options granted is determined
by the Board. Incentive stock options may not have an exercise price that is
less than the fair market value of the underlying stock on the date the stock
option is granted. Any stock option granted to a person who owns greater than
5% of our stock must have an exercise price of not less than 110% of the fair
market value of the underlying stock on the date the stock option is granted.
The Board has the discretion, in connection with a stock option grant, to
grant stock appreciation rights covering the same shares of common stock
subject to the stock option grant or on a stand alone basis. The terms and
conditions of the stock appreciation rights will be included in the stock
option agreement issued in connection with the stock option grant or in a
separate agreement. Upon the exercise of a stock option, any related stock
appreciation right will be canceled. Similarly, upon the exercise of a stock
appreciation right, any related stock option will be canceled. Stock
appreciation rights may not be exercised until six months after the grant date.
Each grant of restricted stock must be made pursuant to an agreement
containing such restrictions, terms and conditions as determined by our Board.
Transfer and other restrictions will be removed from the restricted stock after
the end of the period of restrictions. During the period of restrictions,
holders of restricted stock will have full voting rights and be entitled to
receive dividends and distributions.
The Board has the discretion to accelerate the exercisability date(s) for
stock options and the term of the restricted period for restricted stock upon a
change in control of our company. Such acceleration may be automatic or, at the
discretion of the Board, may depend upon whether a majority of the Board
approves the change in control or may be pursuant to other criteria specified
by the Board.
The Board may include provisions in the applicable agreement that restrict
the transfer of shares purchased or granted under the plan unless they are
first offered to our company or to another shareholder. In addition, the Board
may include a provision providing us with a right to repurchase or redeem all
shares held by a person under the plan upon termination of his or her
employment.
44
<PAGE>
As of February 16, 2000, we had stock options outstanding under the 1999
Stock Plan to purchase 2,164,800 shares of common stock, 498,900 of which were
vested and 1,665,900 of which were subject to future vesting requirements. None
of the stock options have been exercised. We have not granted any stock
appreciation rights or restricted stock pursuant to the plan.
1999 Employee Incentive Stock Plan. The Board of Directors established the
1999 Employee Incentive Stock Plan in September 1999 to enable our employees
and consultants to participate in our future and to enable us to attract and
retain such persons by offering them stock options, stock appreciation rights
or restricted stock in our company. Our shareholders adopted the plan in
November 1999. The plan is administered by the Board or the Board's
Compensation Committee. All of our employees and consultants are eligible to
participate in the plan. The Board and/or its Compensation Committee selects
the actual participants in the plan.
The total number of shares of our common stock subject to issuance under the
plan may not exceed 2,155,000 shares (subject to appropriate adjustment upon a
stock split and other similar events). The plan will remain in effect until all
the shares of common stock subject to it have been purchased or acquired,
unless the Board decides to terminate the plan earlier. No stock options or
restricted stock may be granted under the plan on or after the plan's tenth
anniversary.
Our Board has complete discretion, subject to the provisions of the plan, in
determining the terms and conditions of any stock option grant, including
whether to grant stock options, the number of stock options to grant and
whether the stock option is to be an incentive stock option or a nonstatutory
stock option. Each stock option award must be made pursuant to an option
agreement. Each stock option will expire according to an expiration date
determined by the Board and no later than 10 years from the grant date. The
exercise price for options granted is determined by the Board. Incentive stock
options may not have an exercise price that is less than the fair market value
of the underlying stock on the date the stock option is granted. Any stock
option granted to a person who owns greater than 10% of our stock must have an
exercise price of not less than 110% of the fair market value of the underlying
stock on the date the stock option is granted.
The Board has the discretion, in connection with a stock option grant, to
grant stock appreciation rights covering the same shares of common stock
subject to the stock option grant or on a stand alone basis. The terms and
conditions of the stock appreciation rights will be included in the stock
option agreement issued in connection with the stock option grant or in a
separate agreement. Upon the exercise of a stock option, any related stock
appreciation right will be canceled. Similarly, upon the exercise of a stock
appreciation right, any related stock option will be canceled. Stock
appreciation rights may not be exercised until six months after the grant date.
Each grant of restricted stock must be made pursuant to an agreement
containing such restrictions, terms and conditions as determined by our Board.
Transfer and other restrictions will be removed from the restricted stock after
the end of the period of restriction. During the period of restriction, holders
of restricted stock will have full voting rights and be entitled to receive
dividends and distributions.
The Board has the discretion to accelerate the exercisability date(s) for
stock options and the term of the restricted period for restricted stock upon a
change in control of our company. Such acceleration may be automatic or, at the
discretion of the Board, may depend upon whether a majority of the Board
approves the change in control or may be pursuant to other criteria specified
by the Board.
The Board may include provisions in the applicable agreement that restrict
the transfer of shares purchased or granted under the plan unless they are
first offered to our company or to another shareholder. In addition, the Board
may include a provision providing us with a right to repurchase or redeem all
shares held by a person under the plan upon termination of his or her
employment or engagement with us.
As of February 16, 2000, we had no stock options outstanding or any grants
of stock appreciation rights or restricted stock under this plan.
45
<PAGE>
401(k) Plan
The PartMiner, Inc. 401(k) Plan, or the Plan, allows employees to contribute
up to 15% of their annual compensation (subject to Internal Revenue Service
maximum contribution limitations) before taxes, to our retirement savings plan
through payroll deductions. All current employees with at least six months of
service are eligible to participate in the Plan. Contributions may be stopped
at any time, while an increase or decrease of contributions may only be done
quarterly.
The Plan also provides for us to match contributions and make discretionary
profit sharing contributions. Our matching contribution benefits all eligible
employees contributing to the Plan. Our contributions to the Plan vest over a
five year period.
46
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1999, we sold 81,632 shares of our mandatorily redeemable
convertible preferred stock to Boston Ventures Limited Partnership V, or Boston
Ventures, for $10,000,000 and 10,204,100 shares of our common stock to Thybo
New Ventures Limited, or Thybo, for $7,150,000 in cash. Thybo has since
transferred these shares to its affiliate, Vulcan Securities Limited, or
Vulcan. The 81,632 shares of mandatorily redeemable convertible preferred stock
will automatically convert into 8,163,200 shares of common stock upon the
closing of this offering. In addition, in March 1999 we executed a license
agreement with Information Handling Services, Inc.
On March 16, 1999, we entered into a stock purchase agreement with Seacoast
Capital Partners Limited Partnership, or Seacoast. Pursuant to this stock
purchase agreement, Seacoast converted its 12.5% Senior Subordinated Note of
ours in the principal amount of $3,000,000 issued on July 30, 1997 into 24,490
shares of mandatorily redeemable convertible preferred stock, exercised
warrants issued in connection with the Note for 5,000,000 shares of mandatorily
redeemable common stock and terminated all of its then existing contractual
arrangements with us that it had entered into relating to its purchase of the
Note and warrants. The 24,490 shares of mandatorily redeemable convertible
preferred stock will automatically convert into 2,449,000 shares of common
stock upon the closing of this offering.
On March 16, 1999, Boston Ventures granted to Daniel Nissanoff and Bruce
Friedman an option to purchase an aggregate of 1,020,400 shares of common stock
held by Boston Ventures at a price of $1.225 based on certain operating profit
or market capitalization thresholds.
In March 1999, we loaned Daniel Nissanoff, our Chief Executive Officer and
President, $850,000 in exchange for a promissory note in the principal amount
of $850,000. Mr. Nissanoff used the proceeds of the loan to purchase 15,000,000
shares of our common stock held by Stacy Jargowsky Nissanoff, then a principal
shareholder of ours, and at the time, Mr. Nissanoff's wife. In March 1999, we
repurchased 15,000,000 shares of common stock owned by Mr. Nissanoff in
exchange for cancelling the promissory note.
On September 10, 1999, we entered into a stock purchase agreement with
Elsevier Realty Information Inc., or Elsevier. Pursuant to this stock purchase
agreement, Elsevier purchased 4,630,600 shares of mandatorily redeemable common
stock from us for a purchase price of $10,000,000 and an aggregate of 2,315,300
shares of common stock from Messrs. Nissanoff and Friedman for an aggregate
purchase price of $5,000,000. Elsevier has since changed its name to Cahners
Information Holdings, Inc., or Cahners. In connection with such sale, we
entered into a three-year agreement with Cahners, in which we agreed to pay
Cahners a fee of 20% of all advertising sold by Cahners on our behalf. We are
obligated to purchase a minimum of $500,000 in annual advertising from Cahners.
In addition, Cahners is entitled to a fee of 1% of our consolidated revenues
received from customer purchases resulting from this agreement. In exchange
Cahners has agreed to promote us as its exclusive e-commerce business partner
for electronic components to the electronic original equipment market on its e-
inSITE online network of Web sites and in Cahners' publications.
On November 30, 1999, we entered into an agreement and plan of merger with,
among others, Information Handling Services, Inc., or IHS, and Thybo. Pursuant
to this agreement and plan of merger, we issued to IHS 9,360,600 shares of our
common stock, an additional 437,800 shares of our common stock to Thybo, and a
total of an additional 1,920,600 shares of our common stock to certain other
individuals in exchange for all of the outstanding shares of common stock of
IQXpert Holdings Inc. Thybo has since transferred these shares to its
affiliate, Vulcan. As part of the agreement and plan of merger, we agreed to
negotiate in good faith to license to IHS the CAPSXpert databases and certain
other data, and IHS agreed to negotiate in good faith to license to us certain
of their additional databases. Additionally, we agreed to enter into a services
agreement with IHS to pay IHS approximately $248,000 per month in return for
the provision of certain corporate services by IHS. We currently pay this
amount to IHS.
47
<PAGE>
James M. Wilson, one of our Directors, is a related person of Boston
Ventures. L. Christopher Meyer, one of our Directors, is a related person of
Thybo, Vulcan and IHS. Eben S. Moulton, one of our Directors, is a related
person of Seacoast. Brian Nairn, one of our Directors, is a related person of
Cahners.
On December 20, 1999, Boston Ventures paid Messrs. Nissanoff and Friedman an
aggregate of $4.0 million in consideration for terminating the option granted
to them by Boston Ventures on March 16, 1999.
On December 20, 1999, we entered into a revolving credit facility with HAIC
Inc., an entity affiliated with IHS, Thybo and Vulcan. The credit facility
allowed us to borrow up to $10,000,000. Pursuant to a security agreement
entered into in connection with such credit facility, we granted HAIC Inc. a
first priority security interest in all of our inventory and accounts
receivable as collateral for such facility. During December 1999 and January
and February 2000 we borrowed a total of $9,000,000 under this facility. This
credit facility has been repaid with the net proceeds of our issuance of
mandatorily redeemable convertible preferred stock in February 2000. Both the
credit facility and the security agreement have been terminated.
On February 16, 2000, Bruce Friedman exercised an option he had with us to
purchase 2,796,175 of shares of common stock contributed to us by Mr.
Nissanoff. Mr. Friedman sold 1,287,975 of those shares of common stock to three
of our other shareholders for an aggregate amount equal to $4,500,000.
On February 16, 2000, we sold 1,320,994, 1,013,309, 924,656 and 862,204
shares of our Series B mandatorily redeemable convertible preferred stock to
Vulcan, Boston Ventures, Seacoast and Cahners, respectively, for an aggregate
purchase price of $20,000,000, or $4.853 per share. These shares were sold
pursuant to a stock purchase agreement dated February 16, 2000.
On February 16, 2000, we entered into a third amended and restated
registration rights agreement with certain of our principal shareholders.
We are party to a license agreement with Market Maker Systems Corporation,
an entity which is 50% owned by Mr. Nissanoff. Pursuant to the license
agreement, we received a license to use their Priority Data Software System for
a term of 50 years.
We believe that all of the transactions described above were made on overall
terms no less favorable to us than could have been obtained from unaffiliated
third parties at such time. All future transactions between us and our
directors, officers, principal shareholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
disinterested directors on the Board of Directors, and will be on terms we
believe to be no less favorable to us than could be obtained from unaffiliated
third parties at such time.
48
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of the date of this prospectus and
as adjusted to reflect our sale of the common stock in this offering by the
following:
. each person (or group of affiliated persons) whom we know to own
beneficially more than five (5%) percent of our common stock;
. each of our Directors;
. each of our named executive officers; and
. all of our Directors and executive officers as a group.
The numbers of shares and the percentages of beneficial ownership in the
following table are based on 67,468,805 shares of common stock outstanding as
of the date of this prospectus, assuming the conversion of all outstanding
shares of our mandatorily redeemable convertible preferred stock into shares of
common stock. The number of shares of common stock outstanding after the
offering includes the shares of common stock being offered for sale by us
in this offering and assumes no exercise of the underwriters' over-allotment
option.
Under the rules of the Securities and Exchange Commission, beneficial
ownership includes voting and/or investment power with respect to shares and
includes shares issuable under stock options that are exercisable within 60
days from the date of this prospectus. Shares issuable under such stock options
are deemed outstanding for computing the percentage of the person holding such
options but are not outstanding for computing the percentage of any other
person.
To our knowledge, except as noted in the footnotes to the table, the persons
named below have sole voting and investment power with respect to all shares
beneficially owned by them. Unless otherwise indicated, the business address
for each person listed in the table is c/o PartMiner, Inc., 432 Park Avenue
South, 12th Floor, New York, New York 10016.
<TABLE>
<CAPTION>
Percentage of Shares
------------------------
Number of Shares Before After
Name of Beneficial Owner Beneficially Owned Offering Offering
- ------------------------ ------------------ -------- ----------
<S> <C> <C> <C>
Daniel Nissanoff(1)........... 9,888,525 14.7%
Vulcan Securities Limited..... 11,962,894 17.7%
Par La Ville Place
14 Par La Ville Place
Hamilton HM JK Bermuda
Boston Ventures Limited....... 9,176,509 13.6%
Partnership V
c/o Boston Ventures
Management, Inc.
One Federal Street
23rd Floor
Boston, Massachusetts 02110
Seacoast Capital Partners
Limited Partnership(2)....... 8,373,656 12.4%
c/o Seacoast Capital
Corporation
55 Ferncroft Road
Danvers, Massachusetts 01923
Information Handling Services,
Inc.......................... 7,988,618 11.8%
15 Inverness Way East
Englewood, Colorado 80112
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Percentage of Shares
--------------------------
Number of Shares Before After
Name of Beneficial Owner Beneficially Owned Offering Offering
- ------------------------ ------------------ --------- ---------
<S> <C> <C> <C>
Cahners Information Holdings,
Inc......................... 7,808,104 11.6%
275 Washington Street
Newton, Massachusetts 02458
Bruce M. Friedman(3)......... 1,508,200 2.2%
William E. Barron(4)......... 400,000 * *
Mark A. Schenecker(4)........ 214,800 * *
Earle Zucht(4)............... 71,600 * *
L. Christopher Meyer(5)...... 685,991 1.0%
Eben S. Moulton(5)........... -- --
Brian Nairn(5)............... -- --
Gerhard Schulmeyer........... -- --
James M. Wilson(5)........... -- --
All executive officers and
directors as a group (15
persons)(6)................. 12,990,716 19.3%
</TABLE>
- --------
* Less than one (1%) percent.
(1) 1,500,000 of these shares are subject to stock options granted to some of
our employees.
(2) 500,000 of these shares are subject to stock options granted to some of our
employees.
(3) Mr. Friedman is a beneficial owner of these shares which are held by the
Lynne and Bruce Friedman Family Trust, of which Mr. Friedman is co-trustee.
(4) Represents options to purchase shares of common stock that are exercisable
within 60 days of the date of this prospectus.
(5) Pursuant to rules of the Securities and Exchange Commission, L. Christopher
Meyer may be deemed to beneficially own the shares held by Information
Handling Services, Inc.; Eben S. Moulton may be deemed to beneficially own
the shares held by Seacoast Capital Partners Limited Partnership; Brian
Nairn may be deemed to beneficially own the shares held by Cahners
Information Holdings, Inc.; and James M. Wilson may be deemed to
beneficially own the shares held by Boston Ventures Limited Partnership V.
The foregoing individuals disclaim beneficial ownership of such shares to
the extent they have no pecuniary interest in such shares.
(6) Includes options to purchase 908,000 shares of common stock that are
exercisable within 60 days of the date of this prospectus.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 150,000,000 shares of common stock,
$.0001 par value, 106,122 shares of Series A mandatorily redeemable convertible
preferred stock, $.01 par value, and 10,302,905 shares of Series B mandatorily
redeemable convertible preferred stock, $.01 par value. Upon the closing of
this offering, all outstanding shares of our mandatorily redeemable convertible
preferred stock will automatically convert into shares of common stock.
Common Stock
As of the date of this prospectus, there were 67,468,805 shares of common
stock issued and outstanding assuming the conversion of all outstanding shares
of our mandatorily redeemable convertible preferred stock into shares of common
stock. As of such date, our capital stock was held of record by 24
shareholders. There will be shares of common stock outstanding
(assuming no exercise of the underwriters' over-allotment option and no
exercise after , 2000 of any outstanding options) after giving effect
to the sale of the shares of common stock in this offering and to the
conversion of all outstanding shares of our mandatorily redeemable convertible
preferred stock into shares of common stock.
The following summarizes the rights of holders of our common stock:
. each share of common stock is entitled to one vote on all matters to be
voted on by shareholders, including the election of directors;
. there are no cumulative voting rights;
. subject to any preferences that may be applicable to any preferred stock
outstanding at the time, the holders of our common stock are entitled to
dividends and other distributions out of assets legally available at
such times and in such amounts as our directors may determine from time
to time; and
. upon our liquidation, dissolution or winding-up, the holders of shares
of common stock will be entitled to share ratably in the distribution of
all of our assets remaining available for distribution after
satisfaction of all our liabilities and the payment of the liquidation
preference(s) of any then outstanding preferred stock.
All outstanding shares of common stock are fully paid and nonassessable, and
the shares of common stock to be issued upon completion of this offering will
be, upon issuance, fully paid and nonassessable.
Preferred Stock
Prior to the closing of this offering we will have shares of Series A and
Series B mandatorily redeemable convertible preferred stock outstanding. Each
series of mandatorily redeemable convertible preferred stock will automatically
convert into common stock upon the closing of this offering. The shares of
mandatorily redeemable convertible preferred stock vote together with our
common stock on all matters, subject to applicable law, and enjoy certain
preferences over our common stock in the case of our liquidation. Concurrent
with the closing of this offering, we intend to amend our certificate of
incorporation to delete references to our outstanding mandatorily redeemable
convertible preferred stock.
We intend to further amend our certificate of incorporation to authorize
undesignated shares of preferred stock and authorize our Board of Directors to
create and issue one or more series of preferred stock and determine the rights
and preferences of each series within the limits set forth in our certificate
of incorporation
51
<PAGE>
and applicable law. Among other rights, we intend to authorize the Board to
determine, without further vote or action by our shareholders:
. the number of shares constituting the series and the distinctive
designation of the series;
. the dividend rate on the shares of the series, whether dividends will be
cumulative, and if so, from which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares of the series;
. whether the series will have voting rights in addition to the voting
rights provided by applicable law and, if so, the terms of the voting
rights;
. whether the series will have conversion privileges and, if so, the terms
and conditions of conversion;
. whether or not the shares of the series will be redeemable or
exchangeable, and, if so, the dates, terms and conditions of redemption
or exchange, as the case may be;
. whether the series will have a sinking fund for the redemption or
repurchase of shares of that series, and, if so, the terms and amount of
the sinking fund; and
. the rights of the shares of the series in the event of our voluntary or
involuntary liquidation, dissolution or winding-up and the relative
rights or priority, if any, of payment of shares of the series.
Unless otherwise provided by our Board of Directors, our preferred stock
will rank on a parity with respect to the payment of dividends and to the
distribution of assets upon liquidation. Although we have no present plans to
issue any shares of preferred stock, any future issuance of shares of preferred
stock, or the issuance of rights to purchase preferred shares, may have the
effect of delaying, deferring or preventing a change of control of our company
or an unsolicited acquisition proposal. The issuance of preferred stock could
also decrease the amount of earnings and assets available for distribution to
the holders of common stock and/or could adversely affect the rights and
powers, including voting rights, of the holders of the common stock.
Registration Rights
The holders of 56,072,080 outstanding shares of our common stock (assuming
the conversion of all outstanding shares of our mandatorily redeemable
convertible preferred stock) have rights to cause us to register their shares
under the Securities Act of 1933, as amended, as follows:
. Demand Registration Rights: Certain of our existing shareholders may
make a demand for registration beginning 180 days after the closing of
this offering by providing a written demand from the holders of at least
30% of the shares of common stock held by all such shareholders. We have
agreed to use our best efforts to effect such registration as soon as
possible after receipt of notice. We are obligated to effect a total of
two such demand registrations. We do not, however, have to effect such a
registration more than once during any six-month period.
. Piggyback Registration Rights: Our existing shareholders (other than our
President and Chief Executive Officer, Daniel Nissanoff and our
executive officer and director, Bruce Friedman) may request to have
their shares registered anytime we file a registration statement (not
including the one filed in connection with this offering) to register
any of our securities for our own account or for the account of others.
The number of such registration opportunities is not limited but the
number of shares that can be registered for such shareholders may be
eliminated entirely or reduced in certain situations by the
underwriters.
. S-3 Registration Rights: After we have qualified for registration on
Form S-3, certain of our existing shareholders can request us to
register their shares if the aggregate price of the shares to be offered
to the public is not less than $3,000,000. Such a request must be in
writing from the holders of at least
52
<PAGE>
30% of the shares of common stock held by all such shareholders. We are
not obligated to register such investors' shares on Form S-3 more than
once during any six month period or more than a total of six
registrations.
These registration rights are subject to certain conditions and
limitations, including the right of the underwriters in such offering to
reduce the number of shares included in that registration under certain
circumstances. We are responsible for paying expenses related to these
registration rights, including registration and filing fees, exchange listing
fees, printing expenses, transfer taxes and fees and expenses of our counsel.
In addition, we are responsible for paying reasonable fees of up to $50,000
for each registration and expenses of one counsel for our shareholders seeking
registration. We are not responsible for underwriting discounts or
commissions. Although we are obligated to effect a total of six registrations
on Form S-3 for certain of our existing shareholders, we only have to pay the
expenses for three of the registrations.
Anti-Takeover Effects of Provisions of New York Law and Our Certificate of
Incorporation
General
Certain provisions of New York law and our restated certificate of
incorporation could make more difficult or delay the acquisition of our
company by means of a tender offer, a proxy contest or otherwise and the
removal of incumbent directors. These provisions are intended to discourage
certain types of coercive takeover practices and inadequate takeover bids,
even though such a transaction may offer our shareholders the opportunity to
sell their stock at a price above the prevailing market price. They may also
encourage persons seeking to acquire control of us to negotiate with us first.
New York Takeover Statute
We are subject to the business combination provisions of Section 912 of the
New York Business Corporation Law and expect to continue to be so subject if
and for so long as we have a class of securities registered under Section 12
of the Securities Exchange Act of 1934, as amended. Section 912 provides, with
certain exceptions, that a New York corporation may not engage in a business
combination (e.g., merger, consolidation, recapitalization or disposition of
stock) with any "interested shareholder" for a period of five years from the
date that such person first became an interested shareholder unless:
. the transaction resulting in a person becoming an interested shareholder
was approved by the board of directors of the corporation prior to that
person becoming an interested shareholder;
. the business combination is approved by the holders of a majority of the
outstanding voting stock not beneficially owned by such interested
shareholder;
. the business combination is approved by the disinterested shareholders
at a meeting called no earlier than five years after the interested
shareholder's stock acquisition date; or
. the business combination meets certain valuation requirements for the
capital stock of the New York corporation.
An interested shareholder is defined as any person that is the beneficial
owner of 20% or more of the outstanding voting stock of a New York corporation
or is an affiliate or associate of the corporation that at any time during the
prior five years was the beneficial owner, directly or indirectly, of 20% or
more of the then outstanding voting stock. A business combination includes
mergers, asset sales and other transactions resulting in a financial benefit
to the interested shareholder.
This statute could prohibit or delay the accomplishment of mergers, tender
offers or other takeover or change in control attempts with respect to us and,
accordingly, may discourage attempts to acquire us. These provisions are
likely to impose greater restrictions on new, unaffiliated shareholders than
on our existing shareholders who will continue to own a majority of our
outstanding common stock after this offering.
53
<PAGE>
The stock acquisition date, with respect to any person and any New York
corporation, means the date that such person first becomes an interested
shareholder of such corporation.
Classified Board of Directors
Our restated certificate of incorporation divides our Board of Directors
into four classes with staggered four-year terms. Our directors cannot be
removed except for cause. This could prevent a party who acquires control of a
majority of the outstanding shares of common stock from immediately obtaining
control of our Board of Directors.
Limitations of Liability and Indemnification Matters
As permitted by the New York Business Corporation Law, our restated
certificate of incorporation provides that a director is not personally liable
to us or our shareholders for damages for any breach of duty in his capacity
as a director unless a judgment or other final adjudication adverse to such
director establishes that (i) his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law, (ii) such
director personally gained a financial profit or other advantage to which he
was not legally entitled or (iii) his acts violated Section 719 of the New
York Business Corporation Law.
The provisions of our restated certificate of incorporation are intended to
afford directors protection, and limit their potential liability, to the
fullest extent permitted by New York law. As a result of the inclusion of such
provisions, shareholders may be unable to recover monetary damages against
directors for actions taken by them that constitute negligence or gross
negligence or that are in violation of certain of their fiduciary duties. This
provision does not affect a director's responsibilities under any other laws,
such as the Federal securities laws. In addition, our restated certificate of
incorporation provides that we will indemnify our directors and officers to
the fullest extent permitted by New York law.
We have obtained directors' and officers' insurance for our directors and
officers for specified liabilities.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Trust Company.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for any of our
securities. Therefore, future sales of substantial amounts of our common stock
in the public market could adversely affect market prices prevailing from time
to time. Furthermore, because only a limited number of shares of common stock
will be available for resale shortly after this offering due to contractual and
legal restrictions on resale as described below, sales of substantial amounts
of our common stock in the public market after such restrictions lapse could
adversely affect the then prevailing market price and our ability to raise
equity capital in the future.
Upon completion of this offering, we will have shares of common
stock outstanding, assuming no exercise of outstanding options or the
underwriters' over-allotment option and the automatic conversion of all
outstanding shares of mandatorily redeemable convertible preferred stock into
shares of common stock. All of the shares of common stock sold in
this offering and any shares sold upon exercise of the underwriters' over-
allotment option will be freely tradable without restriction or further
registration under the Securities Act of 1933, unless purchased by our
"affiliates," as such term is defined in Rule 144 under the Securities Act,
which shares will be subject to applicable limitations of Rule 144. The
remaining shares will become eligible for public sale as follows:
<TABLE>
<CAPTION>
Approximate
Date of Availability of Sale Number of Shares
---------------------------- ----------------
<S> <C>
90 to 180 days after the date of this prospectus............
181 days after the date of this prospectus..................
one year after the date of this prospectus..................
at various times thereafter ................................
</TABLE>
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who owns shares that were purchased from us, or any affiliate of ours, at least
one year previously, is entitled to sell within any three-month period a number
of shares that does not exceed the greater of 1% of our then outstanding shares
of common stock, which will equal approximately shares immediately after
this offering, or the average weekly trading volume of our common stock on The
Nasdaq National Market during the four calendar weeks preceding the filing of a
notice of the sale on Form 144. Sales under Rule 144 are also subject to manner
of sale provisions, notice requirements and the availability of current public
information about us. Any person, or persons whose shares are aggregated, who
is not deemed to have been one of our affiliates at any time during the three
months preceding a sale, and who owns shares that were purchased from us, or
any affiliate of ours, at least two years previously, would be entitled to sell
the shares under Rule 144(k) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements.
Rule 701
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally purchased from us by our employees, directors, officers,
consultants or advisers prior to the date we become subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, under written compensatory benefit plans or written contracts
relating to the compensation of these persons. In addition, the Securities and
Exchange Commission has indicated that Rule 701 will apply to typical stock
options granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired upon exercise
of the options, including exercises after the date of this prospectus.
Securities issued in reliance on Rule 701 are restricted securities and,
subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold by persons other than affiliates
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its minimum holding period
55
<PAGE>
requirements only. However, all shares that could be sold in reliance on Rule
701 are subject to lock up agreements and will only become eligible for sale
when the 180-day lock-up period expires.
Lock-up Agreements
Our officers, directors, shareholders and optionholders have agreed,
pursuant to lock-up agreements with the underwriters, not to offer, sell,
contract to sell, pledge, or otherwise dispose of any shares of common stock,
or any securities convertible into or exchangeable or exercisable for any
shares of common stock, owned by them without the prior written consent of
Credit Suisse First Boston Corporation, for a period of 180 days from the date
of this prospectus. However, Credit Suisse First Boston Corporation may, in its
sole discretion, at any time and without public notice release all or any
portion of the shares subject to lock-up agreements.
56
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Bear, Stearns &
Co. Inc. and FleetBoston Robertson Stephens Inc. are acting as representatives,
the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation................................
Bear, Stearns & Co. Inc...............................................
FleetBoston Robertson Stephens Inc....................................
------
Total.............................................................
======
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering, if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro-
rata basis up to additional shares at the initial public 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 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 broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated 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 have agreed that we 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 of 1933
relating to, any 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
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof.
Our officers, directors, shareholders and optionholders have agreed that
they will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any securities or securities convertible into or
exchangeable or exercisable for any securities, enter into a transaction which
would have the same effect, or enter into any swap, hedge or other arrangement
that transfers, in whole or in part, any of the economic consequences of
ownership of our securities, whether any such aforementioned transaction is to
be settled by
57
<PAGE>
delivery of our common stock or such other securities, in cash or otherwise, or
publicly disclose the intention to make any such offer, sale, pledge or
disposition, or to enter into any such transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of Credit Suisse
First Boston Corporation for a period of 180 days after the date of this
prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and certain
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.
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 that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "PTMR."
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock
will be determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in those negotiations will be:
. our results of operations in recent periods;
. estimates of our prospects and the industry in which we compete;
. an assessment of our management;
. the general state of the securities markets at the time of this
offering; and
. the prices of similar securities 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 the 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 or 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 Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
In the past, Bear, Stearns & Co. Inc. has provided certain financial
advisory services to us. In connection with such services, in addition to their
portion of the underwriting discounts and commissions, we have agreed to make a
payment in cash to Bear, Stearns & Co. Inc. upon the consummation of this
offering. The amount of this cash payment will be based upon the gross proceeds
to us in this offering, but in no event will the payment exceed $1.4 million.
58
<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 under securities laws which will vary depending on
the relevant jurisdiction, and which may require resales to be made under
available statutory exemptions or under a discretionary exemption granted by
the Canadian securities regulatory authority that has jurisdiction. 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 represent to us and the dealer from whom the purchase
confirmation is received that:
. the purchaser is entitled under the provincial securities laws that apply
to the purchaser to purchase the common stock without the benefit of a
prospectus qualified under these securities laws;
. the purchaser is purchasing as principal and not as agent if the
purchaser is not allowed to purchase as agent under the provincial
securities laws that apply to the purchaser; and
.the purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action of 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 Canada and, as a result, it may not be
possible for Canadian purchasers to serve process within Canada upon the issuer
or these persons. All or a substantial portion of the assets of the issuer and
these persons may be located outside Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or these persons in Canada or
to enforce a judgment obtained in Canadian courts against the issuer or these
persons outside Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the 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 the purchaser under 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 for 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 with their own legal and
tax advisors about the tax consequences of an investment in the common stock in
their particular circumstances and about the eligibility of the common stock
for investment by the purchaser under Canadian legislation.
59
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by this
prospectus will be passed upon for us by Kirkpatrick & Lockhart LLP, New York,
NY. Proskauer Rose LLP, New York, NY has acted as counsel for the underwriters
in connection with this offering.
EXPERTS
The audited financial statements and schedules included in this prospectus
and elsewhere in the registration statement have been audited by
PricewaterhouseCoopers LLP, independent accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective September 22, 1999, we dismissed Ernst & Young LLP, or E&Y, and
engaged PricewaterhouseCoopers LLP, or PwC, as our independent accountants to
audit our financial statements as of December 31, 1998 and 1999 and for each of
the three years ended December 31, 1999. During the two years ended December
31, 1998 and through the date E&Y ceased serving as our accountants, we had no
disagreements with E&Y on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of E&Y, would have caused it
to make a reference to the subject matter of the disagreements in connection
with its reports. E&Y's report on our financial statements for the two years
ended December 31, 1998, contained no adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principles. During the period from January 1, 1997 through the date of E&Y's
dismissal, there were no "reportable events" within the meaning of Item
304(a)(1)(v) of Regulation S-K promulgated under the Securities Act of 1933.
We did not consult with PwC during the two years ended December 31, 1998 or
through September 22, 1999 on either the application of accounting principles
or type of opinion PwC might issue on our financial statements or any specific
transaction. The decision to change accounting firms was approved by our Board
of Directors on the recommendation of our management.
We provided a copy of the Form S-1 of which this prospectus forms a part to
E&Y and have requested that E&Y furnish us with a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the above
statements and, if not, stating the respects in which it does not agree. A copy
of E&Y's letter to the Securities and Exchange Commission is filed as an
exhibit to the Form S-1 of which this prospectus forms a part.
60
<PAGE>
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered by this prospectus. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits. For
further information with respect to us and the common stock offered by this
prospectus, reference is made to the registration statement and the exhibits.
Statements contained in this prospectus regarding the contents of any contract
or any other document to which reference is made are not necessarily complete.
In each instance where a copy of a contract or other document has been filed as
an exhibit to the registration statement, reference is made to the exhibit for
a more complete description of the matter involved. A copy of the registration
statement and the exhibits may be inspected without charge at the Public
Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the Public Reference Section of the Commission
upon the payment of the fees prescribed by the Commission. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, such as us, that file (or will
file) electronically with the Commission. We intend to provide our shareholders
with annual reports containing consolidated financial statements audited by an
independent accounting firm.
61
<PAGE>
PARTMINER, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PartMiner, Inc. Consolidated Financial Statements
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1999................ F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999..................................................... F-4
Consolidated Statements of Mandatorily Redeemable Securities and
Shareholders' Equity (Deficit) for the years ended December 31, 1997,
1998 and 1999........................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Accurate Components Inc. and Affiliate Combined Financial Statements
Report of Independent Accountants........................................ F-28
Combined Balance Sheets at December 31, 1998 and September 1999.......... F-29
Combined Statements of Operations for the year ended December 31, 1998
and for the nine months ended September 30, 1999........................ F-30
Combined Statements of Shareholder's Equity for the year ended December
31, 1998 and for the nine months ended September 30, 1999............... F-31
Combined Statements of Cash Flows for the year ended December 31, 1998
and for the nine months ended September 30, 1999........................ F-32
Notes to Combined Financial Statements................................... F-33
IQXpert Holdings Inc. and Affiliate Combined Financial Statements
Report of Independent Accountants........................................ F-37
Combined Balance Sheets at November 30, 1998 and 1999.................... F-38
Combined Statements of Operations for the years ended November 30, 1998
and 1999................................................................ F-39
Combined Statements of Owners' Equity for the years ended November 30,
1998 and 1999........................................................... F-40
Combined Statements of Cash Flows for the years ended November 30, 1998
and 1999................................................................ F-41
Notes to Combined Financial Statements................................... F-42
PartMiner, Inc.
Schedule II--Valuation and Qualifying Accounts........................... F-50
PartMiner, Inc. Unaudited Pro Forma Condensed Consolidated Financial
Information
Selected Unaudited Pro Forma Condensed Consolidated Financial
Information............................................................. F-51
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended
December 31, 1999....................................................... F-52
Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations.............................................................. F-53
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
PartMiner, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of mandatorily redeemable securities and
shareholders' equity (deficit) and of cash flows present fairly, in all
material respects, the financial position of PartMiner, Inc. (the "Company") at
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedule of PartMiner, Inc. listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 16, 2000
F-2
<PAGE>
PARTMINER, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma as
of
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(unaudited)
(See Note 1)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.............. $ 127 $ 5,063 $ 52,063
Accounts receivable, net of allowance
for doubtful accounts of $40 at
December 31, 1998 and $900 at
December 31, 1999, respectively....... 3,003 17,069 17,069
Inventories, net....................... 1,039 3,603 3,603
Prepaid expenses and other current
assets................................ 157 1,418 1,418
------ -------- --------
Total current assets................. 4,326 27,153 74,153
Fixed assets, net...................... 391 9,248 9,248
Deferred financing costs, net of
accumulated amortization of $116 at
December 31, 1998..................... 318 -- --
Intangible assets, net of accumulated
amortization of $6 and $3,049 at
December 31, 1998 and 1999,
respectively.......................... 68 110,272 110,272
Other assets........................... 100 228 228
------ -------- --------
Total assets......................... $5,203 $146,901 $193,901
====== ======== ========
Liabilities, Mandatorily Redeemable
Securities and Shareholders' Equity
Current liabilities:
Accounts payable....................... $1,021 $ 7,919 $ 7,919
Accrued expenses....................... 301 4,405 4,405
Short-term debt and current portion of
long-term debt........................ 1,487 692 692
Income taxes payable................... -- 1,209 1,209
Deferred revenues...................... -- 5,210 5,210
------ -------- --------
Total current liabilities............ 2,809 19,435 19,435
Long-term debt.......................... 2,275 4,331 1,331
Redeemable stock purchase warrants...... 2,363 -- --
Other liabilities....................... -- 495 495
------ -------- --------
Total liabilities.................... 7,447 24,261 21,261
Commitments and contingencies (Note
12)....................................
Mandatorily redeemable securities:
Mandatorily redeemable convertible
preferred stock, Series A, $.01 par
value; 106,122 shares authorized and
outstanding at December 31, 1999; no
pro forma authorized, issued and
outstanding shares (liquidation
preference of $13,000)................ -- 24,434 --
Mandatorily redeemable convertible
preferred stock, Series B, $.01 par
value; no pro forma authorized,
issued and outstanding................ -- -- --
Mandatorily redeemable common stock;
22,150,000 shares issued and
outstanding at December 31, 1999; no
pro forma issued and outstanding
shares................................ -- 43,604 --
------ -------- --------
Total mandatorily redeemable
securities.......................... -- 68,038 --
Shareholders' equity (deficit):
Common stock, $.0001 par value;
150,000,000 shares authorized;
(22,150,000 shares designated as
mandatorily redeemable at December
31,
1999 actual; no shares pro forma)
30,000,000 shares issued and
outstanding at December 31, 1998,
24,403,700 shares issued and
outstanding at December 31, 1999 and
67,468,805 shares issued and
outstanding pro forma ................ 3 2 7
Additional paid-in capital............. 17 98,509 216,542
Deferred compensation.................. -- (1,026) (1,026)
Accumulated other comprehensive loss... -- (2) (2)
Accumulated deficit.................... (2,264) (42,881) (42,881)
------ -------- --------
Total shareholders' equity
(deficit)........................... (2,244) 54,602 172,640
------ -------- --------
Total liabilities, mandatorily
redeemable securities and
shareholders' equity (deficit)...... $5,203 $146,901 $193,901
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
PARTMINER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Product revenues....................... $ 18,255 $ 20,655 $ 40,328
Other revenues......................... -- -- 1,175
----------- ----------- -----------
Total revenues....................... 18,255 20,655 41,503
Cost of revenues....................... 12,737 14,711 29,669
----------- ----------- -----------
Gross profit......................... 5,518 5,944 11,834
Operating expenses
Selling and marketing, exclusive of
stock-based compensation expense of
$395 in 1999.......................... 2,950 3,500 11,081
General and administrative, exclusive
of stock-based compensation expense
of $4,026 in 1999..................... 2,144 2,395 6,967
Technology and development, exclusive
of stock-based compensation expense
of $144 in 1999....................... -- 173 1,812
Stock-based compensation............... -- -- 4,565
Amortization of intangibles............ -- 6 3,826
----------- ----------- -----------
Total operating expenses............. 5,094 6,074 28,251
----------- ----------- -----------
Income (loss) from operations........... 424 (130) (16,417)
Other (income) expense
Increase in redeemable stock purchase
warrants.............................. 150 1,213 673
Other interest expense................. 345 740 180
Interest and other income.............. (25) (195) (402)
----------- ----------- -----------
Total other expense, net............. 470 1,758 451
----------- ----------- -----------
Loss before provision (benefit) for
income taxes and extraordinary item.... (46) (1,888) (16,868)
Provision (benefit) for income taxes.... 71 (38) 33
----------- ----------- -----------
Loss before extraordinary item.......... (117) (1,850) (16,901)
Extraordinary item--loss on early
extinguishment of debt, net of income
tax benefit of $0 in 1999.............. -- -- (1,030)
----------- ----------- -----------
Net loss................................ (117) (1,850) (17,931)
Accretion of mandatorily redeemable
convertible preferred stock............ -- -- (12,075)
----------- ----------- -----------
Net loss applicable to common
shareholders........................... $ (117) $ (1,850) $ (30,006)
=========== =========== ===========
Basic and diluted loss per common share:
Loss before extraordinary item......... $ -- $ (.06) $ (.79)
Extraordinary item..................... -- -- (.03)
----------- ----------- -----------
Basic and diluted net loss per common
share................................. $ -- $ (.06) $ (.82)
=========== =========== ===========
Weighted average shares used in
computing basic and diluted net loss
per common share....................... 24,219,178 30,000,000 36,676,134
=========== =========== ===========
Pro forma basic and diluted loss per
common share (unaudited)
Loss before extraordinary item......... $ (.37)
Extraordinary item..................... (.02)
-----------
Pro forma basic and diluted net loss
per common share...................... $ (.39)
===========
Weighted average shares used in
computing pro forma basic and diluted
net loss per common share (unaudited).. 45,107,745
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
PARTMINER, INC.
CONSOLIDATED STATEMENTS OF MANDATORILY REDEEMABLE SECURITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
(in thousands, except share data)
<TABLE>
<CAPTION>
Mandatorily Redeemable
----------------------------------
Convertible
Preferred Stock Common Stock Common Stock
--------------- ------------------ -------------------
Total Accumulated
Mandatorily Additional Other
Redeemable Paid-in Deferred Comprehensive
Shares Amount Shares Amount Securities Shares Amount Capital Compensation Loss
------- ------- ---------- ------- ----------- ----------- ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1997............ -- $ -- -- $ -- $ -- 30,000,000 $ 3 $ 17 $ -- $--
Distributions to
founders........ -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- --
------- ------- ---------- ------- ------- ----------- --- -------- ------- ---
Balance at
December 31,
1997............ -- -- -- -- -- 30,000,000 3 17 -- --
Distributions to
founders........ -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- --
------- ------- ---------- ------- ------- ----------- --- -------- ------- ---
Balance at
December 31,
1998............ -- -- -- -- -- 30,000,000 3 17 -- --
Redemption and
retirement of
common stock.... -- -- -- -- -- (15,000,000) (2) -- -- --
Issuance of
mandatorily
redeemable
preferred stock
for cash, net of
issuance costs
of $641......... 81,632 9,359 -- -- 9,359 -- -- -- -- --
Issuance of
mandatorily
redeemable
convertible
preferred stock
in exchange for
note payable.... 24,490 3,000 -- -- 3,000 -- -- -- -- --
Issuance of
mandatorily
redeemable
common stock for
cash, net of
issuance costs
of $669......... -- -- 12,858,079 21,481 21,481 (2,315,300) -- -- -- --
Issuance of
mandatorily
redeemable
common stock in
exchange for a
license
agreement....... -- -- 4,291,921 4,726 4,726 -- -- -- -- --
Issuance of
mandatorily
redeemable
common stock in
exchange for
exercise of
warrants........ -- -- 5,000,000 3,036 3,036 -- -- -- -- --
Issuance of
common stock in
connection with
IQXpert
acquisition..... -- -- -- -- -- 11,719,000 1 102,499 -- --
Compensation
relating to
stock options... -- -- -- -- -- -- -- 1,591 (1,026) --
Accretion of
mandatorily
redeemable
securities...... -- 12,075 -- 14,361 26,436 -- -- (9,598) -- --
Executive
compensation
expense related
to stock option
grants.......... -- -- -- -- -- -- -- 4,000 -- --
Foreign currency
translation
adjustment...... -- -- -- -- -- -- -- -- -- (2)
Net loss........ -- -- -- -- -- -- -- -- -- --
------- ------- ---------- ------- ------- ----------- --- -------- ------- ---
Balance at
December 31,
1999............ 106,122 $24,434 22,150,000 $43,604 $68,038 24,403,700 $ 2 $ 98,509 $(1,026) $(2)
======= ======= ========== ======= ======= =========== === ======== ======= ===
<CAPTION>
Total
Shareholders'
Accumulated Equity
Deficit (Deficit)
----------- -------------
<S> <C> <C>
Balance at
January 1,
1997............ $ (149) $ (129)
Distributions to
founders........ (68) (68)
Net loss........ (117) (117)
----------- -------------
Balance at
December 31,
1997............ (334) (314)
Distributions to
founders........ (80) (80)
Net loss........ (1,850) (1,850)
----------- -------------
Balance at
December 31,
1998............ (2,264) (2,244)
Redemption and
retirement of
common stock.... (848) (850)
Issuance of
mandatorily
redeemable
preferred stock
for cash, net of
issuance costs
of $641......... -- --
Issuance of
mandatorily
redeemable
convertible
preferred stock
in exchange for
note payable.... -- --
Issuance of
mandatorily
redeemable
common stock for
cash, net of
issuance costs
of $669......... (5,000) (5,000)
Issuance of
mandatorily
redeemable
common stock in
exchange for a
license
agreement....... -- --
Issuance of
mandatorily
redeemable
common stock in
exchange for
exercise of
warrants........ -- --
Issuance of
common stock in
connection with
IQXpert
acquisition..... -- 102,500
Compensation
relating to
stock options... -- 565
Accretion of
mandatorily
redeemable
securities...... (16,838) (26,436)
Executive
compensation
expense related
to stock option
grants.......... -- 4,000
Foreign currency
translation
adjustment...... -- (2)
Net loss........ (17,931) (17,931)
----------- -------------
Balance at
December 31,
1999............ $(42,881) $ 54,602
=========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
PARTMINER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.......................................... $ (117) $(1,850) $(17,931)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................... 184 393 4,081
Interest expense for accretion of warrants...... 150 1,213 673
Extraordinary loss on early extinguishment of
debt........................................... -- -- 1,030
Stock-based compensation........................ -- -- 4,565
Deferred income taxes........................... -- (38) --
Changes in operating assets and liabilities, net
of effect of acquisitions:
Accounts receivable............................ (1,626) (103) (6,941)
Inventories.................................... (367) (404) (2,033)
Prepaid and other current assets............... (173) 77 (333)
Other assets................................... (8) (24) (116)
Accounts payable and accrued expenses.......... 834 (491) 7,794
Deferred revenues.............................. -- -- (388)
------- ------- --------
Net cash used in operating activities......... (1,123) (1,227) (9,599)
Cash flows from investing activities
Acquisitions of businesses, net of cash acquired.. -- -- (5,282)
Net capital expenditures.......................... (232) (77) (8,128)
Acquisition of intangible assets.................. -- (74) --
------- ------- --------
Net cash used in investing activities......... (232) (151) (13,410)
Cash flows from financing activities
Proceeds from issuance of mandatorily redeemable
common stock, net................................ -- -- 16,481
Proceeds from issuance of mandatorily redeemable
convertible preferred stock, net................. -- -- 9,359
Proceeds from borrowings.......................... 3,000 1,450 5,191
Repayments of borrowings.......................... (1,060) (58) (1,687)
Deferred financing and registration costs......... (409) (25) (547)
Redemption of common stock and distributions to
shareholders..................................... (68) (80) (850)
------- ------- --------
Net cash provided by financing activities..... 1,463 1,287 27,947
Foreign exchange effects on cash and cash
equivalents...................................... -- -- (2)
Net increase (decrease) in cash and cash
equivalents...................................... 108 (91) 4,936
Cash and cash equivalents, beginning of year...... 110 218 127
------- ------- --------
Cash and cash equivalents, end of year............ $ 218 $ 127 $ 5,063
======= ======= ========
Supplemental Cash Flow Information:
Cash paid (received) during the year for:
Interest........................................ $ 241 $ 482 $ 268
Income taxes.................................... 56 1 (61)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
1. Organization and Summary of Significant Accounting Policies
Organization and Description of Business
PartMiner, Inc. (formerly Dast Corporation) (the "Company"), a New York
Corporation, was incorporated in September 1993. On May 19, 1999, Dast
Corporation changed its name to PartMiner, Inc. The Company is a provider of
business-to-business procurement services to the global electronics components
industry.
In mid-1998, the Company began moving its business to the Internet with the
release of its proprietary Internet procurement agent at no cost to users. The
procurement agent allows users to source electronic components on the Internet
and facilitates the online purchase of electronic components of all types from
multiple suppliers. In 1999, the Company commenced the development of the Free
Trade Zone, an online procurement platform for the electronic components
industry. At December 31, 1999, the Free Trade Zone and its related
infrastructure was still under development; accordingly, no revenues have been
generated through December 31, 1999 from the Free Trade Zone. In 1999, costs of
$7,086 associated with the development of the Free Trade Zone were capitalized
as computer software developed or obtained for internal use.
The Company is subject to risks common to rapidly growing technology-based
companies, including rapid technological change, growth and commercial
acceptance of the Internet, dependence on principal products, new product
development, new product introductions and other activities of competitors, and
a limited operating history in Internet related e-commerce activities.
Since 1996, the Company has experienced net losses and negative cash flows
from operations. For the foreseeable future, the Company expects to experience
continuing net losses and negative cash flows as management executes its
current business plan. At December 31, 1999, the Company had cash and cash
equivalents totaling approximately $5,063. In September 1999, the Company's
Board of Directors authorized the Company to pursue the sale of shares of the
Company's common stock in an initial public offering. Management believes that
the net proceeds from this offering, together with the Company's current cash
and cash equivalents, will be sufficient to fund its operations for at least
the next twelve months. If the IPO is not completed in a timely manner, the
Company would seek additional financing through private equity or debt
financing sources.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
account balances and transactions have been eliminated in consolidation.
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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-7
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Revenue Recognition
Product Revenues
To date, substantially all of the Company's revenues have been derived from
the sale of electronic components in the spot market. The Company recognizes
revenues on sales of electronic components, net of any discounts, when the
products are shipped and the customer takes ownership and assumes risk of loss.
The Company provides an allowance for sales returns, which have not been
significant, based on historical experience.
Other Revenues
As a result of the recent acquisition of IQXpert (see Note 2) effective
November 30, 1999, the Company began to derive revenues from the sale of
subscriptions to the CAPSXpert databases and software licensing and related
services. Deferred revenue comprises amounts billed or collected by the Company
prior to satisfying the applicable revenues recognition criteria and related
principally to database subscription revenues.
Revenues from the sale of subscriptions are recognized ratably over the term
of the subscription period, generally 12 months. Royalties and commissions
associated with database subscriptions are deferred and amortized to expense
over the subscription period. Software licensing and related services revenues,
which were not significant for the year ended December 31, 1999, are recognized
in accordance with the provisions of Statement of Position 97-2, "Software
Revenue Recognition" ("SOP 97-2"), as amended by Statement of Position 98-4.
Software-related license revenues are generated from licensing the rights to
the periodic or perpetual use of the Company's software products. Software-
related service revenues are generated from sales of maintenance, consulting
and training services performed for customers that license the Company's
products.
Additionally, the American Institute of Certified Public Accountants
recently issued Statement of Position 98-9, which provides certain amendments
to SOP 97-2, which is effective for transactions entered into beginning January
1, 2000. This pronouncement is not expected to materially impact the Company's
revenue recognition practices.
The Company intends to integrate the CAPSXpert databases content and search
functionality into the Free Trade Zone and make it available to the Company's
users at no cost. Consequently, the Company does not expect it will derive
significant amounts of database subscription revenues in the future periods.
Based on the integration of IQXperts' operations into the Free Trade Zone
business model, the Company continues to operate as one business segment.
Cash and Cash Equivalents
Cash equivalents consist of financial instruments which are readily
convertible to cash and have original maturities of three months or less. Such
investments are carried at cost which approximate fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are deposited with high credit quality
financial institutions. The Company maintains an allowance for doubtful
accounts based upon the expected collectibility of accounts receivable. No
customer accounted for more than 10% of net accounts receivable at December 31,
1998 and 1999, respectively. One customer represented 11% of revenues for the
year ended December 31, 1997. No customer represented 10% of revenues during
the years ended December 31, 1998 or 1999.
F-8
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued
expenses approximate fair value because of their short-term maturities. The
carrying amounts of long-term debt, including current portions, approximate
fair value based on interest rates currently available for instruments with
similar terms.
Inventory
Inventory, consisting of purchased electronic component parts, is stated at
the lower of cost or market. Cost is determined on the specific identification
method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets
which range from three to seven years. Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful lives of the
respective assets.
Computer Software Developed or Obtained for Internal Use
The Company follows the provisions of Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), which requires the capitalization of certain costs
incurred in connection with developing or obtaining software for internal use.
These costs are amortized over a period of 3 years, the estimated useful life
of the software. No costs for computer software developed for internal use were
capitalized during the years ended December 31, 1997 and 1998, respectively.
Capitalized computer software developed or obtained for internal use
approximated $7,358 for the year ended December 31, 1999. No amortization
expense for computer software developed or obtained for internal use was
recorded for the year ended December 31, 1999, as the software was not ready
for its intended use as of December 31, 1999.
Intangible Assets
Intangible assets, which represent the excess of the purchase price paid
over the fair value of the tangible net assets acquired, is being amortized on
a straight-line basis over periods which range from 3 to 10 years. The Company
assesses the recoverability of its intangible assets by determining whether the
unamortized balance over its remaining life can be recovered through forecasted
cash flows. If undiscounted forecasted cash flows indicate that the unamortized
amounts will not be recovered, an adjustment will be made to reduce the net
amounts to an amount consistent with forecasted future cash flows discounted at
the Company's incremental borrowing rate. Cash flow forecasts are based on
trends of historical performance and management's estimate of future
performance, giving consideration to existing and anticipated competitive and
economic conditions. Management has evaluated forecasted cash flows and
amortization periods in the current period and has determined that no
impairment currently exists.
Income Taxes
Effective August 1, 1997, the Company began to recognize deferred taxes
using the asset and liability method, wherein, deferred income taxes are
determined based on differences between the financial reporting
F-9
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
and tax bases of assets and liabilities and are measured using the enacted tax
laws and rates in effect for the years in which the differences are expected to
reverse. In addition, valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
Prior to August 1, 1997, the Company elected to be taxed as an S
corporation, which provides that, in lieu of corporate income taxes, the
stockholders report their pro rata share of the Company's items of income,
deductions, losses, and credits. Accordingly, no income tax provision or
deferred tax amounts were recorded prior to this date. See Note 11 for pro
forma tax provision for the year ended December 31, 1997.
Advertising Costs
Advertising costs are expensed as incurred. Such costs amounted to
approximately $71, $105 and $2,041 for the years ended December 31, 1997, 1998
and 1999, respectively.
Foreign Currency Translation
The functional currency of the Company's subsidiaries are the local
currencies. The financial statements of these subsidiaries are translated into
U.S. dollars using rates of exchange in effect at the end of the reporting
period for assets and liabilities and average rates of exchange during the year
for revenues, cost of revenues and expenses. Translation gains and losses are
recorded in accumulated other comprehensive loss.
Stock-Based Compensation
The Company accounts for its employee stock option plans in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. As such, compensation
expense related to employee stock options is recorded only if, on the date of
grant, the fair value of the underlying stock exceeds the exercise price. The
Company adopted the disclosure only requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), which allows entities to continue to apply the provisions of APB 25 for
transactions with employees and provide pro forma earnings and pro forma
earnings per share disclosures for employee stock grants made in 1999 and
future years as if the fair value based method of accounting in SFAS 123 had
been applied to these transactions.
Technology and Development
Technology and development expenses consist primarily of the payroll and
operating expenses for the information technology group, database content
development costs, as well as all costs associated with the Company's web site,
including designing, developing and third party hosting. The useful life of
technology and development costs is less than one year and, accordingly, are
expensed as incurred.
Comprehensive Loss
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive loss
and its components in financial statements. For the year ended December 31,
1999, comprehensive loss consisted of foreign currency translation adjustments
of $2 and the net loss of $17,931. There were no elements of comprehensive loss
for the years ended December 31, 1997 and 1998, other than the net loss
incurred during each of those years.
F-10
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Net loss per common share
Basic net loss per common share is computed by dividing the net loss
applicable to common shareholders for the year by the weighted average number
of common and redeemable common shares outstanding during the year. Diluted net
loss per common share is computed by dividing the net loss applicable to common
shareholders for the year by the weighted average number of common, redeemable
common and common equivalent shares outstanding during the year. Common
equivalent shares, composed of common shares issuable upon the exercise of
stock options, warrants and upon conversion of the mandatorily redeemable
convertible preferred stock, are included in the diluted net loss per share
computation to the extent such shares are dilutive. There is no difference
between basic and diluted earnings per share since potential common shares from
common equivalent shares are anti-dilutive for the years ended December 31,
1997, 1998 and 1999, respectively.
The following table summarizes common stock equivalents that are excluded
from the historical basic and diluted net loss per share calculation because to
do so would be anti-dilutive for the years indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Weighted average effect of common equivalent
shares:
Mandatorily redeemable convertible preferred
stock......................................... -- -- 8,431,611
Warrants to purchase common stock.............. 2,109,589 5,000,000 --
Options to purchase common stock............... -- -- 470,198
--------- --------- ---------
2,109,589 5,000,000 8,901,809
========= ========= =========
</TABLE>
Pro forma basic and diluted net loss per share for the year ended December
31, 1999 has been computed as described above and also gives effect to the
automatic conversion of the mandatorily redeemable convertible preferred stock
that will occur upon completion of the Company's initial public offering.
Accordingly, the Company has included the equivalent number of common shares
from the conversion of the mandatorily redeemable convertible preferred stock
in the calculation of pro forma loss per share from the date of issuance and
excluded the related mandatorily redeemable preferred stock accretion charges
of $12,075.
F-11
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
A reconciliation of the numerator and denominator used in the calculation of
basic and diluted and pro forma basic and diluted net loss per common share
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Net loss before extraordinary item..... $ (117) $ (1,850) $ (16,901)
Extraordinary item--loss on early
extinguishment of debt................ -- -- (1,030)
Accretion of mandatorily redeemable
convertible preferred stock........... -- -- (12,075)
----------- ----------- -----------
Net loss applicable to common
shareholders......................... $ (117) $ (1,850) $ (30,006)
=========== =========== ===========
Denominator:
Weighted average shares of common stock
outstanding........................... 24,219,178 30,000,000 19,077,504
Weighted average shares of mandatorily
redeemable common stock outstanding .. -- -- 17,598,630
----------- ----------- -----------
Denominator for basic and diluted
calculation.......................... 24,219,178 30,000,000 36,676,134
----------- ----------- -----------
Basic and diluted net loss per common
share:
Loss before extraordinary item......... $ -- $ (.06) $ (.79)
Extraordinary item..................... -- -- (.03)
----------- ----------- -----------
Basic and diluted net loss per common
share................................. $ -- $ (.06) $ (.82)
=========== =========== ===========
Weighted average shares used in
computing basic and diluted net loss
per common share....................... 36,676,134
-----------
Adjustment to reflect the assumed
conversion of the mandatorily
redeemable convertible preferred
stock.................................. 8,431,611
-----------
Weighted average shares used in
computing pro forma basic and diluted
net loss per common share (unaudited).. 45,107,745
-----------
Pro forma basic and diluted net loss per
common share (unaudited)
Loss before extraordinary item......... $ (.37)
Extraordinary item..................... (.02)
-----------
Pro forma basic and diluted net loss
per common share...................... $ (.39)
===========
</TABLE>
Unaudited Pro Forma Information
As described in Notes 8 and 15, upon completion of the Company's initial
public offering, the Series A and Series B mandatorily redeemable convertible
preferred stock outstanding as of the closing date, will automatically be
converted into an aggregate of 20,915,105 shares of common stock. In addition,
the mandatory redemption feature associated with 22,150,000 shares of common
stock outstanding at December 31, 1999 will terminate upon completion of the
initial public offering.
The unaudited pro forma consolidated balance sheet information gives effect
to the following:
. the issuance of 10,302,905 shares of Series B mandatorily redeemable
convertible preferred stock for $50,000 consummated in February 2000;
. the repayment of $3,000 of indebtedness outstanding at December 31, 1999
with a portion of the proceeds of such issuance;
. the termination of the mandatorily redeemable feature of the mandatorily
redeemable common stock upon the closing of this offering; and
. the automatic conversion of all outstanding shares of our Series A and B
mandatorily redeemable convertible preferred stock into 20,915,105
shares of common stock upon the closing of this offering.
F-12
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivatives and Hedging Activities" ("SFAS 133"), establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging. In July 1999,
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of Financial
Accounting Standards Board Statement No. 133" ("SFAS 137"), was issued. SFAS
137 deferred the effective date of SFAS 133 from fiscal years beginning after
June 15, 1999 to all fiscal years beginning after June 15, 2000. Currently, as
the Company has no derivative instruments, the adoption of SFAS 133 would have
no impact on the Company's financial condition or results of operations.
2. Acquisitions
IQXpert
Effective November 30, 1999, the Company acquired all of the outstanding
common stock of IQXpert Holdings Inc. and its wholly-owned subsidiaries and
substantially all of the assets and liabilities of an affiliated business
(collectively, "IQXpert"), in exchange for 11,719,000 common shares of the
Company valued at $8.75 per share, which in management's opinion was the fair
market value of the common stock at the date of issuance. IQXpert is engaged in
the design and development of software and database systems relating to
enterprise client/server software products and electronic components
information, including the CAPSXpert databases and the ItemQuest software.
IQXpert was a majority-owned subsidiary of Information Handling Services, Inc.
("IHS"), which is a significant shareholder of the Company's common stock both
directly and through an affiliated company.
The acquisition was accounted for using the purchase method of accounting,
and accordingly, the results of the acquired businesses have been included in
the Company's financial statements from the date of acquisition. The aggregate
purchase price which includes the unamortized balance of $4,017 on the
acquisition date relating to the CAPSXpert license with IHS (see Notes 8 and
13), was allocated based on the fair value of the acquired assets and assumed
liabilities as follows:
<TABLE>
<S> <C>
Current assets.................................................. $ 4,235
Current liabilities............................................. (6,719)
Non-current assets.............................................. 801
Intangible assets............................................... 108,200
--------
$106,517
========
</TABLE>
Accurate Components
On November 12, 1999, the Company acquired all of the common stock of
Accurate Components Inc. and Market Trading Concepts Inc., its affiliate
(collectively, "Accurate Components"), an ISO 9002 certified market maker, for
cash of $6,462. The purchase agreement requires the payment of additional
consideration contingent on future operating results of Accurate Components
through December 31, 2000.
F-13
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Contingent consideration of $510 was recorded as additional goodwill and
accrued expenses on December 31, 1999 in connection with a payment due under
the contingent payment arrangement. Payments under the contingent payment
arrangement during the year ended December 31, 2000, if any, will similarly
increase goodwill. The maximum contingent consideration payable for the year
ending December 31, 2000 is $1,190.
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the results of the acquired businesses have been included in
the Company's financial statements from the date of acquisition. The purchase
price, including direct costs of the acquisition of $171, was allocated based
on the fair values of the acquired assets and assumed liabilities as follows:
<TABLE>
<S> <C>
Current assets.................................................... $5,723
Current liabilities............................................... (3,856)
Non-current assets................................................ 155
Intangible assets................................................. 5,121
------
$7,143
======
</TABLE>
The following unaudited summary presents consolidated results of operations
for the Company as if the acquisitions of Accurate Components and IQXpert had
been consummated on January 1, 1998. The pro forma information does not
necessarily reflect the actual results that would have been achieved, nor is it
necessarily indicative of future consolidated results of the Company.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revenues...................................... $ 49,674 $ 76,144
Loss before extraordinary item................ $ (37,663) $ (47,658)
Net loss...................................... $ (37,663) $ (48,688)
Basic and diluted net loss per share, before
extraordinary item, applicable to common
shareholders................................. $ (.90) $ (1.26)
Basic and diluted net loss per share
applicable to common
shareholders.................................. $ (.90) $ (1.28)
</TABLE>
3. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December
31,
-----------
1998 1999
---- ------
<S> <C> <C>
Computer equipment........................................... $511 $1,559
Computer software developed or obtained for internal use..... -- 7,358
Furniture and fixtures....................................... 140 366
Leasehold improvements....................................... 27 237
---- ------
678 9,520
Less: accumulated depreciation and amortization.............. 287 272
---- ------
$391 $9,248
==== ======
</TABLE>
Depreciation and amortization expense was $81, $131 and $210 for the years
ended December 31, 1997, 1998 and 1999, respectively.
F-14
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
4. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
---------- --------
<S> <C> <C>
Goodwill............................................. $ 74 $ 75,321
Electronic components database....................... -- 20,000
Software............................................. -- 18,000
---------- --------
74 113,321
Less--Accumulated amortization....................... 6 3,049
---------- --------
Intangible assets, net............................... $ 68 $110,272
========== ========
Amortization expense was $6 and $3,826 for the years ended December 31, 1998
and 1999, respectively. There was no amortization expense of intangible assets
for the year ended December 31, 1997.
5. Accrued Expenses
Accrued expenses consist of the following at December 31, 1998 and 1999:
<CAPTION>
December 31,
-------------------
1998 1999
---------- --------
<S> <C> <C>
Payroll and related benefits......................... $ 135 $ 779
Professional services................................ 25 739
Acquisition consideration............................ -- 510
Due to related party (Note 13)....................... -- 1,417
Other................................................ 141 960
---------- --------
$ 301 $ 4,405
========== ========
</TABLE>
6. Borrowings
Related Party Borrowings
On December 20, 1999, the Company entered into a $10,000 revolving credit
agreement (the "Credit Agreement") with an affiliate of IHS. The funds
available under the Credit Agreement are to be used solely for the development
of the Company's Free Trade Zone, working capital and capital expenditure
purposes. In addition, the funds are restricted such that credit advances shall
not exceed $3,000 for each of the monthly periods from December 1999 to
February 2000 and $2,000 for each of the monthly periods from March 2000 to the
January 31, 2001 maturity date. The Credit Agreement also contains other
customary conditions and events of default, the failure to comply with, or
occurrence of, would prevent any further borrowings and would generally require
the repayment of any outstanding borrowings under the Credit Agreement.
Borrowings, including accrued interest, under the Credit Agreement are due
on the earlier of (i) January 31, 2001; (ii) the third business day after the
closing date of an initial public offering by the Company; or (iii) the third
business day after the closing day of a refinancing, as defined. Borrowings
bear interest at the prime rate of approximately 8.5%, and are collateralized
primarily by accounts receivable and inventory. As of December 31, 1999, the
Company had $3,000 of borrowings outstanding under the Credit Agreement.
F-15
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Equipment and Service Financing
In 1999, the Company entered into a three year financing arrangement, as
amended, with a financing affiliate of a vendor in the amount of $2,191 for the
purchase of computer software equipment and related service support. This
arrangement provides for monthly payments of the financed amount with interest
accruing at annual rates ranging from 12.9% to 15.9%. Total payments for the
year ended December 31, 1999 were $332, of which $133 represented interest
expense. This financing arrangement is collateralized by computer equipment.
As of December 31, 1999, future principal payments under this financing
agreement are as follows:
<TABLE>
<S> <C>
Year ending December 31,
2000............................................................... $ 671
2001............................................................... 782
2002............................................................... 539
------
Total future principal payments.................................... 1,992
Less current portion............................................... (671)
------
Long term portion.................................................. $1,321
======
</TABLE>
Line of Credit
On October 22, 1998, the Company entered into a $3,000 line of credit
agreement with a bank (the "Line Agreement"). Borrowings under the Line
Agreement bore interest at the LIBOR base rate, as defined, plus 2.25% or the
bank's cost of funds base rate, as defined, plus 2.25%. Such borrowings, were
based on eligible accounts receivable and inventory, were payable on demand and
were collateralized by a security interest in substantially all the assets of
the Company. At December 31, 1998, the Company had $1,450 of borrowings
outstanding under the Line Agreement. During 1999, the Company repaid all
outstanding borrowings and subsequently terminated this Line Agreement on
December 31, 1999.
Note Payable
On July 30, 1997, the Company issued a senior subordinated note (the "Note")
to an unrelated third party in the amount of $3,000. The Note had a stated
interest rate of 12.5% per annum, which was adjustable to 16.5% upon the
occurrence of any event of default, as defined. In connection with issuance of
the Note, the Company (i) incurred financing costs of approximately $409,
primarily consisting of investment banking and legal fees, which were deferred
and amortized over the life of the Note and (ii) issued warrants to the Note
holder to purchase 5,000,000 common shares of the Company (See Note 7).
Principal on the Note was due and payable annually on December 31 in an
amount equal to 50% of the Company's free cash flow, as defined, provided that
the cumulative amounts that were due and payable did not exceed $600, $1,200,
$1,800 and $2,400 for the years ended December 31, 1998, 1999, 2000 and 2001,
respectively. Any remaining outstanding principal amounts would then be payable
on July 29, 2002. No payments were due under the Note at December 31, 1998.
Substantially all of the assets and outstanding common stock of the Company
were pledged as collateral for the Note. The rights to such collateral were
subordinate to those of the Line Agreement. In addition, the Note also provided
for, among other things, the maintenance of certain covenants, as defined,
including (i) minimum net worth; (ii) minimum earnings before interest, taxes,
depreciation and amortization ("EBITDA") to interest coverage ratio; and (iii)
maximum indebtedness to net worth ratio.
F-16
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
On March 16, 1999, the Note holder exchanged the Note for 24,490 shares of
mandatorily redeemable convertible preferred stock having a fair value of
$3,000. In connection with the exchange of the Note, the Company recorded a
loss on the early extinguishment of debt of $1,030, consisting of (i) $726,
which represented the difference between the fair value of the securities
issued in exchange for the Note and the carrying amount of the Note and (ii)
$304, which represented the unamortized deferred financing costs. Amortization
expense for deferred financing costs was $34, $82 and $14 for the years ended
December 31, 1997, 1998 and 1999, respectively.
Other
Long-term debt includes other notes payable of $69 and $31 at December 31,
1998 and 1999, respectively, including current portions of $37 in 1998 and $21
in 1999.
7. Redeemable Stock Purchase Warrants
In connection with the senior subordinated note financing (see Note 6), the
Company issued warrants to the Note holder to purchase 5,000,000 shares of the
Company's common stock, at an exercise price of $.0001 per share. The warrants
were exercisable at any time prior to the earlier of ten years or six years
from the date on which the Note was paid, as defined. The Note was recorded net
of a discount of $1,000, which represented the estimated fair value of warrants
on July 30, 1997. The discount was being amortized as interest expense
utilizing the effective interest method over the life of the Note. Interest
expense recorded in connection with the warrants was $69, $174 and $31 for the
years ended December 31, 1997, 1998 and 1999, respectively.
The Company also granted the warrant holder a put option ("Put Option") to
sell to the Company such warrant shares plus any other shares of capital stock
owned, as defined, at a per share price as defined in the agreement. The Put
Option was exercisable after the earlier to occur of July 30, 2002 or upon the
occurrence of an event of default, as defined. The Company recorded interest
expense of $150, $1,213 and $673 for the years ended December 31, 1997, 1998
and 1999 for accretion of the warrants to their redemption price.
In March 1999, in connection with the exchange of the note payable, the Note
holder exercised the warrants and was issued 5,000,000 shares of the Company's
mandatorily redeemable common stock.
8. Mandatorily Redeemable Securities and Shareholders' Equity
Authorization of Preferred Stock
In 1999, the Company amended and restated its articles of incorporation to
authorize 106,122 shares of $.01 par value preferred stock. The preferred stock
is voting and is convertible into shares of common stock on a 100 for 1 basis,
subject to certain adjustments. The preferred stockholders are entitled to
receive dividends when declared by the Board of Directors. In the event of any
liquidation, dissolution or winding up of the Company, the convertible
preferred stock has a liquidation preference of $122.50 per share. The
preferred stock is immediately convertible into common stock, at the option of
the holder, and shall automatically convert into common stock upon closing of
an initial public offering of common stock in which the aggregate net proceeds
received by the Company are at least $30,000.
Redeemable Stock Purchase Agreements
On March 16, 1999, the Company issued 81,632 shares of convertible preferred
stock, for proceeds of $9,359, net of issuance costs of $641, to an investor.
F-17
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
On March 16, 1999, the Company issued 10,204,100 shares of mandatorily
redeemable common stock, for proceeds of $11,235, net of issuance costs of
$641, of which $6,509 was in cash and $4,726 was the value assigned to a
license agreement entered into with IHS, an affiliate of the purchaser of the
redeemable common shares. (See Note 13).
On September 10, 1999, the Company issued 4,630,600 shares of mandatorily
redeemable common stock, for proceeds of $9,972, net of issuance costs of $28,
to an investor. In connection with this equity transaction, the founder also
sold 2,315,300 shares of common stock to this investor for $5,000.
The investors which purchased the convertible preferred stock and common
stock in March and September 1999, respectively, are parties to a stockholders
agreement. Pursuant to the terms of the stockholders agreement, if the Company
has not already completed an initial public offering with net proceeds of
$30,000, the holders of the convertible preferred stock and common stock issued
may require the Company to redeem their shares. The earliest redemption dates
are March 16, 2004 for the convertible preferred stockholders and March 16,
2006 for the common stockholders, respectively. The redemption price shall be
the fair market value of the Company's convertible preferred stock and common
stock on the redemption date, as defined. The carrying values of these
mandatorily redeemable securities are being accreted over the period from
issuance through the earliest redemption date. Accretion for these mandatorily
redeemable securities was $26,436 for the year ended December 31, 1999.
If the convertible preferred stock and common stockholders elect to exercise
their redemption options after March 16, 2007, the redemption price shall be
the original issuance price.
Common Stock
In connection with the Company's 1999 amended and restated articles of
incorporation, the Company authorized a 100 for 1 common stock split. At
December 31, 1999, the authorized common stock consists of 150,000,000 shares
of common stock, at $.0001 par value. All per share amounts and number of
shares in the accompanying financial statements have been retroactively
adjusted to reflect the stock split.
The common stockholders are entitled to dividends and other distributions
out of assets legally available at such times and in such amounts as the
directors may determine from time to time. The holders of shares of common
stock are entitled to one vote per share of common stock. Upon liquidation,
dissolution or winding-up, the holders of shares of common stock will be
entitled to share ratably in the distribution of all of the assets remaining
available for distribution after satisfaction of all the liabilities and the
payment of the liquidation preference(s) of any then outstanding preferred
stock.
Share Redemption
On March 16, 1999, the Company redeemed 15,000,000 shares or 50% of the
outstanding common shares of the Company, for $850. Immediately prior to and
immediately after the redemption, the founder controlled 100% of the
outstanding common stock of the Company.
Shareholder Repurchase Option
In connection with the March 1999 convertible preferred stock issuance, the
founder and certain option holders (collectively, the "Optionees") entered into
an option agreement with the convertible preferred stock investor. Pursuant to
the terms of the agreement, the Optionees are entitled to repurchase 1,020,400
shares of preferred stock from the convertible preferred stock investor at
$1.225 per share. The repurchase option was exercisable on December 31, 2001 if
the Company reached certain operating profit or market capitalization
thresholds, as defined. In December 1999, the convertible preferred stock
investor and the Optionees entered into an agreement to terminate the option
agreement. In connection with the termination of this agreement, the
F-18
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
convertible preferred stock investor paid the Optionees $4,000, or
approximately $3.92 per convertible preferred share. Accordingly, the $4,000
option termination payment was accounted for as compensation expense and as a
contribution to additional paid-in capital by the convertible preferred stock
investor.
Reserved Shares
As of December 31, 1999, common stock was reserved for future issuance as
follows:
<TABLE>
<S> <C>
Conversion of mandatorily redeemable convertible preferred
stock......................................................... 10,612,200
1999 Stock Plan................................................ 2,148,200
1999 Employee Incentive Stock Option Plan...................... 2,505,000
----------
15,265,400
==========
</TABLE>
9. Stock Option Plans
During 1999, certain stockholders granted 600,000 non-qualified stock
options to an employee to purchase shares of common stock held by the
shareholders at an exercise price of $.50 per share. The Company recorded
deferred compensation relating to these options totaling $245, representing the
aggregate difference between the estimated fair market value of the Company's
common stock on the date of grant and the exercise price of each option. This
deferred compensation is being amortized over the two-year vesting period of
the related options, resulting in stock-based compensation of $156 for the year
ended December 31, 1999.
The Company also has various stock plans which provide for the issuance of
incentive and non-qualified stock options, stock appreciation rights and
restricted stock. A summary of the various stock plans is as follows:
1999 Stock Plan
Effective May 1999, the Company's Board of Directors established the
PartMiner 1999 Stock Plan (the "1999 Stock Plan"), under which the Company may
issue awards including non-qualified and incentive stock options, stock
appreciation rights and restricted stock for directors, officers and key
employees. A total of 2,148,200 shares of common stock have been reserved for
issuance under the 1999 Stock Plan. Each stock option under the 1999 Stock Plan
allows for the purchase of common stock, generally vests within two to four
years of the grant date and expires at an expiration date determined by the
Board no later than 10 years from the grant date.
Under the terms of the 1999 Stock Plan, the exercise price of incentive
stock options granted shall be at exercise prices not less than 100% of the
fair market value of the Company's common stock on the date of grant, as
determined by the Company's Board or the Board's compensation committee, except
that incentive stock option grants to an optionee who owns greater than 5% of
the Company's stock must have an exercise price of not less than 110% of the
fair market value of the underlying common stock on the date the stock option
is granted. Non-statutory stock options may be granted at exercise prices
determined by the Board of Director's or the Board's compensation committee,
except that the exercise price may not be less than the statutory minimum.
During 1999, the Company granted 1,286,700 non-qualified stock options to
employees to purchase shares of its common stock at exercise prices ranging
from $1.16 to $2.15 per share. The Company recorded deferred compensation
relating to these options totaling $1,346, representing the aggregate
difference between the
F-19
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
estimated fair market value of the Company's common stock on the date of grant
and the exercise price of each stock option. This deferred compensation is
being amortized over the two to three year vesting period of the related stock
options, resulting in stock-based compensation of $409 for the year ended
December 31, 1999.
1999 Employee Incentive Stock Plan
Effective October 1999, the Company's Board of Directors approved the
adoption of the PartMiner 1999 Employee Incentive Stock Plan (the "1999
Employee Stock Plan"), under which the Company may issue employees and
consultants stock options, stock appreciation rights or restricted stock in the
Company. A total of 2,505,000 shares of the Company's common stock have been
reserved for issuance under the 1999 Employee Stock Plan. Each option under the
1999 Employee Stock Plan allows for the purchase of shares of the Company's
common stock, generally vests within five years of grant date and must be
exercised no later than ten years from the date of grant.
Under the 1999 Employee Stock Plan, incentive stock options may not have an
exercise price that is less than the fair market value of the underlying stock
on the date the stock option is granted, as determined by the Company's Board
of Directors or the Board's compensation committee, except that any stock
option granted to an optionee who owns greater than 10% of the Company's stock
must have an exercise price of not less than 110% of the fair market value of
the underlying common stock on the date the stock option is granted. Non-
statutory stock options may be granted at exercise prices determined by the
Company's Board of Director's or the Board's compensation committee, except
that the exercise price may not be less than the statutory minimum. Each stock
option will expire according to an expiration date determined by the Board and
no later than 10 years from the grant date, except for any stock options
granted to an optionee who owns greater than 10% of the voting stock on the
date the stock option is granted in which case the option term shall be five
years from the grant date. During 1999, no stock options, stock appreciation
rights or restricted stock in the Company were granted under this plan.
The following table summarizes the activity of the Company's stock option
grants:
<TABLE>
<CAPTION>
Weighted-
Outstanding Average
Options Exercise Price
----------- --------------
<S> <C> <C>
Balance at January 1, 1999........................ -- $ --
Options granted................................... 1,286,700 1.48
--------- -----
Balance at December 31, 1999.................... 1,286,700 $1.48
========= =====
</TABLE>
The following table summarizes information about stock options issued by the
Company that are outstanding and exercisable at December 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- ------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Outstanding Price
-------- ----------- ----------- --------- ----------- ---------
(In Years)
<S> <C> <C> <C> <C> <C>
$1.16 859,200 9.5 $1.16 286,400 $1.16
$2.10 311,400 9.8 $2.10 23,800 $2.10
$2.15 116,100 9.9 $2.15 38,700 $2.15
--------- -------
1,286,700 348,900
========= =======
</TABLE>
F-20
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
The Company applies APB 25 and related interpretations in accounting for its
stock option plans. Had compensation cost been recognized pursuant to SFAS 123,
the Company's net loss would have been as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Net loss applicable to common shareholders
As reported................................................... $(30,006)
Pro forma..................................................... $(30,117)
Net loss per share applicable to common shareholders
As reported................................................... $ (.82)
Pro forma..................................................... $ (.82)
</TABLE>
For these pro forma calculations, the fair value of each option granted was
estimated on the date of grant using the Black-Scholes option pricing model,
utilizing the following weighted-average assumptions: (1) weighted average risk
free interest rate of 5.82%, (2) weighted-average expected option life of 3.19
years, and (3) expected dividend yield of 0. The effects of applying the fair
value method may be material to the pro forma results of operations in future
years because the determination of the fair value of all options granted after
the Company becomes a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31,
1999 and most options vest over several years.
10. Employee Savings and Retirement Plan
The Company has a 401(k) plan that allows eligible employees to contribute
up to 15% of their salary, subject to annual limits. Under the plan, eligible
employees may defer a portion of their pretax salaries but not more than
statutory limit. The Company may make discretionary matching contributions,
limited to a maximum of 3% of participants' eligible compensation. The Company
contributed approximately $13, $18 and $13 to the plan during the years ended
December 31, 1997, 1998, and 1999, respectively.
11. Income Taxes
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- -------- -------
<S> <C> <C> <C>
Current:
Federal........................................ $ 56 $ -- $ --
State.......................................... 15 -- --
Foreign........................................ -- -- 33
------- -------- -------
71 -- 33
------- -------- -------
Deferred:
Federal........................................ -- (30) --
State.......................................... -- (8) --
Foreign........................................ -- -- --
------- -------- -------
-- (38) --
------- -------- -------
Provision (benefit) for income taxes......... $ 71 $ (38) $ 33
======= ======== =======
</TABLE>
F-21
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
The tax effects of temporary differences that give rise to a significant
portion of the deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
----- ------
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards............................ $ 189 $7,427
Reserves and accruals....................................... 35 287
Other temporary differences................................. 11 379
----- ------
235 8,093
Less: valuation allowance................................. (193) (7,927)
----- ------
42 166
----- ------
Deferred tax liability:
Depreciation and amortization............................... (4) (128)
----- ------
Net deferred tax asset........................................ $ 38 $ 38
===== ======
</TABLE>
Due to the uncertainty of the Company generating future taxable income, the
Company has recorded a valuation allowance against certain deferred tax assets,
which more than likely will not be realized.
The provision for income taxes differs from the amount computed by applying
the federal income tax rate of 34% as a result of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Expected benefit at federal income tax rate.... $ (31) $ (642) $ (5,735)
Foreign, state, and other taxes, net of federal
benefit....................................... 13 (41) (1,068)
Change in valuation allowance for deferred tax
assets allocated to income tax expense........ -- 193 5,261
Amortization of intangibles.................... -- -- 1,301
Non-deductible interest expense................ 74 472 239
Other.......................................... 15 (20) 35
------ ------- ---------
Provision (benefit) for income tax............. $ 71 $ (38) $ 33
====== ======= =========
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $18,263, which expire through 2019. The Company's utilization of
net operating loss carryforwards will be limited pursuant to Internal Revenue
Code Section 382, due to cumulative changes in ownership in excess of 50%
within a three year period.
F-22
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Effective August 1, 1997 (see Note 1), the Company's S corporation status
was terminated and the Company began operations as a C corporation. If the
Company had operated as a C corporation since January 1, 1997, the pro forma
income tax provision for the year ended December 31, 1997 would have been $154
(unaudited), without contemplating any applicable tax laws related to the
utilization of net operating losses. The following sets forth pro forma net
loss and net loss per share data assuming the Company operated as a
C corporation throughout the year ended December 31, 1997.
<TABLE>
<S> <C>
Loss before provision for income taxes......................... $ (46)
Pro forma income tax provision................................. (108)
----------
Pro forma net loss............................................. $ (154)
==========
Pro forma basic and diluted net loss per common share: $ (.01)
==========
Weighted average shares used in computing pro forma basic and
diluted net loss per share.................................... 24,219,178
==========
</TABLE>
No pro forma adjustments are required for the years ended December 31, 1998
and 1999 as the Company was operating as a C corporation during those years.
12. Commitments and Contingencies
Leases
The Company leases its warehouse and office facilities, under noncancelable
operating leases which expire at various dates through 2004.
Future minimum lease payments under these leases are as follows:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
Year ending December 31,
2000............................................................. $1,067
2001............................................................. 833
2002............................................................. 441
2003............................................................. 299
2004............................................................. 97
</TABLE>
Rent expense charged to operations amounted to approximately $208, $291 and
$733 for the years ended December 31, 1997, 1998 and 1999, respectively.
Employment Agreements
The Company has employment agreements with various executive officers and
management personnel which provide for annual base salaries pursuant to
agreements, which expire through March 2004. The Company's aggregate
prospective commitment under such agreements is approximately $2,000 as of
December 31, 1999. In addition, the employment agreements provide for annual
bonuses which are contingent upon the Company's operating performance.
In connection with the March 16, 1999 equity financing (see Note 8), the
Company entered into a five year employment agreement with its chief executive
officer which provides for an annual salary and certain
F-23
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
other benefits, as defined. In addition, if the chief executive officer is
terminated, as defined, the chief executive officer may require the Company to
repurchase all of the outstanding common stock held by the chief executive
officer at the fair market value, as defined, of the common stock at the date
of termination. This repurchase provision expires upon an initial public
offering of the Company's common stock with aggregate net proceeds of $30,000.
Consulting Agreements
In 1999, the Company entered into agreements with certain consultants
whereby the Company is committed to grant non-qualified stock options to the
consultants upon the completion of an initial public offering by the Company.
The number of options to be granted will be the equivalent of $275,000 divided
by the fair value of the Company's common stock underlying the non-qualified
stock options on the date of the initial public offering. The exercise price
for these options will be equal to the initial public offering price.
Litigation and Other Contingencies
The Company is party to various legal and administrative matters arising in
the normal course of business. The resolution of these matters is subject to
many uncertainties, and the ultimate outcome of these proceedings cannot
presently be determined. It is reasonably possible that the final resolution of
some of these matters may require the Company to make expenditures, in excess
of established reserves, over an extended period of time, and in a range of
amounts that cannot be reasonably estimated. Management believes, after
consulting with legal counsel, the ultimate liability in excess of reserves
currently provided for is not expected to have a material adverse effect on the
financial position or overall trends in results of operations of the Company.
13. Other Related Party Transactions
License Agreements
The Company has a 50 year license agreement with an affiliate company, which
is 50% owned by the Company's founder, for the use of a specialized computer
software system which expires in the year 2045. The above agreement does not
call for any payments to be received or paid. No amounts were due to the
affiliate at December 31, 1999.
In March 1999, and concurrent with the sale of 10,204,100 shares of
mandatorily redeemable common stock to an affiliate of IHS, the Company entered
into an agreement with IQXpert to license certain electronic component database
information. Under the terms of this license, IQXpert was to receive an annual
royalty payment of 2% on the first $100,000 of the Company's on-line revenues
and 1% of the revenues in excess of $100,000. In addition, the Company was to
compensate IQXpert for lost revenues attributable to certain customers which
failed to renew their subscription to the database. Concurrent with the
Company's acquisition of IQXpert on November 30, 1999, this license agreement
was terminated. No amounts were due to IQXpert from March 1999 to November 30,
1999.
Advertising Agreement
On September 10, 1999, the Company entered into a three year agreement with
a shareholder for the creation of interfaces between the Company's search
engine and Free Trade Zone and the stockholder's online network of websites.
Pursuant to the agreement, the shareholder agreed to promote the Company as its
exclusive e-commerce business partner for electronic components in the
electronic original equipment market on the shareholder's online network of
websites and in the shareholder's publications. The Company agreed to
F-24
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
use the shareholder as the Company's exclusive advertising agent of the
Company's search engine and Free Trade Zone to electronic component
distributors and manufacturers.
The Company has agreed to pay the shareholder a fee of 20% of all
advertising sold by the shareholder on the Company's behalf and is obligated to
purchase a minimum of $500 in annual advertising from the shareholder. In
addition, the shareholder is entitled to a fee of 1% of the Company's
consolidated revenues received from customer purchases resulting from this
agreement. Related party advertising expense for the year ended December 31,
1999 was $486 and is included in selling and marketing expenses in the
consolidated statements of operations for the year ended December 31, 1999.
IQXpert Agreements
In connection with the IQXpert acquisition, the Company agreed to enter into
a service agreement with IHS, which provides transitional support functions to
the Company. This agreement requires monthly service fees of $248. Service fees
for the year ended December 31, 1999 were $248. The Company has the option to
cancel either a portion or the entire service agreement with a 30-day notice.
IHS has paid certain expenses, primarily employee salary expenses, during
the period from December 1, 1999 through December 31, 1999 on the Company's
behalf. Amounts due to IHS were $1,417 at December 31, 1999 and are included in
accrued expenses on the accompanying consolidated balance sheet.
The Company is party to a non-exclusive sales agency agreement with IHS,
which expires in April 2000. Pursuant to the agreement, IHS is entitled to
receive an 18% commission on the net price paid by customers for new and
renewal subscriptions to the CAPSXpert products. Commission expense for the
year ended December 31, 1999 was $180.
F-25
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
14. Operating Segment and Geographic Information
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information", establishes standards for
reporting information about operating segments in annual financial statements
and for related disclosures about products and services, geographic areas and
major customers. For the following geographic area data, revenues are
attributed to geographic regions based on the location of the customer.
Identifiable assets in the United States as of December 31, 1998 and 1999
include net intangible assets of $68 and $110,272, respectively.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues:
Product Sales:
United States...................................... $ 4,920 $ 7,908 $18,770
Foreign Countries.................................. 13,335 12,747 21,558
Other:
United States...................................... -- -- 823
Foreign Countries.................................. -- -- 352
------- ------- -------
Total................................................ $18,255 $20,655 $41,503
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------ --------
<S> <C> <C>
Identifiable assets:
United States.............................................. $4,939 $146,313
Foreign countries.......................................... 264 588
------ --------
Total........................................................ $5,203 $146,901
====== ========
</TABLE>
15. Subsequent Events
Stock Options
In January and February 2000, the Company granted 878,100 options to its
employees at exercise prices ranging from $2.50 to $5.15 per share. Based on
the ultimate valuation of the Company determined by the initial public offering
and business activities and transactions which have occurred prior to the
completion of the initial public offering, the Company expects to record
compensation expense and deferred compensation to the extent the value
determined in the initial public offering substantially differs from the
exercise price of the options granted.
In February 2000, the Company amended its 1999 Stock Plan to increase the
number of common shares reserved for issuance by 350,000 common shares from
2,148,200 to 2,498,200. In addition, the Company reduced the number of common
shares reserved for issuance of the 1999 Employee Incentive Stock Plan by
350,000 common shares from 2,505,000 to 2,155,000.
In February 2000, the founder contributed 2,796,175 shares of common stock
to the Company. Such contributed shares were previously subject to an option
agreement between the founder and an executive officer of the Company.
Simultaneous with the contribution of the common shares by the founder, the
Company issued options to the officer to purchase 2,796,175 shares of the
Company's common stock, at an exercise price equivalent to the original option
exercise price between the founder and the officer.
F-26
<PAGE>
PARTMINER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Amendment to Certification of Incorporation
In February 2000, the Board of Director's of the Company authorized a
restatement of the Company's certification of incorporation to (i) increase the
number of authorized $.01 par value shares of preferred stock to 10,409,027,
(ii) to designate the 106,122 already outstanding convertible preferred shares
as Series A convertible preferred shares ("Series A") and (iii) to designate
10,302,905 convertible preferred shares as Series B convertible preferred
shares ("Series B").
The Series B preferred shares have substantially all of the same rights and
preferences as the Series A convertible preferred shares, except that (i) the
Series B shares are convertible into shares of common stock on a 1 for 1 basis,
subject to certain adjustments, and (ii) in the event of a liquidation,
dissolution or winding up of the Company, the Series B shares have a
liquidation preference of $4.853 per share.
The Series A and B preferred shares are immediately convertible into common
shares, at the option of the holder, and shall automatically convert into
common stock, upon the closing of a firm commitment underwritten initial public
offering of the Company's common stock in the which the aggregate proceeds
received by the Company are at least $30,000 and at an initial public offering
price of at least $6.06 per common share.
Private Placement
In February 2000, the Company issued 10,302,905 shares of Series B
convertible preferred stock for proceeds of $50,000.
The Series B shares were issued with a conversion ratio that represented a
discount from the market value of the Company's common stock at the time of
issuance. Accordingly, the discount amount is considered incremental yield
("the beneficial conversion"), to the Series B convertible preferred
shareholder's. Based on the conversion terms of the Series B shares, an
embedded dividend will be added to the net loss in the calculation of net loss
applicable to common shareholders in the first quarter of 2000.
Repayment of Related Party Borrowings
In connection with the equity proceeds raised in the February 2000 private
placement, the Company repaid all outstanding borrowings under its Credit
Agreement, of which $3,000 was outstanding at December 31, 1999 ($9,000 was
outstanding immediately prior to the repayment) and subsequently terminated
this agreement.
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of
Accurate Components Inc. and Affiliate
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Accurate
Components Inc. and Affiliate (the "Company") at December 31, 1998 and
September 30, 1999, and the results of their operations and their cash flows
for the year ended December 31, 1998 and for the nine months ended September
30, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
November 12, 1999
F-28
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
COMBINED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................... $ 281 $1,792
Accounts receivable, net for allowance for
doubtful accounts of $47 at December 31, 1998 and
$52 at September 30, 1999, respectively.......... 1,663 2,220
Inventory, net.................................... 755 544
Deferred income taxes............................. 356 434
Current portion of related party promissory note
receivable....................................... 10 10
------ ------
Total current assets............................ 3,065 5,000
Property and equipment, net......................... 148 126
Related party promissory note receivable............ 147 139
Other assets........................................ 11 12
------ ------
Total assets.................................... $3,371 $5,277
====== ======
Liabilities and Shareholder's Equity
Current liabilities:
Accounts payable.................................. $ 352 $ 692
Accrued salaries and benefits..................... 196 347
Income taxes payable.............................. 1,336 1,986
Notes payable..................................... 16 --
------ ------
Total current liabilities....................... 1,900 3,025
------ ------
Commitments and contingencies (Note 9)
Shareholder's equity:
Common stock (Note 7)............................. 7 7
Retained earnings................................. 1,726 2,631
Advances to related party (Note 8)................ (262) (386)
------ ------
Total shareholder's equity...................... 1,471 2,252
------ ------
Total liabilities and shareholder's equity...... $3,371 $5,277
====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-29
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
For The For The Nine
Year Ended Months Ended
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Revenues............................................. $15,582 $15,358
Cost of revenues..................................... 10,394 9,865
------- -------
Gross profit....................................... 5,188 5,493
Selling and marketing................................ 3,198 2,463
General and administrative expenses.................. 2,014 1,612
------- -------
Total operating expenses........................... 5,212 4,075
------- -------
(Loss) income from operations........................ (24) 1,418
Interest income, net................................. 72 64
------- -------
Income before provision for income taxes........... 48 1,482
Provision for income taxes........................... 23 577
------- -------
Net income......................................... $ 25 $ 905
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-30
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Total
Stock Retained Advances to Shareholder's
Amount Earnings Shareholder's Equity
------ -------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997....... $ 7 $1,701 $(137) $1,571
Net income......................... -- 25 -- 25
Advances to related party.......... -- -- (125) (125)
--- ------ ----- ------
Balance at December 31, 1998....... 7 1,726 (262) 1,471
Net income......................... -- 905 -- 905
Advances to related party.......... -- -- (124) (124)
--- ------ ----- ------
Balance at September 30, 1999...... $ 7 $2,631 $(386) $2,252
=== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-31
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For The For the Nine
Year Ended Months Ended
December 31, September
1998 30, 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income.......................................... $ 25 $ 905
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization..................... 21 22
Deferred income taxes............................. (302) (78)
Changes in operating assets and liabilities:
Accounts receivable, net........................ 54 (557)
Inventory, net.................................. (191) 211
Other assets.................................... -- (1)
Accounts payable and accrued expenses........... (100) 491
Income taxes payable............................ 393 650
----- ------
Net cash (used in) provided by operating
activities................................... (100) 1,643
Cash flows from investing activities
Purchases of property and equipment................. (102) --
Repayments of promissory note receivable............ 8 8
Advances to related party........................... (125) (124)
----- ------
Net cash used in investing activities......... (219) (116)
Cash flows from financing activities
Repayments of notes payable......................... (16) (16)
----- ------
Net cash used in financing activities......... (16) (16)
----- ------
Net (decrease) increase in cash and cash
equivalents........................................ (335) 1,511
Cash and cash equivalents, beginning of period...... 616 281
----- ------
Cash and cash equivalents, end of period............ $ 281 $1,792
===== ======
Supplemental disclosure of cash flow information
Income taxes paid................................... $ -- $ 5
===== ======
Interest paid....................................... $ 2 $ 1
===== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-32
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands, except share data)
1. Organization and Summary of Significant Accounting Policies
Organization
Accurate Components Inc. and Affiliate (the "Company") are engaged in the
procurement and wholesale distribution of electronic components within the
domestic and international markets.
Basis of Presentation
Accurate Components Inc. ("ACI") and Marketing Trading Concepts Inc.
("MTCI") are presented on a combined basis since both entities are owned by the
same stockholder, are under common management and have significant financial,
operational, administrative, and legal relationships. All intercompany
transactions and balances have been eliminated in the combined presentation.
Cash and Cash Equivalents
Cash equivalents consist of financial instruments which are readily
convertible to cash and have original maturities of three months or less. Such
financial instruments are carried at cost which approximate fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are deposited with high credit quality
financial institutions. The Company maintains an allowance for doubtful
accounts based upon the expected collectibility of accounts receivable. No
customer accounted for more than 10% of net accounts receivable at December 31,
1998 and September 30, 1999, respectively. No customer represented 10% of
revenues during the year ended December 31, 1998 and during the nine months
ended September 30, 1999, respectively.
Inventory
Inventory, consisting of purchased electronic components parts, is stated at
the lower of cost or market. Cost is determined on the specific identification
method.
Property and Equipment
Property and equipment are stated at cost and depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
range from five to seven years. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful lives of the respective
assets.
Revenue Recognition
The Company recognizes revenue on product sales, net of any discounts, when
the products are shipped and the customer takes ownership and assumes risk of
loss. The Company provides an allowance for sales returns at the time the
related revenue is recognized.
Income Taxes
The Company recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statement and
tax basis of assets and liabilities at enacted statutory tax rates in effect
for the years in which the differences are expected to reverse. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. In addition, valuation allowances are
established when
F-33
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
necessary to reduce deferred tax assets to the amounts expected to be realized.
The income tax expense and income tax assets and liabilities reflected in the
combined financial statements are based upon the aggregate tax expense and tax
assets and liabilities of ACI and MTCI since each entity files a separate
income tax return.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, promissory note receivable, advances
to related party, accounts payable, accrued salaries and benefits and notes
payable, approximate fair value because of their short-term maturities.
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 amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Furniture and fixtures.. $263 $263
Leasehold improvements.. 84 84
---- ----
347 347
Less: accumulated
depreciation and
amortization........... 199 221
---- ----
$148 $126
==== ====
</TABLE>
Depreciation and amortization expense was $21 and $22 for the year ended
December 31, 1998 and for the nine months ended September 30, 1999,
respectively.
3. Line of Credit
On September 1, 1999, the Company entered into a $1,000 line of credit
agreement (the "Line") with a bank. Borrowings bear interest at approximately
8%. There were no borrowings under this Line at any time during the nine months
ended September 30, 1999.
4. Note Payable
On September 1, 1993, the Company entered into an agreement with a former
shareholder, which provided for a $80 loan, in the form of a promissory note.
The note bore interest at an annual rate of 8% and was repaid in September
1999. Interest expense during the year ended December 31, 1998 and during the
nine months ended September 30, 1999 was approximately $2 and $1, respectively.
5. Employee Savings and Retirement Plan
The Company has a 401(k) profit sharing plan that allows eligible employees
to contribute up to 25% of their salary, subject to annual limits. Under the
plan, eligible employees may defer a portion of their pretax salaries but not
more than the statutory limit. The Company may make discretionary
contributions, limited to a
F-34
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
maximum, as described in the plan document. The Company contributed $11 to the
plan during the year ended December 31, 1998. There were no Company
contributions during the nine months ended September 30, 1999.
6. Income Taxes
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
For The Year For The Nine
Ended Months Ended
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Current:
Federal......................................... $276 $557
State........................................... 49 98
---- ----
325 655
---- ----
Deferred:
Federal......................................... (257) (66)
State........................................... (45) (12)
---- ----
(302) (78)
---- ----
Provision for income taxes........................ $ 23 $577
==== ====
</TABLE>
The components of the deferred tax assets (liability) consist of the
following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserve................................ $ 19 $ 21
Inventory reserve............................... 58 131
Accrual to cash adjustment...................... 480 282
----- ----
557 434
----- ----
Deferred tax liability:
Accrual to cash adjustment...................... (201) --
----- ----
Net deferred tax asset........................ $ 356 $434
===== ====
</TABLE>
For income tax purposes, MTCI's income is generally reported in the period
cash is actually received and expenses are generally reported in the period
payments are actually made.
The provision for income taxes differs from the amount computed by applying
the federal income tax rate of 34% as a result of the following:
<TABLE>
<CAPTION>
For The Year For The Nine
Ended Months Ended
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Expected expenses at federal income tax rate.... $16 $504
State taxes, net of federal benefit............. 2 59
Other........................................... 5 14
--- ----
Provision for income tax........................ $23 $577
=== ====
</TABLE>
F-35
<PAGE>
ACCURATE COMPONENTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
7. Shareholder's Equity
The common stock of the combined companies consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Accurate Components, Inc.
Common Stock--No par value
Authorized--200 shares
Issued and outstanding--180 shares............ $ 2 $ 2
Marketing Trading Concepts, Inc.
Common Stock--No par value
Authorized--200 shares
Issued and outstanding--100 shares............ 5 5
--- ---
$ 7 $ 7
=== ===
</TABLE>
8. Related Party Transactions
On July 18, 1994, the Company purchased a promissory note related to and
secured by the principal residence of the sole shareholder for $190. The
promissory note bears interest at 8.75% annually and requires monthly
installments of approximately $2 through July 2009. Interest income on this
note was $14 and $10 for the year ended December 31, 1998 and for the nine
months ended September 30, 1999, respectively.
Advances to related party consist of loans to the sole shareholder by the
Company and are classified as a reduction of shareholder's equity. Such loans
bear interest at an annual rate of 8.75% and have no fixed repayment terms. No
repayments were made by the sole shareholder during the year ended December 31,
1998 and during the nine months ended September 30, 1999. Interest income with
respect to such advances was approximately $17 and $20 for the year ended
December 31, 1998 and for the nine months ended September 30, 1999,
respectively.
9. Commitments and Contingencies
The Company leases its office and operations facilities and other equipment
under noncancellable operating leases which expire at various dates through
2001.
Future minimum lease payments under these noncancellable operating leases
are as follows:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
Period ending December 31,
1999 (three month period remaining).............................. $ 35
2000............................................................. 146
2001............................................................. 53
</TABLE>
Rent expense charged to operations amounted to approximately $92 and $92 for
the year ended December 31, 1998 and for the nine months ended September 30,
1999, respectively.
10. Subsequent Event
On November 12, 1999, the Company was acquired by PartMiner, Inc.
F-36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
IQXpert Holdings Inc. and Affiliate
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of owners' equity and of cash flows present
fairly, in all material respects, the financial position of IQXpert Holdings
Inc., and the affiliated Data division, operating units of Information Handling
Services Group, Inc. (collectively, the "Company"), at November 30, 1998 and
1999 and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
The accompanying combined financial statements have been prepared from the
records maintained by Information Handling Services Group, Inc. and may not
necessarily be indicative of the conditions that would have existed or the
results of operations if IQXpert Holdings, Inc. and the affiliated Data
division had been operated as unaffiliated entities. Portions of certain
expenses represent allocations made from and applicable to Information Handling
Services Group, Inc. as a whole.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
January 14, 2000
F-37
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
COMBINED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
November 30,
--------------
1998 1999
------ -------
<S> <C> <C>
Assets
Current assets
Accounts receivable, net of allowance for doubtful accounts
of $103 and $95 in 1998 and 1999 ........................... $3,094 $ 4,152
Prepaid expenses and other assets............................ 247 408
------ -------
Total current assets....................................... 3,341 4,560
Property and equipment, net.................................... 108 1,101
Intangible assets, net......................................... 3,533 27,527
------ -------
Total assets............................................... $6,982 $33,188
====== =======
Liabilities and Owners' Equity
Current liabilities
Accounts payable and accrued expenses........................ $ -- $ 786
Deferred revenues............................................ 5,104 5,598
------ -------
Total current liabilities.................................. 5,104 6,384
------ -------
Commitments and contingencies (Note 9)
Owners' Equity
Common stock; $0.001 par value, 110,000,000 shares
authorized; 9,556,130 shares issued and outstanding at
November 30, 1999 (Notes 1 and 3)........................... -- 10
Additional paid-in capital................................... -- 30,161
Accumulated deficit.......................................... -- (3,367)
Net contribution from owner ................................. 1,878 --
------ -------
Total owners' equity....................................... 1,878 26,804
------ -------
Total liabilities and owners' equity....................... $6,982 $33,188
====== =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-38
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
For the Years
Ended
November 30,
----------------
1998 1999
------- -------
<S> <C> <C>
Revenues:
Database product subscription revenues, net.................. $13,342 $12,920
Software licenses and services revenues, net................. -- 3,546
------- -------
Total revenues, net........................................ 13,342 16,466
Cost of goods and services................................... 7,417 7,351
Cost of software licenses and services....................... -- 886
------- -------
Gross profit............................................... 5,925 8,229
Selling and marketing expenses............................... 3,929 4,454
General and administrative expenses.......................... 1,052 1,816
Research and development..................................... 256 1,612
Amortization of intangible assets............................ 1,223 3,490
------- -------
Operating loss before provision (benefit) for income
taxes..................................................... (535) (3,143)
Provision (benefit) for income taxes......................... (207) 144
------- -------
Net loss................................................... $ (328) $(3,287)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-39
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
COMBINED STATEMENTS OF OWNERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
--------------------------
Additional Total
Par Paid-in Accumulated Contributions Owners'
Shares Value Capital Deficit by Owner Equity
--------- ----- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30,
1997................... -- $ -- $ -- $ -- $ 4,482 $ 4,482
Net distributions to
owner.................. -- -- -- -- (2,276) (2,276)
Net loss................ -- -- -- -- (328) (328)
--------- ---- -------- -------- ------- --------
Balance at November 30,
1998................... -- -- -- -- 1,878 1,878
Net distribution to
owner.................. -- -- -- -- (1,162) (1,162)
Net income through March
31, 1999............... -- -- -- -- 80 80
--------- ---- -------- -------- ------- --------
Balance at March 31,
1999................... -- -- -- -- 796 796
Incorporation and
capitalization of
IQXpert Holdings Inc... 7,632,977 8 12,405 -- (796) 11,617
Issuance of shares in
connection with
acquisition of ICI..... 1,923,153 2 17,756 -- -- 17,758
Net loss from April 1,
1999................... -- -- -- (3,367) -- (3,367)
--------- ---- -------- -------- ------- --------
Balance at November 30,
1999................... 9,556,130 $ 10 $ 30,161 $ (3,367) $ -- $ 26,804
========= ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-40
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
<TABLE>
<CAPTION>
For the Years
Ended November
30,
-----------------
1998 1999
------- --------
<S> <C> <C>
Cash flows from operating activities
Net loss............................................... $ (328) $ (3,287)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 1,655 4,332
Deferred income taxes................................ -- 38
Changes in operating assets and liabilities, net of
effect of acquisitions
Accounts receivable, net........................... 512 (774)
Prepaid expenses and other assets.................. (23) (199)
Accounts payable and accrued expenses.............. (35) 588
Deferred revenues.................................. 516 494
------- --------
Net cash provided by operating activities........ 2,297 1,192
Cash flows from investing activities
Purchase of ICI, net of cash acquired.................. -- (10,905)
Purchase of ExtraTime.................................. -- (250)
Purchase of property and equipment..................... (21) (468)
Other.................................................. -- (23)
------- --------
Net cash used in investing activities............ (21) (11,646)
Cash flows from financing activities
Net contributions from (distributions to) owner........ (2,276) 10,454
------- --------
Net cash (used in) provided by financing
activities...................................... (2,276) 10,454
------- --------
Net change in cash..................................... -- --
Cash and cash equivalents, beginning of period......... -- --
------- --------
Cash and cash equivalents, end of period............... $ -- $ --
======= ========
Supplemental disclosure of cash flow information:
Income taxes paid...................................... $ -- $ --
======= ========
Interest paid.......................................... $ -- $ --
======= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-41
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
(In thousands, except share data)
1. Organization and Description of Business
IQXpert Holdings Inc. (the "Company") is engaged in the design and
development of information database systems relating to electronic components,
including the CAPSXpert database, and the sale of subscriptions to such
databases through its wholly-owned subsidiary IQXpert Inc. ("IQXpert") and the
affiliated Data division ("Data"). IQXpert Holdings Inc. and Data were
operating units of Information Handling Services Group, Inc. ("IHS") through
November 30, 1999. On November 30, 1999, IHS sold IQXpert Holdings Inc. and
substantially all of the assets and liabilities of Data to PartMiner, Inc. The
accompanying financial statements do not give effect to any adjustments which
would arise as a result in the change in the Company's ownership on November
30, 1999.
On March 24, 1999, the Company was incorporated in Delaware, at which time
IHS transferred cash and certain assets to the Company, consisting primarily of
the CAPSXpert database assets and operations, in return for 7,632,977 common
shares of the Company. Net assets contributed were recorded at their historical
net book value and totaled approximately $796 at March 31, 1999.
Effective April 1, 1999, the Company acquired all of the outstanding common
stock of International ComputTex, Inc. ("ICI"), a developer and provider of
enterprise client/server software products and services that enable
manufacturers to improve product development and business processes through
component and supplier management and product data management.
On September 1, 1999, the Company acquired certain assets of ExtraTime
Technologies, LLC ("ExtraTime"). ExtraTime provides software development,
support and implementation services.
IHS, a Delaware corporation, is a wholly owned subsidiary of HAIC Inc.,
which is a wholly owned subsidiary of Holland America Investment Corporation
("HAIC").
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are presented on a combined basis as
both IQXpert Holdings Inc. and its subsidiaries and Data were under common
ownership and management for the periods presented and have significant
financial, operational, administrative and legal relationships. All material
intercompany transactions and balances have been eliminated in the combined
presentation.
The Company does not maintain corporate treasury, legal, tax, purchasing and
other similar corporate support functions. For purposes of preparing the
accompanying financial statements, certain IHS corporate costs were allocated
to the Company using the allocation methods described in Note 8.
Cash and Cash Equivalents
The Company's cash management functions are performed by IHS. All excess
cash balances of the Company are paid to IHS daily, and as a result, the
Company holds no cash or cash equivalents.
Financial Risks
Financial instruments that potentially subject the Company to credit risk
consist of accounts receivable. The Company maintains an allowance for doubtful
accounts based upon the expected collectibility of accounts
F-42
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
receivable. No customer accounted for more than 10% of accounts receivable at
November 30, 1998 and 1999. No customer represented 10% of revenues during the
year ended November 30, 1998. One customer represented 10% or more of revenues
during the year ended November 30, 1999.
The Company operates in the United States. Export sales to customers
(principally in Europe) comprised approximately 39% and 38% in 1998 and 1999,
respectively. The Company's aggregate sales to various customers within the
U.S. federal government approximated 8% of total revenues in each of 1998 and
1999.
The Company's business is subject to other risks and uncertainties common to
growing technology-based companies, including rapidly changing business models,
new service introductions and other activities of competitors.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
which range from five to seven years.
Intangible Assets
Intangible assets are amortized on a straight-line basis over the estimated
periods benefited which range from five to fifteen years. The realizability of
intangible assets is evaluated periodically when events or circumstances
indicate a possible inability to recover the carrying amounts. Such evaluation
is based on various analyses, including cash flow and profitability
projections. The analyses involve significant management judgment to evaluate
the capacity of an acquired business to perform within projections.
Revenue Recognition
The Company has historically derived revenues from the sale of subscriptions
to its database of electronic components information. Commencing with the
acquisition of ICI, the Company began to derive revenue from the sale of
software licenses and related services. Deferred revenue comprises amounts
billed or collected by the Company prior to satisfying the applicable revenue
recognition criteria and relate principally to database subscription revenues.
Database Subscription Revenue
Revenue from the sale of database subscriptions is recognized ratably over
the term of the subscription period, generally 12 months. Royalties and
commissions associated with database subscriptions are deferred and amortized
to expense over the subscription period.
Software and Service Revenue
Software licensing and services revenues are recognized in accordance with
the provisions of Statement of Position 97-2, "Software Revenue Recognition"
("SOP 97-2"), as amended by Statement of Position 98-4. Additionally, the
American Institute of Certified Public Accountants recently issued Statement of
Position 98-9, which provides certain amendments to SOP 97-2, which is
effective for transactions entered into beginning January 1, 2000. This
pronouncement is not expected to materially impact the Company's revenue
recognition practices.
F-43
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Software-related license revenues are generated from licensing the rights to
the periodic or perpetual use of the Company's software products. Software-
related service revenues are generated from sales of maintenance, consulting
and training services performed for customers that license the Company's
products.
Revenues from software license agreements are generally recognized over the
software implementation period if persuasive evidence of an arrangement exists,
collection is probable, the fee is fixed or determinable, and vendor-specific
objective evidence exists to allocate the total fee to all elements of the
arrangement. The Company has concluded that the implementation services are
essential to the customer's use of the software in arrangements where
implementation services are provided. As such, the Company recognizes revenue
for these arrangements following the percentage-of-completion method over the
implementation period. Percentage of completion is measured by the percentage
of implementation hours incurred to date to estimated total implementation
hours.
Vendor-specific objective evidence is based on the price charged when an
element is sold separately. Elements included in multiple-element arrangements
could consist of software licenses, maintenance, consulting and training
services.
Revenues from maintenance services are recognized ratably over the term of
the contract, typically one year. Consulting revenues are primarily related to
implementation services performed on a time-and-materials basis under separate
service arrangements. Revenues from consulting and training services are
recognized as services are performed.
The Company provides allowances for sales returns at the time the related
revenue is recognized.
Research and Development
Research and development activities are expensed as incurred.
Income Taxes
From April 1, 1999 to November 30, 1999, the Company was a separate taxable
entity for federal, state and local income tax purposes. The Company's tax
provision has been prepared in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, on a separate return
basis for all periods presented.
Deferred taxes result from differences between the financial and tax bases
of the Company's assets and liabilities and are adjusted for changes in tax
rates and tax laws when changes are enacted. Valuation allowances are recorded
to reduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized by the Company.
Owners' Equity and Accumulated Deficit
Prior to incorporation in March 1999, the Company was not a separate legal
entity and had no historical capital structure. For all periods prior to the
Company's incorporation, funding provided by and distributions made to IHS, and
net losses incurred by the Company, have been recorded as Owners' Equity.
Subsequent to incorporation, all losses have been recorded in Accumulated
Deficit.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including
accounts receivable, accounts payable and accrued expenses approximate fair
value because of their short-term maturities.
F-44
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
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 amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. Acquisitions
Effective April 1, 1999, the Company acquired 91.3% of the outstanding
common stock of ICI for an aggregate purchase price of $25,528 including
$10,905 in cash plus 1,566,153 shares of the Company's common stock. The
remaining 8.7% interest in ICI was previously held by Thybo New Ventures
Limited ("Thybo"), an affiliate of IHS. Thybo exchanged its 8.7% interest in
ICI for 357,000 newly issued shares of IQXpert. This exchange was accounted for
at Thybo's original cost of the shares of $3,135 which approximated their fair
value on April 1, 1999. The transaction has been accounted for as a purchase
and the assets and liabilities of ICI have been recorded at fair value on the
date of acquisition as follows:
<TABLE>
<S> <C>
Accounts receivable................................................. $ 284
Other assets........................................................ --
Property, plant and equipment....................................... 735
Software development costs.......................................... 1,968
Goodwill............................................................ 25,875
Accounts payable and accrued expenses............................... (199)
</TABLE>
The results of ICI's operations are included in those of the Company for the
period from acquisition to November 30, 1999.
Supplemental Pro Forma Information (unaudited):
Results of operations for the years ended November 30, 1998 and 1999
assuming that the Company and ICI had been combined at the beginning of such
periods are as follows:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Revenue.................................................... $17,739 $16,761
Net loss................................................... (7,239) (6,007)
</TABLE>
The pro forma information does not reflect the actual results that would
have been achieved, nor is it necessarily indicative of future consolidated
results of the Company.
On September 1, 1999, the Company acquired certain fixed assets and
intangible assets of ExtraTime for approximately $250 in cash in a transaction
accounted for as a purchase.
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Computer equipment...................................................... $ 5
Goodwill................................................................ 245
</TABLE>
The results of ExtraTime's operations are included in those of the Company
for the period from acquisition to November 30, 1999. Supplemental pro forma
information has not been included herein as the results of ExtraTime's
operations for the periods presented are not material to the combined results
of the Company.
F-45
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
4. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
----- ------
<S> <C> <C>
Furniture and computer equipment............................. $ 683 $1,814
Less--accumulated depreciation............................... (575) (713)
----- ------
$ 108 $1,101
===== ======
</TABLE>
Depreciation expense was $68 and $215 for the years ended November 30, 1998
and 1999, respectively.
5. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
Useful Lives 1998 1999
------------ ------- -------
<S> <C> <C> <C>
Goodwill...................................... 5 years $ -- $26,120
Software development costs.................... 5 years 360 2,328
Acquired database assets...................... 15 years 4,685 4,685
Copyrights and patents........................ 12 years 500 523
------- -------
5,545 33,656
Less--accumulated amortization................ (2,012) (6,129)
------- -------
$ 3,533 $27,527
======= =======
</TABLE>
Amortization expense for the years ended November 30, 1998 and 1999 was
$1,587 and $4,117, respectively, of which $364 and $627 is included in cost of
goods and services in the accompanying combined statements of operations for
the years ended November 30, 1998 and 1999, respectively.
F-46
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
6. Income Taxes
At November 30, 1999, the Company had net operating loss carryforwards of
approximately $6,148 and research credit carryforwards of approximately $88,
which expire through 2014. The net operating loss carryforwards were generated
by ICI prior to its acquisition by the Company on April 1, 1999. The Internal
Revenue Code places certain limitations on the annual amount of net operating
loss carryforwards which can be utilized if certain changes in the Company's
ownership occur. Changes in the Company's ownership may limit the use of such
carryforward benefits.
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
----- -------
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts............................... $ 38 $ 50
Net operating loss carryforwards.............................. -- 2,459
Research credit carryforwards................................. -- 88
----- -------
Gross deferred tax assets................................... 38 2,597
Deferred tax liabilities
Accumulated depreciation and amortization................... -- (124)
----- -------
Gross deferred tax liabilities............................ -- (124)
----- -------
38 2,473
Valuation allowance........................................... -- (2,473)
----- -------
Net deferred tax assets................................... $ 38 $ --
===== =======
A valuation allowance has been provided for as of November 30, 1999 relating
to the Company's deferred tax assets due to the fact that it is more likely
than not that such benefits will not be realized.
The following summarizes the provision (benefit) for income taxes for the
years ended November 30, 1998 and 1999:
<CAPTION>
1998 1999
----- -------
<S> <C> <C>
Current:
Federal....................................................... $(147) $ 92
State......................................................... (22) 14
----- -------
(169) 106
----- -------
Deferred:
Federal....................................................... (35) 35
State......................................................... (3) 3
----- -------
(38) 38
----- -------
Provision (benefit) for income taxes............................ $(207) $144
===== =======
</TABLE>
F-47
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
The income tax provision (benefit) differs from the amount computed by
applying the U.S. federal income tax rate of 34% to the loss before income
taxes. The amounts for the years ended November 30, 1998 and 1999 are
reconciled as follows:
<TABLE>
<CAPTION>
1998 1999
----- -------
<S> <C> <C>
U.S. federal income tax benefit at statutory rate............ $(182) $(1,068)
Change in valuation allowance................................ -- 56
State income tax benefit, net of federal expense............. (25) 17
Research credits............................................. -- (30)
Nondeductible goodwill....................................... -- 1,177
Other........................................................ -- (8)
----- -------
Income tax provision (benefit)............................... $(207) $ 144
===== =======
</TABLE>
7. Employee Benefit Plans
The Company participates, as part of IHS and along with other affiliated
companies, in a non-contributory, defined benefit retirement plan administered
by HAIC. The plan covers substantially all salaried employees. Pension costs
are allocated and funded based upon annual actuarial estimates, except that
funding is subject to limitations under applicable tax regulations. The
Company's allocated pension costs totaled approximately $7 for each of the
years ended November 30, 1998 and 1999.
The Company provides workers' compensation, medical and traditional dental
insurance coverages. Costs allocated to the Company were approximately $360 and
$270 for these programs for the years ended November 30, 1998 and 1999,
respectively.
In addition, the Company provides certain health care benefits, along with
other IHS affiliates, for retired employees. Substantially all of the Company's
employees may become eligible for these benefits if they reach normal
retirement age while working for the Company. Costs allocated to the Company
for such benefits totaled approximately $6 and $7 for the years ended November
30, 1998 and 1999, respectively.
Employees may participate in IHS sponsored defined contribution retirement
plans. Benefit expense relating to these plans was approximately $64 and $83
for the years ended November 30, 1998 and 1999, respectively.
On April 1, 1999, the Company established a non-qualified stock option plan
for certain key employees. A total of 288,500 options at an exercise price of
$14.80 per share were issued in 1999 under the plan. The plan was terminated on
November 30, 1999 and all options issued thereunder were cancelled.
8. Related Party Transactions
As discussed in Note 1, the financial statements of the Company reflect
certain allocated corporate support costs from IHS. Such allocations and
charges are based on a percentage of total costs of the services provided,
based on factors such as headcount, revenues, gross asset value, or the
specific level of activity directly related to such costs.
Management believes that these allocations are based on assumptions that are
reasonable under the circumstances. However, these allocations are not
necessarily indicative of the costs and expenses that would have resulted in
the business had been operated as a separate entity.
F-48
<PAGE>
IQXPERT HOLDINGS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
The following summarizes the corporate costs allocated to the Company for
the years ended November 30, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
------ ----
<S> <C> <C>
Marketing and advertising....................................... $3,367 $986
General and administrative...................................... 829 211
Data processing................................................. 1,200 300
</TABLE>
In March 1999, the Company entered into a services agreement with IHS under
which it agreed to pay IHS a fixed monthly fee of $331 in exchange for many of
the services that IHS formerly provided on an allocated basis. A total of
approximately $2,648 was charged to the Company under this agreement during the
period from April 1, 1999 to November 30, 1999.
In March 1999, the Company entered into a non-exclusive sales agency
agreement with IHS, pursuant to which IHS shall receive an 18% commission on
the net price paid by customers for new and renewal subscriptions to the
CAPSXpert products. Commissions paid by the Company to IHS under this agreement
totaled $1,440 through November 30, 1999. This agreement terminates in April
2000.
The Company receives and pays cash to IHS from time to time as necessary for
reimbursement of Company expenses incurred by IHS and for corporate cash
management purposes. No formal borrowing agreement exists between the Company
and IHS and no interest income or expense has been charged or allocated to the
Company. As of November 30, 1999, no amounts were owed to or between IHS and
the Company under this informal agreement.
9. Commitments and Contingencies
Rent expense allocated to the Company by IHS amounted to approximately $200
for each of the years ended November 30, 1998 and 1999, respectively. In
addition, the Company incurred direct rental expenses of $134 in 1999. Minimum
rental commitments under non-cancelable operating leases in effect at November
30, 1999 are as follows:
<TABLE>
<S> <C>
For the Year Ending November 30,
2000................................................................. $202
2001................................................................. 209
2002................................................................. 85
</TABLE>
F-49
<PAGE>
Schedule II
PartMiner, Inc.
Valuation and Qualifying Accounts
(in thousands)
The following is a rollforward of the Company's provision for doubtful
accounts and tax valuation allowances for the years ended December 31, 1997,
1998 and 1999:
<TABLE>
<CAPTION>
Balance at Charges Additions
Beginning of Costs, and due to Balance at
Period Expenses Acquisitions Deductions End of Period
------------ ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1997:
Provision for doubtful
accounts.............. $ 30 $ -- $ -- $ 10 $ 20
Tax valuation
allowances............ -- -- -- -- --
Year ended December 31,
1998:
Provision for doubtful
accounts.............. 20 20 -- -- 40
Tax valuation
allowances............ -- 193 -- -- 193
Year ended December 31,
1999:
Provision for doubtful
accounts.............. 40 375 485 -- 900
Tax valuation
allowances............ $193 $5,261 $2,473 $-- $7,927
</TABLE>
F-50
<PAGE>
PARTMINER, INC.
SELECTED UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The selected unaudited pro forma condensed consolidated financial
information for PartMiner, Inc. (the "Company") set forth below gives effect to
the acquisition of Accurate Components Inc. and Market Trading Concepts, Inc.,
its affiliate (collectively, "Accurate Components"), and IQXpert Holdings Inc.
and its wholly-owned subsidiaries (collectively, "IQXpert"). The historical
financial information set forth below has been derived from, and is qualified
by reference to, the financial statements of the Company, Accurate Components
and IQXpert and should be read in conjunction with those financial statements
and the notes thereto included elsewhere herein.
The selected unaudited pro forma condensed consolidated financial
information presents the condensed consolidated results of operations of the
companies for the year ended December 31, 1999, giving effect to the
acquisitions of Accurate Components and IQXpert as if such acquisitions had
been consummated as of January 1, 1999 under the purchase method of accounting.
Pro forma condensed consolidated balance sheet information has not been
presented because the assets and liabilities of Accurate Components and IQXpert
are included in the Company's audited consolidated balance sheet at December
31, 1999, which is included elsewhere herein.
The selected unaudited pro forma condensed consolidated financial
information reflects certain adjustments, including adjustments to reflect the
amortization of intangible assets resulting from the acquisitions. The
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Financial
Statements--the Company, Accurate Components and IQXpert." The selected
unaudited pro forma condensed consolidated financial information does not
purport to represent what the consolidated results of operations or financial
condition of the Company would actually have been if the Accurate Components
and IQXpert acquisitions had in fact occurred on such date or to project the
future consolidated results of operations or financial condition of the
Company.
See notes to unaudited pro forma financial statements for further
information.
F-51
<PAGE>
PARTMINER, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1999
----------------------------------------------------------
Accurate Pro forma
PartMiner Components IQXpert Adjustments Pro forma
---------- ---------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Product revenues ...... $ 40,328 $19,235 $ -- $ -- $ 59,563
Other revenues......... 1,175 -- 15,406 -- 16,581
---------- ------- ------- ---------- ----------
Total revenues......... 41,503 19,235 15,406 -- 76,144
Cost of revenues........ 29,669 12,512 7,630 -- 49,811
---------- ------- ------- ---------- ----------
Gross profit........... 11,834 6,723 7,776 -- 26,333
Operating expenses
Selling and marketing,
exclusive of stock-
based compensation
expense of $395....... 11,081 2,997 4,153 -- 18,231
General and
administrative,
exclusive of stock-
based compensation
expense of $4,026..... 6,967 1,988 1,750 -- 10,705
Technology and
development, exclusive
of stock-based
compensation expense
of $144............... 1,812 -- 1,610 -- 3,422
Stock-based
compensation.......... 4,565 -- -- -- 4,565
Amortization of
intangibles........... 3,826 -- 3,490 33,539 (a) 36,656
(709)(b)
(3,490)(c)
---------- ------- ------- ---------- ----------
Total operating
expenses.............. 28,251 4,985 11,003 29,340 73,579
---------- ------- ------- ---------- ----------
Income (loss) from
operations............. (16,417) 1,738 (3,227) (29,340) (47,246)
Other (income) expense
Increase in redeemable
stock purchase
warrants.............. 673 -- -- -- 673
Other interest
expense............... 180 -- -- -- 180
Interest and other
income................ (402) (72) -- -- (474)
---------- ------- ------- ---------- ----------
Total other (income)
expense............... 451 (72) -- -- 379
---------- ------- ------- ---------- ----------
Income (loss) before
provision for income
taxes and extraordinary
item................... (16,868) 1,810 (3,227) (29,340) (47,625)
---------- ------- ------- ---------- ----------
Provision for income
taxes.................. 33 726 144 (870)(d) 33
---------- ------- ------- ---------- ----------
Income (loss) before
extraordinary item..... (16,901) 1,084 (3,371) (28,470) (47,658)
Extraordinary item--loss
on early extingushment
of debt, net of income
tax benefit of $0 in
1999................... (1,030) -- -- -- (1,030)
---------- ------- ------- ---------- ----------
Net income (loss)....... (17,931) 1,084 (3,371) (28,470) (48,688)
---------- ------- ------- ---------- ----------
Accretion of mandatorily
redeemable convertible
preferred stock........ (12,075) -- -- -- (12,075)
---------- ------- ------- ---------- ----------
Net income (loss)
applicable to common
shareholders........... $ (30,006) $ 1,084 $(3,371) $ (28,470) $ (60,763)
========== ======= ======= ========== ==========
Basic and diluted net
loss per share, before
extraordinary item,
applicable to common
shareholders........... $ (0.79) $ (1.26)
========== ==========
Weighted average number
of shares used in
computing basic and
diluted per share
calculations........... 36,676,134 10,723,688 (e) 47,399,822
========== ========== ==========
</TABLE>
The accompanying notes and management's assumptions to the unaudited
pro forma condensed consolidated statements of operations are an integral part
of this statement.
F-52
<PAGE>
PARTMINER, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATEDSTATEMENT OF OPERATIONS
(in thousands, except share data)
1. Basis of Presentation
The unaudited pro forma condensed consolidated statements of operations give
effect to the acquisitions by the Company of Accurate Components and IQXpert,
as if such acquisitions had occurred on January 1, 1999. Such unaudited pro
forma condensed consolidated statements of operations set forth the historical
results of operations of the Company for the year ended December 31, 1999, of
Accurate Components for the period January 1, 1999 to November 12, 1999 (date
of acquisition) and of IQXpert for the period from January 1, 1999 through
November 30, 1999 (effective date of acquisition). The operations of Accurate
Components for the period November 13, 1999 through December 31, 1999 and the
operations of IQXpert for the period December 1, 1999 through December 31, 1999
are included in the historical results of operations of the Company for the
year ended December 31, 1999.
The Company's historical diluted weighted average shares of common stock
outstanding for the year ended December 31, 1999 does not include the impact of
common stock equivalents then outstanding, as the effect of their inclusion
would be antidilutive.
2. Pro forma adjustments
The pro forma adjustments to the unaudited pro forma condensed consolidated
statements of operations are as follows:
a) To increase amortization expense by $33,539 due to goodwill and other
intangible assets of $113,321 generated from the acquisitions of Accurate
Components and IQXpert. Amortization will be recognized on a straight-line
basis over the following number of years:
<TABLE>
<CAPTION>
Accurate Components: IQXpert:
-------------------- --------
<S> <C>
Goodwill--10 years Goodwill--3 years
Other intangible assets--3 years
</TABLE>
b) To reverse the amortization expense of $709 associated with the
database licensed from IHS for the period from March 16, 1999 (date of
license agreement) through November 30, 1999 (date of acquisition of
database).
c) To reverse the amortization expense of $3,490 associated with
intangibles of IQXpert for the period January 1, 1999 through November 30,
1999.
d) To record the $870 income tax effect of combining the Company's,
Accurate Components and IQXpert's results of operations and pro forma
adjustments, excluding the impact of non-deductible amounts.
e) To adjust shares used in computing basic and diluted net loss per
share attributable to common shareholders for common shares issued upon the
IQXpert acquisition that would have been outstanding for the entire year
had the acquisition occurred on January 1, 1999.
F-53
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth estimated expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................. $19,800
NASD Fee ........................................................... *
Nasdaq National Market Listing Fee.................................. 95,000
Printing and Engraving Expenses..................................... *
Accounting Fees and Expenses........................................ *
Legal Fees and Expenses............................................. *
Blue Sky Qualification Fees and Expenses............................ *
Transfer Agent Fees and Expenses.................................... *
Miscellaneous....................................................... *
-------
Total............................................................. $ *
=======
</TABLE>
- --------
* To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
The New York Business Corporation Law, or BCL, provides that if a derivative
action is brought against a director or officer of a corporation, the
corporation may indemnify him or her against amounts paid in settlement and
reasonable expenses, including attorneys' fees incurred by him or her, in
connection with the defense or settlement of such action, if such director or
officer acted in good faith for a purpose which he or she reasonably believed
to be in the best interests of the corporation, except that no indemnification
shall be made without court approval in respect of a threatened action, or a
pending action settled or otherwise disposed of, or in respect of any matter as
to which such director or officer has been found liable to the corporation. In
a nonderivative action or threatened action, the BCL provides that a
corporation may indemnify a director or officer against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
incurred by him or her in defending such action, if such director or officer
acted in good faith for a purpose which he or she reasonably believed to be in
the best interests of the corporation.
Under the BCL, a director or officer who is successful, either in a
derivative or nonderivative action, is entitled to indemnification as outlined
above. Under any other circumstances, such director or officer may be
indemnified only if certain conditions specified in the BCL are met. The
indemnification provisions of the BCL are not exclusive of any other rights to
which a director or officer seeking indemnification may be entitled pursuant to
the provisions of the certificate of incorporation or the by-laws of a
corporation or, when authorized by such certificate of incorporation or by-
laws, pursuant to a shareholders' resolution, a directors' resolution or an
agreement providing for such indemnification.
The above is a general summary of certain provisions of the BCL and is
subject, in all cases, to the specific and detailed provisions of Sections 721-
725 of the BCL.
Section 726 of the BCL also contains provisions authorizing a corporation to
obtain insurance on behalf of any director and officer against liabilities,
whether or not the corporation would have the power to indemnify against such
liabilities. We maintain insurance coverage under which our directors and
officers are insured, subject to the limits of the policy, against certain
losses, as defined in the policy, arising from claims made against such
directors and officers by reason of any wrongful acts as defined in the policy,
in their respective capacities as directors or officers. Our restated
certificate of incorporation provides that we shall indemnify and advance
expenses to our directors and officers to the fullest extent permitted by law.
II-1
<PAGE>
The Underwriting Agreement filed as an exhibit hereto contains provisions
pursuant to which each Underwriter severally agrees to indemnify us, any person
controlling us within the meaning of Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities Exchange Act of 1934, as amended,
each director of ours, and each officer of ours who signs this registration
statement with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter expressly for use in this
registration statement.
Item 15. Recent Sales of Unregistered Securities.
Within the past three years, we have sold shares of our capital stock in the
following transactions that were not registered under the Securities Act of
1933, as amended.
. On July 29, 1997, we issued 10,000,000 shares of our common stock to two
executive officers.
. On July 30, 1997, we issued a warrant for the purchase of 5,000,000
shares of our common stock to an investor in connection with a loan of
$3,000,000 by the investor to us.
. On March 16, 1999, we issued 10,204,100 shares of our common stock to an
investor for a purchase price of $7,150,000, and 106,122 shares of our
mandatorily redeemable convertible preferred stock to two investors for
an aggregate purchase price of $13,000,000.
. Since our inception, we have granted to officers, members of management
and employees options to purchase an aggregate of 2,164,800 shares of
our common stock at an average exercise price of $2.81 per share.
. On September 10, 1999, we issued 4,630,600 shares of our mandatorily
redeemable common stock to an investor for a purchase price of
$10,000,000.
. On December 6, 1999, we issued 11,719,000 shares of our common stock to
a group of investors in connection with a merger in which we acquired
all the outstanding capital stock of IQXpert Holdings Inc.
. In July and September of 1999, we granted options to purchase shares at
an exercise price equal to the initial public offering price with an
aggregate value of $275,000 to two consultants.
. On February 16, 2000, we issued 10,302,905 shares of our mandatorily
redeemable convertible preferred stock to 15 investors, including four
principal shareholders, for an aggregate purchase price of approximately
$50 million.
The share amounts for the issuances of common stock referred to above
reflect the ten thousand-for-one split of the common stock effected in March
1999 and the one hundred-for-one split of our common stock effected in December
1999.
We used the net proceeds of the stock sales for working capital and other
general corporate purposes (including corporate acquisitions) and repayment of
indebtedness.
The sales of the securities listed above were deemed to be exempt from
registration under the Securities Act of 1933, as amended, in reliance on
Section 4(2) of such Act or, with respect to issuances to employees, Rule 701
promulgated under Section 3(b) of such Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation. The recipients of securities in
each transaction 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. Appropriate legends were affixed to the instruments
representing such securities issued in such transactions. All recipients had
adequate access, through their relationships or agreements with us, to
information about us.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement ***
Amended and Restated Certificate of Incorporation of PartMiner,
3.1 Inc.***
3.2 By-laws of PartMiner, Inc.***
5.1 Opinion of Kirkpatrick & Lockhart LLP***
10.1 1999 Stock Plan**
10.2 1999 Employee Incentive Stock Plan**
10.3 Intentionally omitted
10.4 Third Amended and Restated Stockholders Agreement, dated as of
February 16, 2000, by and among PartMiner, Boston Ventures Limited
Partnership V, Seacoast Capital Partners Limited Partnership, Seacoast
Investors LLC, Vulcan Securities Limited, Cahners Information
Holdings, Inc., Information Handling Services Inc., Emil H. Dahan,
Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng, James L.
McAlarney, III, Daniel Nissanoff, Integral Capital Partners IV, L.P.,
Integral Capital Partners IV, MS Side Fund, L.P., Agile Software
Corporation, Impact Ventures L.P., OMI Partnership Holdings Generation
Capital Partners L.P., State Board of Administration of Florida,
Generation Parallel Management Partners L.P., Broadview SLP and The
Goldman Sachs Group, Inc.**
10.5 Third Amended and Restated Registration Rights Agreement, dated as of
February , 2000, by and among PartMiner, Boston Ventures Limited
Partnership V, Seacoast Capital Partners Limited Partnership, Seacoast
Investors LLC, Vulcan Securities Limited, Cahners Information
Holdings, Inc., Information Handling Services Inc., Emil H. Dahan,
Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng, James L.
McAlarney, III, Daniel Nissanoff, Integral Capital Partners IV, L.P.,
Integral Capital Partners IV MS Side Fund, L.P., Agile Software
Corporation, Impact Ventures L.P., OMI Partnership Holdings Ltd.,
Generation Capital Partners, L.P. State Board of Administration of
Florida, Generation Parallel Management Partners L.P., Broadview SLP
and The Goldman Sachs Group, Inc.**
10.6 Credit Agreement, dated December 20, 1999, by and between PartMiner,
IQXpert Holdings Inc., IQXpert Inc., ExtraTime Technologies, Inc.,
Accurate Components Inc., Market Trading Concepts Inc. and HAIC Inc.**
10.7 Security Agreement, dated December 20, 1999 by and among PartMiner,
IQXpert Holdings Inc., IQXpert Inc., ExtraTime Technologies, Inc.,
Accurate Components Inc., Market Trading Concepts Inc. and HAIC Inc.**
10.8 Agreement and Plan of Merger, dated as of November 30, 1999, by and
between PartMiner, PartMiner Acquisition Corp., IQXpert Holdings Inc.,
Information Handling Services Inc., Thybo New Ventures Limited, Emil
H. Dahan, Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng and
James L. McAlarney, III**
10.9 Stock Purchase Agreement, dated November 12, 1999, by and between
PartMiner, Accurate Components Inc., Market Trading Concepts Inc. and
Anthony Arena**
10.10 Stock Purchase Agreement, dated as of September 10, 1999, by and among
PartMiner, Elsevier Realty Information, Inc. and Daniel Nissanoff**
10.11 Joint Marketing Agreement, dated September 10, 1999, by and between
PartMiner and Cahners Business Information, a division of Reed
Elsevier Inc.**
10.12 IBM Customer Agreement, dated May 20, 1999, between PartMiner (doing
business as Microcom Technologies Inc.) and International Business
Machines Corporation**
10.13 Amendment dated August 2, 1999, to IBM Customer Agreement, dated May
20, 1999, between PartMiner and International Business Machines
Corporation**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.14 Letter Agreement, dated July 26, 1999, between PartMiner and Fred
Couples**
10.15 Agreement of Sublease, dated April 20, 1999, between PartMiner and
Burrell Communications Group**
10.16 Lease, dated July 23, 1999, between PartMiner and Investment
Properties Associates**
10.17 Stock Purchase Agreement, dated as of March 16, 1999, by and among
PartMiner, Boston Ventures Limited Partnership V, Thybo New Ventures
Limited and Daniel Nissanoff**
10.18 Stock Purchase Agreement, dated as of March 16, 1999, by and among
PartMiner, Seacoast Capital Partners Limited Partnership and Daniel
Nissanoff**
10.19 Stock Purchase Agreement, dated as of February 16, 2000, by and among
PartMiner, Boston Ventures Limited Partnership V, Seacoast Capital
Partners Limited Partnership, Seacoast Investors LLC, Vulcan
Securities Limited, Cahners Information Holdings, Inc., Information
Handling Services Inc., Emil H. Dahan, Michael J. Galvin, Patricia
Tuxbury Salem, Peter W. Jeng, James L. McAlarney, III, Integral
Capital Partners IV, L.P., Intergral Capital Partners IV MS Side Fund,
L.P., Agile Software Corporation, Impact Ventures, L.P., OMI
Partnership Holdings Ltd., Generation Capital Partners, L.P., State
Board of Administration of Florida, Generation Parallel Management
Partners L.P., Broadview SLP and The Goldman Sachs Group, Inc.**
10.20 License Agreement, dated October 30, 1995, between PartMiner and
Market Maker Systems Corporation**
10.21 Employment Letter Agreement, dated July 12, 1999, between PartMiner
and Earle Zucht**
10.22 Employment Letter Agreement, dated June 18, 1999, between PartMiner
and Kim Hibler**
10.23 Employment Letter Agreement, dated May 18, 1999, between PartMiner and
Mark Schenecker**
10.24 Severance Agreement, dated April 28, 1999, between PartMiner and
Michael R. Manley**
10.25 Employment Agreement, dated as of March 16, 1999, by and between
PartMiner and Daniel Nissanoff**
10.26 Employment Agreement, dated March 16, 1999, between PartMiner and
Bruce Friedman**
10.27 Employment Letter Agreement, dated January 26, 1999, between PartMiner
and William L. Barron**
10.28 Letter Agreement, dated September 27, 1999, between PartMiner and
Cyber Management, Inc.**
10.29 Employment Letter Agreement, dated January 31, 2000, between PartMiner
and William R. Engles, Jr.**
11.1 Statement Regarding Computation of Earnings Per Share**
16.1 Letter from Ernst & Young**
21.1 Subsidiaries**
23.1 Consents of PricewaterhouseCoopers LLP**
23.2 Consent of Kirkpatrick & Lockhart LLP (to be included in opinion to be
filed as Exhibit 5.1)
24.1 Power of Attorney ** (appears as part of signature page)
27.1 Financial Data Schedule**
</TABLE>
- --------
* The registrant hereby agrees to furnish supplementally to the Securities
and Exchange Commission, upon request, a copy of any omitted schedule to
any of the agreements contained herein.
** Filed herewith
*** To be filed by amendment
(b) The following financial statement schedules are filed herewith,
accompanied by reports of independent accountants on such schedules:
II-4
<PAGE>
Financial statement schedules not listed above have been omitted because
they are inapplicable, are not required under applicable provisions of
Regulation S-X, or the information that would otherwise be included in such
schedules is contained in the registrant's financial statements or accompanying
notes.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on February 18, 2000.
PartMiner, Inc.
/s/ Daniel Nissanoff
By: _________________________________
Daniel Nissanoff
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of PartMiner, Inc., do hereby
constitute and appoint William R. Engles, Jr. and Michael R. Manley or either
of them, our true and lawful attorneys-in-fact and agents, each with full power
to sign for us or any of us in our names and in any and all capacities, any and
all amendments (including post-effective amendments) to this registration
statement, or any related registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and to file the same, with all exhibits thereto and other documents required in
connection therewith, and each of them with full power to do any and all acts
and things in our names and in any and all capacities, which such attorneys-in-
fact and agents, or either of them, may deem necessary or advisable to enable
PartMiner, Inc. to comply with the Securities Act of 1933, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement; and we hereby do ratify and
confirm all that such attorneys-in-fact and agents, or either of them, shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Daniel Nissanoff President and Chief February 18, 2000
____________________________________ Executive Officer, Director
Daniel Nissanoff (principal executive
officer)
/s/ William R. Engles, Jr. Chief Financial Officer February 18, 2000
____________________________________ (principal financial and
William R. Engles, Jr. accounting officer)
/s/ Bruce Friedman Director February 18, 2000
____________________________________
Bruce Friedman
/s/ L. Christopher Meyer Director February 18, 2000
____________________________________
L. Christopher Meyer
/s/ Eben S. Moulton Director February 18, 2000
____________________________________
Eben S. Moulton
/s/ Brian Nairn Director February 18, 2000
____________________________________
Brian Nairn
/s/ Gerhard Schulmeyer Director February 18, 2000
____________________________________
Gerhard Schulmeyer
/s/ James M. Wilson Director February 18, 2000
____________________________________
James M. Wilson
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement***
Amended and Restated Certificate of Incorporation of PartMiner,
3.1 Inc.***
3.2 By-laws of PartMiner, Inc.***
5.1 Opinion of Kirkpatrick & Lockhart LLP***
10.1 1999 Stock Plan**
10.2 1999 Employee Incentive Stock Plan**
10.3 Intentionally Omitted
10.4 Third Amended and Restated Stockholders Agreement, dated as of
February 16, 2000, by and among PartMiner, Boston Ventures Limited
Partnership V, Seacoast Capital Partners Limited Partnership, Seacoast
Investors LLC, Vulcan Securities Limited, Cahners Information
Holdings, Inc., Information Handling Services Inc., Emil H. Dahan,
Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng, James L.
McAlarney, III, Daniel Nissanoff, Integral Capital Partners IV, L.P.,
Integral Capital Partners IV, MS Side Fund, L.P., Agile Software
Corporation, Impact Ventures L.P., OMI Partnership Holdings Ltd.,
Generation Capital Partners L.P., State Board of Administration of
Florida, Generation Parallel Management Partners L.P., Broadview SLP
and The Goldman Sachs Group, Inc.**
10.5 Third Amended and Restated Registration Rights Agreement, dated as of
February 16, 2000, by and among PartMiner, Boston Ventures Limited
Partnership V, Seacoast Capital Partners Limited Partnership, Seacoast
Investors LLC, Vulcan Securities Limited, Cahners Information
Holdings, Inc., Information Handling Services Inc., Emil H. Dahan,
Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng, James L.
McAlarney, III, Daniel Nissanoff, Integral Capital Partners IV, L.P.,
Integral Capital Partners IV, MS Side Fund, L.P., Agile Software
Corporation, Impact Ventures L.P., OMI Partnership Holdings Ltd.,
Generation Capital Partners, L.P., State Board of Administration of
Florida, Generation Parallel Management Partners L.P., Broadview SLP
and The Goldman Sachs Group, Inc.**
10.6 Credit Agreement, dated December 20, 1999, by and between PartMiner,
IQXpert Holdings Inc., IQXpert Inc., ExtraTime Technologies, Inc.,
Accurate Components Inc., Market Trading Concepts Inc. and HAIC Inc.**
10.7 Security Agreement, dated December 20, 1999 by and among PartMiner,
IQXpert Holdings Inc., IQXpert Inc., ExtraTime Technologies, Inc.,
Accurate Components Inc., Market Trading Concepts Inc. and HAIC Inc.**
10.8 Agreement and Plan of Merger, dated as of November 30, 1999, by and
between PartMiner, PartMiner Acquisition Corp., IQXpert Holdings Inc.,
Information Handling Services Inc., Thybo New Ventures Limited, Emil
H. Dahan, Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng and
James L. McAlarney, III**
10.9 Stock Purchase Agreement, dated November 12, 1999, by and between
PartMiner, Accurate Components Inc., Market Trading Concepts Inc. and
Anthony Arena**
10.10 Stock Purchase Agreement, dated as of September 10, 1999, by and among
PartMiner, Elsevier Realty Information, Inc. and Daniel Nissanoff**
10.11 Joint Marketing Agreement, dated September 10, 1999, by and between
PartMiner and Cahners Business Information, a division of Reed
Elsevier Inc.**
10.12 IBM Customer Agreement, dated May 20, 1999, between PartMiner (doing
business as Microcom Technologies Inc.) and International Business
Machines Corporation**
10.13 Amendment dated August 2, 1999, to IBM Customer Agreement, dated May
20, 1999, between PartMiner and International Business Machines
Corporation**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
10.14 Letter Agreement, dated July 26, 1999, between PartMiner and Fred
Couples**
10.15 Agreement of Sublease, dated April 20, 1999, between PartMiner and
Burrell Communications Group**
10.16 Lease, dated July 23, 1999, between PartMiner and Investment
Properties Associates**
10.17 Stock Purchase Agreement, dated as of March 16, 1999, by and among
PartMiner, Boston Ventures Limited Partnership V, Thybo New Ventures
Limited and Daniel Nissanoff**
10.18 Stock Purchase Agreement, dated as of March 16, 1999, by and among
PartMiner, Seacoast Capital Partners Limited Partnership and Daniel
Nissanoff**
10.19 Stock Purchase Agreement, dated as of February 16, 2000, by and among
PartMiner, Boston Ventures Limited Partnership V, Seacoast Capital
Partners Limited Partnership, Seacoast Investors LLC, Vulcan
Securities Limited, Cahners Information Holdings, Inc., Information
Handling Services Inc., Emil H. Dahan, Michael J. Galvin, Patricia
Tuxbury Salem, Peter W. Jeng, James L. McAlarney, III, Integral
Capital Partners IV, L.P., Intergral Capital Partners IV MS Side Fund,
L.P., Agile Software Corporation, Impact Ventures, L.P., OMI
Partnership Holdings Ltd., Generation Capital Partners L.P., State
Board of Administration of Florida, Generation Parallel Management
Partners L.P., Broadview SLP and The Goldman Sachs Group, Inc.**
10.20 License Agreement, dated October 30, 1995, between PartMiner and
Market Maker Systems Corporation**
10.21 Employment Letter Agreement, dated July 12, 1999, between PartMiner
and Earle Zucht**
10.22 Employment Letter Agreement, dated June 18, 1999, between PartMiner
and Kim Hibler**
10.23 Employment Letter Agreement, dated May 18, 1999, between PartMiner and
Mark Schenecker**
10.24 Severance Agreement, dated April 28, 1999, between PartMiner and
Michael R. Manley**
10.25 Employment Agreement, dated as of March 16, 1999, by and between
PartMiner and Daniel Nissanoff**
10.26 Employment Agreement, dated March 16, 1999, between PartMiner and
Bruce Friedman**
10.27 Employment Letter Agreement, dated January 26, 1999, between PartMiner
and William L. Barron**
10.28 Letter Agreement, dated September 27, 1999, between PartMiner and
Cyber Management, Inc.**
10.29 Employment Letter Agreement, dated January 31, 2000, between PartMiner
and William R. Engles, Jr.**
11.1 Statement Regarding Computation of Earnings Per Share**
16.1 Letter from Ernst & Young**
21.1 Subsidiaries**
23.1 Consents of PricewaterhouseCoopers LLP**
23.2 Consent of Kirkpatrick & Lockhart LLP (to be included in opinion to be
filed as Exhibit 5.1)
24.1 Power of Attorney ** (appears as part of signature page)
27.1 Financial Data Schedule**
</TABLE>
- --------
* The registrant hereby agrees to furnish supplementally to the Securities
and Exchange Commission, upon request, a copy of any omitted schedule to
any of the agreements contained herein.
** Filed herewith
*** To be filed by amendment
<PAGE>
EXHIBIT 10.1
PARTMINER, INC.
1999 STOCK PLAN
SECTION 1. Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. PartMiner, Inc., a New York corporation (the
"Company"), hereby establishes the "1999 STOCK PLAN" (the "Plan") for directors,
officers, and key employees. The Plan permits the grant of Options, Stock
Appreciation Rights and Restricted Stock.
1.2 Purpose. The purpose of the Plan is to advance the interests
of the Company by enabling directors, officers, and key employees of the Company
and its Affiliates to participate in the Company's future and to enable the
Company to attract and retain such persons by offering them an equity interest
in the Company.
1.3 Effective Date. The Plan shall become effective on May 28,
1999 (the "Effective Date"), subject to approval by the affirmative votes of a
majority of the securities of the Company entitled to vote thereon.
SECTION 2. Definitions; Construction
2.1 Definitions. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Company.
(c) "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with, directly or indirectly, through one or
more intermediaries, the Company and designated by the Board and/or the
Committee as such.
(d) "Change in Capitalization" means any increase or reduction in
the number of shares of Stock, or any change (including, but not limited to, a
change in value) in the shares of Stock or exchange of shares of Stock for a
different number or kind of shares or other securities of the Company or any
other corporation or other entity, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
stock dividend, stock split or reverse stock split, extraordinary dividend,
property dividend, combination or exchange of shares or otherwise.
<PAGE>
(e) A "Change in Control" means an event or series of events
after the Effective Date by which (i) any "person" or "group" (as such terms,
are used in Section 13(d) and 14(d) of the Act) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Act), directly or indirectly, of more than
fifty percent (50%) of the aggregate voting power of all the capital stock of
the company normally entitled to vote in the election of directors, (ii) during
any period of two consecutive calendar years individuals who at the beginning of
each period constituted the Board (together with any new directors whose
election by the Board or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination was previously so approved) cease for any reason to
constitute a majority of the directors then in office, or (iii) the stockholders
of the Company approve a definitive agreement or plan to merge or consolidate
the Company with or into another corporation, or to sell, or otherwise dispose
of, all or substantially all of the Company's property and assets, or to
liquidate the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means a committee of the Board designated to
administer the Plan which shall consist solely of two or more members of the
Board who are "disinterested" within the meaning of Rule 16b-3 under the Act.
The foregoing requirement for disinterested administrators of the Plan shall not
apply prior to the date of the first registration of any of the securities of
the Company under the Act.
(h) "Company" means PartMiner, Inc., a New York corporation, and
any successors thereto.
(i) "Disability" shall have the meaning assigned to the terms
"total disability" or "totally disabled" in the Company long-term disability
program for salaried employees, provided the Participant remains totally
disabled for six (6) consecutive months; or, if the Company does not maintain a
long-term disability program, an individual shall have a "disability" if he is
unable to engage in any substantial activity by reason of any medically
determinable, physical or mental impairment that can be expected to result in
death or which has lasted or can be expected to last for a period of ninety (90)
substantially consecutive days or for shorter periods aggregating one hundred
twenty (120) days or more during any twelve (12) month period.
(j) "Fair Market Value" shall be determined in accordance with the
following: (i) if the Stock is not listed and traded upon a recognized
securities exchange or quoted on the NASDAQ system or OTC bulletin board and
there is no report of stock prices with respect to the Stock published by a
recognized stock quotation service, upon the basis of the recent purchases and
sales of the Stock in arms-length transactions; or, if there are no such
transactions, as determined in good faith by the Board and/or the Committee;
(ii) if the Stock is not listed and traded upon a recognized securities exchange
or quoted on the NASDAQ system or OTC bulletin
2
<PAGE>
board, and there are reports of stock prices by a recognized quotations service,
upon the basis of the mean between bid and asked quotations for such Stock on
the date of grant as reported by a recognized stock quotation service, or if
there are no bid and asked quotations on that day, then upon the basis of the
mean between the bid and asked quotations for such Stock on the date nearest
preceding that day; or (iii) if the Stock shall then be listed and traded upon a
recognized securities exchange or quoted on the NASDAQ system or OTC bulletin
board, upon the basis of the mean of the high and low sale prices at which the
shares of the Stock were traded on such recognized securities exchange or NASDAQ
on that date or, if the Stock was not traded on such date, upon the basis of the
mean of such prices on the date nearest preceding that date. If not a quoted
stock, the Board or the Committee may also consider any other factors relating
to the fair market value of the Stock as it shall deem appropriate in good faith
and, in the case of an Incentive Stock Option, in accordance with Section 422 of
the Code.
(k) "Option" means the right to purchase Stock at a stated price
for a specified period of time. For purposes of the Plan, an Option may be
either (i) an "incentive stock option" within the meaning of Section 422 of the
Code, or (ii) a "nonstatutory stock option".
(l) "Option Agreement" means the agreement between the Company and
a Participant evidencing the grant of an Option as described in Subsection 6.2.
(m) "Option Price" means the price at which Stock may be purchased
pursuant to an Option.
(n) "Optionee" means a director, officer or employee to whom an
Option has been granted under the Plan.
(o) "Participant" means a director, officer or employee who has
been granted and, at the time of reference, holds an Option or share of
Restricted Stock.
(p) "Period of Restriction" means the period during which shares of
Restricted Stock are subject to restrictions pursuant to Section 9 of the Plan.
(q) "Restricted Stock" means Stock granted to a Participant
pursuant to Section 9 of the Plan.
(r) "Retirement" shall have the meaning assigned to such term in
the Company's retirement plan, or if such plan is not in effect, such term shall
mean the termination of employment with the Company by reason of the attainment
of the age of sixty-five (65).
(s) "Stock" means the Common Stock of the Company, $.01 par value
per share.
3
<PAGE>
(t) "Stock Appreciation Right" means the right to receive the
increase in the value of Stock related to such right, or Stock subject to an
Option, in lieu of purchasing such Stock.
2.2 Number and Gender. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular, and the masculine shall include the feminine.
SECTION 3. Eligibility and Participation
3.1 Eligibility and Participation. Participants in the Plan shall
be selected by the Board and/or the Committee from among those directors,
officers and other key employees of the Company and its Affiliates who, in the
opinion of the Board and/or the Committee, are in a position to contribute
materially to the Company's continued growth and development and to its long-
term financial success.
SECTION 4. Stock Subject to Plan
4.1 Number. The total number of shares of Stock subject to
issuance under the Plan may not exceed 21,482 subject to adjustment upon
occurrence of any of the events indicated in Subsection 4.5. The shares to be
delivered under the Plan may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock, not reserved for any other purpose.
4.2 Unused Stock; Unexercised Rights. In the event any shares of
Stock are subject to an Option, which for any reason expires or is terminated
unexercised as to such shares, or any shares of Stock subject to a Restricted
Stock grant made under the Plan are reacquired by the Company pursuant to
Section 9 of the Plan, such shares again shall become available for issuance
under the Plan.
4.3 Exercise of Stock Appreciation Right. Whenever a Stock
Appreciation Right is exercised and payment of the amount determined in
Subsection 8.1(b) is made in cash, the shares of Stock allocable to the portion
of the Option surrendered may again be the subject of Options or Restricted
Stock hereunder. Whenever a Stock Appreciation Right is exercised and payment of
the amount determined in Subsection 8.1(b) is made in shares of Stock, no shares
of Stock with respect to which the Stock Appreciation Right is exercised may
again be the subject of Options or Restricted Stock hereunder.
4.4 Restricted Stock. Whenever any shares of Stock granted to a
Participant are forfeited pursuant to Section 9 herein, such shares may again be
the subject of Options or Restricted Stock hereunder, but only if the
Participant had not been paid any dividend or received any other benefit of
ownership of such forfeited shares.
4.5 Adjustment in Capitalization.
4
<PAGE>
(a) In the event of a Change in Capitalization, the Board and/or the
Committee shall conclusively determine the appropriate adjustments, if any, to
the (i) maximum number and class of shares of Stock or other securities with
respect to which Options or Restricted Stock may be granted under the Plan; (ii)
the number and class of shares of Stock or other securities which are subject to
outstanding Options or Restricted Stock granted under the Plan, and the purchase
price therefor, if applicable; and (iii) the maximum number of shares of Stock
or other securities with respect to which Options or Stock Appreciation Rights
may be granted to any Participant during the term of the Plan.
(b) Any such adjustment in the shares of Stock or other securities
subject to outstanding incentive stock options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a grantee of
Restricted Stock shall be entitled to, or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different shares of stock
or securities, such new additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Restricted Stock or shares of Stock subject to the
Option, as the case may be, prior to such Change in Capitalization.
SECTION 5. Duration of Plan
5.1 Duration of Plan. The Plan shall remain in effect, subject to
the Board's right to earlier terminate the Plan pursuant to Subsection 12.3
hereof, until all Stock subject to it shall have been purchased or acquired
pursuant to the provisions hereof. Notwithstanding the foregoing, no Option or
Restricted Stock may be granted under the Plan on or after the tenth anniversary
of the Effective Date.
SECTION 6. Option Grants for Participants
6.1 Grant of Options. Subject to the provisions of Sections 4 and 5,
Options may be granted to Participants at any time and from time to time as
shall be determined by the Board and/or the Committee. The Board and/or the
Committee shall have complete discretion consistent with the terms of the Plan
in determining whether to grant Options and the number of Options granted to
each Participant. The Board and/or the Committee also shall determine whether an
Option is to be an incentive stock option within the meaning of Section 422 of
the Code or a nonstatutory stock option. Nothing in this Section 6 of the Plan
shall be deemed to prevent the grant of nonstatutory stock options in excess of
the maximum established by Section 422 of the Code.
6.2 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the type of Option granted, the Option Price, the
duration of the
5
<PAGE>
Option, the number of shares of Stock to which the Option pertains and such
other provisions as the Board and/or the Committee shall determine.
6.3 Option Price. The Option Price for each Option shall be
determined by, or in the manner specified by, the Board and/or the Committee;
provided that in the case of an incentive stock option, no Option shall have an
Option Price that is less than the Fair Market Value of the Stock on the date
the Option is granted. Notwithstanding the foregoing, any Option granted to a
person who at the time the Option is granted owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of stock of the Company
shall have an exercise price of not less than 110% of the Fair Market Value of
the Stock as of the date of grant.
6.4 Duration of Options. Each Option shall expire at such time as
the Board and/or the Committee shall determine at the time it is granted;
provided, however, that no Option shall be exercisable later than the tenth
- -------- -------
anniversary date of its grant.
6.5 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board and/or the Committee shall in each instance approve, which need not be
the same for all Participants.
SECTION 7. Terms and Conditions Applicable to All Options
7.1 Payment. The Option Price shall be payable to the Company in
full upon exercise of an Option either (i) in cash or its equivalent, or (ii) at
the discretion of the Board and/or the Committee, by tendering shares of Stock
held by the Optionee for more than six (6) months having a Fair Market Value at
the time of exercise equal to the Option Price, or (iii) by a combination of (i)
and (ii). The proceeds from such a payment shall be added to the general funds
of the Company and shall be used for general corporate purposes.
7.2 Restrictions on Stock Transferability. The Board and/or the
Committee may impose such restrictions on any shares of Stock acquired pursuant
to the exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable federal securities law, under
requirements of any stock exchange upon which such shares of Stock are then
listed and under any blue sky or state securities laws applicable to such
shares.
7.3 Termination of Employment Due to Retirement. The Board and/or
the Committee may provide in the Option Agreement that in the event the
employment of the Optionee is terminated by reason of Retirement or for a reason
other than for Cause or following a Change in Control, any outstanding Options
granted to the Optionee which are then exercisable shall continue to be
exercisable at any time prior to the earlier of the expiration date of the
Options and six (6) months after the date of termination, and any Options not
then exercisable shall terminate immediately, subject to such exceptions (which
shall be set forth in the Option Agreement) as the Board and/or the Committee
may, in its sole discretion, approve.
6
<PAGE>
7.4 Termination of Employment Due to Death or Disability. The Board
and/or the Committee may provide in the Option Agreement the rights of an
Optionee under any then outstanding Option granted to the Optionee pursuant to
the Plan in the event the employment of the Optionee is terminated by reason of
death or Disability.
7.5 Termination of Employment for Cause. Notwithstanding anything to
the contrary herein, if the employment of the Optionee shall terminate for
Cause, any then outstanding Option granted pursuant to the Plan to the Optionee
shall terminate immediately; provided that, the Board and/or the Committee may
waive, in whole or in part, the automatic forfeiture of such Options and may set
forth such waiver or condition in the Option Agreement or at any other time,
including following the termination of employment. For purposes of this Plan,
"Cause" means the Optionee's knowingly or recklessly causing material injury to
the Company, the Optionee's willful misconduct in the performance of (or failure
to perform) his duties hereunder, or the Optionee's dishonest, fraudulent or
unlawful behavior involving moral turpitude whether or not in connection with
his employment.
7.6 Nontransferability and Exercisability of Options. No Option
granted under the Plan may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution. Further, all Options granted to an Optionee under the Plan shall
be exercisable during his lifetime only by such Optionee.
SECTION 8. Stock Appreciation Rights
8.1 Stock Appreciation Rights. The Board and/or the Committee may,
in its discretion, in connection with the grant of an Option, grant to the
Optionee Stock Appreciation Rights, the terms and conditions of which shall be
set forth in an agreement. A Stock Appreciation Right granted in connection
with the grant of an Option shall cover the same shares of Stock covered by the
Option (or such lesser number of shares of Stock as the Board and/or the
Committee may determine) and shall, except as provided in this Section 8, be
subject to the same terms and conditions as the related Option. Stock
Appreciation Rights shall be subject to the following terms and provisions:
(a) A Stock Appreciation Right may be granted:
(i) on a stand-alone basis; or
(ii) either at the time of grant, or at any time thereafter
during the term of the Option if related to a nonstatutory stock
option; or
(iii) only at the time of grant if related to an incentive stock
option.
7
<PAGE>
(b) A Stock Appreciation Right will entitle the holder, upon exercise
of the Stock Appreciation Right, to (i) surrender such Option, or any portion
thereof to the extent unexercised, and/or (ii) to receive payment of an amount
determined by multiplying (x) the excess of the Fair Market Value of a share of
Stock on the date of exercise of such Stock Appreciation Right over the purchase
price of a share of Stock related to such Stock Appreciation Right or under a
related Option, by (y) the number of shares as to which such Stock Appreciation
Right has been exercised. Notwithstanding the foregoing, the Board and/or the
Committee may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the agreement evidencing the
Stock Appreciation Right at the time it is granted.
(c) A Stock Appreciation Right will be exercisable at such time or
times and only as set forth in the agreement evidencing such right or to the
extent that a related Option is exercisable, and will not be transferable except
as set forth in such agreement or to the extent that any such related Option may
be transferable. A Stock Appreciation Right granted in connection with an
incentive stock option shall be exercisable only if the Fair Market Value of a
share of Stock on the date of exercise exceeds the purchase price of a share of
Stock related to such Stock Appreciation Right or specified in a related Option.
(d) Upon the exercise of a Stock Appreciation Right, any related
Option shall be canceled to the extent of the number of shares of Stock as to
which the Stock Appreciation Right is exercised, and upon the exercise of an
Option granted in connection with a Stock Appreciation Right, the Stock
Appreciation Right shall be canceled to the extent of the number of shares of
Stock as to which the Option is exercised or surrendered.
(e) Stock Appreciation Rights shall be exercised by an Optionee only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
shares of Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Board and/or the Committee, the Optionee shall
deliver the agreement evidencing the Stock Appreciation Right being exercised
and the agreement evidencing any related Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such agreement
to the Optionee.
(f) Payment of the amount determined under Subsection (b) may be made
by the Company in the discretion of the Board and/or the Committee, solely in
whole shares of Stock in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Stock. If the Board and/or the
Committee decides to make full payment in Stock and the amount payable results
in a fractional share, payment for the fractional share will be made in cash.
Notwithstanding the foregoing, no payment in the form of cash may be made upon
the exercise of a Stock Appreciation Right pursuant to Subsection (b) to an
officer of the Company or an Affiliate who is subject to Section 16 of the Act,
unless the exercise of such Stock Appreciation Right is made either (i) during
the period beginning on the third business day and ending on the twelfth
business day following the date of release for publication of the Company's
quarterly or annual
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statements of sales and earnings, or (ii) pursuant to an irrevocable election to
receive cash made at least six (6) months prior to the exercise of such Stock
Appreciation Right.
(g) No Stock Appreciation Right may be exercised before the date six
(6) months after the date it is granted.
(h) Subject to the terms of the Plan, the Board and/or the Committee
may modify outstanding awards of Stock Appreciation Rights or accept the
surrender of outstanding awards of Stock Appreciation Rights (to the extent not
exercised) and grant new awards in substitution for them. Notwithstanding the
foregoing, no modification of an award of Stock Appreciation Rights shall
adversely alter or impair any rights or obligations under the agreement granting
such Stock Appreciation Rights without the Optionee's consent.
SECTION 9. Restricted Stock
9.1 Grant of Restricted Stock. Subject to the provisions of Sections
4, 5 and 14.4, the Board and/or the Committee, at any time and from time to
time, may grant shares of Restricted Stock under the Plan to such Participants
and in such amounts as it shall determine in its sole discretion. Each grant of
Restricted Stock shall be made pursuant to a written agreement which shall
contain such restrictions, terms and conditions as the Board and/or the
Committee may determine in its discretion. Restrictions upon shares of
Restricted Stock shall lapse at such time or times and on such terms and
conditions as the Board and/or the Committee may determine.
9.2 Transferability. Except as provided in this Section 9 and
subject to the provisions of Section 14.4, the shares of Restricted Stock
granted hereunder may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated for such period of time as shall be determined by the
Board and/or the Committee and shall be specified in the Restricted Stock grant,
or upon earlier satisfaction of other conditions as specified by the Board
and/or the Committee in its sole discretion and set forth in the Restricted
Stock grant; provided that, Restricted Stock granted to officers, directors or
any person who owns, directly or indirectly, more than ten percent (10%) of any
class of equity security of the Company which is registered pursuant to Section
12 of the Act may not be sold for at least six (6) months after the date of
grant.
9.3 Other Restrictions. The Board and/or the Committee may impose
such other restrictions on any shares of Restricted Stock granted to any
Participant pursuant to the Plan as it may deem advisable and may legend the
certificates representing Restricted Stock to give appropriate notice of such
restrictions.
9.4 Certificate Legend. In addition to any legends placed on
certificates pursuant to Subsection 9.3 hereof, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:
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"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer set forth in the
PartMiner, Inc. 1999 Stock Plan, rules of administration adopted
pursuant to such Plan and Restricted Stock grant dated ______________.
A copy of the Plan, such rules and such Restricted Stock grant may be
obtained from the Secretary of PartMiner, Inc."
9.5 Removal of Restrictions. Except as otherwise provided in this
Section 9, shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the shares are released from
the restrictions, the Participant shall be entitled to have the legend required
by Subsection 9.4 removed from his Stock certificate.
9.6 Voting Rights. During the Period of Restriction, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares.
9.7 Dividends and Other Distributions. During the Period of
Restriction, Participants holding shares of Restricted Stock granted hereunder
shall be entitled to receive all dividends and other distributions paid with
respect to those shares while they are so held. If any such dividends or
distributions are paid in shares of Stock, the shares shall be subject to the
same restrictions on transferability as the shares of Restricted Stock with
respect to which they were paid.
SECTION 10. Beneficiary Designation
10.1 Beneficiary Designation. Subject to Subsections 7.6, 9.2 and
14.4, each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the Participant's death
before he or she receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Board and/or the Committee and will be effective only when
filed by the Participant in writing with the Board and/or the Committee during
the lifetime of the Participant. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the estate
of the Participant.
SECTION 11. Right of Participants
11.1 Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Company to terminate any Participant's employment or
service at any time nor confer upon any Participant any right to continue in the
employ or service of the Company.
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11.2 Participation. No employee shall have a right to be selected as
a Participant or, having been so selected, to be selected again as a
Participant. The preceding sentence shall not be construed or applied so as to
deny an employee any participation in the Plan solely on the basis that the
employee was a Participant in connection with a prior grant of benefits under
the Plan.
SECTION 12. Administration; Powers and Duties of the Board and/or the Committee
12.1 Administration. The Plan shall be administered by the Board;
provided, however, that the Board may delegate such administration to the
- -------- -------
Committee. The Board and/or the Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Company, and to
make all other determinations necessary or advisable for the administration of
the Plan, but only to the extent not contrary to the express provisions of the
Plan. Determinations, interpretations, or other actions made or taken by the
Board and/or the Committee pursuant to the provisions of the Plan shall be final
and binding and conclusive for all purposes and upon all persons whomsoever. No
member of the Board and/or the Committee shall be personally liable for any
action, determination or interpretation made or taken with respect to the Plan
and all members of the Board and/or the Committee shall be fully indemnified by
the Company with respect to any such action, determination or interpretation.
12.2 Change in Control. Without limiting the authority of the
Board and/or the Committee as provided herein, the Board and/or the Committee,
either at the time Options or shares of Restricted Stock are granted, or, if so
provided in the applicable Option Agreement or Restricted Stock grant, at any
time thereafter, shall have the authority to take such actions as it deems
advisable, including to accelerate in whole or in part the exercisability of
Options and/or the last day of a Period of Restriction upon a Change of Control.
The Option Agreements and Restricted Stock grants approved by the Board and/or
the Committee may contain provisions whereby, in the event of a Change of
Control, the acceleration of the exercisability of Options and/or the last day
of the Period of Restriction may be automatic or may be subject to the
discretion of the Board and/or the Committee or may depend upon whether the
Change in Control shall be approved by a majority of the members of the Board or
such other criteria as the Board and/or the Committee may specify. Nothing
herein shall obligate the Board and/or the Committee to take any action upon a
Change in Control.
12.3 Amendment, Modification and Termination of Plan. The Board may
at any time terminate, and from time to time may amend or modify, the Plan;
provided, however, that no such action of the Board, without approval of the
- -------- -------
stockholders, may:
(a) Increase the total amount of Stock which may be issued under the
Plan, except as provided in Subsection 4.5 of the Plan.
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(b) Materially increase the cost of the Plan or materially increase
the benefits to Participants.
(c) Extend the period during which Options or Restricted Stock may be
granted.
(d) Extend the maximum period after the date of grant during which
Options may be exercised.
(e) Change the class of individuals eligible to receive Options or
Restricted Stock.
Any amendment which requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 of the Act, if then applicable, or
any other law, regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. No amendment,
modification or termination of the Plan shall in any manner adversely affect any
Options or Restricted Stock theretofore granted to any Participant under the
Plan, without the consent of that Participant.
12.4 Interpretation. Unless otherwise expressly stated in the
relevant Agreement, any grant of Options, Stock Appreciation Rights and
Restricted Stock is intended to be performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code. The Board and/or the Committee
shall not be entitled to exercise any discretion otherwise authorized hereunder
with respect to such Options, Stock Appreciation Rights or Restricted Stock if
the ability to exercise such discretion or the exercise of such discretion
itself would cause the compensation attributable to such Options to fail to
qualify as such performance-based compensation.
SECTION 13. Tax Withholding
13.1 Tax Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to the receipt of shares, securities, cash or
property under the Plan, the Participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any Federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount (the "Withholding Taxes"). Unless otherwise determined
by the Company, withholding obligations may be settled with Stock, including
Stock that is issuable to the Participant under the Plan that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
SECTION 14. Requirements of Law
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14.1 Requirements of Law. The granting of Options or Restricted
Stock, and the issuance of shares of Stock upon the exercise of an Option shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
14.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New York
without giving effect to the choice of law principles thereof, except to the
extent that such law is preempted by federal law.
14.3 Listing, etc. Each Option or share of Restricted Stock is
subject to the requirement that, if at any time the Board and/or the Committee
determines, in its discretion, that the listing, registration or qualification
of shares of Stock issuable pursuant to the Plan is required by any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the grant of an Option or the issuance of shares of Stock, no
Options or shares of Restricted Stock shall be granted or payment made or shares
of Stock issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions as reasonably acceptable to the Board and/or the Committee acting in
good faith.
14.4 Restriction on Transfer. Notwithstanding anything contained in
the Plan or any Agreement to the contrary, in the event that the disposition of
shares of Stock acquired pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933, as amended, and is not
otherwise exempt from such registration, such shares of Stock shall be
restricted against transfer to the extent required by the Securities Act of
1933, as amended, and Rule 144 or other regulations thereunder. The Board
and/or the Committee may require any individual receiving shares of Stock
pursuant to an Option or share of Restricted Stock granted under the Plan, as a
condition precedent to receipt of such shares of Stock to represent and warrant
to the Company in writing that the shares of Stock acquired by such individual
are acquired without a view to any distribution thereof and will not be sold or
transferred other than pursuant to an effective registration thereof under said
Act or pursuant to an exemption applicable under the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder. The certificates
evidencing any of such shares of Stock shall be appropriately legended to
reflect their status as restricted securities aforesaid.
SECTION 15. Repurchase Rights
The Board may, in its discretion, require as a condition to the Grant
of an Option, Stock Appreciation Right, or Restricted Stock hereunder, that the
applicable agreement between the Participant and the Company include provisions,
(i) restricting the Participant's right to transfer shares purchased or granted
hereunder without first offering such shares to the Company or another
shareholder of the Company upon the same terms and conditions as provided
therein; and (ii) providing that upon termination of Participant's employment
with the Company, for any reason, the Company (or another shareholder of the
Company, as provided in such agreement)
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shall have the right at its discretion (or the discretion of such other
shareholders) to purchase and/or redeem all such shares owned by the Participant
on the date of termination of his or her employment at a price equal to the Fair
Market Value of such shares as of such date of termination, and upon terms of
payment permissible under the securities rules; provided that, in the case of
Options or rights granted to officers, directors, consultants or affiliates of
the Company, such repurchase provisions may be subject to additional or greater
restrictions as determined by the Board and/or the Committee.
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EXHIBIT 10.2
PARTMINER, INC.
1999 EMPLOYEE INCENTIVE
STOCK PLAN
SECTION 1. Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. PartMiner, Inc., a New York corporation (the
"Company"), hereby establishes the "1999 EMPLOYEE STOCK PLAN" (the "Plan") for
employees and consultants of the Company. The Plan permits the grant of Options,
Stock Appreciation Rights and Restricted Stock.
1.2 Purpose. The purpose of the Plan is to advance the interests of
the Company by enabling employees and consultants of the Company and its
Affiliates to participate in the Company's future and to enable the Company to
attract and retain such persons by offering them an equity interest in the
Company.
1.3 Effective Date. The Plan shall become effective on October 1,
1999 (the "Effective Date"), subject to approval by the affirmative votes of a
majority of the securities of the Company entitled to vote thereon.
SECTION 2. Definitions; Construction
2.1 Definitions. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Company.
(c) "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with, directly or indirectly, through one or
more intermediaries, the Company and designated by the Board and/or the
Committee as such.
(d) "Change in Capitalization" means any increase or reduction in the
number of shares of Stock, or any change in the shares of Stock or exchange of
shares of Stock for a different number or kind of shares or other securities of
the Company or any other corporation or other entity, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization, spin-
off, split-up, stock dividend, stock split or reverse stock split, extraordinary
dividend, property dividend, combination or exchange of shares or otherwise.
<PAGE>
(e) A "Change in Control" means an event or series of events after
the Effective Date by which (i) any "person" or "group" (as such terms, are used
in Section 13(d) and 14(d) of the Act) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of more than fifty
percent (50%) of the aggregate voting power of all the capital stock of the
company normally entitled to vote in the election of directors, (ii) during any
period of two consecutive calendar years individuals who at the beginning of
each period constituted the Board (together with any new directors whose
election by the Board or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination was previously so approved) cease for any reason to
constitute a majority of the directors then in office, or (iii) the consummation
of a plan or transaction to merge or consolidate the Company with or into
another corporation, or to sell, or otherwise dispose of, all or substantially
all of the Company's property and assets, or to liquidate the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means a committee of the Board designated to
administer the Plan which shall consist solely of two or more members of the
Board who are "non-employee directors" within the meaning of Rule 16b-3 under
the Act. The foregoing requirement for non-employee administrators of the Plan
shall not apply prior to the date of the first registration of any of the
securities of the Company under the Act.
(h) "Company" means PartMiner, Inc., a New York corporation, and any
successors thereto.
(i) "Disability" shall have the meaning assigned to the terms "total
disability" or "totally disabled" in the Company long-term disability program
for salaried employees, provided the Participant remains totally disabled for
six (6) consecutive months; or, if the Company does not maintain a long-term
disability program, an individual shall have a "disability" if he is unable to
engage in any substantial activity by reason of any medically determinable,
physical or mental impairment that can be expected to result in death or which
has lasted or can be expected to last for a period of ninety (90) substantially
consecutive days or for shorter periods aggregating one hundred twenty (120)
days or more during any twelve (12) month period.
(j) "Fair Market Value" shall be determined in accordance with the
following: (i) if the Stock is not listed and traded upon a recognized
securities exchange or quoted on the NASDAQ system or OTC bulletin board and
there is no report of stock prices with respect to the Stock published by a
recognized stock quotation service, upon the basis of the recent purchases and
sales of the Stock in arms-length transactions; or, if there are no such
transactions, as determined in good faith by the Board and/or the Committee;
(ii) if the Stock is not listed and traded upon a recognized securities exchange
or quoted on the NASDAQ system or OTC bulletin
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board, and there are reports of stock prices by a recognized quotations service,
upon the basis of the mean between bid and asked quotations for such Stock on
the date of grant as reported by a recognized stock quotation service, or if
there are no bid and asked quotations on that day, then upon the basis of the
mean between the bid and asked quotations for such Stock on the date nearest
preceding that day; or (iii) if the Stock shall then be listed and traded upon a
recognized securities exchange or quoted on the NASDAQ system or OTC bulletin
board, upon the basis of the mean of the high and low sale prices at which the
shares of the Stock were traded on such recognized securities exchange or NASDAQ
on that date or, if the Stock was not traded on such date, upon the basis of the
mean of such prices on the date nearest preceding that date. If not a quoted
stock, the Board or the Committee may also consider any other factors relating
to the fair market value of the Stock as it shall deem appropriate in good faith
and, in the case of an Incentive Stock Option, in accordance with Section 422 of
the Code.
(k) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan, an Option may be either (i)
an "incentive stock option" within the meaning of Section 422 of the Code, or
(ii) a "nonstatutory stock option".
(l) "Option Agreement" means the agreement between the Company and a
Participant evidencing the grant of an Option as described in Subsection 6.2.
(m) "Option Price" means the price at which Stock may be purchased
pursuant to an Option.
(n) "Optionee" means an employee or consultant to whom an Option has
been granted under the Plan.
(o) "Participant" means an employee or consultant who has been granted
and, at the time of reference, holds an Option or share of Restricted Stock.
(p) "Period of Restriction" means the period during which shares of
Restricted Stock are subject to restrictions pursuant to Section 9 of the Plan.
(q) "Restricted Stock" means Stock granted to a Participant pursuant
to Section 9 of the Plan.
(r) "Retirement" shall have the meaning assigned to such term in the
Company's retirement plan, or if such plan is not in effect, such term shall
mean the termination of employment with the Company by reason of the attainment
of the age of sixty-five (65).
(s) "Stock" means the Common Stock of the Company, $.01 par value per
share.
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(t) "Stock Appreciation Right" means the right to receive the
increase in the value of Stock related to such right, or Stock subject to an
Option, in lieu of purchasing such Stock.
2.2 Number and Gender. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular, and the masculine shall include the feminine.
SECTION 3. Eligibility and Participation
3.1 Eligibility and Participation. Participants in the Plan shall be
selected by the Board and/or the Committee from among those employees and
consultants who have been employed or engaged by the Company or any of its
Affiliates.
SECTION 4. Stock Subject to Plan
4.1 Number. The total number of shares of Stock subject to issuance
under the Plan may not exceed 25,050 subject to adjustment upon occurrence of
any of the events indicated in Subsection 4.5. The shares to be delivered under
the Plan may consist, in whole or in part, of authorized but unissued Stock or
treasury Stock, not reserved for any other purpose.
4.2 Unused Stock; Unexercised Rights. In the event any shares of
Stock are subject to an Option, which for any reason expires or is terminated
unexercised as to such shares, or any shares of Stock subject to a Restricted
Stock grant made under the Plan are reacquired by the Company pursuant to
Section 9 of the Plan, such shares again shall become available for issuance
under the Plan.
4.3 Exercise of Stock Appreciation Right. Whenever a Stock
Appreciation Right is exercised and payment of the amount determined in
Subsection 8.1(b) is made in cash, the shares of Stock allocable to the portion
of the Option surrendered may again be the subject of Options or Restricted
Stock hereunder. Whenever a Stock Appreciation Right is exercised and payment
of the amount determined in Subsection 8.1(b) is made in shares of Stock, no
shares of Stock with respect to which the Stock Appreciation Right is exercised
may again be the subject of Options or Restricted Stock hereunder.
4.4 Restricted Stock. Whenever any shares of Stock granted to a
Participant are forfeited pursuant to Section 9 herein, such shares may again be
the subject of Options or Restricted Stock hereunder, but only if the
Participant had not been paid any dividend or received any other benefit of
ownership of such forfeited shares.
4.5 Adjustment in Capitalization.
(a) In the event of a Change in Capitalization, the Board and/or the
Committee shall conclusively determine the appropriate adjustments, if any, to
the (i) maximum number and
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kind of shares of Stock or other securities with respect to which Options or
Restricted Stock may be granted under the Plan; (ii) the number and kind of
shares of Stock or other securities which are subject to outstanding Options or
Restricted Stock granted under the Plan, and the purchase price therefor, if
applicable; and (iii) the maximum number of shares of Stock or other securities
with respect to which Options or Stock Appreciation Rights may be granted to any
Participant during the term of the Plan.
(b) Any such adjustment in the shares of Stock or other securities
subject to outstanding incentive stock options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a grantee of
Restricted Stock shall be entitled to, or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different shares of stock
or securities, such new, additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Restricted Stock or shares of Stock subject to the
Option, as the case may be, prior to such Change in Capitalization.
SECTION 5. Duration of Plan
5.1 Duration of Plan. The Plan shall remain in effect, subject to
the Board's right to earlier terminate the Plan pursuant to Subsection 12.3
hereof, until all Stock subject to it shall have been purchased or acquired
pursuant to the provisions hereof. Notwithstanding the foregoing, no Option or
Restricted Stock may be granted under the Plan on or after the tenth anniversary
of the Effective Date.
SECTION 6. Option Grants for Participants
6.1 Grant of Options. Subject to the provisions of Sections 4 and 5,
Options may be granted to Participants at any time and from time to time as
shall be determined by the Board and/or the Committee. The Board and/or the
Committee shall have complete discretion consistent with the terms of the Plan
in determining whether to grant Options and the number of Options granted to
each Participant. The Board and/or the Committee also shall determine whether
an Option is to be an incentive stock option within the meaning of Section 422
of the Code or a nonstatutory stock option. Nothing in this Section 6 of the
Plan shall be deemed to prevent the grant of nonstatutory stock options in
excess of the maximum established by Section 422 of the Code.
6.2 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the type of Option granted, the Option Price, the
duration of the Option, the number of shares of Stock to which the Option
pertains and such other provisions as the Board and/or the Committee shall
determine.
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6.3 Option Price. The Option Price for each Option shall be
determined by, or in the manner specified by, the Board and/or the Committee;
provided that in the case of an incentive stock option, no Option shall have an
Option Price that is less than the Fair Market Value of the Stock on the date
the Option is granted. Notwithstanding the foregoing, any incentive stock
option granted to a person who at the time the incentive stock option is granted
owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company shall have an exercise price of not
less than 110% of the Fair Market Value of the Stock as of the date of grant.
6.4 Duration of Options. Each Option shall expire at such time as
the Board and/or the Committee shall determine at the time it is granted;
provided, however, that no Option shall be exercisable later than the tenth
- -------- -------
anniversary date of its grant; provided further, however, that any incentive
-------- ------- -------
stock option granted to a person who at the time the incentive stock option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company shall not be exercisable later than the fifth
anniversary of the date of grant.
6.5 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board and/or the Committee shall in each instance approve, which need not be
the same for all Participants.
SECTION 7. Terms and Conditions Applicable to All Options
7.1 Payment. The Option Price shall be payable to the Company in
full upon exercise of an Option either (i) in cash or its equivalent, or (ii) at
the discretion of the Board and/or the Committee, by tendering shares of Stock
held by the Optionee for more than six (6) months having a Fair Market Value at
the time of exercise equal to the Option Price, or (iii) by a combination of (i)
and (ii). The proceeds from such a payment shall be added to the general funds
of the Company and shall be used for general corporate purposes.
7.2 Restrictions on Stock Transferability. The Board and/or the
Committee may impose such restrictions on any shares of Stock acquired pursuant
to the exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable federal securities law, under
requirements of any stock exchange upon which such shares of Stock are then
listed and under any blue sky or state securities laws applicable to such
shares.
7.3 Termination of Employment Due to Retirement. The Board and/or
the Committee may provide in the Option Agreement that in the event the
employment of the Optionee is terminated by reason of Retirement or for a reason
other than for Cause or following a Change in Control, any outstanding Options
granted to the Optionee which are then exercisable shall continue to be
exercisable at any time prior to the earlier of the expiration date of the
Options and six (6) months after the date of termination, and any Options not
then exercisable
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shall terminate immediately, subject to such exceptions (which shall be set
forth in the Option Agreement) as the Board and/or the Committee may, in its
sole discretion, approve.
7.4 Termination of Employment Due to Death or Disability. The Board
and/or the Committee may provide in the Option Agreement the rights of an
Optionee under any then outstanding Option granted to the Optionee pursuant to
the Plan in the event the employment of the Optionee is terminated by reason of
death or Disability.
7.5 Termination of Employment for Cause. Notwithstanding anything to
the contrary herein, if the employment of the Optionee shall terminate for
Cause, any then outstanding Option granted pursuant to the Plan to the Optionee
shall terminate immediately; provided that, the Board and/or the Committee may
waive, in whole or in part, the automatic forfeiture of such Options and may set
forth such waiver or condition in the Option Agreement or at any other time,
including following the termination of employment. For purposes of this Plan,
"Cause" means the Optionee's knowingly or recklessly causing material injury to
the Company, the Optionee's willful misconduct in the performance of (or failure
to perform) his duties hereunder, or the Optionee's dishonest, fraudulent or
unlawful behavior involving moral turpitude whether or not in connection with
his employment.
7.6 Nontransferability and Exercisability of Options. No Option
granted under the Plan may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution. Further, all Options granted to an Optionee under the Plan shall
be exercisable during his lifetime only by such Optionee.
SECTION 8. Stock Appreciation Rights
8.1 Stock Appreciation Rights. The Board and/or the Committee may,
in its discretion, in connection with the grant of an Option, grant to the
Optionee Stock Appreciation Rights, the terms and conditions of which shall be
set forth in an agreement. A Stock Appreciation Right granted in connection
with the grant of an Option shall cover the same shares of Stock covered by the
Option (or such lesser number of shares of Stock as the Board and/or the
Committee may determine) and shall, except as provided in this Section 8, be
subject to the same terms and conditions as the related Option. Stock
Appreciation Rights shall be subject to the following terms and provisions:
(a) A Stock Appreciation Right may be granted:
(i) on a stand-alone basis; or
(ii) either at the time of grant, or at any time thereafter
during the term of the Option if related to a nonstatutory stock
option; or
(iii) only at the time of grant if related to an incentive stock
option.
7
<PAGE>
(b) A Stock Appreciation Right will entitle the holder, upon exercise
of the Stock Appreciation Right, to (i) surrender such Option, or any portion
thereof to the extent unexercised, and/or (ii) to receive payment of an amount
determined by multiplying (x) the excess of the Fair Market Value of a share of
Stock on the date of exercise of such Stock Appreciation Right over the purchase
price of a share of Stock related to such Stock Appreciation Right or under a
related Option, by (y) the number of shares as to which such Stock Appreciation
Right has been exercised. Notwithstanding the foregoing, the Board and/or the
Committee may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the agreement evidencing the
Stock Appreciation Right at the time it is granted.
(c) A Stock Appreciation Right will be exercisable at such time or
times and only as set forth in the agreement evidencing such right or to the
extent that a related Option is exercisable, and will not be transferable except
as set forth in such agreement or to the extent that any such related Option may
be transferable. A Stock Appreciation Right granted in connection with an
incentive stock option shall be exercisable only if the Fair Market Value of a
share of Stock on the date of exercise exceeds the purchase price of a share of
Stock related to such Stock Appreciation Right or specified in a related Option.
(d) Upon the exercise of a Stock Appreciation Right, any related
Option shall be canceled to the extent of the number of shares of Stock as to
which the Stock Appreciation Right is exercised, and upon the exercise of an
Option granted in connection with a Stock Appreciation Right, the Stock
Appreciation Right shall be canceled to the extent of the number of shares of
Stock as to which the Option is exercised or surrendered.
(e) Stock Appreciation Rights shall be exercised by an Optionee only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
shares of Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Board and/or the Committee, the Optionee shall
deliver the agreement evidencing the Stock Appreciation Right being exercised
and the agreement evidencing any related Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such agreement
to the Optionee.
(f) Payment of the amount determined under Subsection (b) may be made
by the Company in the discretion of the Board and/or the Committee, solely in
whole shares of Stock in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Stock. If the Board and/or the
Committee decides to make full payment in Stock and the amount payable results
in a fractional share, payment for the fractional share will be made in cash.
Notwithstanding the foregoing, no payment in the form of cash may be made upon
the exercise of a Stock Appreciation Right pursuant to Subsection (b) to an
officer of the Company or an Affiliate who is subject to Section 16 of the Act,
unless the exercise of such Stock Appreciation Right is made either (i) during
the period beginning on the third business day and ending on the twelfth
business day following the date of release for publication of the Company's
quarterly or annual
8
<PAGE>
statements of sales and earnings, or (ii) pursuant to an irrevocable election to
receive cash made at least six (6) months prior to the exercise of such Stock
Appreciation Right.
(g) No Stock Appreciation Right may be exercised before the date six
(6) months after the date it is granted.
(h) Subject to the terms of the Plan, the Board and/or the Committee
may modify outstanding awards of Stock Appreciation Rights or accept the
surrender of outstanding awards of Stock Appreciation Rights (to the extent not
exercised) and grant new awards in substitution for them. Notwithstanding the
foregoing, no modification of an award of Stock Appreciation Rights shall
adversely alter or impair any rights or obligations under the agreement granting
such Stock Appreciation Rights without the Optionee's consent.
SECTION 9. Restricted Stock
9.1 Grant of Restricted Stock. Subject to the provisions of Sections
4, 5 and 14.4, the Board and/or the Committee, at any time and from time to
time, may grant shares of Restricted Stock under the Plan to such Participants
and in such amounts as it shall determine in its sole discretion. Each grant of
Restricted Stock shall be made pursuant to a written agreement which shall
contain such restrictions, terms and conditions as the Board and/or the
Committee may determine in its discretion. Restrictions upon shares of
Restricted Stock shall lapse at such time or times and on such terms and
conditions as the Board and/or the Committee may determine.
9.2 Transferability. Except as provided in this Section 9 and
subject to the provisions of Section 14.4, the shares of Restricted Stock
granted hereunder may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated for such period of time as shall be determined by the
Board and/or the Committee and shall be specified in the Restricted Stock grant,
or upon earlier satisfaction of other conditions as specified by the Board
and/or the Committee in its sole discretion and set forth in the Restricted
Stock grant; provided that, Restricted Stock granted to officers, directors or
any person who owns, directly or indirectly, more than ten percent (10%) of any
class of equity security of the Company which is registered pursuant to Section
12 of the Act may not be sold for at least six (6) months after the date of
grant.
9.3 Other Restrictions. The Board and/or the Committee may impose
such other restrictions on any shares of Restricted Stock granted to any
Participant pursuant to the Plan as it may deem advisable and may legend the
certificates representing Restricted Stock to give appropriate notice of such
restrictions.
9.4 Certificate Legend. In addition to any legends placed on
certificates pursuant to Subsection 9.3 hereof, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:
9
<PAGE>
"The sale or other transfer of the shares of stock
represented by this certificate, whether voluntary,
involuntary or by operation of law, is subject to certain
restrictions on transfer set forth in the PartMiner, Inc.
1999 Stock Plan, rules of administration adopted pursuant to
such Plan and Restricted Stock grant dated ______________. A
copy of the Plan, such rules and such Restricted Stock grant
may be obtained from the Secretary of PartMiner, Inc."
9.5 Removal of Restrictions. Except as otherwise provided in this
Section 9, shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the shares are released from
the restrictions, the Participant shall be entitled to have the legend required
by Subsection 9.4 removed from his Stock certificate.
9.6 Voting Rights. During the Period of Restriction, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares.
9.7 Dividends and Other Distributions. During the Period of
Restriction, Participants holding shares of Restricted Stock granted hereunder
shall be entitled to receive all dividends and other distributions paid with
respect to those shares while they are so held. If any such dividends or
distributions are paid in shares of Stock, the shares shall be subject to the
same restrictions on transferability as the shares of Restricted Stock with
respect to which they were paid.
SECTION 10. Beneficiary Designation
10.1 Beneficiary Designation. Subject to Subsections 7.6, 9.2 and
14.4, each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the Participant's death
before he or she receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Board and/or the Committee and will be effective only when
filed by the Participant in writing with the Board and/or the Committee during
the lifetime of the Participant. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the estate
of the Participant.
SECTION 11. Right of Participants
11.1 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment or
service at any time nor confer upon any Participant any right to continue in the
employ or service of the Company.
10
<PAGE>
11.2 Participation. No employee or consultant shall have a right to
be selected as a Participant or, having been so selected, to be selected again
as a Participant. The preceding sentence shall not be construed or applied so
as to deny an employee or consultant any participation in the Plan solely on the
basis that the employee or consultant was a Participant in connection with a
prior grant of benefits under the Plan.
SECTION 12. Administration; Powers and Duties of the Board and/or the Committee
12.1 Administration. The Plan shall be administered by the Board;
provided, however, that the Board may delegate such administration to the
- -------- -------
Committee. The Board and/or the Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Company, and to
make all other determinations necessary or advisable for the administration of
the Plan, but only to the extent not contrary to the express provisions of the
Plan. Determinations, interpretations, or other actions made or taken by the
Board and/or the Committee pursuant to the provisions of the Plan shall be final
and binding and conclusive for all purposes and upon all persons whomsoever. No
member of the Board and/or the Committee shall be personally liable for any
action, determination or interpretation made or taken with respect to the Plan
and all members of the Board and/or the Committee shall be fully indemnified by
the Company with respect to any such action, determination or interpretation.
12.2 Change in Control. Without limiting the authority of the Board
and/or the Committee as provided herein, the Board and/or the Committee, either
at the time Options or shares of Restricted Stock are granted, or, if so
provided in the applicable Option Agreement or Restricted Stock grant, at any
time thereafter, shall have the authority to take such actions as it deems
advisable, including to accelerate in whole or in part the exercisability of
Options and/or the last day of a Period of Restriction upon a Change of Control.
The Option Agreements and Restricted Stock grants approved by the Board and/or
the Committee may contain provisions whereby, in the event of a Change of
Control, the acceleration of the exercisability of Options and/or the last day
of the Period of Restriction may be automatic or may be subject to the
discretion of the Board and/or the Committee or may depend upon whether the
Change in Control shall be approved by a majority of the members of the Board or
such other criteria as the Board and/or the Committee may specify. Nothing
herein shall obligate the Board and/or the Committee to take any action upon a
Change in Control.
12.3 Amendment, Modification and Termination of Plan. The Board may
at any time terminate, and from time to time may amend or modify, the Plan;
provided, however, that no such action of the Board, without approval of the
- -------- -------
stockholders, may:
(a) Increase the total amount of Stock which may be issued under the
Plan, except as provided in Subsection 4.5 of the Plan.
11
<PAGE>
(b) Materially increase the cost of the Plan or materially increase
the benefits to Participants.
(c) Extend the period during which Options or Restricted Stock may be
granted.
(d) Extend the maximum period after the date of grant during which
Options may be exercised.
(e) Change the class of individuals eligible to receive Options or
Restricted Stock.
Any amendment which requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 of the Act, if then applicable, or
any other law, regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. No amendment,
modification or termination of the Plan shall in any manner adversely affect any
Options or Restricted Stock theretofore granted to any Participant under the
Plan, without the consent of that Participant.
12.4 Interpretation. Unless otherwise expressly stated in the
relevant Agreement, any grant of Options, Stock Appreciation Rights and
Restricted Stock is intended to be performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code. The Board and/or the Committee
shall not be entitled to exercise any discretion otherwise authorized hereunder
with respect to such Options, Stock Appreciation Rights or Restricted Stock if
the ability to exercise such discretion or the exercise of such discretion
itself would cause the compensation attributable to such Options to fail to
qualify as such performance-based compensation.
SECTION 13. Tax Withholding
13.1 Tax Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to the receipt of shares, securities, cash or
property under the Plan, the Participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any Federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount (the "Withholding Taxes"). Unless otherwise determined
by the Company, withholding obligations may be settled with Stock, including
Stock that is issuable to the Participant under the Plan that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
SECTION 14. Requirements of Law
12
<PAGE>
14.1 Requirements of Law. The granting of Options or Restricted
Stock, and the issuance of shares of Stock upon the exercise of an Option shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
14.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New York
without giving effect to the choice of law principles thereof, except to the
extent that such law is preempted by federal law.
14.3 Listing, etc. Each Option or share of Restricted Stock is
subject to the requirement that, if at any time the Board and/or the Committee
determines, in its discretion, that the listing, registration or qualification
of shares of Stock issuable pursuant to the Plan is required by any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the grant of an Option or the issuance of shares of Stock, no
Options or shares of Restricted Stock shall be granted or payment made or shares
of Stock issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions as reasonably acceptable to the Board and/or the Committee acting in
good faith.
14.4 Restriction on Transfer. Notwithstanding anything contained in
the Plan or any Agreement to the contrary, in the event that the disposition of
shares of Stock acquired pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933, as amended, and is not
otherwise exempt from such registration, such shares of Stock shall be
restricted against transfer to the extent required by the Securities Act of
1933, as amended, and Rule 144 or other regulations thereunder. The Board
and/or the Committee may require any individual receiving shares of Stock
pursuant to an Option or share of Restricted Stock granted under the Plan, as a
condition precedent to receipt of such shares of Stock to represent and warrant
to the Company in writing that the shares of Stock acquired by such individual
are acquired without a view to any distribution thereof and will not be sold or
transferred other than pursuant to an effective registration thereof under said
Act or pursuant to an exemption applicable under the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder. The certificates
evidencing any of such shares of Stock shall be appropriately legended to
reflect their status as restricted securities aforesaid.
SECTION 15. Repurchase Rights
The Board may, in its discretion, require as a condition to the Grant
of an Option, Stock Appreciation Right, or Restricted Stock hereunder, that the
applicable agreement between the Participant and the Company include provisions,
(i) restricting the Participant's right to transfer shares purchased or granted
hereunder without first offering such shares to the Company or another
shareholder of the Company upon the same terms and conditions as provided
therein;
13
<PAGE>
and (ii) providing that upon termination of Participant's employment with the
Company, for any reason, the Company (or another shareholder of the Company, as
provided in such agreement) shall have the right at its discretion (or the
discretion of such other shareholders) to purchase and/or redeem all such shares
owned by the Participant on the date of termination of his or her employment at
a price equal to the Fair Market Value of such shares as of such date of
termination, and upon terms of payment permissible under the securities rules;
provided that, in the case of Options or rights granted to officers, directors,
consultants or affiliates of the Company, such repurchase provisions may be
subject to additional or greater restrictions as determined by the Board and/or
the Committee.
14
<PAGE>
EXHIBIT 10.3
Intentionally Omitted
<PAGE>
EXHIBIT 10.4
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
-------------------------------------------------
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement ")
---------
dated as of February 16, 2000 by and among PartMiner, Inc., a New York
corporation (the "Company"), Boston Ventures Limited Partnership V ("Boston
------- ------
Ventures"), Seacoast Capital Partners Limited Partnership and Seacoast Investors
- --------
LLC (together, "Seacoast"), Vulcan Securities Limited ("Vulcan"), Cahners
-------- ------
Information Holdings, Inc. ("CIH"), Information Handling Services Inc. ("IHS"),
--- ---
Emil H. Dahan, Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng, James
L. McAlarney, III, IHD-PM, LLC (IHD-PM, LLC and Messrs. Dahan, Galvin, Jeng and
McAlarney and Ms. Salem collectively, the "Individual Stockholders"), Daniel
-----------------------
Nissanoff ("DN"), Integral Capital Partners IV, L.P. and Integral Capital
--
Partners IV MS Side Fund, L.P. (together, "Integral"), Agile Software Corp.
--------
("Agile"), Impact Venture Partners L.P. ("Impact"), OMI Partnership Holdings
- ------- ------
Ltd. ("Onex"), Generation Capital Partners L.P., State Board of Administration
----
of Florida and Generation Parallel Management Partners, L.P. (together, "GP"),
--
Broadview SLP ("Broadview") and The Goldman Sachs Group, Inc. ("Goldman")
--------- -------
(Integral, Agile, Impact, Onex, GP, Broadview and Goldman collectively, the
"Series B Investors").
- -------------------
INTRODUCTION
------------
The Company, Boston Ventures, Seacoast, Vulcan's assignor and DN
entered into a Stockholders Agreement dated as of March 16, 1999 (the "March 16
--------
Agreement").
- ---------
In order to induce CIH to make an investment in the Company, Boston
Ventures, Vulcan's assignor, Seacoast, the Company, CIH and DN entered into an
Amended and Restated Stockholders Agreement dated as of September 10, 1999 (the
"September 10 Agreement"), which amended and restated the March 16 Agreement.
----------------------
In order to induce Vulcan's assignor to make an additional investment
in the Company, and IHS and the Individual Stockholders to make an investment
in the Company, and to provide for the ongoing ownership and governance of the
Company, Boston Ventures, Vulcan, Seacoast, the Company, CIH, IHS, the
Individual Stockholders (with the exception of IHD-PM, LLC) and DN have entered
into the Second Amended and Restated Stockholders Agreement dated as of December
6, 1999 (the "December 6 Agreement"), which amended and restated the September
--------------------
10 Agreement.
Whereas, on this day IHD-PM, LLC purchased shares of Common Stock from
Bruce and Lynne Friedman pursuant to that certain Common Stock Purchase
Agreement dated February 15, 2000 (the "IHD-PM, LLC Common Stock Agreement").
In order to induce the Series B Investors to make an investment in the
Company, the signatories to the December 6 Agreement, IHD-PM, LLC and the Series
B Investors wish to enter into this Agreement, which amends and restates the
December 6 Agreement.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01. Certain Definitions. As used herein, "Purchase
------------------- --------
Agreement" means the Stock Purchase Agreement dated March 16, 1999 among the
- ---------
Company, Boston Ventures, Vulcan's assignor and DN, as amended from time to
time. As used herein, "Series A Shares" means the Company's Series A Preferred
---------------
Stock, $.01 par value per share, issued and sold by the Company pursuant to the
Purchase Agreement. As used herein, "Seacoast Purchase Agreement" means the
---------------------------
Stock Purchase Agreement dated March 16, 1999 among the Company, DN and
Seacoast, as amended from time to time. As used herein, "CIH Purchase
------------
Agreement" means the Stock Purchase Agreement dated September 10, 1999 among the
Company, DN and CIH, as amended from time to time. As used herein, "Series B
--------
Purchase Agreement" means the Preferred Stock Purchase Agreement dated February
- ------------------
16, 2000 among the Company and the Series B Investors (and Boston Ventures,
Seacoast, CIH and Vulcan), as such may be amended from time to time, whereby the
Company has issued and sold shares of its Series B Convertible Preferred Stock
(the "Series B Shares") to the Series B Investors. As used herein, "Purchasers"
--------------- ----------
means Boston Ventures or its Full Transferee, Vulcan or its Full Transferee,
Seacoast or its Full Transferee, CIH or its Full Transferee, IHS or its Full
Transferee, each Individual Stockholder or his/her respective Full Transferee
and each Series B Investor or its respective Full Transferee. As used herein,
"Full Transferee" means a stockholder of the Company who first becomes a
- ----------------
stockholder as a result of acquiring more than 50% of the securities of the
Company presently held by Boston Ventures, Vulcan, Seacoast, CIH, IHS, any
Individual Stockholder or any Series B Investor, respectively. As used herein,
"Management Stockholders" means DN and any other person or entity who may after
-----------------------
the date hereof become a holder of capital stock, options or warrants of the
Company and who becomes (or is required to become) a party to this Agreement as
provided herein, other than the Purchasers or any Full Transferee of Boston
Ventures, Vulcan, Seacoast, CIH, IHS, any Individual Stockholder or any Series B
Investor. As used herein, "Stockholders" means the Purchasers and the
------------
Management Stockholders. As used herein, "Stock" means all capital stock of the
-----
Company held by a Stockholder. As used herein, "Majority of the Purchasers"
--------------------------
means the Purchasers holding a majority of the total number of shares of the
Company's outstanding common stock (on an as-converted basis) held by all such
Purchasers. All other capitalized terms used herein and not otherwise defined
shall have the meanings given to them in the Series B Purchase Agreement.
ARTICLE II
BOARD OF DIRECTORS; VOTING
Section 2.01. Board Size. The Board of Directors of the Company
----------
shall consist of seven directors. At all meetings (and written actions in lieu
of meetings) of stockholders of the Company at which the number of directors of
the Company is to be determined, each Stockholder shall vote all of such
Stockholder's Stock to fix the number of directors of the
- 2 -
<PAGE>
Company at seven.
Section 2.02. Election of Directors. Except as provided in Section
---------------------
2.04 below, at all meetings (and written actions in lieu of meetings) of
stockholders of the Company at which directors are to be elected, each
Stockholder shall vote all of such Stockholder's Stock to elect, as directors of
the Company (in addition to any other directors of the Company):
(a) one nominee designated by Boston Ventures, who may be an Affiliate
of Boston Ventures;
(b) one nominee designated by Vulcan, who may be an Affiliate of
Vulcan;
(c) one nominee designated by Seacoast, who may be an Affiliate of
Seacoast;
(d) two nominees designated by DN, or in case of the death or
disability of DN, two nominees designated by the Management Stockholders;
(e) one nominee designated by CIH, who may be an Affiliate of CIH;
and
(f) one nominee designated by the majority vote of the other six
directors of the Company's Board of Directors.
Section 2.03. Removal. Each Stockholder agrees to vote such
-------
Stockholder's Stock, at all meetings (and written actions in lieu of meetings)
of stockholders of the Company, (a) to remove any director designated under
Subsection 2.02(a), if so requested by Boston Ventures, (b) to remove any
director designated under Subsection 2.02(b), if so requested by Vulcan, (c) to
remove any director designated under Subsection 2.02(c), if so requested by
Seacoast, (d) to remove any director designated under Subsection 2.02(d), if so
requested by DN or the Management Stockholders, as the case may be, (e) to
remove any director designated under Subsection 2.02(e), if so requested by CIH
and (f) to remove any director designated under Subsection 2.02(f), if so
requested by the majority vote of the other six directors of the Company's Board
of Directors. Each Stockholder agrees not to vote such Stockholder's Stock in
favor of the removal of any director other than in accordance with the preceding
sentence.
Section 2.04. Vacancies. Each Stockholder agrees to vote such
---------
Stockholder's Stock, at all meetings (and written actions in lieu of meetings)
of stockholders of the Company, to fill any vacancy on the Board of Directors
caused by the resignation or removal of any director to be designated under
Subsections 2.02(a), (b), (c), (d), (e) or (f), with a nominee selected as
provided therein.
Section 2.05. Compensation Committee. The Board of Directors shall
----------------------
at all times maintain a Compensation Committee consisting of the four directors
appointed by a majority of the Purchasers. The Compensation Committee shall
have sole authority, on behalf of the Board of Directors, to set the
compensation (including salary, bonus, benefits, and other amounts) to be paid
to officers and senior managers of and consultants to the Company and the
- 3 -
<PAGE>
Subsidiaries, and, subject to the approvals required hereunder, to grant stock
options and issue shares of stock or other equity or equity-related interests to
or for the benefit of employees or consultants. The approval of a majority of
the members of the Compensation Committee shall be required to take action by
the Compensation Committee; provided that no member of the Compensation
--------
Committee may vote on his or her own compensation.
Section 2.06. Meetings. The Company will cause its Board of
--------
Directors to meet on a regular basis, not less often than quarterly, and will
give each director at least 3 days prior notice of the time and place of any
meeting.
Section 2.07. Subsidiaries. The Company will cause the Boards of
------------
Directors and Committees thereof of each Subsidiary of the Company to have the
same composition as those of the Company, as provided in this Article II, and to
cause all Subsidiaries to be in compliance with the terms of this Article II as
if such Subsidiary were a party hereto to the same extent as the Company.
Section 2.08. Observation Rights. Until the consummation of a
------------------
Qualified Public Offering (as defined in Section 7.01 hereof), the Company shall
permit a representative of Integral (the "Representative") to attend all
meetings of the Board of Directors (whether in person, telephonically or
otherwise) in a non-voting, observing capacity and shall provide to the
Representative, concurrently with the members of the Board of Directors and in
the same manner, notice of such meeting and a copy of all materials provided to
such members. Any oral or written exchange of confidential and/or proprietary
information between the Company and the Representative shall be governed by the
terms of a confidentiality agreement to be executed between the Company and
Integral promptly after the date hereof.
Section 2.09. Conflict with By-Laws. To the extent that any
---------------------
provision of this Article II conflicts with the By-Laws of the Company, such
provisions shall be subject to appropriate amendments to the By-Laws to be
adopted within 30 days after the Closing.
ARTICLE III
TRANSFER RESTRICTIONS
Section 3.01. No Transfer. (a) No Management Stockholder may sell,
-----------
pledge, give, assign, distribute, hypothecate, mortgage or transfer (all
hereinafter referred to as "transfer") any Stock owned by such Management
--------
Stockholder, directly or indirectly, to any other person or entity, (i) as long
as at least one Purchaser holds in excess of 50% of the Stock originally
purchased by Boston Ventures, Vulcan's assignor, Seacoast, CIH or the Series B
Investors pursuant to the Purchase Agreement, the Seacoast Purchase Agreement,
the CIH Purchase Agreement or the Series B Purchase Agreement, respectively, or
(ii) as permitted by Section 3.02.
(b) Prior to the initial public offering of the Company's securities
(whether or not a Qualified Public Offering), no Stockholder (other than Agile)
may transfer any Stock to any
- 4 -
<PAGE>
person or entity operating a Competitive Business (as defined below) other than
an affiliate of such Stockholder (including any affiliated investment funds).
Notwithstanding the foregoing, Boston Ventures may transfer Stock to its limited
partners, Seacoast may transfer Stock to its limited partners, Onex may transfer
its Stock to its limited partners, GP may transfer its Stock to its limited
partners and Integral may transfer Stock to its limited partners and members.
For purposes of this Agreement, the term "Competitive Business" shall mean (i)
--------------------
any business that develops or sells products or services that are competitive
with the Company's CAPSXpert database, (ii) any business that develops or sells
software for component and supplier management that is competitive with the
Company's products, (iii) any business that sells or distributes electronic
components that is competitive with the Company's products or (iv) any business
that provides an e-commerce web site which aggregates pricing and availability
data for electronic components that is competitive with the Company's products.
Section 3.02. Exceptions to Restrictions. Notwithstanding any other
--------------------------
provision of this Agreement, the following transfers of Stock may be consummated
without restriction:
(a) Transfers of Stock between a Management Stockholder and his
guardian or conservator.
(b) Transfers of Stock of a deceased Management Stockholder to his
executors or administrators or to trustees under his will and thereafter to
transferees enumerated in Subsection (c) below.
(c) Transfers of Stock of a Management Stockholder to the Management
Stockholder's spouse, to any of his children or their issue (or to
custodians for the benefit of minor children or issue), or to the
Stockholder's parents or siblings, or to a trust, the sole beneficiaries of
which consist of any of the foregoing.
(d) Transfers of Stock by DN to Bruce Friedman and Lynne Friedman
pursuant to the letter agreement dated July 30, 1997 among DN and Stacy
Jargowsky Nissanoff and Bruce Friedman and Lynne Friedman.
(e) Transfers of Stock by DN to the employees of the Company set forth
on Schedule 2.05(b) of the Purchase Agreement.
(f) Transfers of Stock by Bruce and Lynne Friedman to Integral Capital
Partners IV, L.P., Integral Capital Partners IV MS Side Fund, L.P. and IHD-
PM, LLC.
All Stock transferred pursuant to this Section shall remain subject to
the restrictions contained herein applicable to the initial Management
Stockholders in the hands of the transferee.
Section 3.03. Drag-Along Requirement. In the event that the Board of
----------------------
Directors of the Company approves a sale or merger of the Company or a sale of
all or substantially all of the assets of the Company, and the transaction is
approved by a Majority of the Purchasers in
- 5 -
<PAGE>
accordance with Article VII of this Agreement, each Stockholder: (a) will vote
the Stock held by it in favor of such transaction and will not dissent to any
such transaction or seek appraisal of its Stock, or exercise any similar rights
with respect to such transaction; (b) will execute any agreement reasonably
required of it in connection with such transaction, including without limitation
any stock purchase or similar agreement; and (c) will cooperate with the Company
in all respects in consummating any such transaction.
Section 3.04. Legends. All certificates representing shares of Stock
-------
issued to a Stockholder shall bear substantially the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS
---
OF ANY STATE. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS COVERING SUCH SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS THE
HOLDER SHALL HAVE OBTAINED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
In addition to the foregoing, all certificates representing shares of
Stock issued to a Management Stockholder after the date hereof shall bear
substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER OBLIGATIONS CONTAINED IN A
STOCKHOLDERS AGREEMENT, AS AMENDED, BETWEEN THE COMPANY AND CERTAIN OF
ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE COMPANY AND WILL
BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO
THE SECRETARY.
ARTICLE IV
PREEMPTIVE RIGHTS
Section 4.01. Notice of Sale. The Company will give the Purchasers
--------------
and DN (each an "Offeree") at least 30 days prior written notice of any proposed
sale or issuance for cash or cash equivalents by the Company of any capital
stock, or any stock or security convertible into or exchangeable for capital
stock and any right, warrant or option to acquire capital stock or such
convertible securities ("Common Stock Equivalents") or any evidence of
------------------------
indebtedness issued in conjunction with Common Stock Equivalents, except for (a)
the grant of options and warrants to purchase shares of the Company's Common
Stock (and the issuance of shares of the Company's Common Stock upon the
exercise of such options and warrants, including any of the foregoing
- 6 -
<PAGE>
that are presently outstanding) by the Compensation Committee of the Company's
Board of Directors, (b) the sale by the Company of Common Stock pursuant to a
Qualified Public Offering, as hereafter defined, (c) the issuance of shares of
Common Stock upon conversion or exercise of Common Stock Equivalents as to which
each Offeree was offered the opportunity to purchase its Proportionate
Percentage (as hereinafter defined) or as to which each Offeree was not required
to be offered such opportunity, (d) the issuance of any Common Stock Equivalent
pursuant to a stock split, stock dividend or similar event which is approved by
the Company's Board of Directors, (e) in connection with the acquisition of any
other entity or business by merger, purchase of assets or purchase of capital
stock approved by the majority vote of the Company's Board of Directors or (f)
in connection with equity issuances to strategic investors or partners, as
determined by the majority vote of the Board of Directors. Such notice will
identify the number of shares or amount of securities to be issued, the class of
shares or securities to be issued, the approximate date of issuance, and the
price and other terms and conditions of the issuance. Such notice will also
include an offer (the "Offer") to sell to each Offeree its Proportionate
-----
Percentage of such securities (the "Offered Securities") at the price and on the
------------------
other terms as are proposed for such sale or issuance, which Offer by its terms
shall remain open for a period of 15 days from the date of receipt of such
notice and which offer may be accepted by any such Offeree in its sole
discretion.
Section 4.02. Acceptance. Each Offeree shall give notice to the
----------
Company of its intention to accept an Offer prior to the end of the 15-day
period of such Offer, setting forth such portion of the Offered Securities which
such Offeree elects to purchase (the "Notice of Acceptance"). If any Offeree
--------------------
fails to subscribe for its Proportionate Percentage of the Offered Securities,
the other Offerees shall be entitled to purchase such Offered Securities that
are not subscribed for by such Offeree in the same proportion in which they were
initially entitled to purchase the Offered Securities. The Company shall notify
each Offeree five (5) days following the expiration of the 15-day period
described above of the amount of Offered Securities which each Offeree may
purchase pursuant to the foregoing sentence and each Offeree shall then have 10
days from the delivery of such notice to indicate such additional amount, if
any, that such Offeree wishes to purchase.
Section 4.03. Closing. Upon the closing of the sale or issuance as
-------
to which the Company has given notice under Section 4.01, each Offeree shall
purchase from the Company, and the Company shall sell to each Offeree, the
Offered Securities subscribed for by each Offeree at the terms specified in the
Offer, which shall be the same terms at which all other persons or entities
acquire such securities in connection with such sale or issuance.
Section 4.04. Sale to Others. If the Offerees do not subscribe for
--------------
all of the Offered Securities, the Company shall have 60 days from the end of
the foregoing 15- or 10-day period, whichever is applicable, to sell all or any
part of the balance of the Offered Securities which an Offeree has not agreed to
purchase, to any other persons or entities, in all material respects on terms
and conditions which are no more favorable to such other persons or entities or
less favorable to the Company than those set forth in the Offer. Any Offered
Securities not purchased by an Offeree or other persons or entities in
accordance with Sections 4.03 or 4.04 may not be sold or otherwise disposed of
until they are again offered under the procedures
- 7 -
<PAGE>
specified in this Article IV.
Section 4.05. Proportionate Percentage. For purposes of this Article
------------------------
IV, "Proportionate Percentage" shall mean (a) the number of shares of Common
------------------------
Stock held by an Offeree (for this purpose, treating each option, warrant and
convertible security as the number of shares of Common Stock for which it is
then exercisable or convertible), divided by (b) the number of outstanding
shares of Common Stock (determined as provided in clause (a) above).
ARTICLE V
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company shall comply with the following covenants unless otherwise
approved by a Majority of the Purchasers:
Section 5.01. Corporate Existence. The Company shall, and shall
-------------------
cause each Subsidiary to, maintain its corporate existence, foreign
qualifications, and all rights, permits, licenses and authorizations material to
its business. Notwithstanding the foregoing, the corporate existence of any
Subsidiary may be terminated with the approval of a majority of the members of
the Board of Directors of the Company.
Section 5.02. Use of Proceeds. The Company shall use the net
---------------
proceeds from the sale of the Series B Shares to the Series B Investors
principally for repaying certain outstanding indebtedness and for working
capital and general corporate purposes.
Section 5.03. Annual Financial Statements. The Company shall furnish
---------------------------
each Purchaser annual audited, consolidated and consolidating financial
statements of the Company and the Subsidiaries, including a balance sheet and
statements of income, cash flow and stockholders equity, within 90 days after
the end of each fiscal year, certified by a nationally recognized independent
public accounting firm reasonably acceptable to the Company's Board of
Directors, accompanied by an opinion of the Company's independent public
accountant.
Section 5.04. Quarterly Financial Statements. The Company shall
------------------------------
furnish each Purchaser quarterly consolidated and consolidating unaudited
financial statements of the Company and the Subsidiaries, including balance
sheets and statements of income, cash flow and stockholders equity, which shall
show a comparison to budget, within 45 days after the end of each month
accompanied by (a) management's analysis of results, and (b) a statement of the
Company's chief executive or chief financial officer explaining any variation of
such results from the budgeted results for such quarter set forth in the Budget
(as hereinafter defined) for such fiscal year.
Section 5.05. Budget. For each fiscal year of the Company,
------
management of the Company shall prepare and submit a monthly and annual
operating plan and budget, cash flow projections and profit and loss
projections, all in reasonable detail (collectively, the "Budget") for such
------
fiscal year to the Board of Directors of the Company for its approval. The
Company shall
- 8 -
<PAGE>
furnish each Purchaser the approved Budget promptly after its approval, but in
any event no later than 30 days prior to the beginning of each such fiscal year.
The Company shall not make material changes to the Budget without the prior
approval of its Board of Directors, and upon such approval information
concerning such material changes shall be furnished to each Purchaser.
Section 5.06. Other Information. The Company shall deliver to each
-----------------
Purchaser: (a) promptly after the occurrence thereof, written notice and a
description of any event, circumstance or condition, including any litigation,
claim or proceeding before any court or governmental authority, which has a
material adverse effect upon the Company, its consolidated financial condition,
results of operations, properties, prospects or business, (b) promptly after
receipt thereof, any material report or communication received by the Company or
any Subsidiary from its independent public accountants, including without
limitation any so-called "management letter", (c) promptly after the occurrence
thereof, a description of any material (on a consolidated basis) default by the
Company or any Subsidiary under any material agreement or arrangement of the
Company or any Subsidiary, including without limitation any agreement or
instrument relating to any material indebtedness of the Company or any
Subsidiary, (d) promptly upon making such materials available, copies of all
reports and other materials sent or made available generally to the stockholders
of the Company, or any material portion thereof, (e) promptly upon such
materials being filed, all materials submitted to the Securities and Exchange
Commission (the "Commission") or any securities exchange, and (f) such other
----------
information with respect to the Company or any Subsidiary, or their respective
businesses, affairs, properties, prospects and any other matters relating
thereto which may be reasonably requested by any Purchaser, and which does not
impose an undue burden on management or interfere with management's
responsibilities to the Company.
Section 5.07. Inspection. The Company will permit any person
----------
designated by a Purchaser, at reasonable intervals, on reasonable notice, to
visit and inspect any of the properties of the Company and the Subsidiaries,
during normal business hours, to examine their books, records and other
materials relating thereto (and to make copies thereof and take extracts
therefrom) and to discuss their affairs, finances and accounts with, and to be
advised as to the same by, their officers, employees, counsel and independent
certified public accountants.
Section 5.08. Books and Accounts. The Company shall, and shall cause
------------------
each Subsidiary to, keep complete and accurate records and books of account and
construe and report under all terms and provisions of this Agreement and all
agreements contemplated hereby in accordance with generally accepted accounting
principles consistently applied.
Section 5.09. Key Man Life Policy. The Company shall use its best
-------------------
efforts to keep the key man life insurance policy currently in effect with
respect to DN in full force and effect until such time as DN ceases to be
employed by the Company. The Company will add a designee, if any, of each
Purchaser as a notice party to such policy, and will request that the issuer of
such policy provide such designee with 10 days notice before such policy is
assigned or terminated for any reason, or before any changes are made in the
designation of the beneficiary thereof. The Company shall use commercially
reasonable efforts to purchase (a) key man life
- 9 -
<PAGE>
insurance for Mark Schenecker and (b) D&O insurance.
Section 5.10. Insurance. The Company shall, and shall cause each
---------
Subsidiary to, use its best efforts to have in full force and effect (a)
insurance on all assets and activities of a type and amount customarily insured,
covering property damage and loss of income by fire or other casualty, and (b)
adequate insurance protection against all liabilities, claims and risks against
which it is customary for companies similarly situated as the Company and the
Subsidiaries to insure.
Section 5.11. Compliance with Laws. The Company will, and will cause
--------------------
each of its Subsidiaries to, comply with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities, with respect to
which the failure to comply could have a material adverse effect on the
business, affairs, properties, prospects or condition of the Company or any
Subsidiary.
Section 5.12. Rule 144A Information. Subject to a confidentiality
---------------------
agreement with applicable third parties reasonably acceptable to the Company,
the Company shall, upon the written request of any Purchaser, provide to such
Purchaser or to any prospective institutional transferee of the Series A Shares
or Series B Shares designated by such Purchaser, such financial or other
information as is reasonably available to the Company or can be reasonably
obtained by the Company without material expense and as such Purchaser may
reasonably determine is required to permit such transfer to comply with the
requirements of Rule 144A promulgated under the Act.
Section 5.13 Amendments to By-Laws. The Company will use its best
---------------------
efforts to cause its By-Laws to be amended in accordance with Section 2.09 of
this Agreement.
ARTICLE VI
NEGATIVE COVENANTS OF THE COMPANY
The Company shall comply with the following covenants unless otherwise
approved by a Majority of the Purchasers:
Section 6.01. Interested Transactions. The Company shall not, and
-----------------------
shall not permit any Subsidiary to, buy, sell or lease any assets to or from,
borrow or lend any money to or from, or deal with or enter into any other
transactions or agreements with, any stockholders (other than the Purchasers and
their Affiliates), officer or director, or any known relative or Affiliate of
any of the foregoing, other than (a) as expressly contemplated by this Agreement
or any other agreement contemplated hereby or (b) those that are (i) fully
disclosed in advance to the Board of Directors, (ii) on terms no less favorable
to the Company or any Subsidiary than could have been obtained from an
unaffiliated third party, and (iii) approved by a disinterested majority of the
Board of Directors of the Company.
Section 6.02. Mergers. The Company shall not, and shall not permit
-------
any Subsidiary to, (a) merge or consolidate with any person or entity, other
than a wholly-owned
- 10 -
<PAGE>
Subsidiary in a transaction in which the Company is the surviving corporation
and in which its Certificate of Incorporation is not altered, or (b) sell, lease
(as lessor) or otherwise dispose of all or any substantial portion of its
assets.
Section 6.03. Dividends. The Company shall not, and shall not permit
---------
any Subsidiary to, pay or declare any dividend or make any distribution of money
or other property on account of any its Capital Stock, other than dividends of a
Subsidiary payable to the Company, or accord any other payment, benefit or
preference to any share of capital stock, other than dividends payable solely in
shares of Common Stock.
Section 6.04. Redemptions. The Company shall not, and shall not
-----------
permit any Subsidiary to, purchase, redeem or otherwise acquire any share of
capital stock, or any options, warrants, convertible securities or other rights
to acquire capital stock other than (a) pursuant to Article VII of this
Agreement and (b) pursuant to the terms of grants of options, stock appreciation
rights, restricted shares of common stock, warrants and restricted stock units
pursuant to compensation or incentive plans approved by the Compensation
Committee, including any of the foregoing that are presently outstanding.
Section 6.05. Acquisitions and Investments. The Company shall not,
----------------------------
and shall not permit any Subsidiary to:
(a) make any acquisition of securities or assets in excess of
$1,000,000; or
(b) make any loan or advance to any person or entity other than in the
ordinary course of business or make any investment in or with any other person
or entity except: (i) investments in evidences of indebtedness issued or fully
guaranteed by the United States of America and having a maturity of not more
than one year from the date of acquisition; (ii) investments and certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of not
more than one year from the date of acquisition issued by a bank organized in
the United States having capital, surplus and undivided profits of at least
$50,000,000; (iii) loans or advances from a Subsidiary to the Company or from
the Company or a Subsidiary to another Subsidiary; (iv) investments in A-rated
(or equivalent) or better commercial paper having a maturity of not more than
one year from the date of acquisition; and (v) investments in "money market"
fund shares or in "money market" accounts fully insured by the Federal Deposit
Insurance Corporation and sponsored by banks and other financial institutions,
or in "money market" accounts sponsored by brokerage firms provided with such
"money market" fund or "money market" accounts invested principally in
investments of the types described in the foregoing clauses of this Subsection
(b).
Section 6.06. Limitation on Restrictions of Subsidiary Payments. The
-------------------------------------------------
Company shall not permit any Subsidiary, directly or indirectly, to create or
permit to exist any encumbrances or restrictions on the ability of any
Subsidiary to (a) pay dividends or make any other distributions on its capital
stock or any interest or participation in its profit owned by any of the Company
or any Subsidiary, or pay any indebtedness owed by any of the Subsidiaries, (b)
make loans or advances to the Company; or (c) transfer any of its properties or
assets to the
- 11 -
<PAGE>
Company.
Section 6.07. No Conflicting Agreements. The Company shall not, and
-------------------------
shall not permit any Subsidiary to, enter into or amend any agreement, contract,
commitment or understanding which restricts or prohibits the exercise by the
Purchasers of any of their rights under this Agreement, any other agreement or
instrument contemplated hereby or the Certificate of Incorporation of the
Company, or restricts or prohibits the ability of the Company or any Subsidiary
to comply with its obligations to the Purchasers under this Agreement, any other
agreement or instrument or the Certificate of Incorporation of the Company.
Section 6.08. Issuance of Securities. The Company shall not, and
----------------------
shall not permit any Subsidiary to, issue shares of capital stock or options,
warrants, convertible securities or other rights which may afford any person or
entity the right to acquire shares of any class of capital stock of the Company
or any Subsidiary, except (a) upon the exercise or conversion of options listed
on a Schedule to this Agreement, or (b) the issuance of additional shares of
Common Stock and options and other rights to acquire shares of Common Stock.
Section 6.09. Financings. The Company shall not, and shall not permit
----------
any Subsidiary to, enter into or materially modify any debt financing of the
Company or any Subsidiary, other than conventional senior debt on customary
terms, financing obtained in the ordinary course of business, including, but not
limited to, any line of credit or other bank facility, or in accordance with the
terms of this Agreement.
Section 6.10. Line of Business. The Company shall not, and shall not
----------------
permit any Subsidiary to, engage in any line of business other than (a) the
sale, distribution, procurement and/or transfer of electronic components and
information related thereto, (b) providing services related to the sale,
distribution, procurement and/or transfer of electronic components and
information related thereto, and (c) any e-commerce or other online activity
related to the sale, distribution, procurement and/or transfer of electronic
components and information related thereto.
ARTICLE VII
RIGHT TO PUT CERTAIN SECURITIES
Section 7.01. Right of the Purchasers to Put Certain Securities. If
-------------------------------------------------
the Company has not completed a Qualified Public Offering and except in the case
of a liquidation or dissolution of the Company, then (a) at any time on or after
the fifth anniversary of the date of issuance by the Company to a Purchaser,
with respect to the Series A Shares or Series B Shares, (b) at any time on or
after the seventh anniversary of the date of issuance by the Company to a
Purchaser, with respect to the Common Stock, or (c) if earlier, upon exercise by
any other Stockholders of a put right under this Article VII (each of the
foregoing being referred to herein as a "Securities Put Event"), then each
--------------------
Purchaser shall have the right, by giving notice to the Company, to require the
Company to purchase all of the Stock and Common Stock Equivalents of the Company
owned by it in accordance with this Article VII. As used herein, "Qualified
---------
Public Offering" means a public offering by the Company of its Common Stock
- ---------------
pursuant to a
- 12 -
<PAGE>
registration statement under the Act, other than a registration relating solely
to a transaction under Rule 145 under the Act (or any successor thereto) or to
an employee benefit plan of the Company in which the aggregate net proceeds to
the Company exceed $30 million at a public offering price per share of at least
$6.06 (as adjusted for any subsequent stock dividends, stock splits or
recapitalizations).
Section 7.02. Purchase Price. The Company shall repurchase the Stock
--------------
and Common Stock Equivalents of the Purchaser exercising its rights under
Section 7.01 at a price equal to its fair market value; provided, however, that
-------- -------
if the Securities Put Event under clause 7.01(i) occurs after the eighth
anniversary of the date hereof, the repurchase price shall be equal to the
original purchase price paid therefor by the original Purchaser of such Stock
and Common Stock Equivalents. For purposes of determining the fair market value
of the Stock and Common Stock Equivalents, the Stock and Common Stock
Equivalents shall be valued as if it were being sold as part of the sale of all
outstanding equity securities of the Company to an unrelated third party in an
arms-length transaction for cash only, without deduction for illiquidity,
minority interest, lack of control or any other similar considerations, and all
proceeds of such sale were being distributed in accordance with the Company's
Certificate of Incorporation proportionately among the holders of the Company's
capital stock on a fully-diluted basis (excluding options, warrants and
conversion privileges not then exercisable), with holders of currently
exercisable options or warrants receiving the net value thereof. The fair
market value of the Stock and Common Stock Equivalents shall be determined as
follows:
(a) By Agreement. The Company and such Purchaser shall endeavor in
------------
good faith to agree on the fair market value of the Stock and Common Stock
Equivalents to be repurchased.
(b) By Appraisal. If the Company and such Purchaser are unable to
------------
agree on the value of the Stock and Common Stock Equivalents within 30 days
after delivery of the notice under Section 7.01, the fair market value of the
Stock and Common Stock Equivalents to be repurchased shall be determined by
appraisal (the "Appraised Value") by a nationally recognized investment banker
---------------
with experience in the industry in which the Company and the Subsidiaries are
engaged, selected by the such Purchaser and reasonably acceptable to the
Company's Board of Directors (excluding such Purchaser's Director), which
investment banker shall not be affiliated with the Company or such Purchaser.
If, within 45 days after delivery of the notice referred to in Section 7.01, an
investment banker has not been selected, such Purchaser and the Company's Board
of Directors (excluding such Purchaser's Director) shall each select an
investment banker, and such investment banker shall select a third investment
banker meeting the criteria specified above who shall conduct the appraisal.
The appraiser shall value the Company and the Stock and Common Stock Equivalents
to be purchased as if (i) the Company and such Stock and Common Stock
Equivalents were being sold as part of the sale of all outstanding securities of
the Company to an unrelated third party in an arms-length transaction for cash
only, without deduction for illiquidity, minority interest, lack of control or
any other similar consideration, and (ii) all proceeds of the deemed sale
referred to above were being distributed among the Stockholders in accordance
with the Certificate of Incorporation (treating Common Stock Equivalents as the
number of shares of Stock for which they would then be exercisable in
- 13 -
<PAGE>
accordance with the preceding clause).
Section 7.03. Payment. Within 20 days following the final
-------
determination of the purchase price under Section 7.02, or such other time as
shall be agreed to by the Company and such Purchaser, the Company shall purchase
the Stock and Common Stock Equivalents held by such Purchaser at the price
determined in accordance with Section 7.02, and such Purchaser shall deliver to
the Company, upon receipt of payment therefor, certificates for the Stock and
Common Stock Equivalents duly endorsed for transfer to the Company. Payment
shall be made by wire transfer of immediately available funds to an account
designated by such Purchaser.
Section 7.04. Certain Remedies. In the event that the Company does
----------------
not fulfill its obligation to pay the purchase price of all or any portion of
the Stock pursuant to this Article VII within the time frame set forth in
Section 7.03, the unpaid portion of the purchase price of the Stock will bear
interest at the lesser of (i) fifteen percent (15%) or (ii) the highest rate
permitted by applicable law, compounding semi-annually. The Company will, upon
the request of any such Purchaser exercising its rights under Section 7.01,
execute and deliver to such Purchaser a promissory note in form and substance
reasonably satisfactory to such Purchaser evidencing such obligation.
Section 7.05. Expenses. The Company will bear all reasonable costs
--------
of determining Appraised Value in connection with any exercise of rights of the
Purchasers hereunder.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. All notices under this Agreement shall be in
-------
writing. Any notice shall be deemed to have been duly given if delivered
personally, three (3) business days after mailing registered or certified mail,
return receipt requested, or sent by nationally recognized overnight delivery
service, to the parties hereto at the addresses set forth on Exhibit A hereto.
---------
Upon notice from any Stockholder of a change of address, the Company's Board of
Directors will cause Exhibit A to be amended to reflect the new address of such
---------
Stockholder. The address of any new Stockholder shall be added by the Board to
Exhibit A.
- ---------
Section 8.02. Binding Effect and Benefit. This Agreement shall be
--------------------------
binding upon, and inure to the benefit of, the Company and the Stockholders and
their respective heirs, legal representatives, successors and Full Transferees,
except that neither the Company nor any Purchaser that acquires Stock from a
Management Stockholder shall be subject to the obligations of the Management
Stockholders hereunder. Notwithstanding the foregoing, a Purchaser's rights
hereunder shall terminate upon the transfer of such Purchaser's Stock to a Full
Transferee.
Section 8.03. Waivers, Entire Agreement, Modifications. No party
----------------------------------------
shall be deemed to waive any rights hereunder unless such waiver be in writing
and signed by the Company, Management Stockholders holding a majority of the
Common Stock held by
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<PAGE>
Management Stockholders and the Purchasers or, in the event the right to be
waived is that of less than all the Purchasers, those Purchasers with such
right. A waiver in writing on one occasion shall not be construed as a consent
to or a waiver of any right or remedy on any future occasion.
Section 8.04. Governing Law, Construction. This Agreement shall be
---------------------------
governed by and construed and enforced in accordance with the internal laws of
the State of New York. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision hereof shall be prohibited by or invalid
under any such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating or nullifying the remainder of
such provision or any other provisions of this Agreement.
Section 8.05. Transferees of Stockholders. Notwithstanding anything
---------------------------
herein to the contrary, no Stockholder shall transfer any Stock (except to the
Company) unless the person, firm, corporation or other entity so acquiring such
Stock shall first become a signatory to this Agreement, agreeing to be bound by
all the terms of this Agreement. Notwithstanding anything herein to the
contrary, a Full Transferee of Boston Ventures, Vulcan, Seacoast, CIH, IHS,
Individual Stockholder or any Series B Investor shall obtain, in lieu of Boston
Ventures, Vulcan, Seacoast, CIH, IHS, any Individual Stockholder or any Series B
Investor all of the rights, benefits and obligations of Boston Ventures, Vulcan,
Seacoast, CIH, IHS, any Individual Stockholder or any Series B Investor
hereunder, respectively. All transferees of a Purchaser other than a Full
Transferee who shall become a party to this Agreement shall be deemed to be
Management Stockholders hereunder. The Company shall not transfer any shares of
Stock on its books which have been transferred in violation of this Agreement,
or to treat as the owner of such shares of Stock, or to accord the right to vote
as such owner or to pay dividends to, any person or entity to which any such
shares of Stock shall have been transferred, from and after any transfer of any
share of Stock made in violation of this Agreement.
Section 8.06. Representations of Stockholders. Each Stockholder
-------------------------------
represents and warrants to each other party that such Stockholder is not bound
by any agreement or commitment that conflicts with or would interfere with the
performance of such Stockholder's obligations under this Agreement.
Section 8.07. Termination. This Agreement shall terminate upon a
-----------
Qualified Public Offering.
Section 8.08. Confidentiality. Each Stockholder agrees to keep
---------------
confidential (a) all material confidential information regarding the other
Stockholders of which the Stockholders become aware by virtue of, or in
connection with, their performance of this Agreement and (b) any trade secrets
or other confidential information of a business, financial, marketing,
technical, or other nature pertaining to the Company and identified as such by
the Company (or which clearly constitutes confidential information), including
information of others that the Company has agreed to keep confidential and has
informed the Stockholders of such ("Confidential Information"). Each
------------------------
Stockholder shall not disclose any such Confidential Information to any
- 15 -
<PAGE>
third party, except (i) to the extent disclosure of such Confidential
Information is required for performance of this Agreement, (ii) for such
employees, independent contractors, representatives and advisors of the
Stockholders that have a need to know such information to perform their
obligations under this Agreement and (iii) as may be required by law or
regulation. The term "Confidential Information" shall not be deemed to include
any information which (i) at the time of disclosure is or thereafter becomes
generally available to and known by the public (other than as a result of
disclosure directly or indirectly by the Stockholders), (ii) was available to
the Stockholders on a non-confidential basis from a source other than one of the
Stockholders or their employees, independent contractors, representatives and
advisors, provided that such source is not in breach of any obligations or
confidentiality to the Stockholders, or (iii) has been independently acquired or
developed by the Stockholders without violating any of the Stockholder
obligations pursuant to this Agreement. Each Stockholder agrees that its
respective employees, independent contractors, representatives and advisors
directly involved in the execution, delivery and performance of this Agreement
shall be promptly informed by such Stockholder of the confidential nature of the
Confidential Information. Notwithstanding the foregoing, a Stockholder may
disclose Confidential Information in the event that such Stockholder is required
or becomes legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose such Confidential Information; provided, however, that such
-------- -------
Stockholder shall promptly advise the non-disclosing Stockholder of such request
or legal compulsion and to the extent that the non-disclosing Stockholder
secures a legally enforceable protective order, the disclosing Stockholder shall
comply with such protective order.
Section 8.09. Consent and Waiver. Boston Ventures, Seacoast, Vulcan,
------------------
CIH, IHS, the Individual Stockholders and DN each being a signatory to one or
more of the following documents, (i) the December 6 Agreement, (ii) the Amended
and Restated Registration Rights Agreement dated December 6, 1999, by and among
the Company, Boston Ventures, Seacoast, Vulcan, CIH, IHS and the Individual
Stockholders, (iii) the CIH Purchase Agreement, or (iv) the Agreement and Plan
of Merger between the Company, Partminer Acquisition Corp., IQXpert Holdings,
Inc., IHS, Vulcan and the Individual Stockholders, hereby consent to the
transactions contemplated by: (A) the Series B Purchase Agreement by and between
the Company and the Series B Investors, (B) the Amended and Restated
Registration Rights Agreement dated the date hereof by and among the parties
hereto (other than DN), (C) this Agreement and (D) all other agreements or
instruments contemplated by the foregoing agreements (drafts of which have been
provided to Boston Ventures, Seacoast, Vulcan, CIH, IHS, the Individual
Stockholders and DN). Boston Ventures, Seacoast, Vulcan, CIH, IHS, the
Individual Stockholders and DN, and each further waives any preemptive rights or
notice provisions and any restrictions on transfers of stock and the granting of
registration rights as contemplated in this agreement, the Series B Agreement,
the Registration Rights Agreement and the Common Stock Purchase Agreements
between Bruce and Lynne Friedman and Integral Capital Partners IV L.P., Integral
Capital Partners IV MS Side Fund, L.P. and IHD-PM, LLC. Each of Boston
Ventures, Seacoast, Vulcan, CIH, IHS and the Individual Stockholders hereby
waives any rights such Purchaser has under Articles IV and VI of the December 6
Agreement in respect of the sale of Series B Shares pursuant to the Series B
Purchase Agreement, except to the extent of any rights such Purchaser may have
under the Series B Purchase Agreement or, with respect to the Individual
Stockholders,
- 16 -
<PAGE>
pursuant to the IHD-PM, LLC Common Stock Purchase Agreement.
Section 8.10. Treatment of IHS and Individual Stockholders.
--------------------------------------------
Notwithstanding anything to the contrary contained herein, neither IHS nor any
Individual Stockholder will be deemed to be a Purchaser for purposes of (a) the
definition "Majority of the Purchasers" or (b) Article 4, and Sections 5.05,
5.07, 5.09, 5.12, 7.01, 7.02, 7.03, 7.04 and 7.05 of this Agreement.
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as a sealed instrument as of the date and year first above written.
PARTMINER, INC.
By: /s/ Daniel Nissanoff
---------------------------------
Name:
------------------------------------
Daniel Nissanoff
BOSTON VENTURES LIMITED
PARTNERSHIP V
By: Boston Ventures Management, Inc.
By: /s/ James Wilson
---------------------------------
Name:
VULCAN SECURITIES LIMITED
By: /s/ Michael von Staudt
---------------------------------
Name:
SEACOAST CAPITAL PARTNERS
LIMITED PARTNERSHIP
By: Seacoast I Advisors LLC,
its General Partner
By: /s/ Eben S. Moulton
---------------------------------
Name:
SEACOAST INVESTORS LLC
By: /s/ Eben S. Moulton
---------------------------------
Name:
- 18 -
<PAGE>
CAHNERS INFORMATION HOLDINGS, INC.
By: /s/ Charles Fontaine
---------------------------------
Name:
INFORMATION HANDLING SERVICES INC.
By: /s/ L. Christopher Meyer
---------------------------------
Name:
/s/ Emil H. Dahan
------------------------------------
Emil H. Dahan
/s/ Michael J. Galvin
------------------------------------
Michael J. Galvin
/s/ Patricia Tuxbury Salem
------------------------------------
Patricia Tuxbury Salem
/s/ Peter W. Jeng
------------------------------------
Peter W. Jeng
/s/ James L. McAlarney III
------------------------------------
James L. McAlarney III
IHD-PM, LLC
By: /s/ Emil H. Dahan
---------------------------------
Name: Emil H. Dahan
- 19 -
<PAGE>
INTEGRAL CAPITAL PARTNERS IV, L.P.
By: Integral Capital Management IV, LLC,
its General Partner
By: /s/ Pamela K. Hagenah
---------------------------------
Name: Pamela K. Hagenah
Title: Manager
INTEGRAL CAPITAL PARTNERS IV
MS SIDE FUND, L.P.
By: Integral Capital Partners NBT, LLC,
its General Partner
By: /s/ Pamela K. Hagenah
---------------------------------
Name: Pamela K. Hagenah
Title: Manager
AGILE SOFTWARE CORP.
By: /s/ Thomas P. Shanahan
---------------------------------
Name:
IMPACT VENTURE PARTNERS L.P.
By: /s/ Adam Dell
---------------------------------
Name:
OMI PARTNERSHIP HOLDINGS LTD.
By: /s/ A.R. Melman
---------------------------------
Name:
- 20 -
<PAGE>
GENERATION CAPITAL PARTNERS PARTNERS L.P.
By: Generation Partners L.P., as General
Partner
By: Generation Capital Company LLC,
as General Partner
By: /s/ Mark Jennings
----------------------------
Mark Jennings
Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Parallel Management
Partners L.P., as Manager
By: Generation Capital Company LLC,
as General Partner
By: /s/ Mark Jennings
----------------------------
Mark Jennings
Managing Director
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.
By: Generation Capital Company LLC,
as General Partner
By: /s/ Mark Jennings
----------------------------
Mark Jennings
Managing Director
BROADVIEW SLP
By: /s/ Peter Mooney
---------------------------------
Name:
- 21 -
<PAGE>
THE GOLDMAN SACHS GROUP, INC.
By: /s/ Joseph Gleberman
---------------------------------
Name:
- 22 -
<PAGE>
EXHIBIT 10.5
THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------------
THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") dated as of February 16, 2000 by and between PartMiner, Inc., a New
- ----------
York corporation (the "Company"), and Boston Ventures Limited Partnership V
-------
("Boston Ventures"), Seacoast Capital Partners Limited Partnership and Seacoast
- -----------------
Investors LLC (together, "Seacoast"), Vulcan Securities Limited ("Vulcan"),
-------- ------
Cahners Information Holdings, Inc. ("CIH"), Information Handling Services Inc.
---
("IHS"), Integral Capital Partners IV MS Side Fund, L.P. and Integral Capital
---
Partners IV, L.P. (together, "Integral"), Agile Software Corp. ("Agile"), Impact
-------- -----
Venture Partners L.P. ("Impact"), OMI Partnership Holdings Ltd. ("Onex"),
------ ----
Generation Capital Partners L.P., State Board of Administration of Florida and
Generation Parallel Management Partners, L.P. (together, "GP"), Broadview SLP
--
("Broadview"), The Goldman Sachs Group, Inc. ("Goldman") (Integral, Agile,
- ----------- -------
Impact, Onex, GP, Broadview and Goldman collectively, the "Series B Investors"),
------------------
Emil H. Dahan, Michael J. Galvin, Patricia Tuxbury Salem, Peter W. Jeng, James
L. McAlarney, III and IHD-PM, LLC (IHD-PM, LLC and Messrs. Dahan, Galvin, Jeng
and McAlarney and Ms. Salem collectively, the "Individual Purchasers"; and
---------------------
together with Boston Ventures, Seacoast, Vulcan, CIH, IHS and the Series B
Investors, the "Purchasers").
----------
INTRODUCTION
------------
Boston Ventures has purchased shares of the Company's Series A
Preferred Stock, $.01 par value per share (the "Series A Shares"), and Vulcan's
---------------
assignor has purchased shares of the Company's common stock, $.0001 par value
per share (the "Common Stock"), pursuant to a Stock Purchase Agreement dated as
------------
of March 16, 1999 (the "Purchase Agreement"). CIH has purchased shares of
------------------
Common Stock, pursuant to a Stock Purchase Agreement dated September 10, 1999
(the "CIH Purchase Agreement"). IHS, Vulcan's assignor (in addition to the
----------------------
Common Stock purchased by its assignor pursuant to the Purchase Agreement) and
the Individual Purchasers acquired shares of Common Stock pursuant to an
Agreement and Plan of Merger dated as of November 30, 1999 (the "Merger
------
Agreement"). IHD-PM, LLC has acquired shares of Common Stock pursuant to a
- ---------
Common Stock Purchase Agreement by and between Bruce and Lynne Friedman and IHD-
PM, LLC dated February 16, 2000.
The Series B Investors, CIH, Seacoast, Boston Ventures and Vulcan have
agreed to purchase shares of the Company's Series B Convertible Preferred Stock
(the "Series B Shares") pursuant to a Preferred Stock Purchase Agreement dated
---------------
February 16, 2000 (the "Series B Purchase Agreement"). The parties hereto,
---------------------------
except the Series B Investors and Seacoast Investors LLC, executed an Amended
and Restated Registration Rights Agreement dated as of December 6, 1999 (the
"December 6 Registration Rights Agreement") as a condition precedent to the
- -----------------------------------------
obligation of IHS, the Company, Vulcan's assignor and the Individual Purchasers
to enter into the Merger Agreement. The execution of this Agreement (which
amends and restates the December 6 Registration Rights Agreement) is a condition
precedent to the obligation of the Series B Investors, CIH, Seacoast, Boston
Ventures, Vulcan and the Company to consummate
<PAGE>
the Series B Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings given to them in the Series B Purchase
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Section 1. Demand Registration Rights. (a) Commencing on the date
--------------------------
which is 180 days (or such later date as may be required by the underwriting
agreement in the initial public offering) after the closing date of the initial
public offering of Common Stock under the Securities Act of 1933, as amended
(the "Act"), if holders of more than 30% of the Registrable Securities (as
defined in Section 4) request the Company to file a registration statement under
the Act for a firm commitment underwritten public offering of not less than 25%
of the Registrable Securities (or any lesser percentage if the anticipated
aggregate offering price of such offering, net of underwriting discounts and
commissions, exceeds $30 million), the Company shall promptly give written
notice of the proposed registration to all other holders of Registrable
Securities and, as soon as practicable, use its best efforts to so register
under the Act the Registrable Securities requested to be registered by the
Purchasers. The Company is obligated to effect two such demand registrations,
which shall not be within the same six month period.
(b) If the Company shall furnish to the requesting Purchasers a
certificate signed by the President or Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of Directors (excluding
the nominees of the requesting Purchaser), (i) such registration would have an
adverse effect on any plan by the Company to engage in any acquisition of
material assets or any merger, consolidation, tender offer, or similar
transaction, (ii) such registration would require the Company to file a
registration statement which includes audited financial statements as of the
date other than the date as of which the Company regularly prepares audited
financial statements, provided that this clause (ii) shall not apply if the
requesting Purchasers shall agree to pay all such additional expenses incurred
by the Company with respect to the preparation of such financial statements,
(iii) such registration would interfere with any material transaction involving
the Company or would require premature disclosure thereof, or (iv) such
registration would have a material adverse effect on the distribution of a
registered primary offering of equity securities by the Company pursuant to a
registration statement effective before the date of such demand, the Company
shall have the right to defer the filing of a Registration Statement with
respect to such offering for a period of not more than 90 days from delivery of
the request of the Purchasers; provided, however, that the Company may not
-------- -------
utilize this right more than twice during any 12-month period.
(c) If the underwriter managing the offering determines that, because
of marketing considerations, all of the Registrable Securities requested to be
registered may not be included in the offering, then all holders of Registrable
Securities who have requested registration shall participate in the offering pro
rata based upon the number of Registrable Securities which they have requested
to be so registered. If any such reduction results in the inclusion of less
than 70% of the Registrable Securities requested by the Purchasers to be
2
<PAGE>
included in the offering, such registration shall not reduce the number of
registrations available to the Purchasers under this Section 1.
(d) If the Company includes in any registration required under this
Section 1 a number of shares other than Registrable Securities that exceeds the
number of Registrable Securities to be included, then such registration shall be
deemed to be a registration under Section 2 hereof instead of this Section 1.
In all other cases where the Company includes in such registration any shares
other than Registrable Securities, such registration shall remain subject to
this Section 1, provided that in no event shall other shares be included if such
inclusion would (i) prevent holders of Registrable Securities from registering
all Registrable Securities requested by them or (ii) materially adversely affect
the offering price of the Registrable Securities in such registration.
Section 2. Piggyback Registration Rights. (a) Whenever the Company
-----------------------------
proposes to register any Common Stock for its own or others' account under the
Act, other than a registration relating to employee benefit plans or a
registration solely relating to shares to be sold under Rule 145 under the Act,
the Company shall give each holder of Registrable Securities and Individual
Registrable Securities (as defined in Section 4) prompt written notice of its
intent to do so. Upon the written request of any such holder given within 15
days after receipt of such notice, the Company will use its best efforts to
cause to be included in such registration all of the Registrable Securities and
Individual Registrable Securities which such holder requests.
(b) If the Company is advised in writing in good faith by any managing
underwriter of the securities being offered pursuant to any registration
statement under this Section 2 that, because of marketing considerations, the
number of shares to be sold by persons other than the Company is greater than
the number of such shares which can be offered without adversely affecting the
offering, the Company may reduce pro rata the number of shares offered for the
accounts of such persons (based upon the number of shares requested by each such
person to be included in the registration) to a number deemed satisfactory by
such managing underwriter, unless the registration statement is filed pursuant
to a demand registration right of a person, in which case the shares of such
person shall be offered first, and no additional shares shall be included until
all of the shares subject to the demand registration have been included.
Section 3. Form S-3 Registration Rights. Subject to Section 1(b),
----------------------------
if, at a time when Form S-3 is available for such registration, the Company
shall receive from the holders of at least 30% of Registrable Securities a
written request or requests that the Company effect a registration on Form S-3
of any of its Registrable Securities, the Company will promptly give written
notice of the proposed registration to all other holders of Registrable
Securities and, as soon as practicable, effect such registration and all related
qualifications and compliances as may be requested and as would permit or
facilitate the sale and distribution of all Registrable Securities as are
specified in such request and any written requests of other holders given within
15 days after receipt of such notice. The Company shall have no obligation to
effect a registration under this Section 3 (a) unless the aggregate offering
price of the Registrable Securities requested to be sold pursuant to such
registration is expected to be equal to or greater than $3,000,000 or (b) more
often than once in any six-month period. Any registration under this
3
<PAGE>
Section 3 will not be counted as a registration under Section 1 above.
Notwithstanding anything herein to the contrary, the Company shall only be
obligated to pay the expenses set forth in Section 8 hereof, for three (3)
registrations under this Section 3 and shall only be obligated to effect a total
of six (6) registrations under this Section 3.
Section 4. Registrable Securities. (a) "Registrable Securities" means
----------------------
(x) any shares of Common Stock (i) held by Vulcan, IHS (or any assignees of any
shares of Common Stock originally held by Vulcan or IHS), CIH or Integral and
any other shares of Common Stock issued in respect of such securities (as a
result of stock splits, stock dividends, reclassifications, recapitalizations or
other events), (ii) issued upon the conversion by Seacoast of the Warrant to
purchase Common Stock of the Company dated July 30, 1997 or (iii) issued upon
the conversion of the Series A Shares or Series B Shares held by any Purchasers;
provided, that with regard to Sections 1(a), 3, 12 and 19 hereof, references to
- --------
"Registrable Securities" shall mean, with respect to clause (iii) of this
Section 4(a), shares of Common Stock issued or issuable upon conversion of
Series A Shares or Series B Shares; (y) any other shares of Common Stock held or
acquired (or which may be acquired upon the exercise or conversion of securities
for or into shares of Common Stock) by the Purchasers (other than any Individual
Purchaser) pursuant to any preemptive right, right of first refusal or
otherwise; and (z) any other shares of Common Stock issued in respect of any of
such securities (as a result of stock splits, stock dividends,
reclassifications, recapitalizations or other events); provided, however, that
-------- -------
such securities shall cease to be Registrable Securities upon (i) any sale
pursuant to a registration statement under the Act, (ii) any sale which is a
"brokers' transaction" pursuant to Rule 144 under the Act, or (iii) in the event
of any registration requested pursuant to Section 3, upon receipt by the Company
of a written opinion of independent counsel, a copy of which will be provided to
the holders of such securities, that such securities are freely tradeable
without registration pursuant to Rule 144(k) (or any successor thereto) under
the Act.
(b) "Individual Registrable Securities" means (x) any shares Common
---------------------------------
Stock acquired by the Individual Purchasers; and (y) any other shares of Common
Stock issued in respect of any of such securities (as a result of stock splits,
stock dividends, reclassifications, recapitalizations or other events);
provided, however, that such securities shall cease to be Individual Registrable
- -------- -------
Securities upon (i) any sale pursuant to a registration statement under the Act
or (ii) any sale which is a "brokers' transaction" pursuant to Rule 144 under
the Act.
Section 5. Blue Sky in Demand Registrations and Form S-3 Registration
----------------------------------------------------------
Rights. In the event of any registration pursuant to Section 1 or 3, the
- ------
Company will exercise its best efforts to register and qualify the securities
covered by the registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be required and reasonably appropriate for
the distribution of such securities expected to be sold by the underwriter in
such states; provided, however, that (a) the Company shall not be required to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions, and (b) notwithstanding anything in this Agreement
to the contrary, in the event any jurisdiction in which the securities shall be
qualified imposes a non-waivable requirement that expenses incurred in
connection with the qualification of the securities be borne by selling
stockholders, such expenses shall be payable pro rata by selling stockholders.
4
<PAGE>
Section 6. Selection of Underwriter. The underwriter of any offering
------------------------
requested pursuant to this Agreement shall be selected by the Company.
Section 7. Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the Registrable Securities under the Act, the Company
shall: (a) as expeditiously as possible (and, in the case of a registration
under Section 1, within 120 days of any request thereunder) file with the
Securities and Exchange Commission (the "Commission") a registration statement,
in form and substance required by the Act, with respect to such Registrable
Securities and use its best efforts to cause that registration statement to
become effective;
(b) as expeditiously as possible, prepare and file with the Commission
any amendments and supplements to the registration statement and the prospectus
included in the registration statement as may be necessary to keep the
registration statement effective, in the case of a firm commitment underwritten
public offering, until completion of the distribution of all securities
described therein and, in the case of any other offering, until the earlier of
the sale of all Registrable Securities covered thereby or nine (9) months after
the effective date thereof;
(c) as expeditiously as possible, furnish to the selling Purchasers,
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as the selling Purchasers may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
owned by them;
(d) in connection with each registration pursuant to Sections 1, 2 and
3 above covering an underwritten public offering, the Company and the selling
Purchasers agree to enter into a written agreement with the managing underwriter
in such form and containing such provisions (including, if the underwriter so
requests, customary contribution provisions on the part of the Company) as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature, provided
that the selling Purchasers shall not be obligated to enter into any such
underwriting agreement if the indemnification provisions thereof are more
burdensome on the selling Purchasers than those contained herein;
(e) at the request of the selling Purchasers, the Company will furnish
to each underwriter, if any, and the selling Purchasers, a legal opinion of its
counsel and a letter from its independent certified public accountants, each in
customary form and substance, at such time or times as such documents are
customarily provided in the type of offering involved provided that furnishing
such documents does not require any information or opinions other than as
provided in the underwriting agreement for the Company's initial public
offering;
(f) whenever the Company is registering any Common Stock under the Act
and any Purchaser is selling securities under such registration or determines
with the opinion of its counsel, that it may be a controlling person under the
Act, the Company will keep the selling
5
<PAGE>
Purchaser advised in writing of the initiation, progress and completion of such
registration, will allow the selling Purchaser and its counsel to participate,
at the sole expense of the selling Purchaser, in the preparation of the
registration statement and to have access to all relevant corporate records,
documents and information, not inconsistent with the information that the
Company includes in the registration statement, will include in the registration
statement such information as the selling Purchaser may reasonably request and
will take all such other action as the selling Purchaser may reasonably request;
(g) the selling Purchasers shall furnish to the Company such
information regarding the selling Purchasers and the distribution proposed by
them as the Company may reasonably request in writing and as shall be required
in connection with the registration, qualification or compliance referred to in
this Agreement;
(h) as of the effective date of any registration statement relating
thereto, cause all such Registrable Securities and/or Individual Registrable
Securities to be listed on each securities exchange or Nasdaq system on which
Common Stock of the Company are then listed; and
(i) as of the effective date of any registration statement relating
thereto, provide a transfer agent for all Registrable Securities and Individual
Registrable Securities.
Section 8. Expenses. The Company will pay all expenses incurred by
--------
the Company in complying with this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, transfer
taxes, fees and expenses of counsel for the Company and the reasonable fees (up
to $50,000 for each registration) and expenses of one counsel selected by the
selling Purchasers reasonably acceptable to the Company to be included in such
registration to represent them, and state Blue Sky fees and expenses, but
excluding underwriting discounts and selling commissions relating to the sale of
the Registrable Securities and/or Individual Registrable Securities, and the
expenses of the Purchasers to the extent the Purchasers are only participating
pursuant to Section 7(f).
Section 9. Notification. The Company shall promptly notify the
------------
selling Purchasers of any event which results in the prospectus included in such
registration statement, as then in effect, containing an untrue statement of a
material fact or omitting to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and the Purchasers will immediately discontinue any
sales of the Company's securities upon such notice until an amendment or
supplement has been prepared and filed (and effective in the case of a post-
effective amendment).
Section 10. Indemnification and Contribution. (a) Indemnification by
-------------------------------- ------------------
the Company. The Company shall indemnify and hold harmless each of the
- -----------
Purchasers, their respective officers, directors, employees, partners and
members, each underwriter of the Registrable Securities and/or Individual
Registrable Securities being sold by the Purchasers, and each controlling person
of any of the foregoing, against all claims, losses, judgments, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or
6
<PAGE>
alleged untrue statement) of a material fact contained in any prospectus,
offering, circular, or other document relating to such Registrable Securities
and/or Individual Registrable Securities (or in any related registration
statement) or 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, or any violation by the Company of the Act, or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any applicable state
securities laws, or any rule or regulation promulgated thereunder, applicable to
the Company and relating to action or inaction required of the Company in
connection with any registration, qualification or compliance contemplated by
this Agreement, and will reimburse the Purchasers, each of their officers,
directors, employees, partners and members, and each such underwriter and
controlling person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such claim, loss, damage or liability (i)
arises out of or is based on any untrue statement or omission based upon and in
conformity with written information furnished to the Company by or on behalf of
the Purchasers and stated to be specifically for use in any prospectus,
offering, circular or any amendments or supplements thereto after the Company
has furnished the Purchasers with a sufficient number of copies thereof, or (ii)
results solely from the failure of the Purchasers to deliver a copy of the
prospectus, offering circular or any amendments or supplements thereto after the
Company has furnished the Purchasers with a sufficient number of copies thereof.
(b) Indemnification by the Purchasers. Each Purchaser, severally and
---------------------------------
not jointly, shall indemnify and hold harmless the Company, its directors, its
officers, each underwriter of the Registrable Securities and/or Individual
Registrable Securities, and each controlling person of any of the foregoing,
against all claims, losses, judgments, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other document relating to the Registrable Securities and/or
Individual Registrable Securities (or in any related registration statement) or
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 or
the failure of such Purchaser to deliver a copy of the prospectus, offering
circular, or any amendments or supplements thereto, and will reimburse the
Company and each such director, officer or controlling person for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided, however,
-------- -------
that no Purchaser will be liable in any such case except to the extent that any
such claim, loss, damage or liability arises out of any untrue statement or
omission based upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser and stated to be specifically for use
therein; provided, further, that in no event shall any indemnity by any
-------- -------
Purchaser under this subsection 10(b), together with any amount payable under
subsection 10(d), exceed the net proceeds from the offering received by such
Purchaser.
(c) Procedures for Indemnification. Each party entitled to
------------------------------
indemnification under Subsection (a) or (b) (the "Indemnified Party") shall give
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the
7
<PAGE>
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or any litigation resulting therefrom,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld or delayed); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. The Indemnified
Party may participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if in the written
opinion of counsel to the Indemnified Party reasonably acceptable to the
Indemnifying Party, such counsel shall believe in good faith that representation
of such Indemnified Party by the counsel retained by the Indemnifying Party
would be inappropriate due to actual or potential differing interests between
the Indemnified Party and any other party represented by counsel to the
Indemnifying Party in such proceeding. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation, and no Indemnified Party shall consent to entry of
any judgment or settle for monetary amounts such claim or litigation without the
prior written consent of the Indemnifying Party.
(d) Contribution. If the indemnification provided for in Subsections
------------
10(a) or (b) is unavailable to any Indemnified Party thereunder in respect of
any losses, claims, damages or liabilities (or actions in respect thereof)
referred to in such Sections, then each person or entity that would have been an
Indemnifying Party thereunder shall contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Indemnifying Party on one hand
and such Indemnified Party on the other and also the relative fault of the
Indemnifying Party on the one hand and such Indemnified Party on the other. The
relative fault shall be determined by reference to, among other things, whether
any 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
Indemnifying Party or such Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, or whether such losses, claims, damages or liabilities
(or actions in respect thereof) arose out of the action or failure to act of one
or more of such parties. Notwithstanding the foregoing, (i) the Purchasers will
not be required to contribute any amount in excess of the net proceeds to the
Purchasers of all Registrable Securities and Individual Registrable Securities
sold by them pursuant to such registration statement, and (ii) no person or
entity guilty of fraudulent misrepresentation, within the meaning of Section
11(f) of the Act, shall be entitled to contribution from any person or entity
who is not guilty of such fraudulent misrepresentation.
Section 11. Reports Under Exchange Act. With a view to making
--------------------------
available to the Purchasers the benefits of Rule 144 promulgated under the Act
and any other rule or regulation of the Commission that may at any time permit a
holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to use its best
efforts to satisfy the requirements applicable to the Company of all such rules
and
8
<PAGE>
regulations (including the requirements for public information, registration
under the Exchange Act and timely reporting to the Commission) at the earliest
possible date (but in any event not later than 90 days) after the effective date
of the registration statement for its first registered public offering. The
Company will furnish to the Purchasers whenever reasonably requested, a written
statement as to its compliance with the reporting requirements of Sections 13 or
15(d) under the Exchange Act, a copy of its most recent annual or quarterly
report, and such other reports and information filed by the Company as the
Purchasers may reasonably request in connection with the sale of Registrable
Securities and/or Individual Registrable Securities without registration.
Section 12. Registration Rights of Others. The Company will not,
-----------------------------
without the prior written consent of the holders of a majority of the
Registrable Securities, grant to any other person or entity the right to (a)
require the Company to initiate the registration of any securities or (b)
require the Company to include in any registration, securities owned by such
holder, unless under the terms of such arrangement, such holder may include
securities in such registration only to the extent that the inclusion thereof
does not limit the number of Registrable Securities included therein or
adversely affect the offering price thereof; provided, that the Company may
--------
grant such rights, subject to the conditions set forth in this Section 12, to
any purchaser of more than 15% of the Company's outstanding capital stock, on a
fully diluted basis. The Company represents and warrants that it has not
granted any person or entity the right to require the Company to initiate the
registration of any securities or include in any registration any securities
owned by such holder, except as provided herein or disclosed in the Purchase
Agreement, the CIH Purchase Agreement, the Merger Agreement or the Series B
Purchase Agreement.
Section 13. Lock-Up Agreement. Each holder of Registrable Securities
-----------------
and Individual Registrable Securities agree that in connection with the initial
public offering of Common Stock and any subsequent public offering of Common
Stock in which shares of Registrable Securities and Individual Registrable
Securities are entitled to be included in such public offering by the terms
hereof, and upon the request of the managing underwriter in such offering, such
holder will not sell, grant any option for the purchase of, or otherwise dispose
of any of the Company's securities held by such holder (other than any included
in such registered offering, any purchased in a public offering by the Company
or any purchased in the open market) without the prior written consent of such
underwriter, for such period of time as may be requested by such underwriter
(not to exceed (a) 180 days after the effective date of such registration, in
the case of the initial public offering of Common Stock, (b) 90 days after the
effective date of such registration, in the case of the second registration of
the Company's common stock or (c) the amount of time negotiated with the
underwriter, not to exceed 90 days, in the case of any other registration). The
obligation of the Purchasers under this Section 13 is conditional upon the
agreement of all of the Company's executive officers and directors and of all
persons holding 5% or greater of the Company's capital stock to be bound by the
terms of this Section 13.
Section 14. Insider Trading Policy. At all times during which the
----------------------
Company is subject to the reporting requirements of the Act, the Company will
use its reasonable best efforts to establish and maintain an internal policy
with respect to officers, directors, employees and
9
<PAGE>
related persons and entities who possess material, non-public information of the
Company or any of its Subsidiaries (each, an "Insider") in which (a) such
Insiders are permitted to trade in the Company's equity securities only during
the period commencing forty-eight (48) hours after the public release of
quarterly or annual earnings and ending immediately preceding the fifteenth
(15th) calendar day before the end of the next fiscal quarter; and (b)
notwithstanding clause (a) above, such Insiders may not, at any time, directly
or indirectly, purchase, sell or engage in any derivative or other transaction
involving any equity security issued by the Company if at the time of such
transaction such Insider is in possession of material, non-public information
about the Company.
Section 15. Notices. All notices, demands, requests or other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered in person, or by United States mail, certified or
registered with return receipt requested, or by nationally recognized overnight
courier service, to the addresses of the respective parties for notices in
accordance with the Purchase Agreement, the Stock Purchase Agreement dated March
16, 1999 between the Company, Daniel Nissanoff and Seacoast, the CIH Purchase
Agreement, the Merger Agreement or the Series B Agreement.
Section 16. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and, with respect to the
Company, its successors and assigns, and with respect to the Purchasers, any
Permitted Transferee (as defined below) or Full Transferee (as such term is
defined in the Third Amended and Restated Stockholders Agreement dated as of
this date) of a Purchaser. As used herein, "Permitted Transferee" means a
partner, member, officer, director or affiliate of a Purchaser, including,
without limitation any affiliated investment fund.
Section 17. Survival. This Agreement, including without limitation
--------
the obligation of the parties under Section 10 hereof, shall survive
indefinitely.
Section 18. Severability and Governing Law. If any provision of this
------------------------------
Agreement is rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render invalid or
unenforceable any other provision of this Agreement. This Agreement is governed
by and construed in accordance with the internal laws of the State of New York.
Section 19. Amendments, Etc. This Agreement may be changed, waived,
---------------
discharged or terminated only with the written consent of the Company and the
holders of 75% the Registrable Securities; provided, that no amendment of this
--------
Agreement which has a disproportionate adverse effect on a particular holder of
Registrable Securities shall be effective against such holder unless consent to
by such holder.
Section 20. Counterparts. This Agreement may be executed in one or
------------
more counterparts, and with counterpart signature pages, each of which shall be
an original, and all of which together shall constitute one in the same
Agreement.
10
<PAGE>
Section 21. Transfer of Rights. Notwithstanding anything in this
------------------
Agreement and the Series B Purchase Agreement, dated as of the date hereof, to
the contrary, any rights to cause the Company to register securities may be
transferred or assigned by any Purchaser to any affiliate of such Purchaser;
provided, that the Company is given written notice at the time of or within a
- --------
reasonable time after said transfer or assignment, stating the name and address
of such transferee or assignee and identifying the specific rights being
transferred or assigned; and, provided, further, that such transferee or
-------- -------
assignee assumes the obligations of the transferring Purchaser under the
applicable transaction agreement and agrees to be bound thereby and hereby.
Section 22. Aggregation of Stock. All shares of Registrable Securities
--------------------
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability and extent of any rights under
this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as a sealed instrument as of the date first above written.
PARTMINER, INC.
By: /s/ Daniel Nissanoff
-----------------------------
Name:
BOSTON VENTURES LIMITED
PARTNERSHIP V
By: Boston Ventures Management, Inc.
By: /s/ James Wilson
-----------------------------
Name: James Wilson
VULCAN SECURITIES LIMITED
By: /s/ Michael von Staudt
-----------------------------
Name: Michael von Staudt
SEACOAST CAPITAL PARTNERS
LIMITED PARTNERSHIP
By: Seacoast I Advisors LLC,
its General Partner
By: /s/ Eben S. Moulton
-----------------------------
Name:
SEACOAST INVESTORS LLC
By: /s/ Eben S. Moulton
-----------------------------
Name:
CAHNERS INFORMATION HOLDINGS, INC.
By: /s/ Charles Fontaine
-----------------------------
Name:
<PAGE>
INFORMATION HANDLING SERVICES INC.
By: /s/ L. Christopher Meyer
------------------------------
Name: L. Christopher Meyer
/s/ Emil H. Dahan
------------------------------
Emil H. Dahan
/s/ Michael J. Galvin
------------------------------
Michael J. Galvin
/s/ Patricia Tuxbury Salem
------------------------------
Patricia Tuxbury Salem
/s/ Peter W. Jeng
------------------------------
Peter W. Jeng
/s/ James L. McAlarney III
------------------------------
James L. McAlarney III
IHD-PM, LLC
By: /s/ Emil H. Dahan
------------------------------
Name: Emil H. Dahan
INTEGRAL CAPITAL PARTNERS IV, L.P.
By: Integral Capital Management IV, LLC,
its General Partner
By: /s/Pamela K. Hagenah
------------------------------
Name: Pamela K. Hagenah
Title: Manager
<PAGE>
INTEGRAL CAPITAL PARTNERS IV,
MS SIDE FUND, L.P.
By: Integral Capital Partners NBT, LLC,
its General Partner
By: /s/ Pamela K. Hagenah
-----------------------------
Name: Pamela K. Hagenah
Title: Manager
AGILE SOFTWARE CORP.
By: /s/ Thomas P. Shanahan
-----------------------------
Name:
IMPACT VENTURE PARTNERS L.P.
By: /s/ Adam Dell
-----------------------------
Name:
OMI PARTNERSHIP HOLDINGS LTD.
By: /s/ A. R. Melman
-----------------------------
Name:
GENERATION CAPITAL PARTNERS PARTNERS L.P.
By: Generation Partners L.P., as General
Partner
By: Generation Capital Company LLC,
as General Partner
By: /s/ Mark Jennings
-------------------------
Mark Jennings
Managing Director
<PAGE>
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Parallel Management
Partners L.P., as Manager
By: Generation Capital Company LLC,
as General Partner
By: /s/ Mark Jennings
------------------------
Mark Jennings
Managing Director
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.
By: Generation Capital Company LLC,
as General Partner
By: /s/ Mark Jennings
------------------------
Mark Jennings
Managing Director
BROADVIEW SLP
By: /s/ Peter Mooney
-----------------------------
Name: Peter Mooney
THE GOLDMAN SACHS GROUP, INC.
By: /s/ Joseph Gleberman
\ -----------------------------
Name: Joseph Gleberman, V.P.
<PAGE>
EXHIBIT 10.6
This Credit Agreement, dated December 20, 1999 is by and among PARTMINER,
INC., a New York corporation (the "Company") and the Company's subsidiaries
listed on Schedule 1 attached hereto (together with the Company, each
individually a "Borrower" and collectively the "Borrowers") and HAIC INC., a
Delaware corporation (the "Lender"). Unless otherwise indicated, all capitalized
terms are set forth in Section 8 hereof.
WHEREAS, the Borrowers have requested that the Lender provide a credit
facility for the purposes hereinafter set forth; and
WHEREAS, the Lender has agreed to make the credit facility available to the
Borrowers on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and agreements hereinafter
set forth, the parties hereto agree as follows:
SECTION 1. THE LOAN
1.1. The Facility. From time to time prior to January 31, 2001 and subject to
-------------
the terms and conditions hereof, the Lender agrees to loan funds to the
Borrowers, jointly and severally, in an aggregate principal amount not to exceed
at any time outstanding the principal amount of Ten Million Dollars
($10,000,000) at a rate of interest equal to the Prime Rate; provided, however,
-------- -------
the Lender shall not be obligated to make more than four Advances in any month;
and provided; further, however, that the total amount of Advances made during
-------- ------- -------
any of the months of December, 1999 or January or February, 2000 shall not
exceed $3,000,000 during any such month and the total amount of Advances made
during any month thereafter shall not exceed $2,000,000 during any such month.
1.2. Joint and Several Obligations. The obligations of the Borrowers hereunder
-----------------------------
are and shall be joint and several. Each Borrower hereby irrevocably appoints
the Company as its respective agent for purposes of making all requests for
Advances, and executing such documents and taking all other actions required or
permitted hereunder, and agrees that all communications by or to the Company and
all execution of documents and other actions taken
1
<PAGE>
by the Company in connection with this Agreement shall be binding on each
Borrower as fully as if such Borrower had made such requests, executed such
documents and/or taken such actions itself.
1.3 Promissory Note. The indebtedness of the Borrowers to the Lender will be
---------------
evidenced by a Note executed by the Borrowers, jointly and severally, in favor
of the Lender. The outstanding principal balance of the Loan together with all
interest accrued thereon shall be due and payable in full on the earliest to
occur of (i) January 31, 2001, or (ii) the third business day after the closing
date of the Initial Public Offering (as hereinafter defined), or (iii) the third
business day after the closing date of the Refinancing (as hereinafter defined).
Notwithstanding the foregoing, the aggregate outstanding principal balance of
the loan and all interest accrued thereon shall be due and payable immediately
on acceleration of the loan in accordance with Section 7 hereof.
1.4. Effectiveness. The effectiveness of this Agreement shall be subject to the
-------------
Lender's receipt of the following documents, each in form and substance
reasonably satisfactory to the Lender: (i) certified copies of appropriate
authorizing resolutions of the Board of Directors of each Borrower authorizing
such Borrower's execution and performance of this Agreement, the Note and the
Loan Documents, (ii) Uniform Commercial Code financing statement searches
against the Borrowers in such jurisdictions as the Lender shall reasonably
require, (iii) the Security Documents (as hereinafter defined) duly executed by
the Borrowers, and (iv) the Note duly executed by the Borrowers.
1.5 Advances. The Company on behalf of the Borrowers shall give the Lender
--------
prior written (which may be telecopied) notice of each requested Advance under
this Agreement by delivery of an Advance Request Form in the form of Exhibit A
hereto, certified by the President, any Vice President or the Chief Financial
Officer of the Company. The Advance Request Form shall specify the date, amount
and purpose of the Advance and shall contain the following information and
representations, which shall be required to be true and correct as of the date
delivered and as of the date of the requested Advance:
(i) the aggregate amount of the requested Advance;
(ii) the purpose of the requested Advance;
(iii) confirmation of the Borrower's compliance on the date of the request
for the Advance with the covenants in Sections 4 and 5 hereof;
(iv) certification that the representations and warranties set forth in
Section 3 hereof are true and correct in all material respects as of
the date of the Advance and no
2
<PAGE>
Event of Default or Default hereunder has occurred and is then
continuing or would occur as a result thereof; and
(v) certification that there have been no Material Adverse Effect since
the date of this Agreement.
Each of the representations and warranties set forth in subparagraphs
(iii), (iv), and (v) above shall be deemed to have been made by the Borrowers on
the date of each request for an Advance. Each of the Borrowers hereby
irrevocably authorizes and requests that the Company execute all Advance Request
Forms on its respective behalf, in each case with the same force and effect as
if such entity had executed such Advance Request Form itself.
1.6 Conditions. It shall be a condition to the Lender's obligation hereunder
----------
to make any Advance that the Lender receive a completed Advance Request Form and
that the representations set forth herein shall be true and correct as if made
on the date of such Advance (except for such representations and warranties as
expressly relate to a prior date), no Event of Default or Default shall have
occurred and be continuing on the date of such Advance, and there shall have
been no Material Adverse Effect since the date of this Agreement.
1.7 Optional Prepayments. The Borrowers may, at their option, at any time and
--------------------
from time to time, prepay all or any part of the outstanding principal balance
of the Loan, without penalty or premium, in multiples of $50,000, provided that
concurrently with each such prepayment the Borrowers shall pay accrued interest
on the principal so prepaid to the date of such prepayment. The amounts of such
prepayments may be reborrowed, subject to the limitations in Section 1.1.
1.8. Day of Payment. Whenever any payment to be made hereunder shall become due
--------------
and payable on a day which is not a Business Day (as defined below), such
payment may be made on the next succeeding Business Day and, in the case of any
payment of principal, such extension of time shall in such case be included in
computing interest on such payment. As used herein, "Business Day" shall mean
any day which is not a Saturday or Sunday and on which banks in the State of New
York are not authorized or required to close. Interest on past due principal and
accrued interest thereon shall be calculated as follows: The amount of principal
past due multiplied by the Default Rate and multiplied by a fraction, the
numerator of which is the number of days such principal and interest is past due
and the denominator of which is 360.
1.9. Use of Proceeds. Funds advanced under the Loan shall be used solely for
---------------
(i) development of the Company's Free Trade Zone, and (ii) the working capital
purposes and capital expenditures of the Borrowers.
3
<PAGE>
1.10. Obligation to Pay. The Borrowers shall make all payments hereunder in
-----------------
full without offset, reduction or deduction of any kind or amount or for any
reason. Notwithstanding the face amount of the Note, the liability of the
Borrowers shall be equal at all times to the actual outstanding principal
indebtedness to the Lender under the Note together with interest thereon and all
fees, costs and expenses provided herein.
SECTION 2. COLLATERAL
2.1 Security Documents. The Loan shall be secured by and the Lender shall be
------------------
entitled to the benefits of Security Agreements executed by each of the
Borrowers on the date hereof (collectively, the "Security Documents"). The
Borrowers shall duly execute and deliver the Security Documents, all consents of
third parties necessary to permit the effective granting of the Liens created in
such agreements, financing statements pursuant to the Uniform Commercial Code
and other documents, all in form and substance satisfactory to the Lender, as
may be reasonably required by the Lender to grant to the Lender a valid,
perfected and enforceable first priority Lien (except for the Lien of Marine
Midland Bank referred to in Section 3.14) on and security interest in the
Collateral. The Borrowers shall file or cause to be filed such financing
statements in each jurisdiction necessary to grant the Lender a valid, perfected
and enforceable first priority Lien (except for the Lien of Marine Midland Bank
referred to in Section 3.14) on and security interest in the Collateral not
later than five business days after the date of this Agreement. As promptly as
practicable, but in no event later than January 10, 2000, the Borrowers shall
file or cause to be filed termination statements pursuant to the Uniform
Commercial Code and other documents as may be required to terminate all Liens of
Marine Midland Bank.
3. REPRESENTATIONS AND WARRANTIES OF BORROWERS. The Borrowers hereby jointly
-------------------------------------------
and severally represent and warrant to the Lender as follows (provided that such
representations and warranties with respect to IQXpert Holdings Inc., IQXpert
Inc. and ExtraTime Technologies Inc. shall be subject to Section 3.19):
3.1 Due Organization and Qualification. Each Borrower is duly organized,
----------------------------------
validly existing and in good standing under the laws of the jurisdiction of its
formation. Each Borrower has all requisite corporate power and authority to own,
lease and operate its assets and properties and to
4
<PAGE>
carry on its business as presently conducted and as presently contemplated. Each
Borrower is duly qualified to transact business and is in good standing in each
jurisdiction in which the nature of its business or the location of its property
requires such qualification, except where the failure to do so would not have a
material adverse effect on its business, operations, assets, prospects or
condition (financial or otherwise). The Company does not have any domestic
Subsidiary except as listed on Schedule 1 hereto.
3.2 Constituent Documents. True and complete copies of each Borrower's
---------------------
Certificate of Incorporation and By-laws, as in effect on the date hereof
(collectively, the "Borrower Constituent Documents"), have been delivered to the
Lender.
3.3. Financial Statements. The audited consolidated balance sheet and related
--------------------
statements of income and cash flow for the Company as at and for the fiscal year
ended on December 31, 1998 (the "1998 Financial Statements") and the unaudited
consolidated balance sheet (the "Company Interim Balance Sheet") and related
statement of income of the Company as at and for the nine-month period ended on
September 30, 1999 (collectively, the "Company Interim Financial Statements";
and together with the 1998 Financial Statements, the "Company Financial
Statements"), true and complete copies of all of which have been delivered to
the Lender, present fairly in all material respects the consolidated financial
condition of the Company as at the dates indicated therein and the consolidated
results of operations of the Company for the periods covered thereby. The
Company Financial Statements have been prepared in accordance with GAAP
consistently applied, subject only in the case of the Company Interim Financial
Statements to ordinary year-end adjustments, none of which are material
individually or in the aggregate, and the absence of footnotes. The financial
books and records of the Company are in all material respects complete and
correct, have been maintained in accordance with good business practices, and
accurately reflect the bases for the consolidated financial condition and
results of operations set forth in the Company Financial Statements.
3.4 Absence of Changes. Since December 6, 1999, there has not been (i) any
------------------
significant adverse change in the financial condition, results of operations,
assets or business of the Borrowers, (ii) any repayment of any indebtedness or
any borrowing of or agreement to borrow any money or any material Liabilities
incurred by the Borrowers, other than current Liabilities incurred in the
ordinary course of business, (iii) any material asset or property of the
Borrowers made subject to a Lien, (iv) any declaration or payment of dividends
on, or other distributions with respect to, or any direct or indirect redemption
or repurchase of, any shares of the capital
5
<PAGE>
stock of Borrowers, (v) any issuance of any stocks, bonds or other securities of
the Borrowers, or any options, warrants or rights or agreements or commitments
to purchase or issue such securities, (vi) any mortgage, pledge, sale,
assignment or transfer of any material tangible or intangible assets of the
Borrowers, except with respect to tangible assets effected in the ordinary
course of business to persons not related to the Borrowers, (vii) any loan by
the Borrowers to any officer, director, employee or shareholder of the Borrowers
or any affiliate thereof, (viii) any material damage, destruction or loss
(whether or not covered by insurance) adversely affecting the assets, property
or business of the Borrowers, (ix) any purchase or other acquisition of assets
or property by the Borrowers other than in the ordinary course of business, (x)
any change in the accounting methods or practices followed by the Borrowers,
(xi) any operation of the business of the Borrowers outside of the ordinary
course of business and/or inconsistent with past practice, (xii) any waiver of
any valuable right of the Borrowers, or the cancellation or reduction of any
material debt or claim held by the Borrowers, or (xiii) any commitment or
agreement (contingent or otherwise) to do any of the foregoing.
3.5 Power and Authority. Each of the Borrowers has the requisite corporate
-------------------
power and authority to execute and deliver this Agreement and all other
agreements and certificates referred to in or contemplated by this Agreement and
to perform its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and all other agreements and certificates referred
to in or contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Borrowers. This Agreement has been
duly executed and delivered by the Borrowers and is (and such other agreements
and certificates, when executed and delivered, will be) the valid and binding
obligations of the Borrowers enforceable against the Borrowers in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, moratorium, insolvency, reorganization or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
3.6 Tax Matters. Each of the Borrowers has timely filed all Tax Returns that
-----------
it has been required to file through the date hereof, and has timely paid in
full all Taxes which were due and payable by it through the date hereof. The
provisions for Taxes reflected on the Company Interim Balance Sheet are adequate
to cover all accrued and unpaid Taxes of the Company for all periods ending on
or before September 30, 1999, and nothing has occurred subsequent to that date
to make such provisions inadequate. The Company has established and is
maintaining current accruals, and will establish and maintain adequate accruals
subsequent to the date hereof, that are in the case of current accruals, and
will be in the case of accruals subsequent to the date
6
<PAGE>
hereof, accurately reflected in the books and records of the Company and are,
and will be, adequate for the payment of any Taxes incurred but not yet due and
payable. No waivers or extensions of any applicable statute of limitations for
the assessment or collection of Taxes with respect to any Tax Returns of the
Borrowers are currently in effect or are currently proposed. Each of the
Borrowers has collected or withheld and paid over to the proper governmental or
regulatory bodies all amounts required to be so collected or withheld and paid
over under all applicable Laws. No action, suit, proceeding, investigation,
audit, claim or assessment is presently pending or, to the Borrowers' knowledge,
threatened with regard to any Taxes that relate to the Borrowers for which any
of the Borrowers is or could reasonably be expected to be liable. There is no
unresolved claim by a taxing authority in any jurisdiction where any of the
Borrowers does not anticipate to file Tax Returns that it is or could reasonably
be expected to be subject to taxation by such jurisdiction. There are no Liens
for Taxes (other than for Taxes not yet due and payable) upon any assets or
property of the Borrowers. The Lender acknowledges that the foregoing
representations and warranties made in this Section 3.6 do not apply in respect
of Accurate Components Inc. ("Accurate") or Market Trading Concepts Inc.
("Market Trading") (recently acquired, wholly-owned subsidiaries of Borrowers).
The Lender further acknowledges that the representations and warranties made in
respect of Accurate and Market Trading as to Tax matters in that certain Stock
Purchase Agreement by and between Borrowers, Accurate, Market Trading and
Anthony Arena, dated November 12, 1999, have been made available to the Lender
for its review and, to the Borrowers' knowledge, they are true and correct.
None of the Borrowers (i) has made any other election pursuant to the Code other
than elections that relate solely to matters of accounting, depreciation, or
amortization, that could reasonably be expected to have an adverse effect on,
its financial condition, its business as presently conducted or presently
proposed to be conducted or any of its properties or assets; and (ii) has at any
time filed a consent to the application of Section 341(f)(2) of the Code to any
property or assets held, acquired or to be acquired by it. None of the Borrowers
is a party to any tax allocation or sharing agreement, and has no liability for
the Taxes of any other entity under Treasury Regulation (S) 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise.
3.7 Compliance with Laws; Permits. Except as set forth on Schedule 3.7
----------------------------- ------------
hereto, each of the Borrowers is and has been in material compliance with all
Laws applicable to it or any of its properties or operations, including, without
limitation, all Environmental Laws. None of the Borrowers has received any
notice of its violation or alleged violation of any Law. Each of the borrowers
has all Permits necessary for the conduct of its business and operations as
currently
7
<PAGE>
conducted. All material Permits of the Borrowers are valid and in full force and
effect. No violations have occurred in respect of any such Permit and no action
or proceeding is pending nor, to the Borrowers' knowledge, threatened to revoke
or limit any such Permit.
3.8 No Breach; Consents; Payments. The execution, delivery and performance of
-----------------------------
this Agreement and all other agreements or certificates referred to in or
contemplated by this Agreement by the Borrowers and the consummation of the
transactions contemplated hereby and thereby will not (i) result in any Lien
upon any property of the Borrowers (other than the Lien in favor of the Lender
pursuant to the Security Documents); or (ii) violate, conflict with or otherwise
result in the breach of any of the terms and conditions of, result in a material
modification of or accelerate or trigger the rights of any person under, or
constitute (or, with the giving of notice or lapse of time or both, would
constitute) a default or termination under (a) any of the Borrowers Constituent
Documents; (b) any instrument, contract or other agreement to which any of the
Borrowers is a party or by or to which any of the Borrowers or any of its
property is bound or subject; (c) any Law applicable to Borrowers or any of its
property or operations; or (d) any Permit. Except as set forth in Schedule 3.8,
------------
no Consent is required on the part of the Borrowers in connection with the
execution, delivery or performance of this Agreement, the Security Documents or
the consummation of the transactions contemplated hereby. There are no payments,
Liabilities or obligations under or pursuant to any Law or contract or other
agreement to which any of the Borrowers is a party which are required to be made
or performed by the Borrowers to any person, arising out of or as a result of
the transactions contemplated by this Agreement.
3.9 Litigation; Claims. Except as set forth on Schedule 3.9 hereto, there are
------------------ ------------
no suits or actions, administrative, arbitration or other proceedings or
governmental investigations pending or, to the Borrowers' knowledge, threatened
against or affecting the Borrowers or any of their property or assets. Except as
set forth on Schedule 3.9, to the Borrowers' knowledge, no person has notified
------------
the Borrowers or any of their affiliates of a material claim against the
Borrowers alleging any personal property or economic injury, loss or damage
incurred as a result of or relating to the use of any products sold by or on
behalf of, or services rendered by, the Borrowers. There is no judgment, order,
injunction, decree or award against Borrowers which is not satisfied and remains
outstanding.
3.10 Employment Matters. The Borrowers have not at any time during the last
------------------
three (3) years had, nor, to the Borrowers' knowledge, is there now threatened,
any walkout, strike, picketing, work stoppage, planned work slowdown or any
similar occurrence. There are no material
8
<PAGE>
controversies or grievances pending or, to the Borrowers' knowledge, threatened
between the Borrowers and any of their employees. No union or other collective
bargaining unit has been certified or formally recognized by the Borrowers.
3.11 Material Agreements. Each of the Borrowers is in compliance with the terms
-------------------
and conditions of its material contracts, except where the failure to be in such
compliance could not reasonably be expected to have a material adverse effect on
the business, operations, assets, or condition (financial or otherwise) of the
Borrowers, taken as a whole.
3.12 Real Estate. The Borrowers do not own, in fee or otherwise, or have the
-----------
right or obligation to acquire any real property or buildings. Each of the
leases, subleases and other agreements pursuant to which the Borrowers occupy
any real property or buildings is a valid agreement in full force and effect,
creates a good and valid leasehold estate in the property leased thereby, and
Borrowers are in material compliance with the provisions of each such agreement
and no other party thereto is, to Borrowers' knowledge, in material default
thereunder.
3.13 Borrowers Intangible Property. Each of the Borrowers has either all
-----------------------------
right, title and interest in or valid and binding rights under contract to use
all items of Borrowers Intangible Property (as defined below) material to, or
necessary to conduct, the business of the Borrowers as presently conducted or
contemplated to be conducted. None of the Borrowers Intangible Property (other
than any patents and patent rights) materially infringes upon or violates any
rights owned or held by any other person. To the Borrowers' knowledge, none of
the patents and patent rights included in the Borrowers Intangible Property
materially infringes upon or violates any rights owned or held by any other
person. There is not pending nor, to the Borrowers' knowledge, threatened any
claim, suit or action against the Borrowers contesting or challenging the rights
of the Borrowers in or to any of the Borrowers Intangible Property or the
validity of any of the Borrowers Intangible Property. To Borrowers' knowledge,
there is no material infringement upon or unauthorized use of any of the
Borrowers Intangible Property owned by the Borrowers by any third party. None of
the Borrowers is in default (or, with the giving of notice or lapse of time or
both, would be in default) under any contract to use the Borrowers Intangible
Property. None of the Borrowers (nor any associate thereof) nor any officer,
director or affiliate or immediate family member, as the case may be, thereof
has any right to or interest in any of the Borrowers Intangible Property,
including, without limitation, any right to payments (by royalty or otherwise)
in respect of any use or transfer thereof.
The "Borrowers Intangible Property" means all patents and patent rights,
trademarks and
9
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trademark rights, trade names and tradename rights, service marks and service
mark rights, service names and service name rights, brand names, inventions,
processes, formulae, copyrights and copyright rights, trade dress, business and
product names, logos, slogans, designs, trade secrets, industrial models,
proprietary data, methodologies, computer programs and software (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how, inventions, works of authorship,
management information systems, and all pending applications for and
registrations of patents, trademarks, service marks and copyrights used in the
business of the Borrowers, in each such case, including all forms (e.g.,
----
electronic media, computer disks, etc.) in which such items are recorded.
3.14 Title to Properties and Assets. Each of the Borrowers has good title to
------------------------------
all of the property and assets owned or purported to be owned by it which are
reflected as assets on its balance sheet and those not so reflected on its
balance sheet because not required to be reflected thereon, but which are used
in the Borrowers' business (except for inventory or other assets disposed of in
the ordinary course of business consistent with past practice since the date of
such Borrower's most recent balance sheet), free and clear of any Lien, except
(i) Liens for Taxes not yet due and payable; (ii) Liens of materialmen,
mechanics, carriers, landlords and like persons which are not due and payable or
which are being contested in good faith and which are not material in the
aggregate; (iii) Liens on assets of IQXpert Holdings Inc., IQXpert Inc. and
ExtraTime Technologies Inc. existing on November 30, 1999; and (iv) as set forth
on Schedule 3.14 hereto ("Permitted Liens"). Other than in the ordinary course
-------------
of business, no person has any written or oral agreement, option, understanding,
commitment or any right or privilege to purchase, lease or license any of the
Borrowers' property or assets. None of the Liens set forth on Schedule 3.14
hereto is a Lien on any accounts receivable or inventory of the Borrowers,
except the Lien of Marine Midland Bank. The line of credit secured by the Lien
of Marine Midland Bank has expired and the only indebtedness secured by the Lien
is one or more stand by letters of credit that will expire on or before December
31, 1999.
3.15 Employee Benefit Plans. All Employee Benefit Plans (as defined in Section
----------------------
3(3) of ERISA) maintained by the Borrowers (or any affiliate thereof) or under
which the Borrowers have any obligations (other than obligations to make current
wage or salary payments) in respect of any of the employees of the Borrowers or
their beneficiaries (each individually, a "Borrowers Employee Benefit Plan" and
collectively, the "Borrowers Employee Benefit Plans") have complied in all
material respects in form, operation and administration with their respective
provisions, any applicable provisions of ERISA, the Code, and all other
applicable Laws. All contributions to and payments from the Borrowers Employee
Benefit Plans which have been
10
<PAGE>
required to be made in accordance with the provisions of the Borrowers Employee
Benefit Plans and, where applicable, ERISA and the Code have been made or are
adequately accrued and reflected on the books and records of the Borrowers.
There are no unfunded Liabilities in respect of any such Borrowers Employee
Benefit Plan. Neither the Borrowers, nor, to the Borrowers' knowledge, any of
its officers, employees or agents has committed any breach of fiduciary
responsibility with respect to the Borrowers Employee Benefit Plans to which
ERISA is applicable which could subject the Borrowers to any Liability under
ERISA. None of the Borrowers is and has ever been obligated to make
contributions to any Multiemployer Plan. The Borrowers do not have any early
retirement options or plans pursuant to which employees may choose to take early
retirement.
3.16 Transactions with Related Parties. Except as set forth on Schedule 3.16
--------------------------------- -------------
hereto, no director, officer or affiliate of the Borrowers nor any of their
immediate family members, as the case may be: (i) has borrowed money from or
loaned money to the Borrowers which has not been repaid; (ii) has an interest in
any property, rights or assets owned and/or used by the Borrowers in its
business; or (iii) is party to any contract or other agreement with the
Borrowers or is engaged in any material transaction or arrangement with the
Borrowers.
3.17 Environmental Matters. Each of the borrowers has: (i) materially complied
---------------------
with all Environmental Laws; (ii) not received any notice from any governmental
authority that any real property now or formerly owned, leased, managed,
operated or otherwise used by it is on any federal, state or foreign "superfund"
or similar list or has been the site of any activity giving rise to any
Liability; (iii) not received any notice of any Environmental Claim; and (iv)
stored, handled, used, released, discharged and disposed of all substances used
in their operations and wastes or by-products from their operations, whether
Hazardous Materials or not, in material compliance with all Environmental Laws.
No Hazardous Materials or other substances or wastes have been spilled,
released, discharged or disposed of from, on or under any property owned, leased
or operated by the Borrowers during its occupancy. None of the Borrowers has any
Liability with respect to the clean-up or remediation of any treatment, storage
or disposal site or facility.
3.18. Year 2000. Borrowers' critical information technology systems which are
---------
used in, or required for the conduct of, their business as currently conducted
or presently proposed to be conducted may be used prior to, during and after the
calendar year 2000 without material error or delay relating to date data and
will not otherwise fail: (i) to deal with or account for transitions or
comparisons from, into and between the years 1999 and 2000 accurately; (ii) to
recognize or
11
<PAGE>
accurately process any specific date in 1999 or 2000; or (iii) to account
accurately for the year 2000's status as a leap year, including recognition and
processing of the correct date on February 29, 2000.
3.19 Exceptions. Anything herein to the contrary notwithstanding, if any
----------
representation and warranty in this Section 3 with respect to IQXpert Holdings
Inc., IQXpert Inc. or ExtraTime Technologies Inc. would have been false or
incorrect if made on November 30, 1999, then Borrowers shall not be deemed to be
in breach of such representation or warranty with respect to IQXpert Holdings
Inc., IQXpert Inc. or ExtraTime Technologies, Inc. on or after the date hereof
by reason of any of the facts or circumstances that would have made such
representation and warranty false or incorrect on November 30, 1999.
SECTION 4. AFFIRMATIVE COVENANTS
The Borrowers covenant and agree that so long as this Agreement shall remain in
effect or any indebtedness of the Borrowers to the Lender hereunder remains
outstanding, the Borrowers each will:
4.1. Existence. Do or cause to be done all things necessary to preserve, renew
---------
and keep in full force and effect its legal existence.
4.2. Taxes. Pay and discharge promptly when due all Taxes, assessments and
-----
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its property before the same shall become delinquent or in default
unless the validity or amount thereof is being contested in good faith by
appropriate proceedings and the Borrowers have maintained adequate reserves with
respect thereto in accordance with GAAP.
4.3 Litigation and Other Notices. Upon knowledge by the Borrowers, give the
----------------------------
Lender prompt written notice of the following:
(a) the issuance by any court or government agency or authority of any
injunction, order decision or other restraint prohibiting, or having the
effect of prohibiting, the making of the Loan hereunder, or invalidating,
or having the effect of invaliding, any provision of this Agreement or any
of the Loan Documents;
(b) the filing or commencement of any action, suit or proceeding against
any of the
12
<PAGE>
claim which could have a Material Adverse Effect;
(c) any Event of Default (as hereinafter defined) or event or condition
which, with the giving of notice or lapse of time or both, would
constitute an Event of Default, specifying the nature and extent thereof
and the action (if any) which is proposed to be taken with respect
thereto.
4.4. Financial Statements.
--------------------
(a) Provide the Lender quarterly consolidated and consolidating unaudited
financial statements of the Company and Subsidiaries, including
balance sheets and statements of income, cash flow and stockholders
equity, within 45 days after the end of each quarter.
(b) Provide the Lender annual audited, consolidated and consolidating
financial statements of the Company and its Subsidiaries, including a
balance sheet and statements of income, cash flow and stockholders
equity, within 90 days after the end of each fiscal year, certified
by a nationally recognized independent public accounting firm
reasonably acceptable to the Company's Board of Directors,
accompanied by an opinion of the Company's independent public
accountant.
4.5. Other Information. Provide the Lender with any other documents and
-----------------
information, financial or otherwise, reasonably requested by the Lender from
time to time.
SECTION 5. NEGATIVE COVENANTS
The Borrowers covenant and agree that so long as this Agreement shall remain in
effect or any indebtedness of the Borrowers to the Lender hereunder remains
outstanding, the Borrowers will not:
5.1. Liens. Incur, create, assume or permit to exist any Lien or other
-----
encumbrance of any kind or nature on any of its property or assets including,
without limitation, the Collateral, whether owned at the date hereof or
hereafter acquired, or assign or convey any rights to or security interests in
any future revenues, except for (i) Permitted Liens, (ii) a purchase money
------
security interest incurred in connection with the purchase of a capital asset
and granting a Lien on the asset purchased only ("Purchase Money Security
Interest"), (iii) Liens and encumbrances created in favor of the Lender as
contemplated by the Security Documents, and (iv) Liens securing the payment of
taxes, assessments and governmental charges or levies that are not delinquent.
5.2 Indebtedness. Incur, create, assume or permit to exist any indebtedness
------------
other than (i)
13
<PAGE>
indebtedness incurred hereunder, (ii) indebtedness to trade creditors incurred
in the ordinary course of business, (iii) a Purchase Money Security Interest,
and (iv) a Refinancing, proceeds of which are used to repay in full all of the
obligations of the Borrowers under this Agreement and the other Loan Documents.
5.3 Dividends and Distributions. Declare or pay, directly and indirectly, any
---------------------------
cash dividends or make any other cash distribution, with respect to any shares
of its capital stock or directly or indirectly redeem, purchase, retire or
otherwise acquire for value any shares of any class of its capital stock or set
aside any amount for any such purpose, or agree to do any of the foregoing.
5.4 Consolidations and Mergers. Consolidate with or merge into any other
--------------------------
person, except any Borrower may consolidate with or merge into any other
Borrower.
5.5 Investments. Own, purchase or acquire any stock, obligations, assets or
-----------
securities of, or any interest in, or make any capital contribution or loan or
advance of money (other than to any other Borrower or except as set forth in
Section 5.10 below), credit or property to, any other person.
5.6 Guarantees. Guarantee, endorse, become surety for, or otherwise in any
----------
way become or be responsible for the obligations of any other person, other than
Subsidiaries of the Company.
5.7 Subsidiaries. Create any Subsidiaries, unless such Subsidiary becomes a
------------
party hereto and to the Security Documents by executing joinder agreements in
form and substance reasonably satisfactory to the Lender.
5.8 Capital Stock. Sell or issue any capital stock, or any stock or security
-------------
covertible into or exchangeable for capital stock and any right, warrant or
option to acquire capital stock or such convertible securities ("Common Stock
Equivalents") or any evidence of indebtedness issued in conjunction with Common
Stock Equivalents, except for (a) the grant of options and warrants to purchase
shares of the Company's Common Stock (and the issuance of shares of the
Company's Common Stock upon the exercise of such options and warrants, including
any of the foregoing that are presently outstanding) by the Compensation
Committee of the Company's Board of Directors, (b) the sale by the Company of
Common Stock pursuant to an Initial Public Offering, as hereafter defined,
proceeds of which are used to repay in full all of the obligations of the
Borrowers under this Agreement and the other Loan Documents, (c) the issuance of
any
14
<PAGE>
Common Stock Equivalent pursuant to a stock split, stock dividend or similar
event which is approved by the Company's Board of Directors, (d) a stock for
stock acquisition, provided the acquired person becomes a party hereto and to
the Security Documents by executing joinder agreements in form and substance
reasonably satisfactory to the Lender, or (e) the sale by the Company of capital
stock, proceeds of which are used to repay in full all of the obligations of the
Borrowers under this Agreement and the other Loan Documents.
5.9. Additional Negative Pledge. Enter into any agreement with any person,
--------------------------
other than the Lender pursuant to this Agreement, that materially restricts or
limits the Borrowers' authority or ability to pledge its assets or properties or
otherwise grant any Liens on its assets or property.
5.10 Foreign Subsidiaries. Make any loans or advances of funds borrowed
--------------------
hereunder to any Subsidary of the Company that is not a Borrower, other than (i)
in the ordinary course of business, or (ii) loans or advances not in excess of
$250,000 in the aggregate.
SECTION 6. CONVERSION RIGHT
In the event that the Borrowers have not paid the Lender on the date such
payment is due (whether by passage of time, acceleration or otherwise) the full
amount of the unpaid principal of and any accrued interest on the Loan and any
other amounts owing hereunder, then the Lender shall have the option at any time
thereafter and prior to payment in full of such amounts by the Borrowers, to
convert all of the amount of outstanding principal, accrued interest and other
amounts into common stock of the Company at a valuation of the Company,
following the conversion, equal to Three Hundred Million Dollars ($300,000,000).
For example, if the outstanding principal and accrued interest equals $10
million, then the Lender shall have the right to convert the $10 million to
receive ownership of an aggregate amount of common stock equal to 3.333% of the
total outstanding capital stock of the Company (immediately after giving effect
to the issuance of such shares to the Lender). The Lender may exercise its
conversion right under this Section by providing written notice of such exercise
to the Company. The Company shall issue the applicable number of shares of
capital stock to the Lender promptly on receipt of the Lender's written notice.
The Company shall have the right to pay the Lender the accured interest on the
Loan after receipt of such notice and prior to the issuance of the shares . In
the event that the Lender exercises its conversion right, the Lender hereby
agrees to be bound by the terms of Section 6.2(l) of that certain Agreement and
Plan of Merger dated as of November 30, 1999 by and between the Company,
PartMiner Acquisition Corp., IQXpert Holdings Inc., Information Handling
Services Inc., Thybo New Ventures Limited, Emil H. Dahan, Michael J. Galvin,
Patricia Tuxbury Salem, Peter W. Jeng and James L. McAlarney, III
15
<PAGE>
(the "Agreement and Plan of Merger").
SECTION 7. EVENT OF DEFAULT; REMEDIES
7.1 Events of Defaults. Each of the following events shall be an Event of
------------------
Default hereunder:
(a) Subject to notice to Borrowers and ten (10) days to cure, if any
Borrower shall fail to pay when due any principal or interest or any
other sum payable to the Lender hereunder or under the other Loan
Documents; or
(b) Subject to notice to Borrowers and thirty (30) days to cure, if any
Borrower shall default in the observance or performance of any
covenants or agreements contained in this Agreement or the other Loan
Documents; or
(c) If any representation or warranty made by the Borrowers in this
Agreement or any other Loan Documents or in connection with any of the
transactions contemplated herein shall prove to have been false or
incorrect in any material respect on the date as of which it was made
or deemed to have been made; or
(d) If any Borrower shall make an assignment for the benefit or creditors,
or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy or shall
be adjudicated a bankrupt or insolvent, or shall file any petition or
answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or shall file
any answer admitting or not contesting the material allegations of a
petition filed against it in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of all or any substantial part of its properties; or
(e) If, within sixty (60) days after the commencement of any action
against any Borrower seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such action
shall not have been dismissed or stayed or if, within sixty (60) days
after the appointment, without the consent or acquiescence of any
16
<PAGE>
Borrower, of any trustee, receiver, or liquidator of any Borrower or
any substantial part of any Borrower's properties, such appointment
shall not have been vacated; or
(f) If any order, judgment, or decree shall be entered in any proceeding
against any Borrower awarding a money judgment or judgments against
such Borrower aggregating more than $500,000, and if, within thirty
(30) days after entry thereof, such order, judgment or decree shall
not have been discharged or execution thereof stayed pending appeal;
of if, within thirty (30) days after the expiration of any such stay,
such judgment, order or decree shall not have been discharged; or
(g) Default shall be made with respect to any material indebtedness of any
Borrower if the effect of any such default shall be to accelerate or
permit the acceleration of the maturity of such indebtedness; or any
amount of principal or interest in respect of such indebtedness shall
not be paid when and as due (after giving effect to any period of
grace specified for such payment in the instrument evidencing or
governing the same);
(h) This Agreement or any other Loan Document shall for any reason cease
to be, or shall be asserted by any Borrower not to be, a legal, valid
and binding obligation of any Borrower, enforceable in accordance with
its terms, or the security interest or Lien purported to be created by
any of the Security Documents shall for any reason cease to be, or be
asserted by any Borrower not to be, a valid, first priority perfected
security interest in any Collateral.
7.2 Remedies. Upon the happening of any Event of Default and at any time
--------
during its continuance thereafter, by written notice by Lender to Borrowers
(except if an Event of Default described in Section 7.1(d) or (e) shall occur in
which case acceleration of the Loan shall occur automatically without any such
notice), the Lender may declare the entire unpaid principal and any accrued
interest in respect of the Loan to be immediately due and payable, and the same
shall thereupon become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrowers. Upon such declaration the Lender shall have no further obligation to
make any Advances. The Lender shall have all rights and remedies of a secured
party under the Uniform Commercial Code of the State of New York, under the
Uniform Commercial Code of any other state in which any Collateral may be
situated
17
<PAGE>
and, additionally, all the rights and remedies referred to herein or in any Loan
Document and under any other applicable law relating to this Agreement or the
Collateral.
7.3 Rights and Remedies Cumulative. No right or remedy herein conferred upon
------------------------------
the Lender is intended to be exclusive of any other right or remedy contained
herein or in any instrument or document delivered in connection with or pursuant
to this Agreement or the other Loan Documents, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
7.4 Rights and Remedies Not Waived. No course of dealing between the
------------------------------
Borrowers and the Lender or any failure or delay on the part of the Lender in
exercising any rights or remedies of the Lender and no single or partial
exercise of any rights or remedies hereunder or under the other Loan Documents
shall operate as a waiver or preclude the exercise of any other rights or
remedies hereunder.
SECTION 8. CERTAIN DEFINITIONS
"Advance" shall mean an advance of funds by the Lender under this
Agreement.
"Collateral" shall mean the collateral described in the Security Documents.
"Contract or other agreement" shall mean and includes all contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, commitments, obligations or other binding arrangements, oral
or written.
"Default Rate" shall mean the Prime Rate, plus 2%.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, Liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any person alleging potential Liability (including Liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, or release or threatened release into the environment, of any
Hazardous Materials at any location (whether or not owned) presently or formerly
operated, leased or managed by any Borrower, or (ii) any and
18
<PAGE>
all claims by any third party seeking damages, contribution, indemnification,
costs recovery, compensation or injunctive relief resulting from the presence or
release of any Hazardous Materials.
"Environmental Laws" shall mean any laws, statutes, regulations, rules or
orders which relate to or otherwise impose Liability or a standard of conduct
concerning the discharge, emission, storage, treatment, transportation,
handling, release, threatened release, or disposal of Hazardous Materials,
including, but not limited to, the Air Pollution Control Act, as amended, the
Federal Water Pollution Control Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conversation and Recovery Act of 1976, as amended, and the Toxic Substances
Control Act of 1976, as amended, and any other similar federal, state or local
statutes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as intepreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
"GAAP" shall mean United States generally accepted accounting principles.
"Hazardous Materials" shall mean any pollutant, contaminant, hazardous,
radioactive or toxic substance, material, constituent or waste, or any other
waste, substance, chemical or material regulated under any Environmental Law,
including (i) petroleum, crude oil and any fractions thereof, (ii) natural gas,
synthetic gas and any mixtures thereof, (iii) asbestos and/or asbestos-
containing material, (iv) radon and (v) polychlorinated biphenyls ("PCBs"), or
materials or fluids containing PCBs.
"Initial Public Offering" shall mean an initial public offering of the
Company's securities.
"Laws" shall mean all federal, state, local and foreign laws, statutes,
ordinances, regulations, orders, judgments, injunctions, awards or decrees.
"Liabilities" shall mean debts, liabilities or obligations, whether
absolute or contingent, asserted or unasserted, accrued or unaccrued, known or
unknown, liquidated or unliquidated, matured or unmatured, due or to become
due, or fixed or unfixed.
"Lien" shall mean and includes any lien, pledge, mortgage, security
interest, claim, lease,
19
<PAGE>
charge, option, right of first refusal or offer, easement, servitude, transfer
restriction or voting requirement under any or similar agreement, or any other
encumbrance, restriction or limitation whatsoever.
"Loan" shall mean the outstanding principal balance of indebtedness
advanced by the Lender to the Borrowers hereunder together with all interest
accrued thereon in accordance hereby and all cost and expense payable hereunder.
"Loan Documents" shall mean this Agreement, the Note, the Security
Documents, and any other instrument, document or agreement executed and
delivered at any time and from time to time in connection herewith.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
businesses, assets, operations or financial or other condition of the Borrowers,
taken as a whole, or (ii) the Lender's Lien on any material portion of the
Collateral.
"Note" shall mean the Senior Secured Promissory Note in the form of Exhibit
B attached hereto, delivered by the Borrowers to the Lender pursuant to Section
1.4 hereof, as amended from time to time.
"Permit" shall mean all licenses, permits, orders and approvals of federal,
state, local and foreign governmental or regulatory bodies necessary for the
conduct of a person's business and operations.
"person" shall mean any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
"Prime Rate" shall mean the per annum rate of interest publicly announced
from time to time by First Union National Bank as its prime rate.
"Refinancing" shall mean a loan, credit facility or other debt financing
provided by a bank, other lending institution or institutional investor
providing for the availability of funds in an amount at least sufficient to
repay in full all of the obligations of the Borrowers under this Agreement and
the other Loan Documents.
20
<PAGE>
"Subsidiary" shall mean with respect to any person, the parent or such
person, any corporation, association or other business entity of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled, directly or indirectly, by the parent or one or more
subsidiaries of the parent.
"Tax Returns" shall mean all written returns, declarations, reports, forms,
estimates, information returns and statements filed in respect of any Taxes and
supplied to any taxing authority in connection with any Taxes.
"Taxes" (or "Tax" where the context requires) shall mean all federal,
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll-related and property
taxes, and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest and penalties with respect thereto.
SECTION 9. MISCELLANEOUS
9.1. Survival. All agreements, representations, warranties and covenants of
--------
Borrowers contained herein or in any documentation required hereunder shall,
except as otherwise expressly provided herein, survive the execution of this
Agreement and the making of the Loan hereunder and will continue in full force
and effect as long as any indebtedness or other obligation of Borrowers under
this Agreement to the Lender remains outstanding.
9.2. Waivers. Presentment, demand and protest or other notice of any kind,
-------
except as may be otherwise specifically provided herein, are all hereby waived
with respect to the Loan, this Agreement and the other Loan Documents.
9.3. Modification. No modification or waiver of any provision of this
------------
Agreement and no consent by the Lender to any departure therefrom by the
Borrowers shall be effective unless such modification or waiver shall be in
writing and signed by the Lender, and the same shall then be effective only for
the period and on the conditions and for the specific instances and purposes
specified in such writing. No notice to or demand on the Borrowers in any case
shall entitle the Borrowers to any other or further notice or demand in similar
or other circumstances.
21
<PAGE>
9.4 Expenses; Indemnity. (a) The Borrowers agree to pay all reasonable out-of-
-------------------
pocket expenses incurred by the Lender in connection with any amendments,
modifications or waivers of the provisions hereof or of the other Loan Documents
or incurred by the Lender in connection with the enforcement or protection of
its rights in connection with this Agreement or the other Loan Documents or in
connection with any pending or threatened action, proceeding, or investigation
relating to the foregoing, in each case including but not limited to the
reasonable fees and disbursements of counsel for the Lender. The Borrowers
further agree that they shall indemnify the Lender from and hold it harmless
against any documentary taxes, assessments or related charges made by any
governmental authority by reason of the execution and delivery of this
Agreement.
(b) The Borrowers agree to indemnify the Lender and its respective
directors, officers, employees and agents against, and to hold the Lender and
each such person harmless from, any and all losses, claims,litigation,
investigations, proceedings, damages, liabilities and related expenses,
including reasonable counsel fees and expenses, incurred by or asserted against
the Lender or any such person arising out of, in any way connected with, or as a
result of this Agreement or the other Loan Documents, the performance by the
parties hereto and thereto of their respective obligations hereunder and
thereunder (including but not limited to the making of the Loan hereunder) and
consummation of the transactions contemplated hereby and thereby ; provided that
--------
such indemnity shall not, as to the Lender and its respective directors,
officers, employees and agents, apply to any such losses, claims, litigation,
investigations, proceedings, damages, liabilities or related expenses to the
extent that they result from the gross negligence or willful misconduct or
unlawful conduct of the Lender. The Borrowers and the Lender agree that any
rights and obligations in this Agreement are independent of any rights and
obligations contained in the Agreement and Plan of Merger.
(c) The provision of this Section 9.4 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of the loan
evidenced by the Note, the invalidity or unenforceability of any term or
provision of this Agreement, or any investigation made by or on behalf of the
Lender. All amounts due under this Section 9.4 shall be payable on written
demand therefor.
9.5 Entire Agreement; Waiver of Jury Trial, etc. This Agreement and the Loan
--------------------------------------------
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any
22
<PAGE>
previous agreement among the parties with respect to the transactions
contemplated herein is superseded by this Agreement and the other Loan
Documents. Except as expressly provided herein or in the other Loan Documents,
nothing in this Agreement or the other Loan Documents, expressed or implied, is
intended to confer upon any party, other than the parties hereto, any rights,
remedies, obligations or liabilities under or by reason of this Agreement or the
other Loan Documents.
Borrowers and Lender hereby knowingly, voluntarily and intentionally waive any
right they may have to a trial by jury in respect of any litigation hereon or
arising out of, under or in connection with this Agreement or the Note.
Borrowers and Lender hereby acknowledge that they were represented by counsel
in their entering into this Agreement and they were explained the meaning of
this Section 9.5 relating to the waiver of jury trial.
9.6 Benefit of Agreement. This Agreement shall be binding upon the successors
--------------------
and assigns of the Borrowers and inure to the benefit of the Lender and its
successors, endorsees and assigns; provided that the Borrowers may not assign or
transfer any interests and obligations hereunder without the prior consent of
the Lender; provided, further, that the Lender may not assign or transfer any
interests or obligations hereunder, other than to an affiliate of the Lender,
without the prior consent of the Borrowers.
9.7 Notices. Any notice or other communication required or which may be given
-------
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission (with confirming copy by overnight courier), or by a
recognized overnight courier for next business day delivery, certified,
registered, or express mail, postage or fees prepaid, and shall be deemed given
when so delivered personally, sent by facsimile transmission with electronic
confirmation of receipt or the next business day after delivered to such
overnight courier or express mail service or, if mailed, five (5) days after the
date of mailing, as follows:
If to the Borrowers:
PartMiner, Inc.
432 Park Avenue South
12/th/ Floor
New York, New York 10016
Attention: General Counsel
23
<PAGE>
Fax (212) 592-5833
with a copy to:
Kirkpatrick & Lockhart LLP
1251 Avenue of the Americas
New York, New York 10020
Attention: Stephen R. Connoni, Esq.
Fax (212) 536-3901
If to the Lender:
HAIC Inc.
15 Inverness Way East
Englewood, Colorado
(zip for regular mail - 80115
zip for express mail - 80112-5776)
Attention: L. Christopher Meyer
Fax (303) 792-9034
with a copy to:
TBG Services Inc.
565 Fifth Avenue
New York, New York 10017
Attention: General Counsel
Fax: (212) 850-8530
Any party may by notice given in accordance with this Section 9.7 to the other
parties designate another address or person for receipt of notices hereunder.
9.8 New York Law. This Agreement shall be construed in accordance with and
------------
governed by the local laws of the State of New York applicable to contracts
executed and to be performed in such state.
BORROWERS:
PARTMINER, INC.
By: /s/ Daniel Nissanoff
--------------------
Name:
Title:
24
<PAGE>
IQXPERT HOLDINGS INC.
By: /s/ Daniel Nissanoff
-----------------------------
Name:
Title:
IQXPERT INC.
By: /s/ Daniel Nissanoff
-----------------------------
Name:
Title:
EXTRATIME TECHNOLOGIES, INC.
By: /s/ Daniel Nissanoff
-----------------------------
Name:
Title:
ACCURATE COMPONENTS INC.
By: /s/ Daniel Nissanoff
-----------------------------
Name:
Title:
MARKET TRADING CONCEPTS INC.
By: /s/ Daniel Nissanoff
-----------------------------
25
<PAGE>
Name:
Title:
LENDER:
HAIC INC.
/s/ Stephen Green
By:_____________________________
Name:
Title:
26
<PAGE>
EXHIBIT 10.7
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as of
------------------
December 20, 1999 by and among PARTMINER, INC., a New York corporation (the
"Company") and the Company's subsidiaries indicated on the signature pages
-------
hereto (together with the Company, each individually an "Obligor" and
-------
collectively the "Obligors"), and HAIC INC., a Delaware corporation (the
--------
"Lender").
------
RECITALS
--------
WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof
(as amended, modified, extended, renewed or replaced from time to time, the
"Credit Agreement"), among the Obligors and the Lender, the Lender has agreed to
----------------
make a Loan upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lender to make the Loan under the Credit
Agreement that the Obligors shall have executed and delivered this Security
Agreement to the Lender.
NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions.
-----------
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the
Credit Agreement, and the following terms which are defined in
the Uniform Commercial Code in effect in the State of New York on
the date hereof are used herein as so defined: Accounts and
Inventory.
(b) In addition, the following terms shall have the following
meanings:
"Secured Obligations": the collective reference to the following:
-------------------
(a) The prompt performance and observance by the Obligors of all
obligations of the Obligors under the Credit Agreement, the Note,
this Security Agreement and the other Loan Documents to which the
Obligor is a party; and
(b) All other indebtedness, liabilities and obligations of any
kind or nature, now existing or hereafter arising, owing from any
Obligor to the Lender under the Loan Documents, howsoever
evidenced, created, incurred or acquired,
<PAGE>
2
whether primary, secondary, direct, contingent, or joint and
several, including, without limitation, all obligations and
liabilities reasonably incurred in connection with collecting and
enforcing the Secured Obligations.
2. Grant of Security Interest in the Collateral. To secure the
--------------------------------------------
prompt payment and in full when due, whether by lapse of time,
acceleration or otherwise, of the Secured Obligations, each Obligor
hereby grants to the Lender, a continuing security interest in, any
and all right, title and interest of such Obligor in and to the
following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
----------
(a) all Accounts
(b) all Inventory
(c) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and
related data processing software (owned by such Obligor
or in which it has an interest) that at any time
evidence or contain information directly relating to
the Accounts and Inventory or are otherwise necessary
or helpful in the collection thereof or realization
thereupon; and
(d) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing.
The Obligors and the Lender, hereby acknowledge and agree that the security
interest created hereby in the Collateral constitutes continuing collateral
security for all of the Secured Obligations, whether now existing or hereafter
arising.
3. Provisions Relating to Accounts.
-------------------------------
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to
observe and perform all the conditions and obligations to be
observed and performed by it thereunder, except as it otherwise
may determine in its reasonable business judgment, all in
accordance with the terms of any agreement giving rise to each
such Account. The Lender shall not have any obligation or
liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement
or the receipt by the Lender of any payment relating to such
Account pursuant hereto, nor shall the Lender be obligated in any
manner to perform any of the obligations of an Obligor under or
pursuant to any Account (or any agreement giving rise thereto),
to make any payment, to make any inquiry as to the nature or the
sufficiency of
<PAGE>
3
any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any
action to enforce any performance or to collect the payment of
any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(b) Once during each calendar month or at any time after the
occurrence and during the continuation of an Event of Default,
the Lender shall have the right, but not the obligation, to make
test verifications of the Accounts in any manner and through any
medium that it reasonably considers advisable, and the Obligors
shall furnish all such assistance and information as the Lender
may reasonably require in connection with such test
verifications. Upon the occurrence of an Event of Default and
during the continuation thereof, the Lender in its own name or in
the name of others may reasonably communicate with account
debtors on the Accounts to verify with them to the Lender's
reasonable satisfaction the existence, amount and terms of any
Accounts.
4. Representations and Warranties. Each Obligor hereby represents
------------------------------
and warrants to the Lender that: (provided that such representations
and warranties with respect to IQXpert Holdings Inc., IQXpert Inc. and
ExtraTime Technologies Inc. shall be subject to subparagraph (f)
below)
(a) Chief Executive Office; Books & Records. As of the date
---------------------------------------
hereof, each Obligor's chief executive office and chief place of
business is (and for the prior four months have been) located at
the locations set forth on Schedule 1 hereto and each Obligor
----------
keeps its primary books and records at such locations.
(b) Location of Collateral. As of the date hereof, the location
----------------------
of all the Accounts and Inventory owned by each Obligor is as
shown on Schedule 1 hereto.
----------
(c) Ownership. Each Obligor is the legal and beneficial owner of
---------
its Collateral and has the right to pledge, sell, assign or
transfer the same. As of the date hereof, each Obligor's legal
name is as shown in this Security Agreement and no Obligor has in
the past four months changed its name.
(d) Security Interest/Priority. This Security Agreement creates
--------------------------
a valid security interest in favor of the Lender, in the
Collateral of such Obligor and, when properly perfected by
filing, shall constitute a valid perfected security interest in
such Collateral, free and clear of all Liens (except for
Permitted Liens).
<PAGE>
4
(e) Accounts. (i) Each Account of the Obligors and the papers
--------
and documents relating thereto are genuine and in all material
respects what they purport to be, (ii) each Account arises out of
(A) a bona fide sale of goods sold and delivered by such Obligor
(or is in the process of being delivered) or (B) services
theretofore actually rendered by such Obligor to, the account
debtor named therein and (iii) no Account of an Obligor is
evidenced by any Instrument or Chattel Paper.
(f) Exceptions. Anything herein to the contrary notwithstanding,
----------
if any representation and warranty in this Section 4 with respect
to IQXpert Holdings Inc., IQXpert Inc. or ExtraTime Technologies
Inc. would have been false or incorrect if made on November 30,
1999, then Obligors shall not be deemed to be in breach of such
representation or warranty with respect to IQXpert Holdings Inc.,
IQXpert Inc. or ExtraTime Technologies, Inc. on or after the date
hereof by reason of any of the facts or circumstances that would
have made such representation and warranty false or incorrect on
November 30, 1999.
5. Covenants. Each Obligor covenants that, so long as any of the
---------
Secured Obligations remain outstanding or any Loan Document is in
effect, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims and
-----------
demands of all other parties claiming an interest therein except
any Person claiming by, through or under the Lender, use
commercial best efforts to keep the Collateral free from all
Liens (except for Permitted Liens), and not sell, exchange,
transfer, assign, lease or otherwise dispose of the Collateral or
any interest therein, except that prior to the occurrence of an
Event of Default, the Borrowers may sell Inventory in the
ordinary course of the Borrowers business.
(b) Instruments/Chattel Paper. If any amount payable under or in
-------------------------
connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, promptly deliver
such Instrument or Chattel Paper to the Lender, duly indorsed in
a manner satisfactory to the Lender, to be held as Collateral
pursuant to this Security Agreement.
(c) Change in Location. Not, without providing reasonable
------------------
written notice to the Lender and without filing such amendments
to any previously filed or additional financing statements as the
Lender may reasonably require, (a) change the location of its
chief executive office and chief place of business (as well as
its principal books and records) from the locations set forth on
Schedule 1 hereto, (b) change the location of a material amount
-----------------
of its Collateral from the locations set forth for such Obligor
on Schedule 1 hereto, or (c) change its name, be party to a
----------
merger, consolidation or other change in structure that would
require amendment to any previously filed financing statement.
<PAGE>
5
(d) Perfection of Security Interest. Execute and deliver to the
-------------------------------
Lender such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and
restatements of existing documents, as the Lender may reasonably
request) and do all such other things as the Lender may
reasonably deem necessary or appropriate (i) to assure to the
Lender its security interests hereunder, including such financing
statements (including renewal statements) or amendments thereof
or supplements thereto or other instruments as the Lender may
from time to time reasonably request in order to perfect and
maintain the security interests granted hereunder in accordance
with the UCC, (ii) to consummate the transactions contemplated
hereby and (iii) to otherwise protect and assure the Lender of
its rights and interests hereunder. To that end, each Obligor
agrees that the Lender may file one or more financing statements
disclosing the Lender's security interest in any or all of the
Collateral of such Obligor without, to the extent permitted by
law, such Obligor's signature thereon, and further each Obligor
also hereby irrevocably makes, constitutes and appoints the
Lender, its nominee or any other person whom the Lender may
designate, as such Obligor's attorney in fact with full power and
for the limited purpose to sign in the name of such Obligor any
such financing statements, or amendments and supplements to
financing statements, renewal financing statements, notices or
any similar documents which in the Lender's reasonable discretion
would be necessary, appropriate or convenient in order to perfect
and maintain perfection of the security interests granted
hereunder, such power, being coupled with an interest, being and
remaining irrevocable so long as the Credit Agreement is in
effect or any amounts payable thereunder or under any other Loan
Document, shall remain outstanding. Each Obligor hereby agrees
that a carbon, photographic or other reproduction of this
Security Agreement or any such financing statement is sufficient
for filing as a financing statement by the Lender without notice
thereof to such Obligor wherever the Lender may in its sole
discretion desire to file the same. In the event for any reason
the law of any jurisdiction other than New York becomes or is
applicable to the Collateral of any Obligor or any part thereof,
or to any of the Secured Obligations, such Obligor agrees to
execute and deliver all such instruments and to do all such other
things as the Lender in its sole discretion reasonably deems
necessary or appropriate to preserve, protect and enforce the
security interests of the Lender under the law of such other
jurisdiction (and, if an Obligor shall fail to do so promptly
upon the reasonable request of the Lender, then the Lender may
execute any and all such requested documents on behalf of such
Obligor pursuant to the power of attorney granted hereinabove).
If any Collateral is in the possession or control of an Obligor's
agents and the Lender so requests, such Obligor agrees to notify
such agents in writing of the Lender's security interest therein
and, upon the Lender's request, instruct them to hold all such
Collateral for the Lender's account and subject to the Lender's
instructions. Each Obligor agrees to mark its
<PAGE>
6
books and records to reflect the security interest of the Lender
in the Collateral.
(e) Treatment of Accounts. Not grant or extend the time for
---------------------
payment of any Account, or compromise or settle any Account for
less than the full amount thereof, or release any person or
property, in whole or in part, from payment thereof, or allow any
credit or discount thereon, other than as normal and customary in
the ordinary course of an Obligor's business.
(f) Insurance. Insure, repair and replace the Collateral of such
---------
Obligor as set forth in the Credit Agreement. All insurance
proceeds shall be subject to the security interest of the Lender
hereunder.
6. Advances by Lenders. On failure of any Obligor to materially
-------------------
perform any of the covenants and agreements contained herein, the
Lender may, upon written notice to Obligor and after a reasonable
opportunity to cure (unless, in the Lender's reasonable judgment, a
cure period could have a detrimental effect on the value of the
security) at its sole option and in its sole discretion, perform the
same and in so doing may expend such sums as the Lender may reasonably
deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien,
expenditures made in defending against any adverse claim and all other
expenditures which the Lender may make for the protection of the
security hereof or which may be compelled to make by operation of law.
All such sums and amounts so expended shall be repayable by the
Obligors on a joint and several basis promptly upon timely notice
thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are
expended at the Default Rate. No such performance of any covenant or
agreement by the Lender on behalf of any Obligor, and no such advance
or expenditure therefor, shall relieve the Obligors of any default
under the terms of this Security Agreement or the other Loan
Documents. The Lender may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax
lien, title or claim except to the extent such payment is being
contested in good faith by an Obligor in appropriate proceedings and
against which adequate reserves are being maintained in accordance
with GAAP.
7. Events of Default.
-----------------
The occurrence of an event which under the Credit Agreement would constitute an
Event of Default shall be an Event of Default hereunder (an "Event of Default").
----------------
8. Remedies.
--------
<PAGE>
7
(a) General Remedies. Upon the occurrence of an Event of Default
----------------
and during continuation thereof, and after written notice by the
Lender to the Obligors, the Lender shall have, in addition to the
rights and remedies provided herein, in the Loan Documents, or by
law (including, but not limited to, the rights and remedies set
forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies
of a secured party under the UCC (regardless of whether the UCC
is the law of the jurisdiction where the rights and remedies are
asserted and regardless of whether the UCC applies to the
affected Collateral), and further, the Lender may, with or
without judicial process or the aid and assistance of others, (i)
enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors,
take possession of the Collateral, (ii) dispose of any Collateral
on any such premises, (iii) require the Obligors to assemble and
make available to the Lender at the expense of the Obligors any
Collateral at any place and time designated by the Lender which
is reasonably convenient to both parties, (iv) remove any
Collateral from any such premises for the purpose of effecting
sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of
which each of the Obligors hereby waives to the fullest extent
permitted by law, at any place and time or times, sell and
deliver any or all Collateral held by or for it at public or
private sale, by one or more contracts, in one or more parcels,
for cash, upon credit or otherwise, at such prices and upon such
terms as the Lender deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In
addition to all other sums due the Lender with respect to the
Secured Obligations, the Obligors shall pay the Lender all
reasonable documented costs and expenses incurred by the Lender
including, but not limited to, reasonable attorneys' fees and
court costs, in obtaining or liquidating the Collateral, in
enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against
the Lender or the Obligors concerning any matter arising out of
or connected with this Security Agreement, any Collateral or the
Secured Obligations, including, without limitation, any of the
foregoing arising in, arising under or related to a case under
the Bankruptcy Code. To the extent the rights of notice cannot be
legally waived hereunder, each Obligor agrees that any
requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Borrower
in accordance with the notice provisions of Section 9.7 of the
-----------
Credit Agreement at least 10 days before the time of sale or
other event giving rise to the requirement of such notice. The
Lender shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been
given. To the extent permitted by law, the Lender may be a
purchaser at any such sale. To the extent permitted by applicable
law, each of the Obligors hereby waives all of its rights of
redemption with respect to any such sale. Subject to the
provisions of applicable law, the Lender may postpone or cause
the postponement of the sale of all or any portion of the
Collateral by announcement at the time and place of such sale,
and such sale
<PAGE>
8
may, without further notice, to the extent permitted by law, be
made at the time and place to which the sale was postponed, or
the Lender may further postpone such sale by announcement made at
such time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
-----------------------------
Event of Default and during the continuation thereof, whether or
not the Lender has exercised any or all of its rights and
remedies hereunder, each Obligor will promptly upon request of
the Lender instruct all account debtors to remit all payments in
respect of Accounts to a mailing location selected by the Lender.
In addition, upon the occurrence and during the continuation of
an Event of Default, the Lender or its designee may notify any
Obligor's customers and account debtors that the Accounts of such
Obligor have been assigned to the Lender or of the Lender's
security interest therein, and may (either in its own name or in
the name of an Obligor or both) demand, collect (including
without limitation by way of a lockbox arrangement), receive,
take receipt for, sell, sue for, compound, settle, compromise and
give acquittance for any and all amounts due or to become due on
any Account, and, in the Lender's discretion, file any claim or
take any other action or proceeding to protect and realize upon
the security interest of the Lender in the Accounts. Each Obligor
acknowledges and agrees that the Proceeds of its Accounts
remitted to or on behalf of the Lender in accordance with the
provisions hereof shall be solely for the Lender's own
convenience and that such Obligor shall not have any right, title
or interest in such Proceeds except as expressly provided herein.
The Lender shall have no liability or responsibility to any
Obligor for acceptance of a check, draft or other order for
payment of money bearing the legend "payment in full" or words of
similar import or any other restrictive legend or endorsement or
be responsible for determining the correctness of any remittance.
Each Obligor hereby agrees to indemnify the Lender from and
against all liabilities, damages, losses, actions, claims,
judgments, costs, expenses, charges and reasonable attorneys'
fees suffered or incurred by the Lender because of the
maintenance of the foregoing arrangements, except as relating to
or arising out of the gross negligence or willful misconduct or
unlawful conduct of the Lender or its officers or employees. In
the case of any investigation, litigation or other proceeding,
the foregoing indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by an Obligor,
its directors, shareholders or creditors or the Lender or any
other Person.
(c) Access. In addition to the rights and remedies hereunder,
------
upon the occurrence of an Event of Default and during the
continuance thereof, the Lender shall have the right to
reasonably enter and remain upon the various premises of the
Obligors without cost or charge to the Lender, and use the same,
together with materials, supplies, books and records of the
Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of
the Collateral, whether by foreclosure, auction or otherwise. In
addition, the Lender may remove
<PAGE>
9
Collateral, or any part thereof, from such premises and/or any
records with respect thereto, in order to effectively collect or
liquidate such Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Lender to
-------------------------------
exercise any right, remedy or option under this Security
Agreement, any other Loan Document, or as provided by law, or any
delay by the Lender in exercising the same, shall not operate as
a waiver of any such right, remedy or option. No waiver hereunder
shall be effective unless it is in writing, signed by the party
against whom such waiver is sought to be enforced and then only
to the extent specifically stated, which in the case of the
Lender shall only be granted as provided herein. To the extent
permitted by law, neither the Lender nor any party acting as
attorney for the Lender, shall be liable hereunder for any acts
or omissions or for any error of judgment or mistake of fact or
law other than their gross negligence or willful misconduct or
unlawful conduct hereunder. The rights and remedies of the Lender
under this Security Agreement shall be cumulative and not
exclusive of any other right or remedy which the Lender may have.
(e) Retention of Collateral. In addition to the rights and
-----------------------
remedies hereunder, upon the occurrence of an Event of Default
and during the continuation thereof, the Lender may, after
providing the notices required by Section 9-505(2) of the UCC and
otherwise complying with the requirements of applicable law of
the relevant jurisdiction, to the extent the Lender is in
possession of any of the Collateral, retain the Collateral in
satisfaction of the Secured Obligations. Unless and until the
Lender shall have provided such notices, however, the Lender
shall not be deemed to have retained any Collateral in
satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
----------
collection or realization are insufficient to pay all amounts to
which the Lender is legally entitled, the Obligors shall be
jointly and severally liable for the deficiency, together with
interest thereon at the Default Rate, together with the
reasonable costs of collection and the reasonable fees of any
attorneys employed by the Lender to collect such deficiency. Any
surplus remaining after the full payment and satisfaction of the
Secured Obligations shall be returned to the Obligors or to
whomsoever a court of competent jurisdiction shall determine to
be entitled thereto.
9. Additional Rights of the Lender.
-------------------------------
(a) Power of Attorney. In addition to other powers of attorney
-----------------
contained herein, each Obligor hereby designates and appoints the
Lender, and each of its designees, as attorney-in-fact of such
Obligor, irrevocably and with power of substitution (to the
extent permitted by applicable law), with authority to take any
or all of the following actions upon the occurrence and during
the continuance of an Event of Default:
<PAGE>
10
(i) to demand, collect, settle, compromise, adjust, give
discharges and releases, all as the Lender may reasonably
determine;
(ii) to commence and prosecute any actions at any court for
the purposes of collecting any Collateral and enforcing any
other right in respect thereof;
(iii) to defend, settle or compromise any action brought and,
in connection therewith, give such discharge or release as the
Lender may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to an
Obligor and endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in respect
of, or otherwise deal with or exercise rights in respect of,
any Collateral or the goods or services which have given rise
thereto, as fully and completely as though the Lender were the
absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance policy
relating thereto;
(vii) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing
statements, security agreements, affidavits, notices and other
agreements, instruments and documents that the Lender may
determine necessary in order to perfect and maintain the
security interests and liens granted in this Security
Agreement and in order to fully consummate all of the
transactions contemplated therein;
(viii) institute any foreclosure proceedings that the Lender
may deem appropriate; and
(ix) do and perform all such other acts and things as the
Lender may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
<PAGE>
11
This power of attorney is a power coupled with an interest and
shall be irrevocable for so long as any of the Secured Obligations remain
outstanding or any Loan Document is in effect. The Lender shall be under
no duty to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Lender in
this Security Agreement, and shall not be liable for any failure to do so
or any delay in doing so. The Lender shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct or
unlawful conduct. This power of attorney is conferred on the Lender solely
to protect, preserve and realize upon its security interest in the
Collateral.
(b) The Lender's Duty of Care. Other than the exercise of
-------------------------
reasonable care to assure the safe custody of the Collateral
while being held by the Lender hereunder, the Lender shall have
no duty or liability to preserve rights pertaining thereto, it
being understood and agreed that the Obligors shall be
responsible for preservation of all rights in the Collateral, and
the Lender shall be relieved of all responsibility for the
Collateral upon surrendering it or tendering the surrender of it
to the Obligors. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment
substantially equal to that which the Lender accords its own
property, which shall be no less than the treatment employed by a
reasonable and prudent Lender in the industry, it being
understood that the Lender shall not have responsibility for
taking any necessary steps to preserve rights against any parties
with respect to any of the Collateral.
10. Application of Proceeds. Upon the occurrence and during the
-----------------------
continuance of an Event of Default, any payments in respect of the
Secured Obligations and any proceeds of the Collateral, when received
by the Lender in cash or its equivalent, will be applied in reduction
of the Secured Obligations and each Obligor irrevocably waives the
right to direct the application of such payments and proceeds and
acknowledges and agrees that the Lender shall have the continuing and
exclusive right to apply and reapply any and all such payments and
proceeds in the Lender's sole discretion, notwithstanding any entry to
the contrary upon any of its books and records.
11. Costs of Counsel. If at any time hereafter, whether upon the
----------------
occurrence of an Event of Default or not, the Lender employs counsel
to prepare amendments, waivers or consents with respect to this
Security Agreement, or to take action or make a response in or with
respect to any legal proceeding relating to this Security Agreement or
relating to the Collateral, or to protect the Collateral or exercise
any rights or remedies under this Security Agreement or with respect
to the Collateral, then the Obligors agree to promptly pay upon demand
any and all such reasonable documented costs and expenses of the
Lender all of which costs and expenses shall constitute Secured
Obligations hereunder.
<PAGE>
12
12. Continuing Agreement.
--------------------
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long
as any of the Secured Obligations remain outstanding or any Loan
Document is in effect. Upon such payment and termination, this
Security Agreement shall be automatically terminated and the
Lender shall, upon the request and at the expense of the
Obligors, forthwith release all of its liens and security
interests hereunder and shall execute and deliver all UCC
termination statements and/or other documents reasonably
requested by the Obligors evidencing such termination.
Notwithstanding the foregoing all releases and indemnities
provided hereunder shall survive termination of this Security
Agreement; but with respect to the indemnities for a period of 24
months following such termination.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations
is rescinded or must otherwise be restored or returned by the
Lender as a preference, fraudulent conveyance or otherwise under
any bankruptcy, insolvency or similar law, all as though such
payment had not been made; provided that in the event payment of
all or any part of the Secured Obligations is rescinded or must
be restored or returned, all reasonable costs and expenses
(including without limitation any reasonable legal fees and
disbursements) incurred by the Lender in defending and enforcing
such reinstatement shall be deemed to be included as a part of
the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and
----------------------------------
the provisions hereof may not be amended, waived, modified, changed,
discharged or terminated except as set forth in Section 9.3 of the
-----------
Credit Agreement.
14. Successors in Interest. This Security Agreement shall create a
----------------------
continuing security interest in the Collateral and shall be binding
upon each Obligor, its successors and assigns and shall inure,
together with the rights and remedies of the Lender hereunder, to the
benefit of the Lender and its successors and permitted assigns;
provided, however, that none of the Obligors may assign its rights or
-------- -------
delegate its duties hereunder without the prior written consent of the
Lender, and the Lender may not assign its rights or delegate its
duties hereunder, other than to an affiliate of the Lender, without
the prior written consent of the Obligors. To the fullest extent
permitted by law, each Obligor hereby releases the Lender, and its
successors and assigns, from any liability for any act or omission
relating to this Security Agreement or the Collateral, except for any
liability arising from the gross negligence or willful misconduct or
unlawful conduct of the Lender, or its officers or employees.
15. Notices. All notices required or permitted to be given under this
-------
Security Agreement shall be in conformance with Section 9.7 of the
-----------
Credit Agreement.
<PAGE>
13
16. Counterparts. This Security Agreement may be executed in any
------------
number of counterparts, each of which where so executed and delivered
shall be an original, but all of which shall constitute one and the
same instrument. It shall not be necessary in making proof of this
Security Agreement to produce or account for more than one such
counterpart signed by each of the parties.
17. Headings. The headings of the sections and subsections hereof are
--------
provided for convenience only and shall not in any way affect the
meaning or construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) This Security Agreement shall be construed in accordance with and
governed by the local laws of the State of New York applicable to
contracts executed and to be performed in such state.
(b) Obligors hereby submit to the jurisdiction of the courts of the
State of New York in New York County or the United States
District Court for the Southern District of New York, in
connection with any action or proceeding arising out of or
relating to this Security Agreement. Obligors hereby irrevocably
appoint the Company, with an address at 432 Park Avenue South,
New York, New York 10016, as their agent to receive service of
copies of summons and complaints and any other process which may
be served in any action or proceeding arising hereunder. Such
service may be made by mailing or delivering a copy of such
process by registered or certified mail, postage prepaid, to
Obligors in care of the Company's address set forth above, to the
attention of the Company's General Counsel, and Obligors hereby
irrevocably authorize and direct the Company to accept such
service on their behalf. Obligors agree that a final judgement in
any such action or proceeding shall be conclusive, subject to
appellate relief, and may be enforced in other jurisdictions by
suit on the judgement or in any other manner provided by law.
Nothing in this Security Agreement shall affect the right of the
Lender to serve legal process in any other manner permitted by
law or affect the right of the Lender to bring any action or
proceeding against Obligors or any of their properties in the
courts of the other jurisdictions to the extent otherwise
permitted by the law.
(c) To the extent that any Obligor has or hereafter may acquire: (i)
any immunity from the jurisdiction of any court of the State of
New York in New York County or the United States District Court
for the Southern District of New York or from any legal process
out of any such court (whether through service or notice,
attachment prior to judgement, attachment in aid of execution,
execution or otherwise) with respect to itself or its property,
or (ii) any objection to the laying of the venue or of an
inconvenient forum or any suit, action or proceeding, if brought
in the State of New York in New York County or the United States
District Court for the Southern District of
<PAGE>
14
New York under process served in accordance with this Security
Agreement, such Obligor hereby irrevocably waives such immunity
or objection in respect of any suit, action or proceeding arising
out of or relating to this Security Agreement.
19. Waiver of Jury Trial. EACH OF THE PARTIES OF THIS SECURITY
--------------------
AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY
AGREEMENT. EACH SUCH PARTY HEREBY ACKNOWLEDGES THAT IT WAS REPRESENTED
BY COUNSEL IN ITS ENTERING INTO THIS SECURITY AGREEMENT AND IT WAS
EXPLAINED THE MEANING OF THIS WAIVER OF JURY TRIAL.
20. Severability. If any provision of this Security Agreement is
------------
determined to be illegal, invalid or unenforceable, such provision
shall be fully severable and the remaining provisions shall remain in
full force and effect and shall be construed without giving effect to
the illegal, invalid or unenforceable provisions.
21. Entirety. This Security Agreement and the other Loan Documents
--------
constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with
respect to the transactions contemplated herein is superseded by this
Security Agreement and the other Loan Documents.
22. Survival. All representations and warranties of the Obligors
--------
hereunder shall survive the execution and delivery of this Security
Agreement, the other Loan Documents, the delivery of the Note and the
making of the Loan so long as any of the Secured Obligations remain
outstanding or any other Loan Document is in effect.
23. Other Security. To the extent that any of the Secured Obligations
--------------
are now or hereafter secured by property other than the Collateral
(including, without limitation, real property and securities owned by
an Obligor), or by a guarantee, endorsement or property of any other
Person, then the Lender shall have the right to proceed against such
other property, guarantee or endorsement upon the occurrence of any
Event of Default and during the continuation, and the Lender shall
have the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Lender shall at
any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any
of the Lender's rights or the Secured Obligations under this Security
Agreement or under any other of the Loan Documents.
<PAGE>
15
24. Joint and Several Obligations of Obligors.
-----------------------------------------
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial
accommodation to be provided by the Lender under the Credit
Agreement, for the mutual benefit, directly and indirectly, of
each of the Obligors and in consideration of the undertakings of
each of the Obligors to accept joint and several liability for
the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety
but also as a co-debtor, joint and several liability with the
other Obligors with respect to the payment and performance of all
of the Secured Obligations arising under this Security Agreement,
and the other Loan Documents, it being the intention of the
parties hereto that all the Obligations shall be the joint and
several obligations of each of the Obligors without preferences
or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Loan Documents, to the extent the
obligations of an Obligor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation,
because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each
Obligor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
Each of the parties hereto has caused a counterpart of this Security Agreement
to be duly executed and delivered as of the date first above written.
OBLIGORS:
---------
PARTMINER, INC.
By: /s/ Daniel Nissanoff
--------------------
Name:
Title:
IQXPERT HOLDINGS INC.
By: /s/ Daniel Nissanoff
--------------------
<PAGE>
16
Name:
Title:
IQXPERT, INC.
By: /s/ Daniel Nissanoff
--------------------
Name:
Title:
EXTRATIME TECHNOLOGIES, INC.
By: /s/ Daniel Nissanoff
--------------------
Name:
Title:
ACCURATE COMPONENTS INC.
By: /s/ Daniel Nissanoff
--------------------
Name:
Title:
MARKET TRADING CONCEPTS, INC.
By: /s/ Daniel Nissanoff
--------------------
Name:
Title:
Accepted and agreed to as of the date first above written.
<PAGE>
17
LENDER:
HAIC INC.
By: /s/ Stephen Green
----------------------
Name:
Title:
<PAGE>
EXHIBIT 10.8
______________________________________________________________________________
______________________________________________________________________________
Agreement and Plan of Merger
by and between
PartMiner, Inc.,
PartMiner Acquisition Corp.,
IQXpert Holdings Inc.,
Information Handling Services Inc.,
Thybo New Ventures Limited,
Emil H. Dahan,
Michael J. Galvin,
Patricia Tuxbury Salem,
Peter W. Jeng
and
James L. Mcalarney, III
____________________
Dated as of: November 30, 1999
____________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. THE MERGER........................................................... 1
1.1. The Merger..................................................... 1
1.2. Effects of the Merger.......................................... 1
1.3. Effective Time of the Merger................................... 1
1.4. Directors...................................................... 2
1.5. Officers....................................................... 2
1.6. Effect of the Merger on Capital Stock.......................... 2
2. CLOSING.............................................................. 2
2.1. Time and Place................................................. 2
3. DELIVERY OF SHARE CERTIFICATES....................................... 3
3.1. Delivery of Share Certificates................................. 3
4. REPRESENTATIONS AND WARRANTIES OF IQX AND THE STOCKHOLDERS.......... 3
4.1. Title to IQX Shares............................................ 3
4.2. Due Organization and Qualification; Subsidiaries............... 3
4.3. Capitalization; Options; Shareholder Rights.................... 4
4.4. Constituent Documents.......................................... 5
4.5. Financial Statements........................................... 5
4.6. Absence of Changes............................................. 5
4.7. Power and Authority............................................ 6
4.8. Tax Matters.................................................... 6
4.9. Customers...................................................... 7
4.10. Compliance with Laws; Permits.................................. 7
4.11. No Breach; Consents; Change of Control Payments................ 7
4.12. Litigation; Claims............................................. 8
4.13. Employment Matters............................................. 8
4.14. Material Agreements............................................ 8
4.15. Real Estate.................................................... 9
4.16. Accounts and Notes Receivable; Payables........................ 9
4.17. IQX Intangible Property........................................ 9
4.18. Title to Properties and Assets................................. 10
4.19. No Undisclosed Liabilities..................................... 10
4.20. CAPSxpert Database............................................. 11
4.21. Employee Benefit Plans......................................... 11
4.22. Insurance...................................................... 13
4.23. No Misrepresentations.......................................... 13
4.24. Transactions with Related Parties.............................. 13
4.25. Environmental Matters.......................................... 13
4.26. Year 2000...................................................... 13
4.27. Bank Accounts; Powers of Attorney.............................. 14
4.28. Brokers........................................................ 14
4.29. Disclosure Schedules........................................... 14
4.30. Stockholder Acknowledgment..................................... 14
4.31. Investment in Buyer Shares..................................... 14
5. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 15
5.1. Authorization of Buyer Shares.................................. 15
5.2. Due Organization and Qualification............................. 15
5.3. Capitalization; Options; Shareholder Rights.................... 15
5.4. Constituent Documents.......................................... 15
5.5. Financial Statements........................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.6. Absence of Changes............................................... 16
5.7. Power and Authority.............................................. 16
5.8. Tax Matters...................................................... 17
5.9. Compliance with Laws; Permits.................................... 17
5.10. No Breach; Consents; Payments.................................... 18
5.11. Litigation; Claims............................................... 18
5.12. Employment Matters............................................... 18
5.13. Material Agreements.............................................. 18
5.14. Real Estate...................................................... 18
5.15. Buyer Intangible Property........................................ 19
5.16. Title to Properties and Assets................................... 19
5.17. Employee Benefit Plans........................................... 20
5.18. Transactions with Related Parties................................ 20
5.19. Environmental Matters............................................ 20
5.20. Year 2000........................................................ 21
5.21. Brokers.......................................................... 21
5.22. Disclosure Schedules............................................. 21
5.23. Investment in IQX Shares......................................... 21
6. COVENANTS AND AGREEMENTS............................................... 21
6.1. Pre-Closing Covenants and Agreements............................... 22
(a) Ongoing IQX Operations......................................... 22
(b) Ongoing Buyer Operations....................................... 22
(c) Investigation by Buyer and IQX................................. 23
(d) Further Assurances............................................. 23
(e) Additional Disclosure.......................................... 24
(f) Exclusive Dealings............................................. 24
(g) Resignations................................................... 24
(h) Records........................................................ 24
(i) Fees and Disbursements......................................... 24
(j) Maintenance of Insurance....................................... 25
(k) Transfer Taxes................................................. 25
(l) Supplemental Disclosure........................................ 25
(m) [Intentionally Omitted]........................................ 25
(n) Termination of Sales Agency Agreement.......................... 25
(o) IQX Stockholders Agreement..................................... 25
6.2. Post-Closing Covenants and Agreements............................... 26
(a) Non-Interference................................................ 26
(b) Non-Compete..................................................... 26
(c) Confidentiality................................................. 26
(d) Equitable Relief................................................ 27
(e) IQX's Employees................................................. 28
(f) Tax Matter...................................................... 28
(g) Right of First Refusal.......................................... 28
(h) Cancellation of IQX Options..................................... 28
(i) WARN Act Notices................................................ 29
(j) Employee Benefit Plan Liabilities............................... 29
(k) Thrift Plan..................................................... 29
(l) Standstill Provisions........................................... 29
(m) Cooperation on Tax Matters...................................... 30
(n) Agreements...................................................... 30
(o) Hiring of IHS Personnel......................................... 30
(p) Buyer Amended and Restated Stockholders Agreement............... 30
(q) Buyer Amended and Restated Registration Rights Agreement........ 31
(r) Collection of Accounts Receivable............................... 31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(s) Audit........................................................... 31
(t) Insurance Matter................................................ 31
(u) License Agreement............................................... 32
(v) IHS Capital Contribution........................................ 32
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE; IQX
DELIVERIES....................................................... 32
7.1. No Legal Proceedings.......................................... 32
7.2. Opinion of IQX's Counsel...................................... 32
7.3 Secretary's Certificate....................................... 32
7.4 IQX Shares.................................................... 32
7.5. Resignations; Authorizations.................................. 32
7.6. Minute Books and Stock Records; Certified Documents........... 33
7.7. Repayment of Related Party Loans.............................. 33
7.8. HSR Filing.................................................... 33
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE STOCKHOLDERS TO CLOSE;
BUYER DELIVERIES................................................. 33
8.1. No Legal Proceedings.......................................... 33
8.2. Buyer Shares.................................................. 33
8.3. Opinion of Buyer's Counsel.................................... 33
8.4. Secretary's Certificate....................................... 33
8.5. Good Standing Certificate..................................... 34
8.6. HSR Filing.................................................... 34
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................... 34
10. INDEMNIFICATION.................................................... 34
10.1. Obligations of IQX and/or the Stockholders to Indemnify....... 34
10.2. Obligation of Buyer to Indemnify.............................. 35
10.3. Notice to Indemnifying Party.................................. 35
10.4. Limitation on Indemnification................................. 36
10.5. Other Provisions.............................................. 36
10.6. Exclusive Remedy.............................................. 37
11. TERMINATION........................................................ 37
12. MISCELLANEOUS...................................................... 37
12.1. Consent to Jurisdiction...................................... 37
12.2. Certain Definitions.......................................... 38
12.3. Publicity.................................................... 40
12.4. Notices...................................................... 40
12.5. Entire Agreement............................................. 41
12.6. Waivers and Amendments....................................... 41
12.7. Binding Effect; Assignment................................... 42
12.8. Variations in Pronouns....................................... 42
12.9. Counterparts................................................. 42
12.10. Headings..................................................... 42
12.11. No Strict Construction....................................... 42
12.12. Governing Law................................................ 42
12.13. No Third Party Beneficiaries................................. 42
12.14. Subsidiaries................................................. 42
</TABLE>
iii
<PAGE>
SCHEDULES:
Schedule 1.5 Officers of Surviving Corporation
IQX's Schedules
- ---------------
Schedule 3.1 Allocation of Buyer Shares
Schedule 4.2 Subsidiaries; Subsidiary Qualification
Schedule 4.3A Options, etc. - IQX
Schedule 4.3B Options, etc. - IQXpert
Schedule 4.5 Financial Statements
Schedule 4.5A Exceptions to GAAP
Schedule 4.6 Absence of Changes
Schedule 4.9 Ten Largest Customers
Schedule 4.10 Permits
Schedule 4.13 Bonus or Other Payments
Schedule 4.13A Compensation
Schedule 4.14 Material Agreements
Schedule 4.15 Leases
Schedule 4.17 Intangible Property
Schedule 4.17A Other Intangible Property
Schedule 4.19 Liabilities
Schedule 4.21 Employee Benefit Plans
Schedule 4.22 Insurance
Schedule 4.24 Related Transactions
Schedule 4.27 Bank Accounts; Powers of Attorney
Schedule 6.1(a)(x) Capital Expenditures
Schedule 10.2 Guarantee
Buyer's Schedules
- -----------------
Schedule 5.2 Qualifications
Schedule 5.3 Options, etc.
Schedule 5.5 Financial Statements
Schedule 5.6 Absence of Changes
Schedule 5.9 Compliance with Laws
Schedule 5.9A Permits
Schedule 5.10 Consents
Schedule 5.11 Litigation; Claims
Schedule 5.14 Leases
Schedule 5.15 Intangible Property
Schedule 5.16 Liens
Schedule 5.17 Employee Benefit Plans
Schedule 5.18 Related Transactions
Schedule 6.2(o) IHS Employees
iv
<PAGE>
EXHIBITS:
Exhibit A Terms of Amended and Restated Services Agreement
Exhibit B Stockholders Agreement-Restrictions on Transfer
Exhibit C Legal Opinion of Stephen Green, Esq.
Exhibit D Legal Opinion of Kirkpatrick & Lockhart LLP
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
30, 1999, by and between PartMiner, Inc., a New York corporation ("Buyer"),
PartMiner Acquisition Corp., a New York corporation and wholly-owned subsidiary
of Buyer ("PartMiner Sub"), IQXpert Holdings Inc., a Delaware corporation
("IQX"), Information Handling Services Inc., a Delaware corporation ("IHS" or
the "Majority Stockholder"), Thybo New Ventures Limited, a Bermuda corporation
("Thybo"), Emil H. Dahan, Michael J. Galvin, Patricia Tuxbury Salem, Peter W.
Jeng and James L. McAlarney, III (Thybo and Messrs. Dahan, Galvin, Jeng and
McAlarney and Ms. Salem collectively, the "Minority Stockholders"; and together
with the Majority Stockholder, the "Stockholders").
WHEREAS, the Stockholders are the beneficial and record owners of
9,556,130 shares of IQX Common Stock (as defined in Section 4.3(a) hereof),
constituting all of the issued and outstanding capital stock of IQX (the " IQX
Shares"); and
WHEREAS, the Boards of Directors of Buyer, PartMiner Sub and IQX deem
it advisable and in the best interests of such entities and their respective
shareholders that PartMiner Sub be merged with and into IQX in a transaction
whereby IQX will become a wholly-owned subsidiary of Buyer (the "Merger"), all
in accordance with the terms of this Agreement and applicable Law (as defined in
Section 4.10 hereof).
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. THE MERGER.
----------
1.1. The Merger. Upon the terms and subject to the conditions of
----------
this Agreement, at the Effective Time (as defined in Section 1.3 hereof),
PartMiner Sub shall be merged with and into IQX in accordance with the
applicable provisions of the Delaware General Corporation Law (the "DGCL") and
the New York Business Corporation Law (the "BCL"). Following the Effective Time,
the separate existence of PartMiner Sub shall cease and IQX shall be the
surviving corporation in the Merger (the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Delaware.
1.2. Effects of the Merger. At the Effective Time, (i) the
---------------------
Certificate of Incorporation of IQX, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation unless and until thereafter amended as provided by applicable Law or
such Certificate of Incorporation, and (ii) the By-laws of IQX, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation unless and until thereafter amended as provided by applicable Law,
the Certificate of Incorporation of the Surviving Corporation or such By-laws.
Subject to the foregoing, any additional effects of the Merger shall be as
provided for by applicable Law.
1.3. Effective Time of the Merger. Subject to the provisions of
----------------------------
this Agreement, on or as soon as practicable after the Closing Date (as defined
in Section 2.1 hereof), certificates of merger (the "Certificates of Merger")
complying with the requirements of the DGCL and the BCL shall be executed by IQX
and PartMiner Sub and filed with the Secretaries
<PAGE>
of State of the States of Delaware and New York. The parties shall make all such
other filings or recordings in connection with the Merger when and as required
under the DGCL, the BCL or other applicable Law. The Merger shall become
effective at the time the Certificates of Merger are duly filed with the
Secretaries of State of the States of Delaware and New York, or at such later
time or date as may be specified in the Certificates of Merger as Buyer and IQX
shall agree (the time and date that the Merger becomes effective being
hereinafter referred to as the "Effective Time").
1.4. Directors. The directors of PartMiner Sub immediately prior to
---------
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
1.5. Officers. The individuals set forth on Schedule 1.5 hereto,
-------- ------------
who are the current officers of PartMiner Sub, shall be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
1.6. Effect of the Merger on Capital Stock. At the Effective Time,
-------------------------------------
by virtue of the Merger and without any action on the part of any holder of the
capital stock of IQX or PartMiner Sub:
(i) Conversion of IQX Common Stock. Each issued and outstanding share
------------------------------
of IQX Common Stock shall be converted into the right to receive
0.0122633 of a share (the "Ratio") of Buyer Common Stock (as
defined in Section 5.3 hereof), which amount shall be
proportionately adjusted for any stock split or stock dividend
effected between the date of this Agreement and the Effective
Time. The aggregate amount of capital stock to be issued by Buyer
in connection with the Merger shall be 117,190 restricted shares
of Buyer Common Stock (the "Buyer Shares"), which number shall
equal 20.5% of the total outstanding capital stock of Buyer
(immediately after giving effect to the issuance of the Buyer
Shares to the Stockholders). All shares of IQX Common Stock, when
so converted, shall no longer be outstanding and shall be
canceled and retired and cease to exist, and each holder of a
certificate formerly representing any such shares shall cease to
have any rights with respect thereto, except the right to receive
the number of shares of Buyer Common Stock to be issued in
accordance with the Ratio.
(ii) Treatment of PartMiner Sub Stock. Each issued and outstanding
--------------------------------
share of common stock, no par value per share, of PartMiner Sub
shall be converted into and become one fully paid and non-
assessable share of common stock, $.001 par value per share, of
the Surviving Corporation.
2. CLOSING.
-------
2.1. Time and Place. The closing of the Merger (the "Closing")
--------------
shall take place at the offices of Kirkpatrick & Lockhart LLP, 1251 Avenue of
the Americas, New York,
2
<PAGE>
New York 10020, and is expected to occur at 10:00 a.m., local time, on November
30, 1999; provided, that, if the waiting period with respect to the HSR Filing
--------
(as defined in Section 12.2 hereof) shall not have expired or been terminated by
such date, within two (2) business days after such expiration or termination, or
at such other time, date and/or place as the parties may mutually agree to in
writing. The date upon which the Closing shall occur is hereinafter referred to
as the "Closing Date." The parties agree to file the Certificates of Merger
promptly after the Closing Date.
3. DELIVERY OF SHARE CERTIFICATES.
------------------------------
3.1. Delivery of Share Certificates. Promptly after the Effective
------------------------------
Time, Buyer shall, subject to the terms and conditions hereof, deliver to each
of the Stockholders a stock certificate evidencing the number of Buyer Shares
set forth opposite such Stockholder's name on Schedule 3.1 hereto, against
------------
delivery by such Stockholder of a stock certificate or certificates evidencing
the full number of IQX Shares set forth opposite such Stockholder's name on
Schedule 3.1.
- ------------
4. REPRESENTATIONS AND WARRANTIES OF IQX AND THE STOCKHOLDERS.
----------------------------------------------------------
Subject to Sections 10 and 12.14 hereof, IQX (if the Closing shall not occur)
and the Majority Stockholder (except with respect only to the representations
and warranties made in Sections 4.1 (with respect to the third sentence
thereof), 4.7 (with respect to the third and fifth sentences thereof), 4.11
(with respect to clauses (ii)(b) and (c) thereof as they pertain to each
Stockholder only), 4.30 and 4.31 hereof, as to which each Stockholder severally
hereby represents and warrants), jointly and severally, hereby represent and
warrant to Buyer as follows:
4.1. Title to IQX Shares. The IQX Shares constitute, and on the
-------------------
Closing Date will constitute, all of the issued and outstanding capital stock of
IQX. The Stockholders are, and on the Closing Date will be, the sole holders of
the IQX Shares. Each of the Stockholders is, and on the Closing Date will be,
the sole beneficial and record owner of the number of IQX Shares set forth
opposite such Stockholder's name on Schedule 3.1 hereto and such Shares are, and
------------
will be on such date, free and clear of all Liens (as defined in Section 12.2
hereof).
4.2. Due Organization and Qualification; Subsidiaries. IQX is duly
------------------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of IQX and its subsidiaries has all requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its respective business as presently conducted and as presently contemplated.
Each of IQX and its subsidiaries is duly qualified to transact business and is
in good standing in each jurisdiction in which the nature of its business or the
location of its property (as defined in Section 12.2 hereof) requires such
qualification, except where the failure to do so would not have a material
adverse effect on its business, operations, assets, prospects or condition
(financial or otherwise). IQX is not qualified to do business in any
jurisdiction other than its state of incorporation. The jurisdictions in which
the subsidiaries of IQX are qualified to do business are set forth on Schedule
--------
4.2 hereto. Except as set forth on Schedule 4.2, IQX has no subsidiaries
- --- ------------
(direct or indirect) or any other equity or beneficial interest or investment in
any other person (as defined in Section 12.2 hereof). Each subsidiary (direct
or indirect) of IQX is
3
<PAGE>
duly organized, validly existing and in good standing under the laws of the
state of its incorporation.
4.3. Capitalization; Options; Shareholder Rights. (a) The
-------------------------------------------
authorized capital stock of IQX consists solely of 20,000,000 shares of common
stock, $.001 par value per share ("IQX Common Stock"). There are, and on the
Closing Date there will be, 9,556,130 shares of IQX Common Stock issued and
outstanding, and there are not, and will not be on such date, any other shares
of capital stock of IQX issued or outstanding. All of the issued and outstanding
shares of IQX Common Stock have been duly authorized, and are validly issued,
fully paid and non-assessable. There are (except as set forth on Schedule 4.3A
-------------
hereto), and on the Closing Date there will be, no outstanding obligations,
options, warrants, convertible securities, subscriptions, or other commitments
or rights (matured or contingent) of any nature to acquire or subscribe for any
securities or other equity interest of or in IQX. There are, and on the Closing
Date there will be, no bonds, debentures, notes or other indebtedness of IQX
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matter on which any shareholder of IQX may
vote. There are, and on the Closing Date there will be, no preemptive rights,
rights of first refusal, voting rights, change of control or similar rights,
anti-dilution protections or other rights which any shareholder, officer,
employee or director of IQX or any other person would be entitled to exercise or
invoke as a result of the Merger.
(b) The authorized capital stock of IQXpert Inc. ("IQXpert")
consists solely of 110,000,000 shares of common stock, $.001 par value per share
("IQXpert Common Stock"). There are, and on the Closing Date there will be,
100,000,000 shares of IQXpert Common Stock issued and outstanding, and there are
not, and will not be on such date, any other shares of capital stock of IQXpert
issued or outstanding. IQX is the sole record and beneficial owner of all of the
issued and outstanding IQXpert Common Stock. All of the issued and outstanding
shares of IQXpert Common Stock have been duly authorized, and are validly
issued, fully paid and non-assessable. Except as set forth on Schedule 4.3B
-------------
hereto, there are, and on the Closing Date there will be, no outstanding
obligations, options, warrants, convertible securities, subscriptions, or other
commitments or rights (matured or contingent) of any nature to acquire or
subscribe for any securities or other equity interest of or in IQXpert. There
are, and on the Closing Date there will be, no bonds, debentures, notes or other
indebtedness of IQXpert having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
any shareholder of IQXpert may vote. There are, and on the Closing Date there
will be, no preemptive rights, rights of first refusal, voting rights, change of
control or similar rights, anti-dilution protections or other rights which any
shareholder, officer, employee or director of IQXpert or any other person would
be entitled to exercise or invoke as a result of the Merger.
(c) The authorized capital stock of ExtraTime Technologies, Inc.
("ETI") consists solely of 1,000 shares of common stock, $1.00 par value per
share ("ETI Common Stock"). There are, and on the Closing Date there will be,
1,000 shares of ETI Common Stock issued and outstanding, and there are not, and
will not be on such date, any other shares of capital stock of ETI issued or
outstanding. IQXpert is the sole record and beneficial owner of all of the
issued and outstanding ETI Common Stock. All of the issued and outstanding
shares of ETI Common Stock have been duly authorized, and are validly issued,
fully paid and non-assessable. There are, and on the Closing Date there will
be, no outstanding obligations, options, warrants, convertible securities,
subscriptions, or other commitments or rights (matured or contingent) of
4
<PAGE>
any nature to acquire or subscribe for any securities or other equity interest
of or in ETI. There are, and on the Closing Date there will be, no bonds,
debentures, notes or other indebtedness of ETI having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matter on which any shareholder of ETI may vote. There are, and on the
Closing Date there will be, no preemptive rights, rights of first refusal,
voting rights, change of control or similar rights, anti-dilution protections or
other rights which any shareholder, officer, employee or director of ETI or any
other person would be entitled to exercise or invoke as a result of the Merger.
4.4. Constituent Documents. True and complete copies of IQX's,
---------------------
IQXpert's and ETI's respective Certificates of Incorporation and By-laws, as in
effect on the date hereof (collectively, the "IQX Constituent Documents"), have
been delivered to Buyer. True and correct copies of the minute books, stock
books and stock transfer records of IQX, IQXpert and ETI shall have been
provided to Buyer or its counsel prior to the Closing.
4.5. Financial Statements. The unaudited consolidated balance sheet
--------------------
(the "IQX Interim Balance Sheet") and the related statement of income of IQX as
at and for the nine-month period ended on August 31, 1999 (collectively, the
"IQX Financial Statements"), true and complete copies of which have been
delivered to Buyer and are attached hereto as Schedule 4.5, present fairly in
------------
all material respects the consolidated financial condition of IQX as at the date
indicated therein and the consolidated results of operations of IQX for the
period covered thereby. Except as set forth on Schedule 4.5A hereto, the IQX
-------------
Financial Statements have been prepared in accordance with GAAP (as defined in
Section 12.2 hereof) consistently applied, subject only to ordinary year-end
adjustments, none of which are material individually or in the aggregate, and
the absence of footnotes. The financial books and records of IQX, IQXpert and
ETI are in all material respects complete and correct, have been maintained in
accordance with good business practices, and accurately reflect the bases for
the consolidated financial condition and results of operations set forth in the
IQX Financial Statements.
4.6. Absence of Changes. Except as set forth on Schedule 4.6
------------------ ------------
hereto, since the date of the IQX Interim Balance Sheet, there has not been (i)
any significant adverse change in the financial condition, results of
operations, assets or business of IQX, (ii) any repayment of any indebtedness or
any borrowing of or agreement to borrow any money or any material Liabilities
(as defined in Section 12.2 hereof) incurred by IQX, other than current
Liabilities incurred in the ordinary course of business, (iii) any material
asset or property of IQX made subject to a Lien, (iv) any waiver of any valuable
right of IQX, or the cancellation or reduction of any material debt or claim
held by IQX, (v) any declaration or payment of dividends on, or other
distributions with respect to, or any direct or indirect redemption or
repurchase of, any shares of the capital stock of IQX, IQXpert or ETI, (vi) any
issuance of any stocks, bonds or other securities of IQX, IQXpert or ETI or any
options, warrants or rights or agreements or commitments to purchase or issue
such securities, (vii) any mortgage, pledge, sale, assignment or transfer of any
material tangible or intangible assets of IQX (including any IQX Intangible
Property, as defined in Section 4.17 hereof), other than sales or licensing of
products and services in the ordinary course of business and consistent with
past practices, (viii) any loan by IQX, IQXpert or ETI to any officer, director,
employee or shareholder of IQX, IQXpert or ETI, or any affiliate (as defined in
Section 12.2 hereof) thereof, (ix) any material damage, destruction or loss
(whether or not covered by insurance) adversely affecting the assets, property
or business of IQX, (x) any material increase,
5
<PAGE>
direct or indirect, in the compensation paid or payable to any officer,
director, employee or agent of IQX, IQXpert or ETI, (xi) any purchase or other
acquisition of assets or property of IQX other than in the ordinary course of
business, (xii) any change in the accounting methods or practices followed by
IQX, (xiii) any operation of the business of IQX outside of the ordinary course
of business and/or inconsistent with past practice, or (xiv) except as provided
by this Agreement, any commitment or agreement (contingent or otherwise) to do
any of the foregoing.
4.7. Power and Authority. IQX has the requisite corporate power and
-------------------
authority to execute and deliver this Agreement and all other agreements and
certificates referred to in or contemplated by this Agreement and to perform its
obligations hereunder and thereunder. Each of the Majority Stockholder and
Thybo has the requisite corporate power and authority to execute and deliver
this Agreement and all other agreements and certificates referred to in or
contemplated by this Agreement and to perform its obligations hereunder and
thereunder. Each of the Minority Stockholders (other than Thybo) is legally
competent to execute and deliver this Agreement and all other agreements
referred to in or contemplated by this Agreement and to perform his/her
obligations hereunder and thereunder. The execution, delivery and performance
of this Agreement and all other agreements and certificates referred to in or
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of IQX, the Majority Stockholder and Thybo. This
Agreement has been duly executed and delivered by IQX and each Stockholder and
is (and such other agreements and certificates, when executed and delivered,
will be) the valid and binding obligations of each such party enforceable
against such party in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, moratorium, insolvency, reorganization
or other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law). Each of the Stockholders hereby consents
to and approves the Merger, this Agreement and the transactions referred to in
or contemplated by this Agreement.
4.8. Tax Matters. IQX has timely filed any Tax Returns (as defined
-----------
in Section 12.2 hereof) that it has been required to file through the date
hereof, and has timely paid in full any Taxes (as defined in Section 12.2
hereof) which were due and payable by it through the date hereof. The provisions
for Taxes reflected on the IQX Interim Balance Sheet are adequate to cover all
accrued and unpaid Taxes of IQX for all periods ending on or before August 31,
1999, and nothing has occurred subsequent to that date to make such provisions
inadequate. IQX has established and is maintaining current accruals that are
accurately reflected in the books and records of IQX and are adequate for the
payment of any Taxes incurred but not yet due and payable with respect to the
property and operations of IQX through the date hereof and will establish and
maintain adequate accruals for the payment of any such Taxes in respect of the
period through the Closing Date. No waivers or extensions of any applicable
statute of limitations for the assessment or collection of Taxes with respect to
any Tax Returns of IQX are currently in effect or are currently proposed. IQX
has collected or withheld and paid over to the proper governmental or regulatory
bodies all amounts required to be so collected or withheld and paid over under
all applicable Laws. No action, suit, proceeding, investigation, audit, claim or
assessment is presently pending or, to IQX's and the Majority Stockholder's
knowledge (as defined in Section 12.2 hereof), threatened with regard to any
Taxes that relate to IQX for which IQX is or could reasonably be expected to be
liable. There is no unresolved claim by a taxing authority in any jurisdiction
where IQX does not anticipate to file Tax Returns that it is or could
6
<PAGE>
reasonably be expected to be subject to taxation by such jurisdiction. There are
no Liens for Taxes (other than for Taxes not yet due and payable) upon any
assets or property of IQX.
IQX (i) has not made any other election pursuant to the Code (as
defined in Section 12.2 hereof), other than elections that relate solely to
matters of accounting, depreciation, or amortization, that could reasonably be
expected to have a significant adverse effect on it, its financial condition,
its business as presently conducted or proposed to be conducted or any of its
properties or assets; and (ii) at no time has filed a consent to the application
of Section 341(f)(2) of the Code to any property or assets held, acquired or to
be acquired by it, and will not file any such consent prior to Closing. IQX has
not made any payments, is not obligated to make any payments and is not a party
to any agreement that could obligate it to make any payments that are or would
not be deductible under Section 280G or Section 162(m) of the Code. IQX is not
a party to or otherwise bound by any tax allocation, tax indemnity or tax
sharing agreement, and has no liability for the Taxes of any other entity under
Treasury Regulation (S) 1.1502-6 (or any similar provision of state, local or
foreign Law), as a transferee or successor, by contract, or otherwise. Neither
IQX nor any of its subsidiaries is part of a consolidated group that includes
any other corporation for Tax filing or reporting purposes.
4.9. Customers. Neither IQX nor the Majority Stockholder has
---------
received any notice nor has otherwise been notified that any of the ten (10)
largest customers or clients of IQX for the period from March 24, 1999 to the
date hereof (a true and correct list of which is attached as Schedule 4.9
------------
hereto) intends to terminate its business arrangements with IQX or to
substantially reduce its level of purchases from or the services rendered to it
by IQX from the level of purchases or services in such period.
4.10. Compliance with Laws; Permits. IQX is and has been in
-----------------------------
compliance with all federal, state, local and foreign laws, statutes,
ordinances, regulations, orders, judgments, injunctions, awards or decrees
(collectively, "Laws") applicable to it or any of its properties or operations,
including, without limitation, all Environmental Laws (as defined in Section
12.2 hereof). IQX has not received any notice of its violation or alleged
violation of any Law. IQX has all licenses, permits, orders and approvals of
federal, state, local and foreign governmental or regulatory bodies necessary
for the conduct of its business and operations as currently conducted
(collectively, the "Permits"). All material Permits of IQX are set forth on
Schedule 4.10 hereto and are valid and in full force and effect. No violations
- -------------
have occurred in respect of any such Permit and no action or proceeding is
pending nor, to IQX's and the Majority Stockholder's knowledge, threatened to
revoke or limit any such Permit. All material Permits are renewable by their
terms or in the ordinary course of business without the need of IQX or Buyer
complying with any special qualifications or procedures or paying any amounts
other than routine filing fees.
4.11. No Breach; Consents; Change of Control Payments. The
-----------------------------------------------
execution, delivery and performance of this Agreement and all other agreements
or certificates referred to in or contemplated by this Agreement by IQX and the
Stockholders, and the consummation of the transactions contemplated hereby and
thereby, will not (i) result in any Lien upon any of the property of IQX, or
(ii) violate, conflict with or otherwise result in the breach of any of the
terms and conditions of, result in a material modification of or accelerate or
trigger the rights of any person under, or constitute (or, with the giving of
notice or lapse of time or both, would
7
<PAGE>
constitute) a default or termination under any (a) of the IQX Constituent
Documents; (b) instrument, contract or other agreement (as defined in Section
12.2 hereof) to which IQX or any Stockholder is a party or by or to which IQX or
any Stockholder or any of their properties are bound or subject; (c) Law
applicable to IQX or any of its property or operations or any Stockholder; or
(d) Permit. Other than the HSR Filing, Certificates of Merger and any blue-sky
or other securities law filings, no consent, approval or authorization of, or
declaration or filing with, any governmental authority or other person
("Consent") is required on the part of IQX or any Stockholder in connection with
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby. There are no payments, Liabilities or
obligations under or pursuant to any Law or contract or other agreement to which
IQX is a party which are required to be made or performed by IQX to any person
arising out of or as a result of any change of control of IQX or the
transactions contemplated by this Agreement.
4.12. Litigation; Claims. There are no suits or actions,
------------------
administrative, arbitration or other proceedings or governmental investigations
pending or, to IQX's and the Majority Stockholder's knowledge, threatened
against or affecting IQX or any of its property or assets. To IQX's and the
Majority Stockholder's knowledge, no person has notified IQX or any of its
affiliates of a material claim against IQX alleging any personal, property or
economic injury, loss or damage incurred as a result of or relating to the use
of any products sold by or on behalf of, or services rendered by, IQX. There is
no judgment, order, injunction, decree or award against IQX which is not
satisfied and remains outstanding.
4.13. Employment Matters. IQX has not at any time during the last
------------------
three (3) years had, nor, to IQX's and the Majority Stockholder's knowledge, is
there now threatened, any walkout, strike, picketing, work stoppage, planned
work slowdown or any similar occurrence. There are no material controversies or
grievances pending or, to IQX's and the Majority Stockholder's knowledge,
threatened between IQX and any of its employees. No union or other collective
bargaining unit has been certified or formally recognized by IQX. All key
employees of IQX have executed confidentiality or non-disclosure agreements,
true and correct copies of all of which have been previously delivered to Buyer.
Neither IQX nor the Majority Stockholder is aware that any officer or key
employee intends to terminate his/her employment with IQX. Except as set forth
on Schedule 4.13 hereto, no bonuses, profit sharing, incentive payments, and no
-------------
increases in compensation in excess of the rate of $5,000 per annum for any
individual employee, or $50,000 for all employees, have been paid, agreed to,
accrued or granted by IQX for any period after the date of the IQX Interim
Balance Sheet. Schedule 4.13A hereto lists the (i) names and titles or job
--------------
descriptions of all employees, officers and directors of IQX and each of its
subsidiaries, and (ii) annual salaries for 1999 (as of November 30, 1999) of all
such employees.
4.14. Material Agreements. Schedule 4.14 hereto sets forth a true
------------------- -------------
and correct list of each contract or other agreement to which IQX is a party or
by or to which any of IQX's property is bound or otherwise subject, that (i)
requires payments or performance having a stated value in excess of $50,000;
(ii) has not been made in the ordinary course of business; (iii) is an
employment, consulting, non-competition, indemnification (other than
indemnification provisions contained in licenses, leases and other contracts
entered into in the ordinary course of business) or contribution agreement; (iv)
is a franchise, distributorship, licensing, supply or sales agency agreement;
(v) is an agreement providing for the sale, acquisition or lease of any
8
<PAGE>
properties of IQX other than in the ordinary course of business; (vi) is a
mortgage, pledge, security agreement or other similar agreement with respect to
any tangible or intangible property of IQX; (vii) is a loan agreement, credit
agreement, promissory note, guaranty, letter of credit or any other similar type
of agreement; (viii) is a retainer agreement with attorneys, accountants,
investment bankers or other professional advisers; (ix) is an agreement with any
governmental authority or agency; (x) is an agreement relating to a patent,
trademark, copyright or other item of IQX Intangible Property (as defined in
Section 4.17 hereof); (xi) is an agreement referred to in Section 4.24 hereof;
(xii) is an agreement otherwise material to the operations, business or
financial condition of IQX taken as a whole (other than agreements for the sale
or license of products or services in the ordinary course of business involving
less than $50,000); (xiii) is an agreement providing for the purchase of the
capital stock or material assets of any other person; or (xiv) is a commitment
or agreement to enter into any of the foregoing (collectively, "Material
Agreements"). True and correct copies of all Material Agreements have been
delivered to Buyer and each Material Agreement is a valid agreement in full
force and effect and IQX is in compliance with the provisions of each such
Agreement and no other party thereto is, to IQX's and the Majority Stockholder's
knowledge, in material default thereunder.
4.15. Real Estate. IQX does not own, in fee or otherwise, or have
-----------
the right or obligation to acquire any real property or buildings. Schedule
--------
4.15 hereto sets forth all leases, subleases or other agreements (oral or
- ----
written) pursuant to which IQX has the right to use or occupy any real property.
True and correct copies of such leases, subleases and other agreements have been
delivered to Buyer and each is a valid agreement in full force and effect,
creates a good and valid leasehold estate in the property leased thereby, and
IQX is in compliance with the provisions of each such agreement and no other
party thereto is, to IQX's and the Majority Stockholder's knowledge, in material
default thereunder.
4.16. Accounts and Notes Receivable; Payables. All accounts and
---------------------------------------
notes receivable reflected on the IQX Interim Balance Sheet have arisen from
bona fide transactions in the ordinary course of business. All accounts and
- ---- ----
notes receivable of IQX that arose after the date of the IQX Interim Balance
Sheet through the date hereof and which may arise after the date hereof through
the Closing Date are (or will be) the result of bona fide transactions in the
---- ----
ordinary course of business. There are no recoupments, set-offs or
counterclaims in respect of any such receivables. All accounts payable of IQX,
as reflected on the IQX Interim Balance Sheet or arising after the date thereof,
are the result of bona fide transactions in the ordinary course of business
---- ----
consistent with past practice.
4.17. IQX Intangible Property. Schedule 4.17 hereto sets forth all
----------------------- -------------
United States and foreign patents, registered copyrights, registered trademarks,
service marks and trade names, applications for any of the foregoing, and
written permits, grants, options and licenses or other rights in writing running
to or from IQX (other than licenses of products to end users of such products
entered into in the ordinary course of business) relating to any IQX Intangible
Property (as defined below). IQX has either all right, title and interest in,
or valid and binding rights under contract to use, all items of IQX Intangible
Property material to, or necessary to conduct, the business of IQX as presently
conducted or contemplated to be conducted. None of the IQX Intangible Property
(other than any patents and patent rights) infringes upon or violates any rights
owned or held by any other person. To IQX's and the Majority Stockholder's
knowledge, none of the patents and patent rights included in the IQX Intangible
Property infringes upon or
9
<PAGE>
violates any rights owned or held by any other person. There is not pending nor,
to IQX's and the Majority Stockholder's knowledge, threatened any claim, suit or
action against IQX contesting or challenging the rights of IQX in or to any IQX
Intangible Property or the validity of any of the IQX Intangible Property. To
IQX's and the Majority Stockholder's knowledge, there is no infringement upon or
unauthorized use of any of the IQX Intangible Property owned by IQX by any third
party. There are no material restrictions on the direct or indirect transfer of
any contract or other agreement, or any interest therein, held by IQX in respect
of any item of IQX Intangible Property disclosed on Schedule 4.17. IQX is not in
-------------
default (or, with the giving of notice or lapse of time or both, would be in
default) under any contract or other agreement to use the IQX Intangible
Property required to be disclosed on Schedule 4.17. Except as set forth on
-------------
Schedule 4.17, neither any Stockholder (nor any associate (as defined in Section
- -------------
12.2 hereof) thereof) nor any officer, director or affiliate or immediate family
member, as the case may be, thereof has any right to or interest in any IQX
Intangible Property, including, without limitation, any right to payments (by
royalty or otherwise) in respect of any use or transfer thereof.
"IQX Intangible Property" means all patents and patent rights,
trademarks and trademark rights, trade names and tradename rights, service marks
and service mark rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, designs, trade secrets, industrial
models, proprietary data, methodologies, computer programs and software
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how, inventions, works
of authorship, management information systems, and all pending applications for
and registrations of patents, trademarks, service marks and copyrights used or
owned by IQX and usable in the business of IQX, in each such case, including all
forms (e.g., electronic media, computer disks, etc.) in which such items are
----
recorded, and including, without limitation, all such IQX Intangible Property
owned by IQX and listed on Schedule 4.17A hereto.
--------------
4.18. Title to Properties and Assets. IQX has good title to all of
------------------------------
the property and assets owned or purported to be owned by it which are reflected
as assets on the IQX Interim Balance Sheet and those not so reflected on the IQX
Interim Balance Sheet because not required to be reflected thereon, but which
are used in IQX's business, or because acquired by IQX since the date of the IQX
Interim Balance Sheet (except for inventory or other assets disposed of in the
ordinary course of business consistent with past practice since the date of the
IQX Interim Balance Sheet), free and clear of any Lien, except (i) Liens for
Taxes not yet due and payable; and (ii) Liens of materialmen, mechanics,
carriers, landlords and like persons which are not due and payable or which are
being contested in good faith and which are not material in the aggregate.
Other than in the ordinary course of business, pursuant to the terms of this
Agreement or as disclosed on Schedules 4.14, 4.17 and 4.24 hereto, no person has
-----------------------------
any written or oral agreement, option, understanding, commitment or any right or
privilege to purchase, lease or license any of IQX's property or assets.
4.19. No Undisclosed Liabilities. IQX has no material Liabilities,
--------------------------
including guarantees and indemnities by IQX of Liabilities of any other person,
other than (i) Liabilities as and to the extent reflected on the IQX Interim
Balance Sheet; (ii) Liabilities incurred by IQX since the date of the IQX
Interim Balance Sheet (none of which is a material Liability for breach of
contract, breach of warranty, tort, infringement, claim or lawsuit) in the
ordinary course of
10
<PAGE>
business consistent with past practice and adequately reflected on the books and
records of IQX; (iii) obligations of IQX under existing contracts and
agreements; and (iv) the Liabilities set forth on Schedule 4.19 hereto.
-------------
4.20. CAPSxpert Database. All of the assets comprising the CAPSxpert
------------------
Database (as defined in Section 12.2 hereof) and all of the DATA/PAL Assets (as
defined in Section 12.2 hereof) are owned solely, irrevocably and
unconditionally by IQX (and not by any affiliate or subsidiary of IQX).
4.21. Employee Benefit Plans. Schedule 4.21 hereto contains a true
---------------------- -------------
and complete list of all pension, profit sharing, retirement, deferred
compensation, incentive, bonus, severance, disability, hospitalization, medical
insurance, life insurance and other employee benefit plans, programs or
arrangements ("Employee Benefit Plans") maintained by IQX (or any organization
that may be aggregated with IQX under Sections 414(b), (c), (m) or (o) of the
Code (the "IQX Group")) or under which IQX or any member of the IQX Group has
any obligations (other than obligations to make current wage or salary payments)
in respect of any of the employees or former employees of IQX (including a
description of IQX's vacation policy) or their beneficiaries or which benefits
any of the employees or former employees of IQX (each individually, an "IQX
Employee Benefit Plan" and collectively, the "IQX Employee Benefit Plans"). IQX
has delivered to Buyer true and complete copies of, to the extent applicable,
all material documents, as such may have been amended to the date hereof,
embodying the IQX Employee Benefit Plans, all trust documents, all available
determination letters issued by the Internal Revenue Service (the "IRS"),
employee booklets, summary plan descriptions, insurance contracts, the most
recent compliance and nondiscrimination tests (if any), the most recent Form
5500 reports, standard COBRA forms and notices, any correspondence or inquiry by
the IRS or the Department of Labor, and any material employee communications, in
each case relating to any IQX Employee Benefit Plan.
All IQX Employee Benefit Plans and all related insurance contracts,
trusts and funds have complied in form, operation and administration with their
respective provisions, any applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code, and all other
applicable Laws. All contributions to and payments from the IQX Employee
Benefit Plans which have been required to be made in accordance with the
provisions of the IQX Employee Benefit Plans and, where applicable, ERISA and
the Code have been made or are adequately accrued and reflected on the books and
records of IQX. There are no unfunded Liabilities in respect of any such IQX
Employee Benefit Plan. There has been no breach of fiduciary responsibility
with respect to any IQX Employee Benefit Plan to which ERISA is applicable which
could subject Buyer or IQX to any Liability under ERISA.
No IQX Employee Benefit Plan is a multiemployer plan within the
meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan")
or a multiple employer plan described in Sections 4063 and 4064 of ERISA. No
member of the IQX Group has withdrawn from any IQX Employee Benefit Plan which
is a Multiemployer Plan or incurred any withdrawal liability to or under any
Multiemployer Plan.
IQX does not have any Liability, and after the Closing, IQX will not
have any Liability, with respect to any Employee Benefit Plan which is not an
IQX Employee Benefit
11
<PAGE>
Plan, whether as a result of delinquent contributions, distress terminations,
fraudulent transfers, failure to pay premiums to the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA (the
"PBGC"), withdrawal liability or otherwise.
No accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code) exists nor has any funding waiver from the IRS been
received or requested with respect to any IQX Employee Benefit Plan and no
excise or other Tax is due or owing because of any failure to comply with the
minimum funding standards of the Code or ERISA with respect to any of such
plans. To IQX's and the Majority Stockholder's knowledge, no IQX Employee
Benefit Plan is or is threatened to be under audit or investigation, and no
completed audit of any IQX Employee Benefit Plan has resulted in the imposition
of any Tax, fine or penalty.
With respect to each IQX Employee Benefit Plan that purports to be a
qualified plan under Section 401(a) of the Code and exempt from federal income
tax under Section 501(a) of the Code (each a "Qualified Plan"), a determination
letter (or opinion or notification letter, if applicable) has been received from
the IRS that such plan is qualified under Section 401(a) of the Code and exempt
from federal income tax under Section 501(a) of the Code. No Qualified Plan has
been amended since the date of the most recent such letter. No member of the
IQX Group, nor any fiduciary of any Qualified Plan, nor any agent of any of the
foregoing, has done anything that would adversely affect the qualified status of
a Qualified Plan or the qualified status of any related trust.
The present value of vested and nonvested accrued benefits under each
IQX Employee Benefit Plan that is a defined benefit plan within the meaning of
Section 3(35) of ERISA ("Defined Benefit Plan") does not exceed the present fair
market value of the assets of such plan, based on the actuarial assumptions and
methodology used for funding purposes (i) as set forth in such plan's most
recent actuarial report; (ii) as required by the PBGC on a termination basis;
and (iii) as set forth in FASB 87. No Defined Benefit Plan has been terminated
or partially terminated since September 1, 1974. No event has occurred and no
condition has existed that could constitute grounds under Section 4042 of ERISA
for termination of or appointment of a trustee to administer any IQX Employee
Benefit Plan which is a Defined Benefit Plan. No member of the IQX Group has
transferred, in whole or in part, a Defined Benefit Plan to a corporation that
was at the time of transfer a member of a different controlled group of
corporations (within the meaning of Section 4001(a)(14) of ERISA) than the
transferor. IQX has no liability for any IQX Employee Benefit Plan that is not
accrued.
No prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) with respect to any IQX Employee Benefit Plan
exists or has occurred that could subject IQX to any Liability or Tax under Part
5 of Title I of ERISA or Section 4975 of the Code. With the exception of the
requirements of Section 4980B of the Code and, except as set forth on Schedule
--------
4.21, no post-retirement benefits are provided under any IQX Employee Benefit
- ----
Plan that is a welfare benefit plan as described in Section 3(1) of ERISA.
Except as set forth on Schedule 4.21, IQX does not have any early retirement
-------------
options or plans pursuant to which employees may choose to take early
retirement. Except as set forth on Schedule 4.21, no shares of capital stock
-------------
are reserved and/or eligible to be issued pursuant to any stock option, stock
appreciation, stock grant or similar plan of IQX.
12
<PAGE>
4.22. Insurance. Schedule 4.22 hereto sets forth a true and complete
--------- -------------
list and general description of all policies or binders of fire, liability,
product liability, workers' compensation, vehicular, business interruption or
other insurance held by or on behalf of IQX specifying the insurer, the policy
number or covering note number with respect to binders, and describing any
pending claim(s) thereunder. All of such policies and binders are in full force
and effect. IQX is not in default with respect to any provision contained in any
such policy or binder. IQX has not received or given a written notice of
cancellation or non-renewal with respect to any such policy or binder.
4.23. No Misrepresentations. This Agreement (including the Schedules
---------------------
hereto) does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained herein, in
light of the circumstances under which they were made, not misleading.
4.24. Transactions with Related Parties. Except as set forth on
---------------------------------
Schedule 4.24 hereto, neither any Stockholder, nor any director, officer or
- -------------
affiliate thereof, nor, to IQX's and the Majority Stockholder's knowledge, any
immediate family member or associate thereof, as the case may be: (i) has
borrowed money from or loaned money to IQX or any affiliate which has not been
repaid; (ii) has any contractual, tort or other claim, express or implied,
against IQX or any affiliate; (iii) has an interest in any property, rights or
assets owned and/or used by IQX in its business; or (iv) is party to any
contract or other agreement with IQX or any affiliate (including any Financial
Support Arrangement (as defined in Section 12.2 hereof) maintained by IQX for
the benefit of the Majority Stockholder and/or any of its affiliates) or is
engaged in any material transaction or arrangement with IQX or any affiliate.
Except as set forth on Schedule 4.24, following the Closing (and assuming
-------------
execution of the Services Agreement (as defined in Section 6.2(n) hereof)) and
the provision of services thereunder in accordance therewith, Buyer shall have
all assets and rights necessary to conduct the business of IQX on a stand-alone,
independent basis as it is currently conducted.
4.25. Environmental Matters. IQX has: (i) complied with all
---------------------
Environmental Laws; (ii) not received any notice from any governmental authority
that any real property now or formerly owned, leased, managed, operated or
otherwise used by it is on any federal, state or foreign "superfund" or similar
list or has been the site of any activity giving rise to any Liability; (iii)
not received any notice of any Environmental Claim (as defined in Section 12.2
hereof); and (iv) stored, handled, used, released, discharged and disposed of
all substances used in its operations and wastes or by-products from its
operations, whether Hazardous Materials (as defined in Section 12.2 hereof) or
not, in compliance with all Environmental Laws. No Hazardous Materials or other
substances or wastes have been spilled, released, discharged or disposed of
from, on or under any property owned, leased or operated by IQX during its
occupancy. IQX has no Liability with respect to the clean-up or remediation of
any treatment, storage or disposal site or facility. IQX has delivered to Buyer
true and complete copies of any environmental and Hazardous Materials reports,
studies and assessments in its possession or control with respect to its leased
or operated real properties and/or any land adjacent thereto.
4.26. Year 2000. IQX's critical information technology systems which
---------
are used in, or required for the conduct of, its business as currently conducted
or presently proposed to be conducted may be used prior to, during and after the
calendar year 2000 without material error or
13
<PAGE>
delay relating to date data and will not otherwise fail: (i) to deal with or
account for transitions or comparisons from, into and between the years 1999 and
2000 accurately; (ii) to recognize or accurately process any specific date in
1999 or 2000; or (iii) to account accurately for the year 2000's status as a
leap year, including recognition and processing of the correct date on February
29, 2000.
4.27. Bank Accounts; Powers of Attorney. Set forth on Schedule 4.27
--------------------------------- -------------
hereto is a list of each bank or other financial institution at which IQX
maintains an account or safe deposit box, the corresponding number of each such
account or safe deposit box and the names of all persons holding check-signing
or withdrawal power or other authority with respect thereto. Also set forth on
Schedule 4.27 [sets forth a true and complete list] of all powers of attorney in
- -------------
effect in respect of IQX.
4.28. Brokers. Neither IQX nor any Stockholder (or affiliate
-------
thereof) has made any agreement or taken any other action causing anyone to
become entitled to a broker's fee or commission as a result of the transactions
contemplated hereby.
4.29. Disclosure Schedules. All Schedules to this Agreement are
--------------------
integral parts of this Agreement. Nothing in a Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein, unless the
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. IQX and the Majority Stockholder are
responsible for preparing and arranging the Schedules corresponding to the
numbered subsections contained in this Section 4.
4.30. Stockholder Acknowledgment. The Stockholders hereby
--------------------------
acknowledge that Buyer has informed them that it is contemplating an initial
public offering of its equity securities, and hereby agree not to use or
disclose such information other than directly in connection with the
transactions contemplated hereby.
4.31. Investment in Buyer Shares. The Stockholders acknowledge that
--------------------------
the Buyer Shares are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), or under any state or foreign securities laws and that
the Buyer Shares are being sold to the Stockholders materially in reliance upon
the representations and warranties contained in this Section 4.31. The
Stockholders further understand that the offer and sale of the Buyer Shares are
intended to be exempt from registration under the Securities Act and under any
applicable state and foreign securities laws. In furtherance thereof, each
Stockholder represents and warrants to and agrees with Buyer that (i) such
Stockholder is purchasing Buyer Shares for such Stockholder's own account, for
investment purposes only and not with a view to the resale or distribution
thereof except in compliance with the Securities Act and any applicable state
and foreign securities laws; (ii) such Stockholder is an "accredited investor,"
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act; (iii) such Stockholder's purchase of Buyer Shares will not
violate the Laws of the jurisdiction of his/her/its incorporation or residence
or any other Laws; and (iv) such Stockholder has such knowledge and experience
in financial, tax, and business matters so as to enable him/her/it to evaluate
the merits and risks of acquiring Buyer's Shares and make an informed investment
decision with respect thereto.
14
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Subject to Sections 10
---------------------------------------
and 12.14 hereof, Buyer hereby represents and warrants to the Stockholders as
follows:
5.1. Authorization of Buyer Shares. All corporate action necessary
-----------------------------
for the issuance and delivery of the Buyer Shares has been taken by Buyer and,
when issued and delivered against delivery to Buyer of the IQX Shares and the
conversion thereof pursuant to the Merger, the Buyer Shares will be validly
issued, fully paid and non-assessable (except as provided in Section 630 of the
BCL).
5.2. Due Organization and Qualification. Buyer is duly organized,
----------------------------------
validly existing and in good standing under the laws of the State of New York.
Buyer has all requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as presently conducted
and as presently contemplated. Buyer is duly qualified to transact business and
is in good standing in each jurisdiction in which the nature of its business or
the location of its property requires such qualification, except where the
failure to do so would not have a material adverse effect on its business,
operations, assets, prospects or condition (financial or otherwise). The
jurisdictions in which Buyer is qualified to do business are set forth on
Schedule 5.2 hereto.
- ------------
5.3. Capitalization; Options; Shareholder Rights. The authorized
-------------------------------------------
capital stock of Buyer consists solely of 1,500,000 shares of common stock, $.01
par value per share ("Buyer Common Stock"), and 106,122 shares of preferred
stock, $.01 par value per share ("Buyer Preferred Stock"). There are, and on the
Closing Date there will be (not including the Buyer Shares), 348,347 shares of
Buyer Common Stock and 106,122 shares of Buyer Preferred Stock issued and
outstanding, and there are not, and will not be on such date, any other shares
of capital stock of Buyer issued or outstanding (not including the Buyer
Shares). All of the issued and outstanding shares of Buyer's capital stock have
been duly authorized, and are validly issued, fully paid and non-assessable,
except as provided in Section 630 of the BCL. Except as set forth on Schedule
--------
5.3 hereto, there are, and on the Closing Date there will be, no outstanding
- ---
obligations, options, warrants, convertible securities, subscriptions, or other
commitments or rights (matured or contingent) of any nature to acquire or
subscribe for any securities or other equity interest of or in Buyer. There
are, and on the Closing Date there will be, no bonds, debentures, notes or other
indebtedness of Buyer having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
any shareholder of Buyer may vote. Except as set forth on Schedule 5.3, there
------------
are, and on the Closing Date there will be, no preemptive rights, rights of
first refusal, voting rights, change of control or similar rights, anti-dilution
protections or other rights which any shareholder, officer, employee or director
of Buyer or any other person would be entitled to exercise or invoke as a result
of the issuance by Buyer of the Buyer Shares.
5.4. Constituent Documents. True and complete copies of Buyer's
---------------------
Certificate of Incorporation and By-laws, as in effect on the date hereof
(collectively, the "Buyer Constituent Documents"), have been delivered to the
Majority Stockholder.
5.5. Financial Statements. The audited consolidated balance sheet and
--------------------
related statements of income and cash flow for Buyer as at and for the fiscal
year ended on December
15
<PAGE>
31, 1998 (the "1998 Financial Statements") and the unaudited consolidated
balance sheet (the "Buyer Interim Balance Sheet") and related statement of
income of Buyer as at and for the nine-month period ended on September 30, 1999
(collectively, the "Buyer Interim Financial Statements"; and together with the
1998 Financial Statements, the "Buyer Financial Statements"), true and complete
copies of all of which have been delivered to the Majority Stockholder and are
attached hereto as Schedule 5.5, present fairly in all material respects the
------------
consolidated financial condition of Buyer as at the dates indicated therein and
the consolidated results of operations of Buyer for the periods covered thereby.
The Buyer Financial Statements have been prepared in accordance with GAAP
consistently applied, subject only in the case of the Buyer Interim Financial
Statements to ordinary year-end adjustments, none of which are material
individually or in the aggregate, and the absence of footnotes. The financial
books and records of Buyer are in all material respects complete and correct,
have been maintained in accordance with good business practices, and accurately
reflect the bases for the consolidated financial condition and results of
operations set forth in the Buyer Financial Statements.
5.6. Absence of Changes. Except as set forth on Schedule 5.6 hereto,
------------------ ------------
since the date of the Buyer Interim Balance Sheet, there has not been (i) any
significant adverse change in the financial condition, results of operations,
assets or business of Buyer, (ii) any repayment of any indebtedness or any
borrowing of or agreement to borrow any money or any material Liabilities
incurred by Buyer, other than current Liabilities incurred in the ordinary
course of business, (iii) any material asset or property of Buyer made subject
to a Lien, (iv) any declaration or payment of dividends on, or other
distributions with respect to, or any direct or indirect redemption or
repurchase of, any shares of the capital stock of Buyer, (v) any issuance of any
stocks, bonds or other securities of Buyer, or any options, warrants or rights
or agreements or commitments to purchase or issue such securities (other than
the Buyer Shares), (vi) any mortgage, pledge, sale, assignment or transfer of
any material tangible or intangible assets of Buyer, except with respect to
tangible assets effected in the ordinary course of business to persons not
related to Buyer, (vii) any loan by Buyer to any officer, director, employee or
shareholder of Buyer or any affiliate thereof, (viii) any material damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the assets, property or business of Buyer, (ix) any purchase or other
acquisition of assets or property by Buyer other than in the ordinary course of
business, (x) any change in the accounting methods or practices followed by
Buyer, (xi) any operation of the business of Buyer outside of the ordinary
course of business and/or inconsistent with past practice, (xii) any waiver of
any valuable right of Buyer, or the cancellation or reduction of any material
debt or claim held by Buyer, or (xiii) except as provided by this Agreement, any
commitment or agreement (contingent or otherwise) to do any of the foregoing.
5.7. Power and Authority. Buyer has the requisite corporate power and
-------------------
authority to execute and deliver this Agreement and all other agreements and
certificates referred to in or contemplated by this Agreement and to perform its
obligations hereunder and thereunder. The execution, delivery and performance
of this Agreement and all other agreements and certificates referred to in or
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and is (and such other agreements and certificates, when
executed and delivered, will be) the valid and binding obligations of Buyer
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
16
<PAGE>
moratorium, insolvency, reorganization or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
equitable principles (whether considered in a proceeding in equity or at law).
5.8. Tax Matters. Buyer has timely filed all Tax Returns that it has
-----------
been required to file through the date hereof, and has timely paid in full all
Taxes which were due and payable by it through the date hereof. The provisions
for Taxes reflected on the Buyer Interim Balance Sheet are adequate to cover all
accrued and unpaid Taxes of Buyer for all periods ending on or before September
30, 1999, and nothing has occurred subsequent to that date to make such
provisions inadequate. Buyer has established and is maintaining current accruals
that are accurately reflected in the books and records of Buyer and are adequate
for the payment of any Taxes incurred but not yet due and payable with respect
to the property and operations of Buyer through the date hereof and will
establish and maintain adequate accruals for the payment of any such Taxes in
respect of the period through the Closing Date. No waivers or extensions of any
applicable statute of limitations for the assessment or collection of Taxes with
respect to any Tax Returns of Buyer are currently in effect or are currently
proposed. Buyer has collected or withheld and paid over to the proper
governmental or regulatory bodies all amounts required to be so collected or
withheld and paid over under all applicable Laws. No action, suit, proceeding,
investigation, audit, claim or assessment is presently pending or, to Buyer's
knowledge (as defined in Section 12.2 hereof), threatened with regard to any
Taxes that relate to Buyer for which Buyer is or could reasonably be expected to
be liable. There is no unresolved claim by a taxing authority in any
jurisdiction where Buyer does not anticipate to file Tax Returns that it is or
could reasonably be expected to be subject to taxation by such jurisdiction.
There are no Liens for Taxes (other than for Taxes not yet due and payable) upon
any assets or property of Buyer. The Stockholders acknowledge that the foregoing
representations and warranties made in this Section 5.8 do not apply in respect
of Accurate Components Inc. ("Accurate") or Market Trading Concepts Inc.
("Market Trading") (recently acquired, wholly-owned subsidiaries of Buyer). The
Stockholders further acknowledge that the representations and warranties made in
respect of Accurate and Market Trading as to Tax matters in that certain Stock
Purchase Agreement by and between Buyer, Accurate, Market Trading and Anthony
Arena, dated November 12, 1999, have been made available to the Stockholders for
their review and, to Buyer's knowledge, they are true and correct.
Buyer (i) has not made any other election pursuant to the Code other
than elections that relate solely to matters of accounting, depreciation, or
amortization, that could reasonably be expected to have an adverse effect on,
its financial condition, its business as presently conducted or presently
proposed to be conducted or any of its properties or assets; and (ii) at no time
has filed a consent to the application of Section 341(f)(2) of the Code to any
property or assets held, acquired or to be acquired by it, and will not file any
such consent prior to Closing. Buyer is not a party to any tax allocation or
sharing agreement, and has no liability for the Taxes of any other entity under
Treasury Regulation (S) 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
5.9. Compliance with Laws; Permits. Except as set forth on Schedule
----------------------------- --------
5.9 hereto, Buyer is and has been in compliance with all Laws applicable to it
- ---
or any of its properties or operations, including, without limitation, all
Environmental Laws. Buyer has not received any notice of its violation or
alleged violation of any Law. Buyer has all Permits necessary for the
17
<PAGE>
conduct of its business and operations as currently conducted. All material
Permits of Buyer are set forth on Schedule 5.9A hereto and are valid and in full
-------------
force and effect. No violations have occurred in respect of any such Permit and
no action or proceeding is pending nor, to Buyer's knowledge, threatened to
revoke or limit any such Permit.
5.10. No Breach; Consents; Payments. The execution, delivery and
-----------------------------
performance of this Agreement and all other agreements or certificates referred
to in or contemplated by this Agreement by Buyer and the consummation of the
transactions contemplated hereby and thereby will not (i) result in any Lien
upon any property of Buyer; or (ii) violate, conflict with or otherwise result
in the breach of any of the terms and conditions of, result in a material
modification of or accelerate or trigger the rights of any person under, or
constitute (or, with the giving of notice or lapse of time or both, would
constitute) a default or termination under (a) any of the Buyer Constituent
Documents; (b) assuming the Consents listed on Schedule 5.10 hereto are obtained
-------------
on or prior to the Closing Date, any instrument, contract or other agreement to
which Buyer is a party or by or to which Buyer or any of its property is bound
or subject; (c) any Law applicable to Buyer or any of its property or
operations; or (d) any Permit. Except as set forth on Schedule 5.10, and other
-------------
than the HSR Filing, the Certificates of Merger and any blue-sky or other
securities law filings, no Consent is required on the part of Buyer in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby. There are no payments,
Liabilities or obligations under or pursuant to any Law or contract or other
agreement to which Buyer is a party which are required to be made or performed
by Buyer to any person, arising out of or as a result of the transactions
contemplated by this Agreement.
5.11. Litigation; Claims. Except as set forth on Schedule 5.11
------------------ -------------
hereto, there are no suits or actions, administrative, arbitration or other
proceedings or governmental investigations pending or, to Buyer's knowledge,
threatened against or affecting Buyer or any of its property or assets. Except
as set forth on Schedule 5.11, to Buyer's knowledge, no person has notified
-------------
Buyer or any of its affiliates of a material claim against Buyer alleging any
personal property or economic injury, loss or damage incurred as a result of or
relating to the use of any products sold by or on behalf of, or services
rendered by, Buyer. There is no judgment, order, injunction, decree or award
against Buyer which is not satisfied and remains outstanding.
5.12. Employment Matters. Buyer has not at any time during the last
------------------
three (3) years had, nor, to Buyer's knowledge, is there now threatened, any
walkout, strike, picketing, work stoppage, planned work slowdown or any similar
occurrence. There are no material controversies or grievances pending or, to
Buyer's knowledge, threatened between Buyer and any of its employees. No union
or other collective bargaining unit has been certified or formally recognized by
Buyer.
5.13. Material Agreements. Buyer is in compliance with the terms and
-------------------
conditions of its material contracts, except where the failure to be in such
compliance could not reasonably be expected to have a material adverse effect on
the business, operations, assets, or condition (financial or otherwise) of
Buyer, taken as a whole.
5.14. Real Estate. Buyer does not own, in fee or otherwise, or have
-----------
the right or obligation to acquire any real property or buildings. Schedule
--------
5.14 hereto sets forth all leases,
- ----
18
<PAGE>
subleases or other agreements (oral or written) pursuant to which Buyer has the
right to use or occupy any real property. True and correct copies of such
leases, subleases and other agreements have been delivered to the Majority
Stockholder and each is a valid agreement in full force and effect, creates a
good and valid leasehold estate in the property leased thereby, and Buyer is in
material compliance with the provisions of each such agreement and no other
party thereto is, to Buyer's knowledge, in material default thereunder.
5.15. Buyer Intangible Property. Schedule 5.15 hereto sets forth all
------------------------- -------------
United States and foreign patents, registered copyrights, registered trademarks,
service marks and trade names, applications for any of the foregoing, and
written permits, grants, options and licenses or other rights in writing running
to or from Buyer relating to any Buyer Intangible Property (as defined below).
Buyer has either all right, title and interest in or valid and binding rights
under contract to use all items of Buyer Intangible Property material to, or
necessary to conduct, the business of Buyer as presently conducted or
contemplated to be conducted. None of the Buyer Intangible Property (other than
any patents and patent rights) infringes upon or violates any rights owned or
held by any other person. To Buyer's knowledge, none of the patents and patent
rights included in the Buyer Intangible Property infringes upon or violates any
rights owned or held by any other person. There is not pending nor, to Buyer's
knowledge, threatened any claim, suit or action against Buyer contesting or
challenging the rights of Buyer in or to any Buyer Intangible Property or the
validity of any of the Buyer Intangible Property. To Buyer's knowledge, there
is no infringement upon or unauthorized use of any of the Buyer Intangible
Property owned by Buyer by any third party. Buyer is not in default (or, with
the giving of notice or lapse of time or both, would be in default) under any
contract to use the Buyer Intangible Property required to be disclosed on
Schedule 5.15. Neither Buyer (nor any associate thereof) nor any officer,
- -------------
director or affiliate or immediate family member, as the case may be, thereof
has any right to or interest in any Buyer Intangible Property, including,
without limitation, any right to payments (by royalty or otherwise) in respect
of any use or transfer thereof.
"Buyer Intangible Property" means all patents and patent rights,
trademarks and trademark rights, trade names and tradename rights, service marks
and service mark rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, designs, trade secrets, industrial
models, proprietary data, methodologies, computer programs and software
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how, inventions, works
of authorship, management information systems, and all pending applications for
and registrations of patents, trademarks, service marks and copyrights used in
the business of Buyer, in each such case, including all forms (e.g., electronic
----
media, computer disks, etc.) in which such items are recorded.
5.16. Title to Properties and Assets. Buyer has good title to all of
------------------------------
the property and assets owned or purported to be owned by it which are reflected
as assets on the Buyer Interim Balance Sheet and those not so reflected on the
Buyer Interim Balance Sheet because not required to be reflected thereon, but
which are used in Buyer's business, or because acquired by Buyer since the date
of the Buyer Interim Balance Sheet (except for inventory or other assets
disposed of in the ordinary course of business consistent with past practice
since the date of the Buyer Interim Balance Sheet), free and clear of any Lien,
except (i) Liens for Taxes not yet due
19
<PAGE>
and payable; (ii) Liens of materialmen, mechanics, carriers, landlords and like
persons which are not due and payable or which are being contested in good faith
and which are not material in the aggregate; and (iii) as set forth on Schedule
--------
5.16 hereto. Other than in the ordinary course of business, other than pursuant
- ----
to the terms of this Agreement or as disclosed on Schedules 5.15 and 5.18
hereto, no person has any written or oral agreement, option, understanding,
commitment or any right or privilege to purchase, lease or license any of
Buyer's property or assets.
5.17. Employee Benefit Plans. Schedule 5.17 hereto contains a true
---------------------- -------------
and complete list of all Employee Benefit Plans maintained by Buyer (or any
affiliate thereof) or under which Buyer has any obligations (other than
obligations to make current wage or salary payments) in respect of any of the
employees of Buyer or their beneficiaries (each individually, a "Buyer Employee
Benefit Plan" and collectively, the "Buyer Employee Benefit Plans"). Buyer has
delivered to the Majority Stockholder true and complete copies of all material
documents, as such may have been amended to the date hereof, embodying the Buyer
Employee Benefit Plans, all trust documents, all available determination letters
issued by the IRS, employee booklets, summaries and descriptions, the most
recent compliance and nondiscrimination tests (if any), the most recent Form
5500 reports, standard COBRA forms and notices, any correspondence or inquiry by
the IRS or the Department of Labor, and any material employee communications, in
each case relating to any Buyer Employee Benefit Plan.
All Buyer Employee Benefit Plans have complied in form, operation and
administration with their respective provisions, any applicable provisions of
ERISA, the Code, and all other applicable Laws. All contributions to and
payments from the Buyer Employee Benefit Plans which have been required to be
made in accordance with the provisions of the Buyer Employee Benefit Plans and,
where applicable, ERISA and the Code have been made or are adequately accrued
and reflected on the books and records of Buyer. There are no unfunded
Liabilities in respect of any such Buyer Employee Benefit Plan. Neither Buyer,
nor, to Buyer's knowledge, any of its officers, employees or agents has
committed any breach of fiduciary responsibility with respect to the Buyer
Employee Benefit Plans to which ERISA is applicable which could subject Buyer to
any Liability under ERISA. Buyer is not and has never been obligated to make
contributions to any Multiemployer Plan. Buyer does not have any early
retirement options or plans pursuant to which employees may choose to take early
retirement. There are 46,532 shares of Buyer Common Stock reserved and/or
eligible to be issued pursuant to stock option, stock appreciation, stock grant
or similar plans of Buyer.
5.18. Transactions with Related Parties. Except as set forth on
---------------------------------
Schedule 5.18 hereto, no director, officer or affiliate of Buyer nor any of
- -------------
their immediate family members, as the case may be: (i) has borrowed money from
or loaned money to Buyer which has not been repaid; (ii) has an interest in any
property, rights or assets owned and/or used by Buyer in its business; or (iii)
is party to any contract or other agreement with Buyer or is engaged in any
material transaction or arrangement with Buyer.
5.19. Environmental Matters. Buyer has: (i) complied with all
---------------------
Environmental Laws; (ii) not received any notice from any governmental authority
that any real property now or formerly owned, leased, managed, operated or
otherwise used by it is on any federal, state or foreign "superfund" or similar
list or has been the site of any activity giving rise to any Liability; (iii)
not received any notice of any Environmental Claim; and (iv) stored, handled,
used,
20
<PAGE>
released, discharged and disposed of all substances used in their operations and
wastes or by-products from their operations, whether Hazardous Materials or not,
in compliance with all Environmental Laws. No Hazardous Materials or other
substances or wastes have been spilled, released, discharged or disposed of
from, on or under any property owned, leased or operated by Buyer during its
occupancy. Buyer has no Liability with respect to the clean-up or remediation of
any treatment, storage or disposal site or facility.
5.20. Year 2000. Buyer's critical information technology systems
---------
which are used in, or required for the conduct of, its business as currently
conducted or presently proposed to be conducted may be used prior to, during and
after the calendar year 2000 without material error or delay relating to date
data and will not otherwise fail: (i) to deal with or account for transitions or
comparisons from, into and between the years 1999 and 2000 accurately; (ii) to
recognize or accurately process any specific date in 1999 or 2000; or (iii) to
account accurately for the year 2000's status as a leap year, including
recognition and processing of the correct date on February 29, 2000.
5.21. Brokers. Buyer has not made any agreement or taken any other
-------
action causing anyone to become entitled to a broker's fee or commission as a
result of the transactions contemplated hereby.
5.22. Disclosure Schedules. All Schedules to this Agreement are
--------------------
integral parts of this Agreement. Nothing in a Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein, unless the
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Buyer is responsible for preparing and
arranging the Schedules corresponding to the numbered subsections contained in
this Section 5.
5.23. Investment in IQX Shares. Buyer acknowledges that the IQX
------------------------
Shares are not registered under the Securities Act or under any state or foreign
securities laws and that the IQX Shares are being sold to Buyer materially in
reliance upon the representations and warranties contained in this Section 5.23.
Buyer further understands that the offer and sale of the IQX Shares are intended
to be exempt from registration under the Securities Act and under any applicable
state securities laws. In furtherance thereof, Buyer represents and warrants to
and agrees with the Stockholders that (i) Buyer is purchasing the IQX Shares for
Buyer's own account, for investment purposes only and not with a view to the
resale or distribution thereof except in compliance with the Securities Act and
any applicable state securities laws; (ii) Buyer is an "accredited investor," as
such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act; and (iii) Buyer's purchase of the IQX Shares will not violate
the Laws of the jurisdiction of its incorporation.
6. COVENANTS AND AGREEMENTS.
------------------------
6.1. Pre-Closing Covenants and Agreements. The parties covenant and
------------------------------------
agree from the date hereof until the earlier of the Closing Date or the
termination of this Agreement (in accordance with its terms) as follows:
21
<PAGE>
(a) Ongoing IQX Operations. IQX shall, and the Majority Stockholder
----------------------
shall cause IQX to, conduct its business diligently and substantially in the
same manner as heretofore conducted and use reasonable best efforts to preserve
the present relationships between IQX and its suppliers, distributors, customers
and others having business relations with it, and shall not, except with Buyer's
prior written consent: (i) declare, make or pay any distributions or dividends
on its capital stock or any other equity securities; (ii) make or grant any
increases in salary or other compensation or bonuses to employees (other than in
connection with arrangements or agreements in effect prior to the date hereof
and specifically disclosed in writing to Buyer), or grant any employee any
severance or termination pay except in accordance with its existing policies, or
establish, adopt, enter into or amend in any material respect any bonus, profit
sharing, thrift, pension, retirement, deferred compensation, policy or
arrangement for the benefit of any directors, officers or employees; (iii) make
any material general adjustment in the type or hours of work of its employees;
(iv) enter into or amend any agreement or transaction with any person or entity
who or which is an associate or an affiliate of IQX; (v) permit or engage in any
of the actions or transactions set forth in Sections 4.6 (to the extent not
otherwise covered by this Section 6.1(a)) and 4.24 hereof; (vi) acquire,
exchange, lease, license or dispose of any property or assets, other than in the
ordinary course of business; (vii) issue or grant any shares of capital stock or
other securities, whether or not such are exercisable for, convertible into or
exchangeable for shares of capital stock or such other securities of IQX or any
of its subsidiaries; (viii) amend or repeal any of its Constituent Documents;
(ix) incur any indebtedness or permit any of its property to become subject to
any Lien other than indebtedness incurred in the ordinary course of
business; (x) except as set forth on Schedule 6.1(a)(x) hereto, make any capital
------------------
expenditure in excess of $50,000; (xi) other than in the ordinary course of
business, enter into, terminate or amend any Material Agreement; (xii) discount,
collect or write-off any accounts or notes receivables other than in the
ordinary course of business; (xiii) waive any of its valuable rights; (xiv)
operate its business outside of the ordinary course of business except as
specifically required by this Agreement; or (xv) enter into any agreement to
take any of the foregoing actions except as required by this Agreement.
(b) Ongoing Buyer Operations. Buyer shall conduct its business
------------------------
diligently and substantially in the same manner as heretofore conducted and use
reasonable best efforts to preserve the present relationships between Buyer and
its suppliers, distributors, customers and others having business relations with
it, and shall not, except with IQX's prior written consent: (i) declare, make or
pay any distributions or dividends on its capital stock or any other equity
securities; (ii) enter into or amend any agreement or transaction with any
person or entity who or which is an associate or an affiliate of Buyer; (iii)
permit or engage in any of the actions or transactions set forth in Section 5.18
hereof; (iv) issue or grant any shares of capital stock or other securities,
whether or not such are exercisable for, convertible into or exchangeable for
shares of capital stock or such other securities of Buyer or any of its
subsidiaries, other than the Buyer Shares and stock options granted to
employees, officers or directors; (v) amend or repeal its Constituent Documents;
or (vi) enter into any agreement to take any of the foregoing actions except as
required by this Agreement.
(c) Investigation by Buyer and IQX. Each of Buyer and IQX may,
------------------------------
through its respective representatives (including, without limitation, its
counsel, accountants and consultants), make such investigations of the
properties, offices and operations of the other party upon reasonable prior
notice and such review or audit of the financial condition of the other party
22
<PAGE>
as it deems necessary or advisable in connection with the transactions
contemplated hereby, including, without limitation, any investigations enabling
it to familiarize itself with such properties, offices, operations and financial
condition; provided, that no unreasonable interference with the normal business
--------
operations of the other party shall thereby be caused. No such investigations
shall affect or limit any of the representations, warranties and agreements made
hereunder. Each of IQX and Buyer shall permit the other party and its
respective authorized representatives, subject to the foregoing provisions of
this Section 6.1(c) and Section 6.2(c)(ii) and (iii) hereof, to have full access
to the premises upon reasonable prior notice and to all books and records of
such party, and shall allow such other party the right to make copies thereof
and excerpts therefrom. Each of IQX and Buyer shall, subject to Section
6.2(c)(ii) and (iii) hereof, furnish the other party with such financial,
customer, supplier and operating data and other information with respect to
itself as such other party may from time to time reasonably request. IQX shall
permit Buyer and its authorized representatives, upon Buyer's reasonable
request, to contact suppliers, distributors, customers and others having
business relations with IQX.
(d) Further Assurances. Each of the parties shall on or after the
------------------
Closing, as may be appropriate, execute such documents and other papers and take
such other further actions as may be reasonably required to carry out the
provisions hereof and to effectuate the transactions contemplated by this
Agreement (including with respect to the HSR Filing). Each party shall use
his/her/its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions to the Closing within such party's control, including obtaining any
Consents required in connection herewith. In particular, and without limiting
the foregoing, the Majority Stockholder shall use its reasonable best efforts to
obtain as soon as practicable (whether prior or subsequent to the Closing) the
consent of Manufacturing Technology, Inc. ("MTI") to the assignment by the
Majority Stockholder to Buyer of all of the Majority Stockholder's rights and
benefits under that certain value-added reseller agreement, dated December 18,
1998, by and between MTI and the Majority Stockholder (the "MTI Agreement"). If
the Majority Stockholder shall be unable to obtain such consent, it will use its
reasonable best efforts to provide Buyer with substantially all of the economic
benefits of the MTI Agreement. The Majority Stockholder agrees that it shall
execute such documents and other papers and use its reasonable best efforts,
including obtaining any required Consent, to assign to Buyer and/or the
Surviving Corporation any contract, license or other agreement relating to the
CAPSXpert Database and/or IQXpert's ItemQuest product line to which Buyer is not
presently a party and which has not otherwise been effectively assigned in
connection with this Agreement. The parties hereby acknowledge and agree that it
is the intent of this Agreement that all such contracts, licenses and other
agreements be transferred and assigned to Buyer and/or the Surviving Corporation
in connection with the transactions contemplated by this Agreement.
(e) Additional Disclosure. Each of IQX and Buyer shall promptly
---------------------
notify the other party and furnish the other party with any information that
such other party may reasonably request with respect to (i) the occurrence of
any event or condition or the existence of any fact that would cause any of the
conditions to such party's obligation to consummate the transactions
contemplated by this Agreement not to be fulfilled and/or (ii) any material
adverse change in such party's financial condition, business or operations. In
addition, any contract or other agreement entered into between the date hereof
and the Closing Date that would have been required to be listed on Schedule 4.14
-------------
hereto if entered into prior to the date hereof shall be
23
<PAGE>
delivered to Buyer by IQX promptly after being entered into and shall be deemed
to be a Material Agreement for all purposes of this Agreement.
(f) Exclusive Dealings. IQX (including all affiliates and associates
------------------
thereof), and their respective officers and directors, and the Stockholders
shall not at any time prior to the earlier of the Closing or December 31, 1999,
directly or indirectly (i) encourage, solicit, initiate or participate in any
discussions or negotiations with, furnish any information to or entertain or
accept any inquiry or proposal from any person other than Buyer, regardless of
the form of the proposed transaction, concerning the proposed sale, exchange or
transfer, directly or indirectly, of any securities or other interests of IQX
(whether or not presently outstanding) or any material assets of IQX (other than
inventory in the ordinary course of business), or the direct or indirect merger,
recapitalization, combination or consolidation of IQX with any other person or
(ii) cause or permit IQX to dissolve or liquidate. In the event that IQX and/or
any Stockholder shall receive any solicitation, offer, inquiry or proposal of
the type described in this Section 6.1(f), he/she/it will promptly notify Buyer.
If, at any time prior to the earlier of the Closing or December 31, 1999, Buyer
terminates this Agreement pursuant to the provisions hereof, it shall so notify
in writing IQX and the Majority Stockholder, and IQX and the Stockholders shall
thereupon be released from the restrictions set forth in this Section 6.1(f).
(g) Resignations. On or before the Closing Date, IQX and the Majority
------------
Stockholder shall cause to be delivered to Buyer duly executed resignations,
effective immediately after the Closing, of those officers and directors of IQX,
IQXpert and ETI as shall be requested by Buyer in writing delivered to the
Majority Stockholder on or before the Closing.
(h) Records. On the Closing Date, the Majority Stockholder shall
-------
deliver or cause to be delivered to Buyer, or make available to Buyer at IQX's
office, all original agreements, documents, books, records and files, including
records and files stored on computer disks or tapes or any other storage medium
(collectively, "Records") in the possession or control of the Majority
Stockholder or Thybo relating to IQX.
(i) Fees and Disbursements. Buyer and the Stockholders (and not IQX)
----------------------
shall, subject to the penultimate sentence of Section 11 hereof, pay their own
costs and expenses, including the fees and disbursements of any counsel and
accountants retained by any of them, incurred in connection with the
preparation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby, whether or not the transactions contemplated
hereby are consummated.
(j) Maintenance of Insurance. Until the Closing, IQX and Buyer shall
------------------------
maintain in full force and effect their current respective insurance policies
unless, simultaneously with any termination or lapse thereof, replacement
policies shall be in full force and effect that provide coverage at levels and
amounts equal to or greater than the coverage under such current policies.
(k) Transfer Taxes. Notwithstanding anything to the contrary contained
--------------
herein, the Majority Stockholder shall be responsible for all transfer, real
property transfer, documentary, gains, stamp, duties, recording and other
similar Taxes and fees imposed upon or incurred in connection with the
transactions contemplated by this Agreement (collectively, the
24
<PAGE>
"Transfer Taxes") and all necessary Tax Returns and other documentation with
respect to any Transfer Taxes shall be filed by the Majority Stockholder.
(l) Supplemental Disclosure. The parties agree that, with respect to
-----------------------
their representations and warranties made in this Agreement, they will have a
continuing obligation to promptly supplement and/or amend all Schedules to this
Agreement with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Schedules to this Agreement.
(m) [Intentionally Omitted].
---------------------
(n) Termination of Sales Agency Agreement. IHS and IQX hereby agree
-------------------------------------
that that certain Sales Agency Agreement, dated March 24, 1999, by and between
IHS and IQX (the "Sales Agency Agreement") shall be terminated prior to the
Closing with no payments made or required from IQX or Buyer and without any
Liability of IQX or Buyer to IHS; provided, that IHS will be permitted to
--------
continue to distribute the CAPSXpert Database products in "bundled sales" (as
defined below) from the Effective Date until April 30, 2000 (the "Agency
Period"). For purposes of this Section 6.1(n), "bundled sales" shall mean a sale
in which an IHS sales representative is selling a customer both IHS products and
CAPSXpert Database products. During the Agency Period, IHS shall receive only a
percentage commission at the rate of eighteen (18%) percent on all bundled
sales; provided, that all pricing related to such bundled sales shall be subject
--------
to Buyer's prior written approval. IHS and IQX shall, prior to the Closing,
deliver to Buyer evidence reasonably satisfactory to Buyer that the Sales Agency
Agreement has been terminated.
(o) IQX Stockholders Agreement. The Stockholders shall provide Buyer
--------------------------
with evidence reasonably satisfactory to Buyer that that certain Stockholders
Agreement, dated March 24, 1999, between the Stockholders shall have been
irrevocably and unconditionally terminated on or prior to the Closing.
6.2. Post-Closing Covenants and Agreements. Buyer and the
-------------------------------------
Stockholders covenant and agree from and after the Closing Date as follows:
(a) Non-Interference. IHS, Thybo and their respective affiliates
----------------
shall not, at any time during the period commencing on the Closing Date and
continuing until the fifth anniversary of the Closing Date (the "Restricted
Period"), directly or indirectly, (i) recruit any employee of Buyer or IQX or
solicit or induce, or attempt to solicit or induce, any employee of Buyer or IQX
to terminate his/her employment with, or otherwise cease his/her relationship
with Buyer or IQX or (ii) solicit, divert or take away, or attempt to solicit,
divert or take away any of the clients, customers or accounts, or prospective
clients, customers or accounts, of Buyer or IQX to purchase, or from purchasing,
products or services covered by the definition of Competitive Business (as
defined below).
(b) Non-Compete. (i) Subject to the provisions of the CAPSXpert
-----------
License Agreement (as defined in Section 6.2(n) hereof), IHS, Thybo and their
respective affiliates shall not, at any time during the Restricted Period,
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or provide
25
<PAGE>
financing to, any Competitive Business; provided, that nothing in this Section
--------
6.2(b) shall prohibit IHS or Thybo (including their respective affiliates and
associates and any "group" (as such term is defined in the rules promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
which such person is a member) from acquiring up to five (5%) percent of any
class of outstanding equity securities of any corporation or other entity whose
equity securities are regularly traded on a national securities exchange or in
the "over-the-counter market."
For purposes of this Agreement, the term "Competitive Business" shall
mean (w) any business that develops or sells products or services that are
competitive with the CAPSXpert Database, (x) any business that develops or sells
software for component and supplier management, (y) any business that sells or
distributes electronic components or (z) any business that provides an e-
commerce web site which aggregates pricing and availability data for electronic
components.
(ii) Each of the Minority Stockholders (other than Thybo) hereby
unconditionally acknowledges and agrees that the non-competition provisions set
forth in Section 6.09 and the insurance provisions set forth in Section 6.10 of
that certain Formation Agreement, dated January 10, 1999, between IHS and those
certain stockholders of ICI (as defined in Section 10.1(a) hereof) identified
therein (the "Formation Agreement") shall remain in full force and effect and
continue to bind and inure to the benefit of such Stockholder after the Closing,
and further agrees that Buyer is, and shall be, an intended third-party
beneficiary of Section 6.09 of such Agreement. Buyer acknowledges and agrees
that it is the successor to IHS for purposes of Section 6.10 of the Formation
Agreement.
(c) Confidentiality. (i) Each Stockholder acknowledges that all
---------------
information concerning IQX's business, financial condition, operations,
strategies and prospects, including, but not limited to, customer, supplier and
distributor lists, trade secrets, plans, manufacturing techniques, sales,
marketing and expansion strategies, products, services, production, development,
technology and processes and all related technical information, procurement and
sales activities and procedures, promotion and pricing techniques and credit and
financial data relating to IQX are valuable, special and unique assets of IQX
(collectively, the "Confidential Information"); provided, however, that
-------- -------
Confidential Information shall not include any information that (x) is or shall
become generally known to the public (other than as a result of a breach of this
Agreement by a Stockholder); (y) shall become available to a Stockholder from an
unaffiliated third party; provided, that such party shall not be under any
--------
obligation of confidentiality known to such Stockholder to another party to this
Agreement; or (z) is required by Law or court order to be disclosed; provided,
--------
that the disclosing party shall give Buyer prompt written notice of any such
legal or judicial process requiring disclosure of Confidential Information and
shall reasonably cooperate with Buyer, at Buyer's expense, in any lawful action
which Buyer desires to take to limit the disclosure required by such legal or
judicial process, and shall permit Buyer to attempt, by appropriate legal means,
to limit and/or delay such disclosure.
(ii) Buyer agrees that it shall not (until after the Closing)
disclose any Confidential Information to any person or make use of or exploit
any Confidential Information for its own purposes or for the benefit of any
person other than disclosure to its accountants, attorneys or other
representatives to the extent reasonably necessary to complete its due diligence
26
<PAGE>
review of IQX's businesses and to document and consummate the transactions
contemplated by this Agreement; provided, that Buyer shall notify such
--------
accountants, attorneys or other representatives of Buyer's obligations under the
terms of this Section 6.2(c)(ii) and Buyer shall use its best efforts to cause
its accountants, attorneys or other representatives to comply with the
provisions of this Section 6.2(c)(ii). If this Agreement is terminated in
accordance with Section 11 hereof, Buyer shall return all Confidential
Information and all copies thereof to IQX, destroy any extracts or notes derived
therefrom, and shall not make use of any Confidential Information for its own
purposes or for the benefit of any person, except that Buyer may retain copies
of the Confidential Information, subject to its confidentiality obligations
hereunder, which are required to be retained to support any claim that shall
have arisen or may reasonably be expected to arise out of this Agreement or the
transactions contemplated hereby.
(iii) Each Stockholder acknowledges and agrees that all
Confidential Information is the exclusive property of IQX and, after the
Closing, of Buyer and IQX. No Stockholder shall disclose, directly or
indirectly, Confidential Information to any person or, directly or indirectly,
make use of or exploit any Confidential Information for his/her/its own purposes
or the benefit of any other person.
(d) Equitable Relief. Each of Buyer and the Stockholders
----------------
acknowledges and agrees that any breach by Buyer, IQX or any Stockholder of any
of the provisions of Sections 6.1(f), 6.2(a), (b), (c), (g) or (l) hereof would
cause irreparable injury and could not be remedied solely by monetary damages.
In the event of a breach or threatened breach of any of such provisions, any
non-breaching party shall be entitled to equitable relief, including, without
limitation, injunctive relief and specific performance, without proof of actual
damages. Such relief shall be in addition to any other remedies available at law
or in equity.
(e) IQX's Employees. Buyer agrees that, as soon as reasonably
---------------
practicable after the Closing, it shall determine in good faith whether to
adjust the compensation of the employees of IQX who shall remain employees of
IQX or become employees of Buyer, based upon such factors as it shall deem
appropriate, including, without limitation, prevailing market rates of
compensation and Buyer's then existing compensation for similarly situated
employees. Buyer agrees that all employees of IQX who shall remain employees of
IQX or become employees of Buyer shall be entitled to participate in the
employee benefits and plans, including, without limitation, stock option plans,
provided by Buyer to its employees generally, subject to the terms thereof, and
that, to the extent permissible and practicable, such employees shall be given
credit for their years of prior service with IQX in connection with the
provision of such benefits. Notwithstanding anything contained herein, nothing
in this Agreement shall confer, or shall be construed to confer, upon any
employee of IQX who shall remain an employee of IQX or become an employee of
Buyer any right to the continuance of employment with IQX or Buyer nor shall
anything contained in this Agreement limit in any manner the right of IQX or
Buyer to terminate any such employee at any time or for any reason.
(f) Tax Matter. The parties hereto intend that the Merger shall
----------
qualify as a tax-free reorganization under Section 368(a) of the Code. Without
limiting the generality of the foregoing, each party agrees not to take any
position on any Tax Returns that is inconsistent with its undertaking pursuant
to this Section 6.2(f) and agrees to prepare and timely file any required
reports and information consistent with this Section 6.2(f).
27
<PAGE>
(g) Right of First Refusal. For nine (9) months following the
----------------------
Closing Date (the "First Refusal Period"), IHS shall not Transfer (as defined
below) the Partsxpert Business (as defined below) or any material portion
thereof to any third party without first offering in writing Buyer a reasonable
opportunity to negotiate an agreement with IHS for the purchase of the
Partsxpert Business or such material portion. IHS and Buyer shall negotiate in
good faith and use reasonable efforts to reach an agreement and to consummate
such purchase. If after thirty (30) days from the date of the written notice
provided to Buyer, IHS and Buyer are unable to reach an agreement for the
purchase by Buyer of the Partsxpert Business, then IHS shall be permitted to
Transfer the Partsxpert Business during the First Refusal Period to a third
party; provided, that the terms of such Transfer are not more favorable, in any
--------
material respect, to those contained in the final offer made by Buyer in such
negotiations for the Partsxpert Business.
For purposes of this Section 6.2(g), (i) a "Transfer" shall mean, any
direct or indirect disposition or sale, including by means of a merger,
consolidation, sale-leaseback, exchange, sale of stock or assets or other
similar transaction (other than a Transfer to a wholly-owned subsidiary of IHS),
and (ii) "Partsxpert Business" shall mean the businesses comprising the
Universal Parts Center, Vendor Catalog, Haystack and GSA product lines of IHS.
(h) Cancellation of IQX Options. In consideration of the provisions
---------------------------
of Section 6.2(e) hereof, IQX hereby agrees that all outstanding options of IQX,
all of which are set forth on Schedule 4.3 hereto (the "IQX Outstanding
------------
Options"), shall terminate and be cancelled prior to the Closing Date in
accordance with Section 8.3(A) of the Non-Qualified Stock Option Plan of IQX
governing the IQX Outstanding Options (a true and correct copy of which has been
delivered to Buyer prior to the date hereof) without IQX having made any
additional agreements or arrangements with respect to such IQX Outstanding
Options or the grantees thereof.
(i) WARN Act Notices. IQX shall provide any notices to its
----------------
employees that may be required under any Law including, but not limited to, the
Worker Adjustment Retraining and Notification Act, as amended (the "WARN Act"),
or any similar state or local Law, with respect to all events that occur prior
to the Closing Date or as a result of the transactions contemplated by this
Agreement. Buyer shall not take any action after the Closing that would cause
any termination of employees by IQX that occur on or before the Closing Date to
constitute a "plant closing" or "mass layoff" under the WARN Act or any similar
state or local Law.
(j) Employee Benefit Plan Liabilities. In respect of all IQX
---------------------------------
Employee Benefit Plans sponsored or created by the Majority Stockholder or any
affiliate thereof (other than IQX) covering any employees of IQX or any of its
subsidiaries ("Sponsored Benefit Plans"), the Majority Stockholder or such
affiliate shall retain all accrued benefit obligations, Liabilities (whether or
not otherwise transferable by operation of Law) and assets through the Closing
Date for all of the then active, vested, former and retired employees of IQX and
its subsidiaries covered under any such Sponsored Benefit Plans. All employees
of IQX and its subsidiaries covered under any retirement plan which is a
Sponsored Benefit Plan will be fully vested on the Closing Date and their
accrued benefits determined under such retirement plan as of the Closing Date.
No further benefits and/or service for any purpose will be accrued under such
retirement plan for said employees after the Closing Date. Distribution of such
vested, accrued benefits
28
<PAGE>
shall be made to such active, vested former and retired employees by the
Majority Stockholder or its affiliates in accordance with the terms of such
retirement plan.
(k) Thrift Plan. Prior to the Closing, the Majority Stockholder
-----------
shall pay to the Thrift Plan (as defined in Section 12.2 hereof), on behalf of
each employee of IQX and its subsidiaries, any employee contributions and the
matching contribution attributable to any pre-tax 401(k) contribution made by
such employees on or prior to the Closing Date. Any payments made by the
Majority Stockholder subsequent to November 30, 1999 shall be subject to Section
6.2(v) hereof. The Majority Stockholder shall cause the sponsor of such Thrift
Plan to take all actions needed, including, but not limited to, adoption of any
amendment to the Thrift Plan, if necessary, to cause the trustee(s) of the
Thrift Plan to distribute all account balances to the employees of IQX and its
subsidiaries in accordance with applicable Law, including the Code and ERISA.
IQX shall retain sponsorship of the International Computex, Inc. Retirement
Savings Plan.
(l) Standstill Provisions. The Majority Stockholder shall not, at
---------------------
any time during the two (2)-year period following the Closing Date, without the
unanimous vote of Buyer's Board of Directors (i) acquire, offer or agree to
acquire, directly or indirectly, any additional shares of capital stock of
Buyer, or any rights or options to acquire any such capital stock (except (x)
any capital stock acquired in connection with a stock split, reverse split or
other reclassification of Buyer's securities or a stock dividend or other pro
rata distribution by Buyer to the holders of its outstanding securities and (y)
any Buyer Common Stock which may be acquired from the Minority Stockholders);
(ii) make, or otherwise participate in, directly or indirectly, any
"solicitation" of "proxies" or consents (as such terms are used in the proxy
rules under the Exchange Act) to vote any capital stock of Buyer, seek to
encourage or influence any person with respect to the voting of any such capital
stock, otherwise solicit shareholders of Buyer for the approval of one or more
shareholder proposals or induce or attempt to induce any other person to
initiate any shareholder proposal; (iii) form, join, or in any way participate
in a "group" (within the meaning of Section 13(d) (3) of the Exchange Act) with
respect to any capital stock of Buyer; (iv) seek, directly or indirectly, to
remove (other than for "cause," as such term is used under the BCL) any member
of the Board of Directors of Buyer (other than Thybo's Board representative); or
(v) propose or make any exchange offer or tender offer for any of the capital
stock of Buyer. As a condition to its sale or other transfer of any of the Buyer
Shares that it shall own, the Majority Stockholder shall, prior to the
consummation of Buyer's initial public offering, cause any transferee thereof to
agree in writing to be bound by, and subject to, the provisions of this Section
6.2(l).
(m) Cooperation on Tax Matters. The Majority Stockholder shall
--------------------------
cooperate fully with Buyer and IQX in connection with the filing of Tax Returns
of IQX for all Tax Periods beginning prior to the Closing Date and any audit,
litigation or other proceeding with respect to such Tax Periods. Buyer, IQX and
the Majority Stockholder further agree, upon request, to use their best efforts
to obtain any certificate or other document from any governmental authority or
any other person, as may be necessary, to mitigate, reduce or eliminate any Tax
liability that could be imposed (including, but not limited to, with respect to
the transactions contemplated hereby). The Stockholders shall provide Buyer with
all information reasonably necessary for Buyer to determine its Tax basis in the
IQX Shares.
29
<PAGE>
(n) Agreements. Within thirty (30) days following the Closing, (i)
----------
Buyer, IQX and IHS shall negotiate in good faith a license agreement relating to
the CAPSXpert Database (the "CAPSXpert License Agreement"), a license agreement
relating to that certain Universal Parts Center data (the "UPC License
Agreement") and a license for the use by Buyer of that certain Haystack database
of IHS, and (ii) IHS and IQX shall execute and deliver to the other party an
Amended and Restated Services Agreement (the "Services Agreement"), on
substantially the terms set forth on Exhibit A hereto.
---------
(o) Hiring of IHS Personnel. IHS acknowledges that Buyer desires to
-----------------------
hire those employees of IHS set forth on Schedule 6.2(o) hereto, and IHS agrees
---------------
to permit Buyer, and to reasonably cooperate with and assist Buyer in its
efforts, to hire such employees as soon as practicable following the Closing.
(p) Buyer Amended and Restated Stockholders Agreement. Within
-------------------------------------------------
thirty (30) days following the Closing, the Stockholders shall duly execute and
deliver to Buyer, and thereby agree to be bound by, the Amended and Restated
Stockholders Agreement, among the present shareholders of Buyer ("Buyer's
Stockholders Agreement"); provided, that with respect to Buyer's Stockholders
--------
Agreement, the Stockholders (other than Thybo) shall agree that they are not
entitled to the "put" rights set forth in Article VII thereof or to the
preemptive rights set forth in Article IV thereof, that they are not entitled to
an additional directorship, that they are not entitled to any rights in respect
of the affirmative or negative covenants set forth in Articles V and VI,
respectively, thereof, that they are bound by the restrictions on transfer set
forth on Exhibit B attached hereto and that, subject to Buyer's obtaining any
---------
necessary consents or approvals from its current shareholders, the Minority
Stockholders (other than Thybo) shall be deemed not to be a "Management
Stockholder" for purposes of Section 3.01 of Buyer's Stockholders Agreement;
provided, further, if such consents or approvals are not received within a
- -------- -------
reasonable period of time after the Closing, such Minority Stockholders shall
not be required to execute, and shall not be bound by, Buyer's Stockholders
Agreement, but hereby agree to be bound by the restrictions on transfer set
forth on Exhibit B hereto.
---------
(q) Buyer Amended and Restated Registration Rights Agreement.
--------------------------------------------------------
Within thirty (30) days of the Closing, the Stockholders and Buyer shall duly
execute and deliver to Buyer, and thereby agree to be bound by, the Amended and
Restated Registration Rights Agreement, among the present shareholders of Buyer
("Buyer's Registration Rights Agreement"); provided, that with respect to
--------
Buyer's Registration Rights Agreement, (i) the Buyer Shares acquired by the
Majority Stockholder and Thybo pursuant to this Agreement shall be considered
Registrable Securities (as defined in Buyer's Registration Rights Agreement) for
all purposes of Buyer's Registration Rights Agreement, and (ii) the Buyer Shares
acquired by the Minority Stockholders (other than Thybo) shall be considered
Registrable Securities only for purposes of Section 2 of Buyer's Registration
Rights Agreement.
(r) Collection of Accounts Receivable. Upon written notice from
---------------------------------
Buyer, the Majority Stockholder shall pay to Buyer an amount equal to the
difference of (i) the aggregate amount of the billed accounts receivable of IQX
reflected on the November 30, 1999 balance sheet of IQX to be prepared in a
manner consistent with past practice and with the IQX Interim Balance Sheet (the
"Receivables") minus $500,000, less (ii) the amounts collected by Buyer in
respect of such Receivables on or before March 31, 2000. Any such deficiency
amount shall be
30
<PAGE>
payable by the Majority Stockholder promptly after March 31, 2000 by wire
transfer of immediately available funds to an account designated by Buyer. If,
and to the extent, that Buyer shall collect any additional amounts in respect of
the Receivables following March 31, 2000, it shall promptly remit all such
amounts to IHS if and to the extent that they exceed $500,000; provided, that
--------
IHS shall have made in full the payment to Buyer referred to in the prior
sentence.
(s) Audit. The Majority Stockholder shall reasonably cooperate with
-----
Buyer in the conduct of the audit of IQX's financial statements as at and for
the period ended on August 31, 1999 and for any subsequent period(s) that Buyer
may be required to have audited in connection with its contemplated public
offering.
(t) Insurance Matter. The Majority Stockholder agrees that with
----------------
respect to any insurance policy that it holds which covers IQX or any of its
assets and operations which is an occurrence-based policy, it shall reasonably
cooperate with IQX and Buyer in their making and prosecuting any claim(s) which
may be made by IQX in respect of such policies to the extent that the accident,
event or occurrence that results in an insurable loss of IQX occurs prior to the
Closing Date. The Majority Stockholder further agrees that any recovery under
such policies shall be the exclusive property of IQX and Buyer.
(u) License Agreement. IHS agrees that, prior to the Closing, all
-----------------
of its rights under that certain License Agreement, dated March 16, 1999,
between IHS and Buyer shall be irrevocably and unconditionally assigned to IQX
with no payments being made or required from IQX or Buyer.
(v) IHS Capital Contribution. IHS will treat as a capital
------------------------
contribution to IQX the amount of the indebtedness of IQX to IHS outstanding at
November 30, 1999. Subsequent to November 30, 1999, for a transition period to
be mutually agreed by the parties, IQX will continue to participate in IHS'
central cash management system. To the extent collections of IQX accounts
receivable by IHS exceed payments made by IHS on behalf of IQX during such
transition period, IHS will remit the difference to IQX. To the extent payments
made by IHS on behalf of IQX during such transition period exceed collections of
IQX accounts receivable by IHS, Buyer will cause IQX to pay the difference to
IHS. Such payments shall be made on a timely basis to be agreed upon by IHS and
Buyer. Nothing in this Section 6.2(v) shall affect or diminish IHS' guarantee of
payment of the Receivables pursuant to Section 6.2(r) hereof.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE; IQX
-------------------------------------------------------------
DELIVERIES. The obligation of Buyer to complete the Closing is subject to the
- ----------
fulfillment on or prior to the Closing Date of all of the following conditions,
any one or more of which (other than Sections 7.1 and 7.8 hereof) may be waived
by Buyer in writing:
7.1. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain, materially
delay or prohibit the transactions contemplated hereby.
7.2. Opinion of IQX's Counsel. Buyer shall have received a legal
------------------------
opinion, dated the Closing Date, of Stephen Green, Esq., counsel to IQX and the
Majority Stockholder, substantially in the form of Exhibit C attached hereto.
---------
31
<PAGE>
7.3 Secretary's Certificate. Buyer shall have received a
-----------------------
certificate, dated the Closing Date and executed by the Secretary of each of IQX
and the Majority Stockholder, setting forth a copy of the resolutions adopted by
the Boards of Directors of IQX and the Majority Stockholder duly authorizing and
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
7.4 IQX Shares. Buyer shall have received the stock certificates
----------
representing all of the IQX Shares.
7.5. Resignations; Authorizations. Buyer shall have received,
----------------------------
effective as of the Closing Date, written resignations of the directors and
officers of IQX, IQXpert and ETI required to resign pursuant to Section 6.1(g)
hereof. The Majority Stockholder shall have delivered to Buyer all such
documents as Buyer shall request in order for Buyer to terminate all
authorizations with respect to IQX's bank or other accounts and any powers of
attorney granted by IQX required to be set forth on Schedule 4.27 hereto.
-------------
7.6. Minute Books and Stock Records; Certified Documents. IQX and
---------------------------------------------------
the Majority Stockholder shall have delivered to Buyer (i) true and complete
originals of the minute books, stock records, stock ledger and corporate seal
(if available) of each of IQX, IQXpert and ETI, (ii) a copy of the Certificate
of Incorporation of each of IQX, IQXpert and ETI, each certified by the
Secretary of State of the state of such entity's incorporation, (iii) good
standing certificates evidencing the good standing of each of IQX, IQXpert and
ETI, each certified by the Secretary of State of such entity's incorporation and
(iv) a copy of the By-laws of each of IQX, IQXpert and ETI, each certified by
IQX's, IQXpert's and ETI's Secretary as being true and complete. The Majority
Stockholder shall have also delivered or made available to Buyer all Records.
7.7. Repayment of Related Party Loans. IQX shall have received
--------------------------------
repayment in full of all loans and other amounts owed to it by any director,
officer or employee of IQX, and any affiliates or associates thereof.
7.8. HSR Filing. The waiting period under the Hart-Scott-Rodino
----------
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable to
the Merger shall have expired or been terminated.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE STOCKHOLDERS TO
--------------------------------------------------------------
CLOSE; BUYER DELIVERIES. The obligations of the Stockholders to complete the
- -----------------------
Closing is subject to the fulfillment on or prior to the Closing Date of all of
the following conditions, any one or more of which (other than Sections 8.1 and
8.6 hereof) may be waived by the Majority Stockholder (on behalf of all of the
Stockholders), other than the condition set forth in Section 8.2 below which may
be waived only by each Stockholder severally, in writing:
8.1. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain, materially
delay or prohibit the transactions contemplated hereby.
32
<PAGE>
8.2. Buyer Shares. Each Stockholder shall have received from Buyer a
------------
stock certificate evidencing the number of Buyer Shares to be issued to such
Stockholder as set forth opposite such Stockholder's name on Schedule 3.1
------------
hereto.
8.3. Opinion of Buyer's Counsel. The Majority Stockholder shall have
--------------------------
received a legal opinion, dated the Closing Date, of Kirkpatrick & Lockhart LLP,
special counsel to Buyer, substantially in the form of Exhibit D attached
---------
hereto.
8.4. Secretary's Certificate. The Majority Stockholder shall have
-----------------------
received a certificate, dated the Closing Date and executed by the Secretary of
Buyer, setting forth a copy of the resolutions adopted by the Board of Directors
of Buyer duly authorizing and approving the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
8.5. Good Standing Certificate. Buyer shall have delivered to the
-------------------------
Majority Stockholder a good standing certificate evidencing the good standing of
Buyer certified by the Secretary of State of the State of New York.
8.6. HSR Filing. The waiting period under the HSR Act applicable to
----------
the Merger shall have expired or been terminated.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
------------------------------------------
right of Buyer fully to investigate the affairs and conditions of IQX and
notwithstanding any right of the Stockholders fully to investigate the affairs
and conditions of Buyer, Buyer and the Stockholders have the right to rely upon
the representations, warranties, covenants and agreements of the other parties
contained in this Agreement. All representations and warranties contained in
this Agreement (including the Schedules hereto) and in any certificate required
hereby to be delivered with respect hereto will be deemed to be representations
and warranties hereunder and, except for those representations and warranties
contained in Sections 4.1, 4.3, 4.7, 4.8, 4.17, 4.21, 4.25, 4.28, 5.1, 5.3, 5.7,
5.8, 5.15, 5.17, 5.19 and 5.21 hereof, shall survive for thirty (30) months
following the Closing Date. The representations and warranties contained in
Sections 4.1, 4.3, 4.7, 5.1, 5.3 and 5.7 hereof shall survive the Closing Date
indefinitely, and the representations and warranties contained in Sections 4.8,
4.17, 4.21, 4.25, 4.28, 5.8, 5.15, 5.17, 5.19 and 5.21 hereof shall survive
until the expiration of any applicable statute of limitations. All covenants and
agreements contained herein which are to be performed after the Closing shall
survive until fully performed in accordance with their terms, and all covenants
and agreements contained in Sections 6.1(a), (b), (h), (i) and (k) hereof which
are, in accordance with their terms, to be performed at or prior to the Closing
shall expire thirty (30) months following the Closing Date. No claim or cause of
action resulting from a breach hereunder may be asserted unless asserted in
writing to the party as to which or whom there is alleged a breach prior to the
expiration of the applicable survival period; provided, however, that the
-------- -------
representations, warranties, covenants and agreements hereunder shall survive
after the applicable survival period with respect to any claim made in writing
in accordance with this Agreement by a party prior to the expiration thereof
until, and shall expire when, such claim or cause of action is finally resolved.
33
<PAGE>
10. INDEMNIFICATION.
---------------
10.1. Obligations of IQX and/or the Stockholders to Indemnify.
-------------------------------------------------------
(a) Subject to the limitations and expiration dates contained in
Section 9 hereof and to this Section 10, IQX (if a claim is made prior to
Closing) and the Majority Stockholder shall, jointly and severally, indemnify,
defend and hold harmless Buyer and each of its directors, officers,
shareholders, agents, affiliates (including IQX after the Closing), successors
and permitted assigns (collectively, "Buyer's Related Indemnitees") from and
against, and shall pay and/or reimburse the foregoing persons for, any and all
losses, liabilities, claims, obligations, penalties, damages and costs and
expenses (including reasonable attorneys' fees and disbursements and other costs
incurred or sustained by an Indemnitee (as defined below) in connection with the
investigation, defense or prosecution of any such claim or any action or
proceeding between the Indemnitee and the Indemnifying Party (as defined below)
or between the Indemnitee and any third party or otherwise), whether or not
involving a third-party claim (collectively, "Losses"), relating to or arising
out of (i) subject to Section 10.1(b) hereof, the breach of any representation,
warranty, covenant or agreement of any of the Stockholders or IQX contained in
this Agreement; (ii) any claim, suit or action brought or made by a former
shareholder of International Computex, Inc. ("ICI") arising out of or relating
to the purchase of such shareholder's shares of ICI in connection with the
merger provided for in that certain Agreement and Plan of Merger, dated January
25, 1999, between Information Handling Services, Inc., IHS Itemquest II Inc.,
IHS Itemquest Inc. and International Computex, Inc. (the "ICI Merger") and any
related transactions, including, without limitation, in respect of any actual or
alleged violation of federal or state securities laws; (iii) any claim, suit or
action seeking or claiming an interest in any capital stock of Buyer and/or
seeking monetary damages brought or made by a person claiming to hold or have an
interest in any options, warrants or other securities of IQX, IQXpert or ICI, or
any successors or predecessors thereof, other than in respect of the IQX
Outstanding Options; provided, that IQXpert shall not be merged or consolidated
--------
with Buyer directly (excluding, for this purpose, with any direct or indirect
subsidiary of Buyer); (iv) any guarantee made by IQX to a third party in
connection with any Liabilities of IHS and/or any of its affiliates; and (v) the
failure of the Majority Stockholder to have obtained any Consents required in
connection with the transactions referred to in the Formation Agreement,
including the ICI Merger and any related transactions, other than the Consent
required in connection with the MTI Agreement.
(b) Notwithstanding anything to the contrary contained in Section
10.1(a) hereof, subject to the limitations and expiration dates contained in
Section 9 hereof and to this Section 10, each Minority Stockholder severally
shall indemnify, defend and hold harmless Buyer's Related Indemnitees from and
against, and shall pay and/or reimburse such Indemnitees for, any and all Losses
relating to or arising out of (i) any breach of such Stockholder's several
representations or warranties contained in Section 4 hereof; and (ii) any breach
of such Stockholder's obligation under Section 3.1 hereof to deliver the IQX
Shares owned by such Stockholder at the Closing.
10.2. Obligation of Buyer to Indemnify. Subject to the limitations
--------------------------------
and expiration dates contained in Section 9 hereof and to this Section 10, Buyer
shall indemnify, defend and hold harmless the Stockholders and their respective
directors, officers, shareholders,
34
<PAGE>
agents, affiliates, successors, heirs, legal beneficiaries and permitted assigns
from and against, and shall pay and/or reimburse the foregoing persons for, any
and all Losses relating to or arising out of (i) the breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement; and (ii) the guarantee set forth on Schedule 10.2 hereto made by IHS
-------------
to a third party in connection with any Liabilities of IQX.
10.3. Notice to Indemnifying Party. If any party (the "Indemnitee")
----------------------------
receives notice of any claim or the commencement of any action or proceeding
with respect to which the other party (or parties) is obligated to provide
indemnification (the "Indemnifying Party") pursuant to Sections 10.1 or 10.2
hereof, the Indemnitee shall give the Indemnifying Party written notice thereof
within a reasonable period of time following the Indemnitee's receipt of such
notice. Such notice shall describe the claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the Losses that have been or may
be sustained by the Indemnitee. The Indemnifying Party may, subject to the other
provisions of this Section 10.3, compromise or defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any such
matter involving the asserted liability of the Indemnitee in respect of a third-
party claim. If the Indemnifying Party elects to compromise or defend such
asserted liability, it shall within thirty (30) days (or sooner, if the nature
of the asserted liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee, shall reasonably cooperate, at the request and
reasonable expense of the Indemnifying Party, in the compromise of, or defense
against, such asserted liability. The Indemnifying Party will not be released
from any obligation to indemnify the Indemnitee hereunder with respect to a
claim without the prior written consent of the Indemnitee, unless the
Indemnifying Party delivers to the Indemnitee a duly executed agreement settling
or compromising such claim with no monetary liability to or injunctive relief
against the Indemnitee and a complete release of the Indemnitee with respect
thereto. The Indemnifying Party shall have the right, except as provided below
in this Section 10.3, to conduct and control the defense of any third-party
claim made for which it has been provided notice hereunder. All costs and fees
incurred with respect to any such claim will be borne by the Indemnifying Party.
The Indemnitee will have the right to participate, but not control, at its own
expense, the defense or settlement of any such claim; provided, that if the
--------
Indemnitee and the Indemnifying Party shall have conflicting claims or defenses,
the Indemnifying Party shall not have control of such conflicting claims or
defenses and the Indemnitee shall be entitled to appoint a separate counsel for
such claims and defenses at the cost and expense of the Indemnifying Party. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are reasonably required for such defense.
10.4. Limitation on Indemnification. The Majority Stockholder, on
-----------------------------
the one hand, and Buyer, on the other hand, shall be obligated to indemnify any
Indemnitee pursuant to Sections 10.1(a) and 10.2 hereof, respectively, with
respect to any Loss incurred by such Indemnitee only if and to the extent that
the aggregate amount of Losses for claims made by all Indemnitees shall exceed
$200,000, in which case only the excess over $200,000 shall be subject to
indemnification hereunder; provided, however, that the foregoing $200,000
-------- -------
limitation shall not apply in respect of claims arising out of or resulting from
breach(es) of Sections 3.1, 4.1, 4.3, 4.7, 4.16, 4.17, 4.28, 5.1, 5.3, 5.7,
5.15, 5.21, 6.1(d), (i) and (k), 6.2(a), (b), (c), (g), (h) and (r),
10.1(a)(iii), (iv) and (v) or 10.2(ii) hereof. In no event shall the
Stockholders or Buyer, as the
35
<PAGE>
case may be, be liable to any Indemnitee hereunder for special, indirect,
incidental or punitive damages.
10.5. Other Provisions. Buyer shall be entitled to offset and reduce
----------------
any amounts owed by it to the Stockholders hereunder by all amounts due in
respect of Losses for which Buyer (or any related Indemnitee) is entitled to
indemnification under Section 10.1(a) and/or (b) hereof. A Stockholder shall be
entitled to offset and reduce any amounts owed by such Stockholder to Buyer
hereunder by all amounts due in respect of Losses for which such Stockholder (or
any related Indemnitee) is entitled to indemnification under Section 10.2
hereof. For purposes of this Section 10.5, "amounts due" means (i) any amount
that the parties involved in the offset claim agree in writing to be due and
payable or (ii) any amount determined to be due and payable pursuant to the
binding determination of three jointly selected arbitrators or a court of
competent jurisdiction.
10.6. Exclusive Remedy. The parties hereto agree that (absent fraud)
----------------
the sole and exclusive remedy and recourse with respect to any and all claims,
suits, actions, demands, liabilities, losses, expenses and damages relating to
or arising out of the subject matter of this Agreement shall be pursuant, and
subject, to the indemnification provisions set forth in this Section 10, subject
to the provisions of Section 6.2(d) hereof.
11. TERMINATION. This Agreement may be terminated prior to the
-----------
Closing:
(a) at any time by the mutual written consent of Buyer and the
Majority Stockholder;
(b) by the Majority Stockholder or Buyer in writing if the Closing
shall not have occurred by December 31, 1999, but only if the
Closing shall not have occurred for a reason other than the
material breach by such terminating party of any of its
representations, warranties, covenants or agreements contained
herein;
(c) at any time by Buyer in writing upon a material breach of any
of the representations, warranties, covenants or agreements of
IQX and/or the Stockholders contained in this Agreement; or
(d) at any time by the Majority Stockholder in writing upon a
material breach of any of the representations, warranties,
covenants or agreements of Buyer contained in this Agreement.
In the event of termination of this Agreement by a party as set forth
above, this Agreement shall forthwith terminate and there shall be no liability
on the part of the Stockholders, IQX or Buyer, or any of their respective equity
owners, officers, directors, affiliates and employees; provided, that no party
--------
shall be relieved of any Losses occurring or sustained as a result of a
termination following a material breach of such party's representations,
warranties, covenants or agreements contained herein. Notwithstanding any
termination of this Agreement, the provisions of Section 6.2(c), this Section 11
and Section 12 hereof shall survive.
36
<PAGE>
12. MISCELLANEOUS.
-------------
12.1. Consent to Jurisdiction. Any legal action, suit or proceeding
-----------------------
in equity or at law arising out of or relating to this Agreement and the
transactions contemplated hereby shall be instituted exclusively in the state or
Federal courts located in the State and County of New York and each party agrees
not to assert, by way of motion, as a defense, or otherwise, in any such action,
suit or proceeding, any claim that such party is not subject personally to the
jurisdiction of any such court, that the action, suit or proceeding is brought
in an inconvenient forum, that the venue of the action, suit or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by any such court. Each party further irrevocably submits to the
jurisdiction of any such court in any such action, suit or proceeding. Any and
all service of process and any other notice in any such action, suit or
proceeding shall be effective against any party if given personally or by
registered or certified mail, return receipt requested, or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such party as
herein provided. Nothing herein contained shall be deemed to affect or limit the
right of any party to serve process in any other manner permitted by applicable
law.
12.2. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following meanings unless the context otherwise clearly
requires:
(a) "affiliate," with respect to any person, means and includes any
---------
other person, directly or indirectly, controlling, controlled by or under common
control with such person.
(b) "associate" shall have the meaning ascribed thereto in Rule
---------
405 of the Securities Act.
(c) "Buyer's knowledge" means the actual knowledge of the executive
-----------------
officers of Buyer after their conducting reasonable inquires of the appropriate
employees of Buyer.
(d) "CAPSxpert Database" means the collection of information on
------------------
electronic components, including semiconductor devices and integrated circuits,
PCB-type connectors, multipin connectors, resistors, capacitators and inductors.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and
----
the applicable Treasury Regulations (as hereinafter defined).
(f) "contract or other agreement" means and includes all contracts,
---------------------------
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, commitments, obligations or other binding arrangements, oral
or written.
(g) "DATA/PAL Assets" means the rights to the DATA Digest books and
---------------
DATA/PAL cd-rom products, all accounts receivable associated with such products
and any other assets principally related to such products.
(h) "Environmental Claim" means any and all administrative,
-------------------
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, Liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person alleging
37
<PAGE>
potential Liability (including Liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (i) the presence, or release or
threatened release into the environment, of any Hazardous Materials at any
location (whether or not owned) presently or formerly operated, leased or
managed by IQX or Buyer, as applicable, or (ii) any and all claims by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or release of any
Hazardous Materials.
(i) "Environmental Laws" mean any laws, statutes, regulations, rules
------------------
or orders which relate to or otherwise impose Liability or a standard of conduct
concerning the discharge, emission, storage, treatment, transportation,
handling, release, threatened release, or disposal of Hazardous Materials,
including, but not limited to, the Air Pollution Control Act, as amended, the
Federal Water Pollution Control Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, and the Toxic Substances
Control Act of 1976, as amended, and any other similar federal, state or local
statutes.
(j) "Financial Support Arrangements" means any obligations, contingent
------------------------------
or otherwise, of a person in respect of any Liability of another person,
including but not limited to remaining Liabilities that are assigned,
transferred or otherwise delegated to another person, if any, letters of credit
and standby letters of credit (including any related reimbursement or indemnity
agreements), direct or indirect guarantees, endorsements (except for collection
or deposit in the ordinary course of business), notes co-made or discounted,
recourse agreements, take-or-pay agreements, keep-well agreements, contribution
agreements, agreements to purchase or repurchase the indebtedness, obligation or
liability of another person or any security therefor or to provide funds for the
payment or discharge thereof, agreements to maintain solvency, assets, level of
income or other financial condition, agreements to make payment other than for
value received and any other financial accommodations.
(k) "GAAP" means United States generally accepted accounting
----
principles.
(l) "Hazardous Materials" means any pollutant, contaminant, hazardous,
-------------------
radioactive or toxic substance, material, constituent or waste, or any other
waste, substance, chemical or material regulated under any Environmental Law,
including (i) petroleum, crude oil and any fractions thereof, (ii) natural gas,
synthetic gas and any mixtures thereof, (iii) asbestos and/or asbestos-
containing material, (iv) radon and (v) polychlorinated biphenyls ("PCBs"), or
materials or fluids containing PCBs.
(m) "HSR Filing" means the joint filing under the HSR Act (as defined
----------
in Section 7.8 hereof) made by Buyer and Thyssen-Bornemisza Continuity Trust on
November 12, 1999.
(n) "IQX's and the Majority Stockholder's knowledge" means with
----------------------------------------------
respect to (i) IQX, the actual knowledge of the executive officers of IQX after
their conducting reasonable inquiries of the appropriate employees of IQX,
IQXpert and ETI and/or (ii) the Majority
38
<PAGE>
Stockholder, the actual knowledge of the executive officers of such Stockholder
after conducting reasonable inquiries.
(o) "Liabilities" means debts, liabilities or obligations, whether
-----------
absolute or contingent, asserted or unasserted, accrued or unaccrued, known or
unknown, liquidated or unliquidated, matured or unmatured, due or to become due,
or fixed or unfixed.
(p) "Lien" means and includes any lien, pledge, mortgage, security
----
interest, claim, lease, charge, option, right of first refusal or offer,
easement, servitude, transfer restriction or voting requirement under any or
similar agreement, or any other encumbrance, restriction or limitation
whatsoever. "Lien" shall not include any liability pursuant to Section 630 of
the BCL.
(q) "person" means any individual, corporation, partnership, firm,
------
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
(r) "property" means real, personal or mixed property, tangible or
--------
intangible.
(s) "Tax Returns" means all written returns, declarations, reports,
-----------
forms, estimates, information returns and statements filed in respect of any
Taxes and supplied to any taxing authority in connection with any Taxes.
(t) "Taxes" (or "Tax" where the context requires) means all federal,
----- ---
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll-related and property
taxes, and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest and penalties with respect thereto.
(u) "Thrift Plan" means the TBG Thrift Plan.
-----------
(v) "Treasury Regulations" means the regulations promulgated under the
--------------------
Code.
12.3. Publicity. No publicity release or announcement concerning
---------
this Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof by Buyer and the Majority
Stockholder jointly (which approval shall not be unreasonably withheld, delayed
or conditioned) other than any announcement required by applicable securities
laws or the rules and regulations of any stock or similar exchange to which a
party is subject; provided, that the party making such disclosure shall notify
--------
the other party reasonably in advance of such disclosure.
12.4. Notices. Any notice or other communication required or which
-------
may be given hereunder shall be in writing and shall be delivered personally,
sent by facsimile transmission (with confirming copy by overnight courier), or
by a recognized overnight courier for next business day delivery, certified,
registered, or express mail, postage or fees prepaid, and shall be deemed given
when so delivered personally, sent by facsimile transmission with
39
<PAGE>
electronic confirmation of receipt or the next business day after delivered to
such overnight courier or express mail service or, if mailed, five (5) days
after the date of mailing, as follows:
if to Buyer, to:
PartMiner, Inc.
432 Park Avenue South
12/th/ Floor
New York, NY 10016
Attn: General Counsel
Fax: (212) 592-5833
with a copy to:
Kirkpatrick & Lockhart LLP
1251 Avenue of the Americas
New York, NY 10020
Attn: Stephen R. Connoni, Esq.
Fax: (212) 536-3901
if to any of the Stockholders:
c/o TBG Services Inc.
565 Fifth Avenue
New York, NY 10017
Attn: General Counsel
Fax: (212) 850-8503
with a copy to:
Gambrell & Stolz, L.L.P.
Suntrust Plaza
303 Peachtree Street
Suite 4300
Atlanta, GA 30308
Attn: Henry B. Levi, Esq.
Any party may by notice given in accordance with this Section 12.4 to
the other parties designate another address or person for receipt of notices
hereunder.
12.5. Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto) and the certificates executed in connection with the
consummation of the transactions contemplated hereby embody the entire agreement
and understanding of the parties with respect
40
<PAGE>
to the subject matter hereof and supersede all prior agreements and
understandings between the parties hereto.
12.6. Waivers and Amendments. This Agreement may be amended,
----------------------
superseded or canceled only by a written instrument signed by Buyer and the
Majority Stockholder on behalf of all the Stockholders. Any of the terms or
conditions hereof may be waived only by a written instrument signed by the party
or parties to be bound thereby. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right, power or privilege
hereunder, nor any single or partial exercise of any right, power or privilege
hereunder, preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.
12.7. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, legal beneficiaries and heirs. This Agreement and any rights
or obligations hereunder shall not be assignable or delegable by any party
except with the prior written consent of the other parties and except that,
after the Closing, Buyer may assign its rights hereunder to any affiliate
thereof; provided, that such assignment shall not release Buyer from its
--------
obligations hereunder.
12.8. Variations in Pronouns. All pronouns and any variations
----------------------
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
12.9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
12.10. Headings. The headings in this Agreement are for reference
--------
purposes only and shall not in any way affect or limit the meaning or
interpretation of this Agreement.
12.11. No Strict Construction. The language used in this Agreement
----------------------
has been negotiated by the parties and will be deemed to be the language chosen
by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party.
12.12. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such jurisdiction.
12.13. No Third Party Beneficiaries. Except as provided in Sections
----------------------------
6.2(b)(ii), 10.1 and 10.2 hereof, there are no intended third party
beneficiaries to this Agreement and this Agreement does not confer, and shall
not be construed to confer, upon any person, other than the parties, any rights,
privileges or remedies hereunder or otherwise.
12.14. Subsidiaries. For purposes of this Agreement, all references
------------
to IQX and Buyer in this Agreement shall, unless the context specifically
indicates otherwise, be deemed to be references to IQX and each of its
subsidiaries (and shall include the DATA/PAL Assets) and Buyer and each of its
subsidiaries, respectively.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Merger on the date first above written.
PARTMINER, INC.
/s/ Daniel Nissanoff
By:______________________________________________
Name: Daniel Nissanoff
Title: President and Chief Executive Officer
PARTMINER ACQUISITION CORP.
/s/ Daniel Nissanoff
By:________________________________________
Name:
Title:
IQXPERT HOLDINGS INC.
/s/ Stephen Green
By:________________________________________
Name:
Title:
INFORMATION HANDLING SERVICES INC.
/s/ Stephen Green
By:________________________________________
Name:
Title:
THYBO NEW VENTURES LIMITED
/s/ C.A. Hughes
By:________________________________________
Name:
Title:
42
<PAGE>
/s/ Emil H. Dahan
__________________________________________
Emil H. Dahan
/s/ Michael J. Galvin
__________________________________________
Michael J. Galvin
/s/ Patricia Tuxbury Salem
__________________________________________
Patricia Tuxbury Salem
/s/ Peter W. Jeng
__________________________________________
Peter W. Jeng
/s/ James L. McAlarney, III
__________________________________________
James L. McAlarney, III
<PAGE>
EXHIBIT 10.9
______________________________________________________________________________
______________________________________________________________________________
STOCK PURCHASE AGREEMENT
by and between
PARTMINER, INC.,
ACCURATE COMPONENTS INC.,
MARKET TRADING CONCEPTS INC.
AND
ANTHONY ARENA
____________________
Dated: November 12, 1999
____________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. SALE AND PURCHASE OF THE SHARES.......................................... 1
1.1. Sale and Purchase................................................... 1
2. CLOSING.................................................................. 1
2.1. Time and Place...................................................... 1
3. CONSIDERATION FOR THE SHARES; PAYMENT; PURCHASE PRICE ADJUSTMENT......... 1
3.1. Amount of Purchase Price............................................ 1
3.2. Payment at Closing.................................................. 2
3.3. Closing Payment Adjustment.......................................... 2
3.4. Contingent Payment(s)............................................... 2
3.5. Dispute Resolution Procedures....................................... 4
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER........................ 5
4.1. Title to Shares..................................................... 5
4.2. Due Organization and Qualification; Subsidiaries.................... 5
4.3. Capitalization; Options; Shareholder Rights......................... 5
4.4. Constituent Documents............................................... 6
4.5. Financial Statements................................................ 6
4.6. Absence of Changes.................................................. 6
4.7. Power and Authority................................................. 7
4.8. Tax Matters......................................................... 7
4.9. Customers........................................................... 8
4.10. Compliance with Laws; Permits...................................... 8
4.11. No Breach; Consents; Change of Control Payments.................... 9
4.12. Litigation; Claims................................................. 9
4.13. Employment Matters................................................. 9
4.14. Material Agreements................................................ 10
4.15. Real Estate........................................................ 10
4.16. Accounts and Notes Receivable; Payables............................ 11
4.17. Intangible Property................................................ 11
4.18. Title to Properties and Assets..................................... 12
4.19. No Undisclosed Liabilities......................................... 12
4.20. Inventories........................................................ 12
4.21. Employee Benefit Plans............................................. 13
4.22. Insurance.......................................................... 14
4.23. No Misrepresentations.............................................. 14
4.24. Transactions with Related Parties.................................. 14
4.25. Environmental Matters.............................................. 14
4.26. Year 2000.......................................................... 14
4.27. Bank Accounts; Powers of Attorney.................................. 15
4.28. Brokers............................................................ 15
4.29. Disclosure Schedules............................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.30. Other Shareholder Representations.................................. 15
4.31. No Other Representations........................................... 15
5. REPRESENTATIONS AND WARRANTIES OF BUYER.................................. 15
5.1. Due Organization.................................................... 15
5.2. Power of Buyer...................................................... 16
5.3. No Breach........................................................... 16
5.4. Governmental and Other Consents..................................... 16
5.5. Brokers............................................................. 16
5.6. Investment in Shares................................................ 16
6. COVENANTS AND AGREEMENTS................................................. 17
6.1. Pre-Closing Covenants and Agreements................................ 17
(a) Ongoing Operations................................................. 17
(b) Investigation by Buyer............................................. 16
(c) Further Assurances................................................. 18
(d) Additional Disclosure.............................................. 18
(e) Exclusive Dealings................................................. 18
(f) Resignations....................................................... 19
(g) Records............................................................ 19
(h) Fees and Disbursements............................................. 19
(i) Maintenance of Insurance........................................... 19
(j) Transfer Taxes..................................................... 19
(k) Supplemental Disclosure............................................ 19
6.2. Post-Closing Covenants and Agreements............................... 19
(a) Non-Interference................................................... 20
(b) Non-Compete........................................................ 20
(c) Confidentiality.................................................... 20
(d) Equitable Relief................................................... 21
(e) The Companies' Employees........................................... 22
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE................. 22
7.1. Agreements and Conditions........................................... 22
7.2. Representations and Warranties...................................... 23
7.3. Loss, Damage or Destruction......................................... 23
7.4. No Legal Proceedings................................................ 23
7.5. Officer's Certificate............................................... 23
7.6. [Intentionally Omitted.]............................................ 23
7.7. Opinion of the Companies' Counsel................................... 23
7.8 Secretary's Certificate............................................. 23
7.9 Shares.............................................................. 24
7.10. Resignations....................................................... 24
7.11. Material Adverse Change............................................ 24
7.12. Minute Books and Stock Records; Certified Documents................ 24
7.13. Repayment of Related Party Loans................................... 24
7.14. Employment Agreement of Shareholder................................ 24
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SHAREHOLDER TO CLOSE....... 24
8.1. Agreements and Conditions........................................... 24
8.2. Representations and Warranties...................................... 25
8.3. No Legal Proceedings................................................ 25
8.4. Officer's Certificate............................................... 25
8.5. Payment of the Closing Payment...................................... 25
8.6. Opinion of Buyer's Counsel.......................................... 25
8.7. Employment Agreement of Shareholder................................. 25
8.8. Option Agreement.................................................... 25
8.9 Payments and Mortgage Discharge..................................... 25
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................... 25
10. INDEMNIFICATION......................................................... 26
10.1. Obligations of the Companies and/or the Shareholder to Indemnify.. 26
10.2. Obligation of Buyer to Indemnify.................................. 27
10.3. Notice to Indemnifying Party...................................... 27
10.4. Limitation on Indemnification..................................... 28
10.5. Relationship with Purchase Price Adjustment....................... 29
10.6. Other Provisions.................................................. 29
10.7. Exclusive Remedy.................................................. 30
11. TERMINATION............................................................. 30
12. MISCELLANEOUS........................................................... 30
12.1. Consent to Jurisdiction........................................... 30
12.2. Certain Definitions............................................... 31
12.3. Publicity......................................................... 32
12.4. Notices........................................................... 33
12.5. Entire Agreement.................................................. 34
12.6. Waivers and Amendments............................................ 34
12.7. Binding Effect; Assignment........................................ 34
12.8. Variations in Pronouns............................................ 34
12.9. Counterparts...................................................... 34
12.10. Headings......................................................... 34
12.11. No Strict Construction........................................... 34
12.12. Governing Law.................................................... 34
12.13. No Third Party Beneficiaries..................................... 34
</TABLE>
SCHEDULES:
Schedule 3.3 Working Capital Calculation
Schedule 3.3B Advances and Shareholder Mortgage
Schedule 3.4 Gross Profit Calculation Example
Schedule 4.2 Qualifications
Schedule 4.5 Financial Statements
iii
<PAGE>
Schedule 4.6 Absence of Changes
Schedule 4.8 Tax Matters
Schedule 4.9 Ten Largest Customers
Schedule 4.10 Permits
Schedule 4.11 Consents
Schedule 4.12 Litigation; Claims
Schedule 4.13 Confidentiality and/or Non-Disclosure Agreements; Bonus or Other
Payments
Schedule 4.13A Compensation
Schedule 4.14 Material Agreements
Schedule 4.15 Leases
Schedule 4.17 Intangible Property
Schedule 4.18 Liens
Schedule 4.19 Material Liabilities
Schedule 4.20 Inventories
Schedule 4.21 Employee Benefit Plans
Schedule 4.22 Insurance
Schedule 4.24 Related Transactions
Schedule 4.26 Year 2000
Schedule 4.27 Bank Accounts; Powers of Attorney
EXHIBITS:
Exhibit A Five (5) Top Performing Sales Employees
Exhibit B List of Senior Employees
Exhibit C Legal Opinion of Nixon Peabody LLP
Exhibit D Arena Employment Agreement
Exhibit E Legal Opinion of Kirkpatrick & Lockhart LLP
Exhibit F Stock Option Agreement
iv
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (this "Agreement"), dated November 12, 1999,
by and between PartMiner, Inc., a New York corporation ("Buyer"), Accurate
Components Inc., a New York corporation ("Accurate"), Market Trading Concepts
Inc., a New York corporation ("Market Trading"; and together with Accurate, the
"Companies"), and Anthony Arena (the "Shareholder").
WHEREAS, the Shareholder is the beneficial and record owner of all of
the issued and outstanding capital stock of each of Accurate (the "Accurate
Shares") and Market Trading (the "Market Trading Shares"; and together with the
Accurate Shares, the "Shares"); and
WHEREAS, the Shareholder desires to sell to Buyer, and Buyer desires
to purchase from the Shareholder, the Shares, all in the manner and subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. SALE AND PURCHASE OF THE SHARES.
-------------------------------
1.1. Sale and Purchase. On the Closing Date (as defined below in
-----------------
Section 2.1) and subject to the terms and conditions contained herein, the
Shareholder hereby agrees to sell, convey and transfer to Buyer, and Buyer
hereby agrees to purchase from the Shareholder, the Shares. On the Closing Date,
the Shareholder shall deliver to Buyer, against payment by Buyer of the Closing
Payment (as defined in Section 3.2 hereof), stock certificates representing all
the Shares, duly endorsed in blank or with duly executed stock powers attached
thereto, in proper form for transfer, free and clear of all Liens (as defined in
Section 12.2 hereof).
2. CLOSING.
-------
2.1. Time and Place. The closing of the sale and purchase of the
--------------
Shares (the "Closing") shall take place at the offices of Kirkpatrick & Lockhart
LLP, 1251 Avenue of the Americas, New York, New York 10020, at 10:00 a.m., local
time, on November 12, 1999, or at such other time, date and/or place as the
parties may mutually agree in writing. The date upon which the Closing shall
occur is hereinafter referred to as the "Closing Date."
3. CONSIDERATION FOR THE SHARES; PAYMENT; PURCHASE PRICE ADJUSTMENT.
----------------------------------------------------------------
3.1. Amount of Purchase Price. The aggregate purchase price for the
------------------------
Shares shall be the sum of (i) $7,400,000, subject to adjustment pursuant to
Section 3.3 hereof (the "Initial Purchase Price"); and (ii) any contingent
payments due and payable pursuant to Section 3.4 hereof (subsections (i) and
(ii) collectively, the "Purchase Price"). The portions of the Purchase Price
attributable to the Accurate Shares and to the Market Trading Shares shall be
agreed to by the Shareholder and Buyer as soon as practicable following the
Closing. Additionally, Buyer will pay to the Shareholder at Closing, interest at
a rate of seven (7%) percent per annum on the Closing Payment for the period
from and after September 30, 1999
<PAGE>
until October 31, 1999 (i.e., $38,191); provided, that the foregoing obligation
--------
of Buyer to pay interest is subject to the obligations of the Shareholder and
the Companies not to take any actions or omit to take any actions in breach of
this Agreement that result in an unreasonable delay of the Closing. In the event
that the Closing has not occurred by December 1, 1999, and the parties at such
time still intend to seek to effect the transactions contemplated hereby, the
parties will meet in good faith to discuss the payment and amount of any future
additional interest.
3.2. Payment at Closing. At Closing, Buyer shall pay to the
------------------
Shareholder the aggregate amount of $7,400,000 less the adjustments required
pursuant to Section 3.3 hereof (the "Closing Payment") for the Shares. The
Closing Payment (and interest due pursuant to Section 3.1 hereof) shall be paid
by Buyer's delivery to the Shareholder of a wire transfer of immediately
available funds to such account(s) as shall be designated by the Shareholder.
3.3. Closing Payment Adjustment. (a) Buyer and the Shareholder agree
--------------------------
that the Initial Purchase Price shall be decreased by $440,769 (the "Adjustment
Amount") reflecting the amount by which the Companies' "working capital" as of
September 30, 1999 was less than $3,500,000. As used in this Section 3.3,
-----------
"working capital" shall mean the Companies' current assets less their current
liabilities as derived from and based on, except as otherwise provided in
Schedule 3.3 hereto, the Interim Financial Statements. Interim Financial
- ------------
Statements shall mean the combined financial statements of the Companies as at
and for the nine-month period ended on September 30, 1999 prepared by the
Companies and audited by Buyer's independent auditors and which are attached as
part of Schedule 4.5 hereto. "Working capital" and the Adjustment Amount have
------------
been calculated as set forth on Schedule 3.3 hereto.
-------------------
(b) In addition, the (i) the advances to the Shareholder listed on
Schedule 3.3B (which have been included as a current asset for purposes of
- -------------
Section 3.3(a)) and (ii) the outstanding balance on the mortgage loan to the
Shareholder listed on Schedule 3.3B (which balance has been included as a
-------------
current asset for purposes of Section 3.3(a)) shall be paid by the Shareholder
by deducting such amounts from the Initial Purchase Price. At the Closing, the
Companies and Buyer shall acknowledge that such advances and mortgage loan have
been paid in full and the Companies shall deliver a full satisfaction and
discharge of the mortgage listed on Schedule 3.3B.
-------------
3.4. Contingent Payment(s).
---------------------
(a) In addition to the Initial Purchase Price, Buyer will pay up to a
maximum of $1,700,000 as additional purchase price for the Shares, payable as,
and subject to the provisions, set forth below, and subject to the express
provisions of Section 3.4(e) hereof and the Arena Employment Agreement (as
defined in Section 7.14 hereof) (the "Contingent Payments"):
(i) If the Companies' 1999 EBIT (as defined below) shall equal
or exceed $1,500,000, Buyer shall pay to the Shareholder $510,000 (the "First
Contingent Payment") no later than March 31, 2000, following the completion of
the audit of Buyer's consolidated financial statements for the fiscal year ended
December 31, 1999 (the "1999 Audit"). As used herein, the "Companies' 1999 EBIT"
shall mean the earnings of the Companies before reduction for the payment of
interest and taxes for the fiscal year ended December 31, 1999. Such amount
shall be determined by Buyer in connection with the performance of the 1999
Audit and in a
2
<PAGE>
manner consistent with the preparation and presentation of the income statement
included in the Interim Financial Statements; provided, that, for the period
--------
following the Closing Date through December 31, 1999, the Companies shall be
treated for the purposes hereof on a stand-alone basis and any intercompany
transactions between Buyer and the Companies shall be eliminated.
(ii) If the condition set forth below in this subsection (ii) is
met, Buyer shall pay to the Shareholder $1,190,000 (the "Second Contingent
Payment") no later than March 31, 2001, following the completion of the audit of
Buyer's consolidated financial statements for the fiscal year ended December 31,
2000 (the "2000 Audit"):
the aggregate "gross profit" (as defined below) generated by and
attributable to the Companies and the office (other than the contract
manufacturing division thereat) of Buyer currently located at Airport Corporate
Center, 630 Johnson Avenue, Bohemia, New York, or such other substitute location
at which Buyer may install the operations presently located thereat (other than
the contract manufacturing division thereat) in the future ("PartMiner Long
Island"), for Buyer's fiscal year 2000 ("2000 Gross Profit") shall equal or
exceed $9,751,580. As used herein, "gross profit" shall mean gross sales
(revenues), less sales returns, minus direct product cost (i.e., the cost of
---
products paid by the Companies and/or Buyer). 2000 Gross Profit shall be
determined by Buyer in connection with the performance of the 2000 Audit and
shall be determined in good faith by Buyer and in a manner consistent with the
determination of "gross profit" based on the Interim Financial Statements, with
adjustments thereto consistent with those made in determining gross profit as
set forth on Schedule 3.4 hereto. Buyer represents that Schedule 3.4 fairly
------------ ------------
presents the gross sales and direct product cost amounts for PartMiner Long
Island for the nine-month period ended September 30, 1999. A calculation of
"gross profit" for the nine months ended September 30, 1999 is set forth on
Schedule 3.4.
- ------------
(b) Buyer agrees that it will cause the 1999 Audit and 2000 Audit,
respectively, to be completed no later than ninety (90) days after the end of
the fiscal years ending on December 31, 1999 and December 31, 2000,
respectively. Buyer shall deliver to the Shareholder a copy of Buyer's audited
financial statements for fiscal years 1999 and 2000 when such become generally
available. Additionally, Buyer will pay to the Shareholder interest, at the rate
of 10% per annum, on any Contingent Payment which is payable to the Shareholder
hereunder which shall not have been paid on or before March 31, 2000 in the case
of the First Contingent Payment and March 31, 2001 in the case of the Second
Contingent Payment.
(c) (i) Buyer shall provide to the Shareholder a certificate setting
forth in reasonable detail all of the determinations and calculations required
to be made pursuant to subsections (a)(i) and (ii) above, along with the
relevant financial information and statements from which they were derived and
copies of any accounting workpapers and other documentation regarding the
calculations.
(ii) Buyer shall use its commercially best efforts to permit the
Companies and PartMiner Long Island operations to be conducted on a stand-alone
basis and in a manner which shall readily allow the determinations of 1999 EBIT
and 2000 Gross Profit to be made in accordance with subsections 3.4(a)(i) and
(ii) above. If, and to the extent that, Buyer cannot do the foregoing, Buyer
shall notify the Shareholder in writing and the 1999 EBIT and 2000 Gross Profit
shall be determined by Buyer, after making and giving effect to any adjustments
as Buyer shall
3
<PAGE>
reasonably and equitably determine are necessary. Buyer further agrees that from
the Closing until January 1, 2001 Buyer shall not restrict, and shall not
prevent the Companies from, the hiring of employees who are dedicated to
generating sales for the Companies (or Buyer in respect of the portion of
Buyer's business which was operated by the Companies prior to the Closing) and
PartMiner Long Island such that the number of such dedicated employees is not
less than 110% of the number of such dedicated employees of the Companies and
PartMiner Long Island as of the date hereof (which number the parties hereby
agree is 41). Any material breach by Buyer of the provisions set forth in the
immediately preceding sentence shall entitle the Shareholder to the full amount
of the Second Contingent Payment whether or not the conditions to entitlement
therefor shall have been satisfied.
(d) The parties hereby acknowledge and agree that:
(i) any payment(s) due pursuant to this Section 3.4 shall be
made by Buyer's delivery to the Shareholder of a wire transfer of immediately
available funds;
(ii) except as provided in Section 3.4(e) hereof, the First
Contingent Payment and/or the Second Contingent Payment shall be payable if and
only if the conditions set forth in Section 3.4(a)(i), with respect to the First
Contingent Payment, and/or Section 3.4(a)(ii), with respect to the Second
Contingent Payment, are satisfied in full, and that the Shareholder is not, and
will not be, entitled to any partial or pro rata payments of the First
Contingent Payment and/or the Second Contingent Payment; and
(iii) the Shareholder's entitlement to the First Contingent
Payment is not dependent on the Shareholder's entitlement to the Second
Contingent Payment and vice-versa, and the Shareholder's failure to become
entitled to either the First Contingent Payment or the Second Contingent Payment
shall not impair any entitlement to the other.
(e) Notwithstanding anything to the contrary in this Section 3.4
hereof, the Shareholder shall be entitled to be paid the Contingent Payments
(not already paid) immediately in the event that the Shareholder's employment
pursuant to the Arena Employment Agreement is terminated by the Company other
than for Cause (as defined in the Arena Employment Agreement) or by the
Shareholder for Good Reason (as defined in the Arena Employment Agreement) prior
to January 1, 2001, as provided in Section 5(e)(i) of the Arena Employment
Agreement (subject to Section 5(e)(i)(x) thereof).
3.5. Dispute Resolution Procedures. If any party disputes any
-----------------------------
calculation or determination made pursuant to Section 3.4(a)(i) and/or (ii)
hereof or any financial statements or other information from which such
calculation or determination shall be derived, then within fifteen (15) calendar
days of his/its receipt of the challenged calculation or determination he/it
shall notify in writing the other party to this Agreement. Upon receipt of such
a notice, the parties hereby agree to negotiate in good faith for a period of
fifteen (15) calendar days to attempt to resolve such dispute. If the parties
are unable to resolve the dispute within such fifteen (15) calendar day period
then such dispute shall be promptly submitted to the American Arbitration
Association's New York City office for final and binding arbitration before
three arbitrators. Any such arbitration shall be resolved using the American
Arbitration Association's rules for expedited commercial arbitration. Each party
to the arbitration shall bear his/its own costs and expenses (including the fees
of counsel,
4
<PAGE>
accountants and/or other experts). The fees and expenses of the arbitrator(s)
shall be borne by the party against whose position the arbitrators substantially
rules.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. Subject to
-------------------------------------------------
Section 10 hereof, the Shareholder hereby represents and warrants to Buyer as
follows:
4.1. Title to Shares. The Accurate Shares constitute, and at Closing
---------------
will constitute, all of the issued capital stock of Accurate. The Shareholder is
the sole beneficial and record owner of the Accurate Shares, free and clear of
all Liens (as defined in Section 12.2 hereof). The Market Trading Shares
constitute, and at Closing will constitute, all of the issued capital stock of
Market Trading. The Shareholder is the sole beneficial and record owner of the
Market Trading Shares, free and clear of all Liens. Upon delivery of the Closing
Payment to the Shareholder for the Shares, Buyer shall acquire from the
Shareholder good and marketable title to the Shares, free and clear of all
Liens.
4.2. Due Organization and Qualification; Subsidiaries. Each of
------------------------------------------------
Accurate and Market Trading is duly organized, validly existing and in good
standing under the laws of the State of New York. Each of Accurate and Market
Trading has all requisite power and authority to own, lease and operate its
assets and properties and to carry on its respective businesses as presently
conducted and as presently contemplated. Each of Accurate and Market Trading is
duly qualified to transact business and is in good standing in each jurisdiction
in which the nature of its business or the location of its property (as defined
in Section 12.2 hereof) requires such qualification, except where the failure to
do so is not reasonably expected to have a material adverse effect on the
business, operations, assets or condition (financial or otherwise) of the
Companies taken as a whole. The jurisdictions in which Accurate and Market
Trading are qualified or licensed to do business are set forth on Schedule 4.2
------------
hereto. Neither Accurate nor Market Trading has any subsidiaries or any other
equity or beneficial interest or investment in any other person (as defined in
Section 12.2 hereof).
4.3. Capitalization; Options; Shareholder Rights.
-------------------------------------------
(a) The authorized capital stock of Accurate consists solely of 200
shares of common stock, no par value ("Accurate Common Stock"). On the Closing
Date, there will be 180 shares of Accurate Common Stock issued and outstanding,
and there will not be any other shares of capital stock of Accurate issued or
outstanding. All of the issued and outstanding shares of capital stock of
Accurate have been duly authorized, and are validly issued, fully paid and non-
assessable, except as provided in Section 630 of the New York Business
Corporation Law. As of the Closing, there will be no outstanding obligations,
options, warrants, convertible securities, subscriptions, or other commitments
or rights (matured or contingent) of any nature to acquire or subscribe for any
securities or other equity interest of or in Accurate. As of the Closing, there
will be no bonds, debentures, notes or other indebtedness of Accurate having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matter on which any shareholder of Accurate may vote. As
of the Closing, there will be no preemptive rights, rights of first refusal,
voting rights, change of control or similar rights, anti-dilution protections or
other rights which any shareholder, officer, employee or director of
5
<PAGE>
Accurate or any other person would be entitled to exercise or invoke as a result
of the purchase by Buyer of the Accurate Shares.
(b) The authorized capital stock of Market Trading consists solely of
200 shares of common stock, no par value ("Market Trading Common Stock"). On the
Closing Date, there will be 100 shares of Market Trading Common Stock issued and
outstanding, and there will not be any other shares of capital stock of Market
Trading issued or outstanding. All of the issued and outstanding shares of
capital stock of Market Trading have been duly authorized, and are validly
issued, fully paid and non-assessable, except as provided in Section 630 of the
New York Business Corporation Law. As of the Closing, there will be no
outstanding obligations, options, warrants, convertible securities,
subscriptions, or other commitments or rights (matured or contingent) of any
nature to acquire or subscribe for any securities or other equity interest of or
in Market Trading. As of the Closing, there will be no bonds, debentures, notes
or other indebtedness of Market Trading having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matter on
which any shareholder of Market Trading may vote. As of the Closing, there will
be no preemptive rights, rights of first refusal, voting rights, change of
control or similar rights, anti-dilution protections or other rights which any
shareholder, officer, employee or director of Market Trading or any other person
would be entitled to exercise or invoke as a result of the purchase by Buyer of
the Market Trading Shares.
4.4. Constituent Documents. True and complete copies of Accurate's and
---------------------
Market Trading's Certificates of Incorporation and By-laws as in effect on the
date hereof (collectively, the "Constituent Documents"), have been delivered to
Buyer. True and correct copies of the minute books, stock books and stock
transfer records of Accurate and Market Trading shall have been provided to
Buyer or its counsel prior to the Closing.
4.5. Financial Statements. The audited combined balance sheets and
--------------------
related statements of income and cash flow of the Companies as at and for the
fiscal year ended on December 31, 1998 (the "1998 Financial Statements") and the
Interim Financial Statements (the Interim Financial Statements and the 1998
Financial Statements are collectively referred to herein as the "Financial
Statements"), true and complete copies of all of which have been delivered to
Buyer and are attached hereto as Schedule 4.5, present fairly in all material
------------
respects the financial condition of the Companies as at the dates indicated
therein and the results of operations of the Companies for the periods covered
thereby. The Financial Statements have been prepared in accordance with GAAP
consistently applied. The financial books and records of the Companies are in
all material respects complete and correct, have been maintained in accordance
with good business practices, and accurately reflect the bases for the financial
condition and results of operations of the Companies set forth in the Financial
Statements.
4.6. Absence of Changes. Except as set forth on Schedule 4.6 hereto,
------------------ ------------
since September 30, 1999 or, in respect of subsections (v), (vii) and (viii)
below, since June 30, 1999, there has not been (i) any significant adverse
change in the financial condition, results of operations, assets, business or
prospects of the Companies, (ii) any repayments of any indebtedness or any
borrowing of or agreement to borrow any money or any Liabilities (as defined in
Section 12.2 hereof) incurred by the Companies, other than current Liabilities
incurred in the ordinary course of business, (iii) any asset or property of the
Companies made subject to a Lien, (iv) any waiver of any valuable right of the
Companies, or the cancellation or reduction of
6
<PAGE>
any material debt or claim held by the Companies, (v) any declaration or payment
of dividends on, or other distributions with respect to, or any direct or
indirect redemption or repurchase of, any shares of the capital stock of the
Companies, (vi) any issuance of any stocks, bonds or other securities of the
Companies or options, warrants or rights or agreements or commitments to
purchase or issue such securities, (vii) any mortgage, pledge, sale, assignment
or transfer of any tangible or intangible assets of the Companies, except with
respect to tangible assets effected in the ordinary course of business to
persons not related to the Companies, (viii) any loan by the Companies to any
officer, director, employee or shareholder of the Companies, (ix) any damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the assets, property or business of the Companies, (x) any material increase,
direct or indirect, in the compensation paid or payable to any officer,
director, employee or agent of the Companies (it being agreed that any increase
at a rate of $5,000 or more per annum for an individual or at the rate of
$25,000 or more per annum for all individuals shall be deemed material), (xi)
any purchase or other acquisition of assets or property other than in the
ordinary course of business, (xii) any change in the accounting methods or
practices followed by the Companies, (xiii) any operation of the business of the
Companies outside of the ordinary course of business and/or inconsistent with
past practice, or (xiv) except as provided by this Agreement, any commitment or
agreement (contingent or otherwise) to do any of the foregoing.
4.7. Power and Authority. Each of Accurate and Market Trading has the
-------------------
requisite corporate power and authority to execute and deliver this Agreement
and all other agreements and certificates contemplated by this Agreement and to
perform its obligations hereunder and thereunder. The Shareholder represents and
warrants that he is legally competent to execute and deliver this Agreement and
all other agreements contemplated by this Agreement and to perform his
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and all other agreements and certificates contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of each of Accurate and Market Trading. This Agreement has been duly
executed and delivered by each of Accurate and Market Trading and the
Shareholder and is (and such other agreements and certificates, when executed
and delivered, will be) the valid and binding obligation of each such party,
enforceable against such party in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, moratorium, insolvency,
reorganization or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and the implied covenants of
good faith and fair dealing.
4.8. Tax Matters. Except as set forth on Schedule 4.8 hereto, the
----------- --------
Companies have timely filed all Tax Returns (as defined in Section 12.2 hereof),
that they have been required to file through September 30, 1999 except for Tax
Returns in respect of the accruals for Taxes payable on the Interim Financial
Statements, and have timely paid in full all Taxes (as defined in Section 12.2
hereof) which are due and payable by them pursuant to such Tax Returns. True and
complete copies of the Tax Returns of the Companies for the tax years ended
December 31, 1997 and December 31, 1998 have previously been delivered to Buyer.
To the Companies' and the Shareholder's knowledge, as of September 30, 1999, the
Companies had no liabilities for unpaid Taxes, except for possible liabilities
which may exist for unpaid Taxes in respect of the matters set forth in that
certain letter agreement dated as of the date hereof among the parties (the
"Agreed Tax Items") for which certain accruals have been made in the Interim
Financial
7
<PAGE>
Statements. No waivers or extensions of any applicable statute of limitations
for the assessment or collection of Taxes with respect to any Tax Returns of the
Companies are currently in effect or are currently proposed. The Companies have
collected or withheld and paid over to the proper governmental or regulatory
bodies all employee withholding Taxes required to be so collected or withheld
and paid over as of September 30, 1999 under all applicable Laws (as defined in
Section 4.10 hereof) or have made adequate accruals therefor in the Interim
Financial Statements. No action, investigation, audit, claim or assessment is
presently pending or, to the Companies' and the Shareholder's knowledge (as
defined in Section 12.2 hereof), threatened with regard to any Taxes that relate
to the Companies for which either of the Companies is or could reasonably be
expected to be liable. There is no unresolved claim by a taxing authority in any
jurisdiction where either of the Companies does not anticipate to file Tax
Returns that it is or could reasonably be expected to be subject to taxation by
such jurisdiction. There are no Liens for Taxes (other than for Taxes not yet
due and payable) upon any assets or property of the Companies.
Neither of the Companies (i) has elected to be treated as a
collapsible corporation pursuant to Section 341(f) of the Code (as defined in
Section 12.2 hereof); (ii) is treated as a Subchapter S corporation pursuant to
Section 1362(1) of the Code; (iii) since January 1, 1999, has made any other
election pursuant to the Code (other than elections that relate solely to
matters of accounting, depreciation, or amortization) that could reasonably be
expected to have an adverse effect on it, its financial condition, its business
as presently conducted or presently proposed to be conducted or any of its
properties or assets; or (iv) has at any time filed a consent to the application
of Section 341(f)(2) of the Code to any property or assets held, acquired or to
be acquired by it, and will not file any such consent prior to Closing. The
Companies have not made any payments, are not obligated to make any payments and
are not a party to any agreement that could obligate it to make any payments
that would not be deductible under Section 280G or Section 162(m) of the Code.
Neither of the Companies is a party to any tax allocation or sharing agreement,
and neither has any liability for the Taxes of any entity under Treasury
Regulation (S) 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
4.9. Customers. Neither of the Companies nor the Shareholder has
---------
received any notice and has not otherwise been notified that any of the ten (10)
largest customers of the Companies for the period from January 1, 1999 to the
date of this Agreement (a true and correct list of which is attached as Schedule
--------
4.9 hereto) intends to terminate its business arrangements with the Companies or
- ---
to substantially reduce its level of purchases from the Companies from the level
of purchases it has made in such prior period. The Companies and the Shareholder
have advised Buyer that the Companies' ten (10) largest customers in any given
period, and the sales by such customers, vary from year to year as indicated in
the sales reports previously provided to Buyer.
4.10. Compliance with Laws; Permits. The Companies are and have been
-----------------------------
in compliance with all federal, state, local and foreign laws, statutes,
ordinances, regulations, orders, judgments, injunctions, awards or decrees
(collectively, "Laws") applicable to them or any of their properties or
operations, including, without limitation, all Environmental Laws (as defined in
Section 12.2 hereof) and all Laws concerning export-import regulation and
control. Neither of the Companies have received any notice of any uncured
violation or alleged violation
8
<PAGE>
of any Law by it. The Companies have all licenses, permits, orders and approvals
of federal, state, local and foreign governmental or regulatory bodies necessary
for the conduct of their businesses and operations as currently conducted
(collectively, the "Permits"). All such Permits of the Companies are set forth
on Schedule 4.10 hereto and are valid and in full force and effect. No
-------------
violations have occurred in respect of any such Permit and no action or
proceeding is pending or, to the Companies' and the Shareholder's knowledge,
threatened to revoke or limit any such Permit. All such Permits are renewable by
their terms or in the ordinary course of business without the need of the
Companies or Buyer complying with any special qualifications or procedures or
paying any amounts other than routine filing fees.
4.11. No Breach; Consents; Change of Control Payments. The execution,
-----------------------------------------------
delivery and performance of this Agreement by the Companies and the Shareholder
and the consummation of the transactions contemplated hereby and thereby will
not (i) result in any Lien upon any of the property of the Companies or (ii)
violate, conflict with or otherwise result in the breach of any of the terms and
conditions of, result in a material modification of or accelerate or trigger the
rights of any person under, or constitute (or with notice or lapse of time or
both would constitute) a default or termination under (a) any of the Constituent
Documents; (b) any instrument, contract or other agreement to which Accurate or
Market Trading or the Shareholder is a party or by or to which Accurate or
Market Trading or the Shareholder or any of their properties are bound or
subject, except to the extent that any Consent listed on Schedule 4.11 is
-------------
required in connection with the transactions contemplated and has not been
obtained; (c) any Law applicable to the Companies or any of their properties or
operations; or (d) any Permit. Except as set forth on Schedule 4.11, no consent,
-------------
approval or authorization of, or declaration or filing with, any governmental
authority or other person ("Consent") is required on the part of either Accurate
or Market Trading in connection with the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
There are no payments, Liabilities or obligations under or pursuant to any Law
or contract or other agreement to which either of the Companies is a party which
are required to be made or performed by either Accurate or Market Trading to any
person, arising out of or as a result of any change of control of either
Accurate or Market Trading or the transactions contemplated by this Agreement.
4.12. Litigation; Claims. Except as set forth on Schedule 4.12
------------------
hereto, there are no suits or actions, administrative, arbitration or other
proceedings or governmental investigations pending or, to the Companies' and the
Shareholder's knowledge, threatened against or affecting the Companies or any of
their properties or assets. Except as set forth on Schedule 4.12, to the
Companies' and the Shareholder's knowledge, no person has notified the Companies
of a material claim against either of the Companies alleging any personal,
property or economic injury, loss or damage incurred as a result of or relating
to the use of any products sold by or on behalf of or services rendered by the
Companies, other than routine claims for return of goods, including for
allegedly defective products, supplied by the Companies which have been or are
subject to replacement or credit only in accordance with the Companies' standard
product warranties, which claims are not material in the aggregate. There is no
judgment, order, injunction, decree or award against either of the Companies
which is not satisfied and remains outstanding.
4.13. Employment Matters. The Companies have not at any time during
------------------
the last three (3) years had, nor, to the Companies' and the Shareholder's
knowledge, is there now
9
<PAGE>
threatened, any walkout, strike, picketing, work stoppage, planned work slowdown
or any similar occurrence. There are no material controversies or grievances
pending or, to the Companies' and the Shareholder's knowledge, threatened
between either of the Companies and any of its employees. No union or other
collective bargaining unit has been certified or formally recognized by either
of the Companies. Schedule 4.13 hereto sets forth a complete list of the
-------------
employees of the Companies who have executed confidentiality or non-disclosure
agreements, copies of all of which have been previously provided to Buyer.
Neither the Companies nor the Shareholder is aware that any officer or key
employee intends to terminate his/her employment with the Companies. Except
pursuant to and in accordance with the terms of the plans and arrangements
listed on Schedule 4.21 hereto and as set forth on Schedule 4.13, no bonuses,
------------- -------------
profit sharing, incentive payments, and no increases in compensation in excess
of the rate of $5,000 per annum for any individual employee, have been paid,
accrued or granted by the Companies for any period after the date of the Interim
Balance Sheet. Schedule 4.13A lists the names, title or job description, and
--------------
annual salary for 1999 (as of October 31, 1999) of all employees, officers and
directors of the Companies.
4.14. Material Agreements. Schedules 4.13, 4.14 and 4.15 hereto set
------------------- ----------------------------
forth a true and correct list of each contract or other agreement (as defined in
Section 12.2 hereto) to which either of the Companies is a party or by or to
which any of the Companies' properties are bound or otherwise subject, other
than outstanding purchase orders entered into or accepted in the ordinary course
of business by the Companies and which involve an amount less than $50,000 for
purchase order(s) for any particular customer, that (i) requires payments or
performance having a stated value in excess of $25,000 in any 12-month period or
$50,000 in the aggregate and which may not be cancelled by thirty (30) days or
less notice without penalty; (ii) has not been made in the ordinary course of
business and/or the performance of which, by its terms, extends over a period
greater than ninety (90) days and is not cancelable by the Companies at any time
without penalty; (iii) is an employment, consulting, non-competition or
indemnification agreement; (iv) is a franchise, distributorship, licensing,
supply or sales agency agreement; (v) is an agreement providing for the sale,
acquisition or lease of any properties of the Companies other than in the
ordinary course of business; (vi) is a mortgage, pledge, security agreement or
other similar agreement with respect to any tangible or intangible property of
the Companies; (vii) is a loan agreement, credit agreement, promissory note,
guaranty, letter of credit or any other similar type of agreement; (viii) is a
retainer agreement with attorneys, accountants, investment bankers or other
professional advisers; (ix) is an agreement with any governmental authority or
agency; (x) is an agreement relating to a patent, trademark, copyright or other
item of Intangible Property (as defined in Section 4.17 herein); (xi) is an
agreement referred to in Section 4.24 hereof; (xii) is an agreement otherwise
material to the operations, business or financial condition of the Companies
taken as a whole; or (xiii) is a commitment or agreement to enter into any of
the foregoing (collectively, "Material Agreements"). True and correct copies of
all written Material Agreements (or forms thereof) have been delivered to Buyer
and, except as set forth on Schedule 4.14, each Material Agreement is a valid
-------------
agreement in accordance with its terms and the Companies are in compliance with
the provisions of each such Agreement and no other party thereto is, to the
Companies' and the Shareholders' knowledge, in material default thereunder.
4.15. Real Estate. Neither of the Companies owns, in fee or otherwise,
-----------
or has the right or obligation to acquire any real property or buildings.
Schedule 4.15 hereto sets forth all leases, subleases or other agreements (oral
- -------------
or written) pursuant to which the Companies have
10
<PAGE>
the right to use or occupy any real property. True and correct copies or
summaries of such leases, subleases and other agreements have been delivered to
Buyer and each is a valid agreement in accordance with its terms, and the
Companies are in compliance with the provisions of each such agreement and no
other party thereto is, to the Companies' and the Shareholders' knowledge, in
material default thereunder.
4.16. Accounts and Notes Receivable; Payables. All accounts and notes
---------------------------------------
receivable reflected on the Interim Balance Sheet have arisen from bona fide
---- ----
transactions in the ordinary course of business and are good and fully
collectible in the ordinary course of business at the aggregate recorded amounts
thereof on the Interim Balance Sheet, net of any applicable reserve for doubtful
accounts reflected on the Interim Balance Sheet. All accounts and notes
receivable of the Companies that arose after the date of the Interim Balance
Sheet through the date hereof are the result of bona fide transactions in the
---- ----
ordinary course of business. There are no recoupments, set-offs or counterclaims
in respect of any such receivables reflected on the Interim Balance Sheet, and
other than routine claims for return of goods, including for allegedly defective
products, supplied by the Companies which have been or are subject to
replacement or credit only in accordance with the Companies' standard product
warranties or warranties set forth in the Material Agreements listed on items
12, 13 and 14 of Schedule 4.14 hereto, which claims are not material in the
-------------
aggregate. All accounts payable of the Companies, as reflected on the Interim
Balance Sheet or arising after the date thereof, are the result of bona fide
---- ----
transactions in the ordinary course of business consistent with past practice.
No guarantee of collectibility of any receivables which arose after September
30, 1999 or which are not reflected in the Interim Financial Statements is
intended or shall be deemed made pursuant to this Section 4.16.
4.17. Intangible Property. Schedule 4.17 hereto sets forth all
------------------- -------------
United States and foreign patents, registered copyrights, registered trademarks,
service marks and trade names, applications for any of the foregoing, and
written permits, grants, options and licenses or other rights in writing running
to or from the Companies relating to any Intangible Property (as defined below)
which are material to the Companies' business. The Companies have either all
right, title and interest in or valid and binding rights under contract in
accordance with the terms thereof to use all items of Intangible Property
material to, or necessary to conduct, the business of the Companies. None of the
Intangible Property owned by the Companies infringes upon or violates any rights
owned or held by any other person. There is not pending nor, to the Companies'
and the Shareholder's knowledge, threatened, any claim, suit or action against
the Companies contesting or challenging the rights of the Companies in or to any
Intangible Property or the validity of any of the Intangible Property. To the
Companies' and the Shareholder's knowledge, there is no infringement upon or
unauthorized use of any of the Intangible Property owned by the Companies by any
third party. Except as set forth on Schedule 4.17 hereto, there are no material
-------------
restrictions on the direct or indirect transfer of any contract, or any interest
therein, held by the Companies in respect of any item of Intangible Property
disclosed on Schedule 4.17. The Companies are not in default (or with the giving
-------------
of notice or lapse of time or both, would be in default) under any contract to
use the Intangible Property required to be disclosed on Schedule 4.17. Neither
-------------
the Shareholder (nor any "associate" thereof) nor any officer, director or
"affiliate" of the Companies ("affiliate" and "associate," as defined in Section
12.2 hereof) has any right to or interest in any Intangible Property, including,
without limitation, any right to payments (by royalty or otherwise) in respect
of any use or transfer thereof.
11
<PAGE>
"Intangible Property" means all patents and patent rights, trademarks
and trademark rights, trade names and tradename rights, service marks and
service mark rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, designs, trade secrets, industrial
models, proprietary data, methodologies, computer programs (including all source
codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how, inventions, works of authorship,
management information systems, and all pending applications for and
registrations of patents, trademarks, service marks and copyrights used in the
business of the Companies, in each such case, including all forms (e.g.,
electronic media, computer disks, etc.) in which such items are recorded.
4.18. Title to Properties and Assets. The Companies have good title
------------------------------
to all of their properties and assets purported to be owned by them which are
reflected as assets on the balance sheet included in the Interim Financial
Statements (the "Interim Balance Sheet") and those not so reflected on the
Interim Balance Sheet because not required to be reflected thereon, but which
are used in the Companies' business, or because acquired by the Companies since
the date of the Interim Balance Sheet (except for inventory and other assets
disposed of in the ordinary course of business consistent with past practice
since the date of the Interim Balance Sheet), free and clear of any Lien, except
(i) Liens for Taxes not yet due and payable; (ii) Liens of materialmen,
mechanics, carriers, landlords and like persons which are not due and payable or
which are being contested in good faith and which are not material in the
aggregate; (iii) those Liens listed on Schedule 4.18 hereto; (iv) in respect of
-------------
those original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business and set forth
on Schedule 4.14 hereto; (v) in respect of restrictions contained in the leases
-------------
and licenses of Intangible Property set forth on Schedule 4.14 and subject to
-------------
any subsequent recording or registration to perfect title to any Intangible
Property; and (vi) routine claims for return of goods, including for allegedly
defective products, supplied by the Companies which have been or are subject to
replacement or credit only in accordance with the Companies' standard product
warranties or warranties set forth in the Material Agreements listed on items
12, 13 and 14 of Schedule 4.14, which claims are not material in the aggregate
-------------
(collectively, "Permitted Liens"). Other than in the ordinary course of
business and other than pursuant to the terms of this Agreement or any Material
Agreement, no person has any written or oral agreement, option, understanding,
commitment or any right or privilege to purchase, lease or license from the
Companies any of the Companies' properties or assets.
4.19. No Undisclosed Liabilities. Except as set forth on Schedule
-------------------------- --------
4.19 hereto, the Companies have no material Liabilities (as defined in Section
- ----
12.2 hereof), including guarantees and indemnities by the Companies of
Liabilities of any other person, other than (i) Liabilities as and to the extent
reflected on the Interim Balance Sheet; or (ii) Liabilities incurred by the
Companies since the date of the Interim Balance Sheet (none of which is a
material Liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) in the ordinary course of business consistent
with past practice and adequately reflected on the books and records of the
Companies; or (iii) the Companies' obligations under purchase orders, the
Material Agreements and other contracts entered into in the ordinary course of
business.
4.20. Inventories. All items of inventory reflected on the Interim
-----------
Balance Sheet or acquired by the Companies since the date of the Interim Balance
Sheet are merchantable and
12
<PAGE>
fit for the specific purpose for which they are to be used and consist of a
quantity and quality usable and salable in the ordinary course of business,
except for obsolete or defective materials, all of which have been written down
to net realizable value or have been adequately reserved against on the books
and records of the Companies (and on the Interim Balance Sheet, to the extent
applicable) in accordance with GAAP consistently applied, and are reflected on
such books and records at the lower of cost or market value, the cost thereof
being determined on a first-in, first-out basis in accordance with GAAP
consistently applied.
4.21. Employee Benefit Plans. Schedule 4.21 hereto contains a true
---------------------- -------------
and complete list of all pension, profit sharing, retirement, deferred
compensation, incentive, bonus, severance, disability, hospitalization, medical
insurance, life insurance and other employee benefit plans, programs or
arrangements maintained by the Companies (or any affiliate thereof) or under
which the Companies have any obligations (other than obligations to make current
wage or salary payments) in respect of any of the employees of the Companies or
their beneficiaries (each individually, an "Employee Benefit Plan" and
collectively, the "Employee Benefit Plans"). The Companies have delivered to
Buyer true and complete copies of all material documents, as such may have been
amended to the date hereof, embodying the Employee Benefit Plans, all trust
documents, all available determination letters issued by the Internal Revenue
Service (the "IRS"), employee booklets, summary and descriptions, the most
recent compliance and nondiscrimination tests (if any), the most recent Form
5500 reports, standard COBRA forms and notices, any correspondence or inquiry by
the IRS or the Department of Labor, and any material employee communications, in
each case relating to any Employee Benefit Plan. A true and complete copy of the
Companies' personnel manuals have been delivered to Buyer. The Companies'
policies and methods in respect of vacation time are accurately set forth in
such manuals delivered to Buyer and on Schedule 4.21. Except in respect to the
-------------
plans and arrangements set forth in Schedule 4.21 and as provided by Section
-------------
6.2(e) hereof, the Shareholder hereby acknowledges that neither he nor the
Companies have any agreements or understandings (in writing or orally) with any
employees of the Companies concerning their employment by the Companies or Buyer
following the Closing.
All Employee Benefit Plans have complied in form, operation and
administration with their respective provisions, any applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
Code, and all other applicable Laws. All contributions to and payments from the
Employee Benefit Plans which have been required to be made in accordance with
the provisions of the Employee Benefit Plans and, where applicable, ERISA and
the Code have been made or are adequately accrued and reflected on the books and
records of the Companies. There are no unfunded Liabilities in respect of any
such Employee Benefit Plan. Neither of the Companies, nor, to the Companies' and
the Shareholder's knowledge, any of their officers, employees or agents has
committed any breach of fiduciary responsibility with respect to the Employee
Benefit Plans to which ERISA is applicable which could subject Buyer or the
Companies to any Liability under ERISA. The Companies are not and have never
been obligated to make contributions to any multiemployer plan, as defined under
ERISA. The Companies do not have any early retirement options or plans pursuant
to which employees may choose to take early retirement. No shares of capital
stock are reserved and/or eligible to be issued pursuant to any stock option,
stock appreciation, stock grant or similar plan of the Companies.
13
<PAGE>
4.22. Insurance. Schedule 4.22 hereto sets forth a true and complete
--------- -------------
list or general description of all policies or binders of fire, liability,
product liability, workmen's compensation, vehicular, business interruption or
other insurance held by or on behalf of the Companies (true and complete copies
of all of which policies and binders have been delivered to Buyer) specifying
the insurer, the policy number or covering note number with respect to binders,
and describing any pending claim(s) thereunder. All of such policies and binders
are in full force and effect. The Companies are not in default with respect to
any provision contained in any such policy or binder. The Companies have not
received or given a written notice of cancellation or non-renewal with respect
to any such policy or binder.
4.23. No Misrepresentations. To the Companies' and the Shareholder's
---------------------
knowledge, this Agreement (including the Schedules and Exhibits hereto) does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
4.24. Transactions with Related Parties. Except as set forth on
---------------------------------
Schedule 4.24 hereto and except for compensation and benefits provided as set
- -------------
forth on Schedules 4.13 and 4.21, neither the Shareholder (nor any associate
-----------------------
thereof), any director, officer or affiliate of the Companies nor any of their
respective immediate family members: (i) has borrowed money from or loaned money
to the Companies which has not been repaid; (ii) has any contractual, tort or
other claim, express or implied, of any kind whatsoever against either of the
Companies; (iii) has an interest in any property, rights or assets owned and/or
used by the Companies in their businesses; or (iv) except for the employment
arrangements set forth on Schedules 4.13 and 4.21 of this Agreement, is party to
-----------------------
a contract or other agreement with either of the Companies or is engaged in any
material transaction or arrangement with either of the Companies.
4.25. Environmental Matters. The Companies have: (i) complied with
---------------------
all Environmental Laws; (ii) not received any notice from any governmental
authority that any real property now or formerly owned, leased, managed,
operated or otherwise used by them is on any Federal, state or foreign
"superfund" or similar list or has been the site of any activity giving rise to
any Liability; (iii) not received any notice of any Environmental Claim (as
defined in Section 12.2 hereof); and (iv) stored, handled, used, released,
discharged and disposed of all substances used in their operations and wastes or
by-products from their operations, whether Hazardous Materials (as defined in
Section 12.2 hereof) or not, in compliance with all Environmental Laws. No
Hazardous Materials or other substances or wastes have been spilled, released,
discharged or disposed of from, on or under any property owned, leased or
operated by the Companies during the Companies' occupancy and use thereof in
violation of any Environmental Laws. The Companies have no Liability with
respect to the clean-up or remediation of any treatment, storage or disposal
site or facility in respect of any violation of Environmental Laws. The
Companies have provided to Buyer true and complete copies of any environmental
and Hazardous Materials reports, studies and assessments in their possession or
control with respect to their leased or operated real properties and/or any land
adjacent thereto.
4.26. Year 2000. Except for those portions of the Companies'
---------
information technology systems set forth on Schedule 4.26 hereto, all of the
-------------
Companies' information technology systems which are used in, or required for the
conduct of, the Companies' businesses
14
<PAGE>
as currently conducted are designed to be used or have been reprogrammed to
permit the proper functioning, in and following the calendar year 2000 without
material error or delay relating to date data and in order to calculate, to
compare, to sequence, to display, to store, to transmit, or to receive year-2000
date-related data, and will not otherwise fail: (i) to deal with or account for
transitions or comparisons from, into and between the years 1999 and 2000
accurately; (ii) to recognize or accurately to process any specific date in 1999
or 2000; or (iii) to account accurately for the year 2000's status as a leap
year, including recognition and processing of the correct date on February 29,
2000.
4.27. Bank Accounts; Powers of Attorney. Set forth on Schedule 4.27
--------------------------------- -------------
hereto is a list of each bank or other financial institution at which either of
the Companies maintains an account or safe deposit box, the corresponding number
of each such account or safe deposit box and the names of all persons holding
check-signing or withdrawal power or other authority with respect thereto. Also
set forth on Schedule 4.27 are true and complete copies of all powers of
-------------
attorney in effect in respect of either of the Companies.
4.28. Brokers. Neither of the Companies nor the Shareholder has made
-------
any agreement or taken any other action causing anyone to become entitled to a
broker's fee or commission as a result of the transactions contemplated
hereunder.
4.29. Disclosure Schedules. All Schedules to this Agreement are
--------------------
integral parts of this Agreement. Nothing in a Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein, unless the
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The Companies and the Shareholder are
responsible for preparing and arranging the Schedules corresponding to the
numbered Sections contained herein. Any fact or item disclosed on any Schedule
hereto shall not by reason only of such inclusion be deemed to be material and
shall not be employed as a point of reference in determining any standard of
materiality under this Agreement.
4.30. Other Shareholder Representations. The Shareholder hereby
---------------------------------
acknowledges that Buyer has informed him that it is contemplating an initial
public offering of its equity securities, and agrees not to use or disclose such
information other than directly in connection with the transactions contemplated
hereby or disclosure to employees, officers or directors of Buyer in connection
with Buyer's business, and further agrees that neither the Purchase Price nor
the provisions of the Arena Employment Agreement shall be affected or modified
regardless of whether or not such offering shall be consummated, or, if
consummated, the time of such consummation.
4.31. No Other Representations. Except for the representations and
------------------------
warranties contained in Section 3.4(c)(ii) and this Section 4, neither the
Shareholder nor the Companies makes any express or implied representation or
warranty to Buyer or any other person.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Subject to Section 10
---------------------------------------
hereof, Buyer hereby represents and warrants to the Shareholder as follows:
5.1. Due Organization. Buyer is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of New York,
and has all requisite corporate
15
<PAGE>
power and authority to own, lease and operate its assets and properties and to
carry on its business as presently conducted.
5.2. Power of Buyer. Buyer has the requisite corporate power and
--------------
authority to execute and deliver this Agreement and all other agreements and
certificates contemplated by this Agreement and to perform its obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Buyer and is (and such other agreements and certificates, when executed and
delivered, will be) the valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as such enforceability may be
limited by bankruptcy, moratorium, insolvency or other similar laws generally
affecting the enforcement of creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and the
implied covenants of good faith and fair dealing.
5.3. No Breach. The execution, delivery and performance of this
---------
Agreement, and all other agreements and certificates contemplated by this
Agreement, by Buyer and the consummation of the transactions contemplated hereby
and thereby will not violate, conflict with or otherwise result in the breach of
any of the terms and conditions of, result in a material modification of or
constitute (or with notice or lapse of time or both would constitute) a default
under (i) any of the Certificate of Incorporation, By-Laws or other
organizational documents of Buyer; (ii) any material instrument, contract or
other agreement to which Buyer is a party or by or to which it or any of its
properties is bound or subject; or (iii) any Law or Permit applicable to Buyer
or any of its properties or operations.
5.4. Governmental and Other Consents. No consent, approval or
-------------------------------
authorization of, or declaration or filing with, any governmental authority or
other person is required on the part of Buyer in connection with the execution,
delivery and performance of this Agreement by it or the consummation of the
transactions contemplated hereby. There is no suit or action, administrative,
arbitration or other proceeding or governmental investigation pending, or to the
knowledge of Buyer, threatened against Buyer with respect to the transaction
contemplated by this Agreement or which is reasonably expected to have a
material adverse effect on the business, operations, assets or condition
(financial or otherwise) of Buyer taken as a whole.
5.5. Brokers. Buyer has not made any agreement or taken any other
-------
action causing anyone to become entitled to a broker's fee or commission as a
result of the transactions contemplated hereunder.
5.6. Investment in Shares. Buyer acknowledges that the Shares are
--------------------
not registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state or foreign securities laws and that the Shares are
being sold to Buyer in reliance upon the representations and warranties
contained in this Section 5.6. Buyer further understands that the sale of the
Shares is intended to be exempt from registration under the Securities Act and
under any applicable state securities laws. In furtherance thereof, Buyer
represents and warrants to and agrees with the Shareholder that (i) Buyer is
purchasing the Shares for Buyer's own account, for investment purposes only and
not with a view to the resale or distribution thereof except in compliance with
the Securities Act and any applicable state and foreign securities laws and (ii)
Buyer is an "accredited investor," as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act.
16
<PAGE>
6. COVENANTS AND AGREEMENTS.
------------------------
6.1. Pre-Closing Covenants and Agreements. The parties covenant and
------------------------------------
agree to perform or take any and all such actions to effectuate the following
from the date hereof until the earlier of the Closing Date or the termination of
this Agreement in accordance with its terms:
(a) Ongoing Operations. The Companies shall, and the Shareholder
------------------
shall cause the Companies to, conduct their businesses diligently and
substantially in the same manner as heretofore conducted and use reasonable best
efforts to preserve the present relationships between the Companies on the one
hand and their suppliers, distributors, customers and others having business
relations with either of them on the other, and shall not, except with Buyer's
prior written consent: (i) declare, make or pay any distributions or dividends
on their capital stock or any other equity securities not reflected in the
Interim Financial Statements; (ii) make or grant any increases in salary or
other compensation or bonuses to employees (other than in connection with
arrangements or agreements in effect as of the date hereof and specifically
disclosed in writing to Buyer) in excess of a rate of $5,000 per annum for any
individual employee or a rate of $25,000 per annum for all employees, or grant
any employee any severance or termination pay except in accordance with the
Companies' existing policies as set forth in the personnel manuals delivered to
Buyer pursuant to Section 4.21 hereof, or establish, adopt, enter into or amend
in any material respect any bonus, profit sharing, thrift, pension, retirement,
deferred compensation, policy or arrangement for the benefit of any directors,
officers or employees; (iii) make any material general adjustment in the type or
hours of work of their employees; (iv) enter into or amend any agreement or
transaction with any person or entity who or which is an associate or an
affiliate of the Companies or the Shareholder; (v) permit or engage in any of
the actions or transactions set forth in Sections 4.6 (to the extent not
otherwise covered by this Section 6.1(a)) and 4.24 hereof; (vi) acquire,
exchange, lease, license or dispose of any property or assets, other than in the
ordinary course of business; (vii) issue or grant any shares of capital stock or
other securities, whether or not such are exercisable for, convertible into or
exchangeable for shares of capital stock or such other securities; (viii) amend
or repeal any of their Constituent Documents; (ix) incur any indebtedness or
permit any of their assets or property to become subject to any Lien other than
Permitted Liens (as defined in Section 4.18 hereof) and indebtedness incurred in
the ordinary course of business; (x) make any capital expenditure in excess of
$50,000; (xi) enter into, terminate or amend any Material Agreement; (xii)
discount, collect or write-off any accounts or notes receivables other than in
the ordinary course of business; (xiii) waive any valuable right of the
Companies; (xiv) operate the business of the Companies outside of the ordinary
course of business except as required by this Agreement; or (xv) enter into any
agreement to take any of the foregoing actions except as required by this
Agreement.
(b) Investigation by Buyer. Buyer may, through its representatives
----------------------
(including, without limitation, its counsel, accountants and consultants), make
such investigations of the properties, offices and operations of the Companies
upon reasonable prior notice and such review or audit of the financial condition
of the Companies as it deems necessary or advisable in connection with the
transactions contemplated hereby, including, without limitation, any
investigations enabling it to familiarize itself with such properties, offices,
operations and financial condition; provided, that no unreasonable interference
--------
with the normal business operations of the Companies shall thereby be caused.
Such investigations shall not, however,
17
<PAGE>
affect or limit any of the Companies' or the Shareholder's representations,
warranties and agreements hereunder. The Companies shall permit Buyer and its
authorized representatives, subject to the foregoing provisions of this Section
6.1(b) and Section 6.2(c)(ii) hereof, to have full access to the premises upon
reasonable prior notice and to all books and records of the Companies, and Buyer
shall have the right to make copies thereof and excerpts therefrom. The
Companies shall, subject to Section 6.2(c)(ii) hereof, furnish Buyer with such
financial, customer, supplier and operating data and other information with
respect to the Companies as Buyer may from time to time reasonably request and
shall, and the Shareholder shall cause the Companies to, permit Buyer and its
authorized representatives, at Buyer's reasonable request, to contact suppliers,
distributors, customers and others having business relationships with the
Companies.
(c) Further Assurances. Each of the parties shall on or after the
------------------
Closing, as may be appropriate, execute such documents and other papers and take
such other further actions as may be reasonably required to carry out the
provisions hereof and to effectuate the transactions contemplated in this
Agreement. Each such party shall use his/its reasonable best efforts to fulfill
or obtain the fulfillment of the conditions to the Closing within such party's
control, including obtaining any Consents (without being required to pay any
third person (other than his/its attorneys) to obtain the same) required in
connection herewith. Following the Closing, the Shareholder shall, at the
Buyer's request and expense, cooperate with and assist Buyer in obtaining the
Consent referred to on item 1 of Schedule 4.11 hereto (without being required to
-------------
pay any third person (other than his attorneys) to obtain the same).
(d) Additional Disclosure. The Companies and the Shareholder shall
---------------------
promptly furnish Buyer with any information it may reasonably request with
respect to (i) the occurrence of any event or condition or the existence of any
fact that would cause any of the conditions to Buyer's obligation to consummate
the transactions contemplated by this Agreement not to be fulfilled and/or (ii)
any material adverse change in the financial condition, business or prospects of
the Companies. In addition, any contract or other agreement of the Companies
entered into between the date hereof and the Closing Date that would have been
required to be listed on Schedule 4.14 hereto if entered into prior to the date
-------------
hereof shall be delivered to Buyer by the Companies promptly after being entered
into and shall be deemed to be a Material Agreement for all purposes of this
Agreement.
(e) Exclusive Dealings. The Companies (including any affiliates and
------------------
associates thereof) and their respective officers and directors, and the
Shareholder shall not at any time prior to the earlier of the Closing or
November 30, 1999, directly or indirectly, (i) encourage, solicit, initiate or
participate in any discussions or negotiations with, furnish any information to
or entertain or accept any inquiry or proposal from any person other than Buyer,
regardless of the form of the proposed transaction, concerning the potential or
proposed sale, exchange or transfer of any equity or debt securities or other
interests of either of the Companies (whether or not presently outstanding) or
any material assets of the Companies (other than inventory in the ordinary
course of business), or the merger, recapitalization, combination or
consolidation of either of the Companies with any other person or (ii) cause or
permit either of the Companies to dissolve or liquidate. In the event that
either of the Companies and/or the Shareholder shall receive any solicitation,
offer, inquiry or proposal of the type described in this Section 6.1(e), it/he
will promptly notify Buyer. If, at any time prior to the earlier of the Closing
18
<PAGE>
or November 30, 1999, Buyer determines not to proceed with the transactions
contemplated by this Agreement, it shall so notify in writing the Companies and
the Shareholder, and the Companies and the Shareholder shall thereupon be
released from the restrictions set forth in this Section 6.1(e).
(f) Resignations. On or before the Closing Date, the Shareholder
------------
shall cause to be delivered to Buyer duly executed resignations, effective
immediately after the Closing, of those officers and directors of the Companies
as shall be requested by Buyer in writing delivered to the Shareholder on or
before the third business day prior to the Closing.
(g) Records. On the Closing Date, the Shareholder shall deliver or
-------
cause to be delivered to Buyer or make available to Buyer at the Companies'
office all original agreements, documents, books, records and files, including
records and files stored on computer disks or tapes or any other storage medium
(collectively, "Records") in the possession or control of the Shareholder
relating to the Companies.
(h) Fees and Disbursements. Buyer will pay the reasonable costs
----------------------
associated with the audit of the Interim Financial Statements, including the
reasonable costs of Brian Golub in connection therewith. Except as provided in
the preceding sentence, Buyer and the Shareholder (and not the Companies) shall
pay their own costs and expenses, including the fees and disbursements of any
counsel and accountants retained by each of them, incurred in connection with
the preparation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby, whether or not the transactions contemplated
hereby are consummated.
(i) Maintenance of Insurance. The Companies shall maintain in full
------------------------
force and effect their current insurance policies, unless simultaneously with
such termination or lapse replacement policies shall be in full force and effect
that provide coverage at levels and amounts equal to or greater than the
coverage under such current policies.
(j) Transfer Taxes. Notwithstanding anything to the contrary
--------------
contained herein, the Shareholder and Buyer shall each be responsible for fifty
(50%) percent of all sales, use, transfer, real property transfer, documentary,
gains, stamp, duties, recording and similar Taxes and fees imposed upon or
incurred in connection with the transactions contemplated by this Agreement
(collectively, the "Transfer Taxes") and all necessary Tax Returns and other
documentation with respect to any Transfer Taxes shall be filed by the party
required to do so by applicable Law.
(k) Supplemental Disclosure. The parties agree that, with respect to
-----------------------
their representations and warranties made in this Agreement, they will have a
continuing obligation to promptly supplement and/or amend all Schedules to this
Agreement with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Schedules to this Agreement.
6.2. Post-Closing Covenants and Agreements. Buyer and the Shareholder
-------------------------------------
covenant and agree from and after the Closing Date as follows:
19
<PAGE>
(a) Non-Interference. The Shareholder shall not, at any time during
----------------
the time commencing on the Closing Date and continuing until the later of (i)
the fifth anniversary of the Closing Date and (ii) the second anniversary of the
termination for any reason (including the expiration of the term thereof) of his
employment by Buyer (the "Restricted Period"), directly or indirectly, (x)
recruit any employee of Buyer or the Companies or solicit or induce, or attempt
to solicit or induce, any employee of the Companies to terminate his employment
with, or otherwise cease his relationship with Buyer or the Companies or (y)
solicit, divert or take away, or attempt to solicit, divert or to take away, the
business or patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts, of Buyer or the Companies that were
contacted, solicited or served by Buyer or the Companies while the Shareholder
was employed or retained by, or affiliated with Buyer and/or, the Companies.
(b) Non-Compete. The Shareholder shall not, at any time during the
-----------
Restricted Period, directly or indirectly, own, manage, operate, join, control
or participate in the ownership, management, operation or control of, or be
employed or retained by, render services to, provide financing or advice to, or
otherwise be connected in any manner with any business that then competes with
any business of Buyer and/or the Companies; provided, that nothing in this
--------
Section 6.2(b) shall prohibit the Shareholder (including his respective
affiliates and associates and any "group" (as such term is defined in the rules
promulgated under the Securities Exchange Act of 1934, as amended) of which such
person is a member) from acquiring up to three (3%) percent of any class of
outstanding equity securities of any corporation or other entity whose equity
securities are regularly traded on a national securities exchange or in the
"over-the-counter market."
(c) Confidentiality. (i) The Shareholder acknowledges that all
---------------
information concerning each of the Companies' business, financial condition,
operations, strategies and prospects, including, but not limited to, customer,
supplier and distributor lists, trade secrets, plans, manufacturing techniques,
sales, marketing and expansion strategies, products, services, production,
development, technology and processes and all related technical information,
procurement and sales activities and procedures, promotion and pricing
techniques and credit and financial data relating to the Companies are valuable,
special and unique assets of the Companies (collectively, the "Confidential
Information"); provided, however, that Confidential Information shall not
-------- -------
include any information that (x) is or shall become generally known to the
public (other than as a result of a breach of this Agreement by the
Shareholder); (y) shall become available to a disclosing party from an
unaffiliated third party; provided, that such party shall not be under any
--------
obligation of confidentiality known to the Shareholder to another party to this
Agreement; or (z) is required by law or court order to be disclosed; provided,
--------
that the disclosing party shall give all other parties to this Agreement prompt
written notice of any such legal or judicial process requiring disclosure of
Confidential Information and shall reasonably cooperate with the other party, at
such other party's expense, in any lawful action which such other party desires
to take to limit the disclosure required by such legal or judicial process, and
shall permit any other party to this Agreement to attempt, by appropriate legal
means, to limit and/or delay such disclosure.
The Shareholder hereby acknowledges and agrees that during such time
as he was a shareholder of the Companies and thereafter during his employment by
Buyer, any and all United States and/or foreign patents, patent applications,
service marks, inventions, discoveries, innovations, improvements, trade secrets
and secret processes, whether or not patentable, which
20
<PAGE>
he may have conceived, developed or made, or may conceive, develop or make,
either alone or in conjunction with others, and which were or will be used in or
developed for the business of the Companies or Buyer (collectively "Developed
Property"), have been and shall be fully disclosed to Buyer, and are and shall
be the sole and exclusive property of Buyer, whether or not disclosed, as
against the Shareholder. The Shareholder hereby unconditionally and irrevocably
assigns to Buyer any and all right, title and interest in and to such Developed
Property and hereby irrevocably and unconditionally waives any rights in or to
such Developed Property.
(ii) Buyer agrees that neither Buyer nor any of its affiliates
shall (until after the Closing) disclose any Confidential Information to any
person or make use of or exploit any Confidential Information for its own
purposes or for the benefit of any person other than to its accountants,
attorneys or other representatives to the extent reasonably necessary to
complete its due diligence review of the Companies' businesses and to document
and consummate the transactions contemplated by this Agreement; provided, that
--------
Buyer shall notify such accountants, attorneys or other representatives of
Buyer's obligations under the terms of this Section 6.2(c)(ii) and Buyer shall
be responsible for its accountants, attorneys or other representatives
compliance with the provisions of this Section 6.2(c)(ii). If this Agreement is
terminated pursuant to Section 11 hereof, Buyer shall return all Confidential
Information and all copies thereof to the Companies, destroy any extracts or
notes derived therefrom, and shall not make use of any Confidential Information
for its own purposes or for the benefit of any person, except that Buyer may
retain copies of the Confidential Information, subject to its confidentiality
obligations hereunder, which are required to be retained to support any claim
that shall have arisen or may reasonably be expected to arise out of this
Agreement or the transactions contemplated hereby.
(iii) The Shareholder acknowledges and agrees that all
Confidential Information is the exclusive property of the Companies and, after
the Closing, of Buyer and the Companies. The Shareholder shall not disclose,
directly or indirectly, Confidential Information to any person or, directly or
indirectly, make use of or exploit for his own purposes or the benefit of any
other person (except as an officer, director or employee of Buyer or its
affiliates) any Confidential Information.
(d) Equitable Relief. Each of Buyer and the Shareholder acknowledges
----------------
and agrees that any breach by Buyer or the Shareholder of any provision of
Sections 6.1(e), 6.2(a), (b) or (c) hereof would cause irreparable injury and
could not be remedied solely by monetary damages. In the event of a breach or
threatened breach of any of such provisions, any non-breaching party shall be
entitled to equitable relief, including, without limitation, injunctive relief
and specific performance, without proof of actual damages. Such relief shall be
in addition to any other remedies available at law or in equity. In the event
the Company fails to pay to the Shareholder any Contingent Payments, subject to
Section 10.6(a) hereof, when due in accordance with this Agreement, which
failure is not cured within fifteen (15) days after written notice from the
Shareholder, the provisions of Section 6.2(a) and (b) shall terminate; provided,
--------
however, that to the extent there is any dispute as to whether any Contingent
- -------
Payment is due, such payment shall not be deemed to be due until fifteen (15)
days after the issuance of a final, non-appealable judgment of a court of
competent jurisdiction or a final and binding arbitration ruling pursuant to
Section 3.5 hereof as to whether such Contingent Payment is due.
21
<PAGE>
(e) The Companies' Employees. Buyer agrees that as soon as
------------------------
practicable after the Closing it shall determine in good faith whether to adjust
the compensation of the employees of the Companies who shall remain employees of
the Companies or become employees of Buyer based upon such factors as it shall
deem reasonably appropriate, including, without limitation, prevailing market
rates of compensation and Buyer's then existing compensation for similarly
situated employees. Buyer does not presently believe and it is not Buyer's
present intention to alter in any material respect the compensation of such
employees of the Companies following the Closing. Notwithstanding anything
herein to the contrary, Buyer agrees that with respect to the four senior
employees of the Companies listed on Exhibit B hereto and the five (5) top
---------
performing sales representatives of the Companies listed on Exhibit A hereto,
---------
after the Closing and through December 31, 2000 (so long as such persons shall
remain employees of the Companies) each such employee will be paid a salary and
provided a commission plan which in the aggregate are substantially equivalent
to the aggregate salary and commission plan provided by the Companies
immediately prior to the Closing, all of which salaries and commission plans
have been disclosed in writing to Buyer prior to the Closing. Buyer recognizes
that the Shareholder believes that such agreement is material to his ability to
earn the Contingent Payments. In consideration of certain non-compete agreements
to be entered into by Buyer and such senior employees (in form and substance to
be reasonably and mutually agreed to as soon as practicable following the
Closing), Buyer agrees that the senior employees of the Companies listed on
Exhibit B hereto shall be provided, for a period of up to six (6) months
- ---------
following the termination of their employment, if within one year following the
Closing Date, by Buyer or the Companies for any reason other than "cause" (as
such term is generally defined and used under New York contract law), with the
base salary and general employee benefits to which they were entitled at the
time of their termination. Buyer agrees that all employees of the Companies who
shall remain employees of the Companies or become employees of Buyer shall be
entitled to participate in the employee benefits and plans, including, without
limitation, stock option plans, provided by Buyer to its employees generally
subject to the terms thereof and that such employees shall be given credit for
their years of prior service with the Companies in connection with the provision
of such benefits and any preexisting conditions or limitations with respect to
medical and health benefits shall be waived (or Buyer shall maintain in effect
the Companies' present medical and health insurance plans). Notwithstanding
anything contained herein, nothing in this Agreement shall confer, or shall be
construed to confer, upon any employee of the Companies (other than the
Shareholder) who shall become an employee of Buyer any right to the continuance
of employment with Buyer nor shall anything contained in this Agreement limit in
any manner the right of Buyer to terminate any such employee at any time or for
any reason.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE. The
--------------------------------------------------------
obligation of Buyer to complete the Closing is subject to the fulfillment on or
prior to the Closing Date of all of the following conditions, any one or more of
which (other than the first sentence of Section 7.4 hereof) may be waived by
Buyer in writing:
7.1. Agreements and Conditions. On or before the Closing Date, the
-------------------------
Companies and the Shareholder shall have complied with and duly performed in all
material respects all covenants, agreements and conditions on their parts to be
complied with and performed by such date pursuant to this Agreement.
22
<PAGE>
7.2. Representations and Warranties. The representations and
------------------------------
warranties of the Companies and the Shareholder contained in this Agreement
shall be true and correct in all material respects (without giving effect to any
materiality qualification contained in any such representation or warranty) on
and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date
(except to the extent that any such representation or warranty is made as of a
specified date, then as of such date).
7.3. Loss, Damage or Destruction. Between the date hereof and the
---------------------------
Closing Date there shall not have been any loss, damage or destruction to or of
any of the assets, property or business of the Companies in excess of $50,000 in
the aggregate not covered by insurance, nor shall the assets, business or
prospects of the Companies have been adversely affected in any significant way
as a result of any fire, accident, or other casualty, war, civil strife, riot or
act of God or the public enemy or otherwise.
7.4. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain, materially
delay or prohibit the transactions contemplated hereby. Additionally, on the
Closing Date there shall be no court or governmental action or proceeding
pending or threatened against or affecting the Companies which involves a demand
for any judgment or recovery, whether or not covered by insurance, and which may
result in any material adverse change in the business, assets, prospects or
financial condition of the Companies.
7.5. Officer's Certificate. Buyer shall have received a certificate
---------------------
dated the Closing Date and executed by a duly authorized executive officer of
each of the Companies and the Shareholder that the conditions set forth in
Sections 7.1, 7.2, 7.3 and 7.4 hereof have been fulfilled. The receipt of such
certificate and the consummation of the Closing shall not constitute a waiver by
Buyer of any of the representations and warranties of the Companies or the
Shareholder contained in Section 4 hereof. Upon the delivery of such
certificate, the representations and warranties contained in Section 4 hereof
shall be deemed to have been made on and as of the Closing Date with the same
force and effect as if made on and as of such date (except to the extent that
any such representation or warranty is made as of a specified date, then as of
such date).
7.6. [Intentionally Omitted.]
7.7. Opinion of the Companies' Counsel. Buyer shall have received a
---------------------------------
legal opinion, dated the Closing Date, of Nixon Peabody LLP, counsel to the
Companies and the Shareholder, substantially in the form of Exhibit C hereto.
---------
7.8 Secretary's Certificate. Buyer shall have received (i) a
-----------------------
certificate dated the Closing Date and executed by the Secretary of Accurate
setting forth a copy of the resolutions adopted by the Board of Directors of
Accurate duly authorizing and approving the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (ii)
a certificate dated the Closing Date and executed by the Secretary of Market
Trading setting forth a copy of the resolutions adopted by the Board of
Directors of Market Trading duly
23
<PAGE>
authorizing and approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
7.9 Shares. Buyer shall have received the stock certificates
------
representing all of the Shares, duly endorsed in blank or with duly executed
stock powers attached, in proper form for transfer.
7.10. Resignations. Buyer shall have received, effective as of the
------------
Closing Date, written resignations of the directors and officers of each of the
Companies required to resign pursuant to Section 6.1(f) hereof. The Shareholder
shall have delivered to Buyer all such documents as Buyer shall request in order
for Buyer to terminate all authorizations with respect to the Companies' bank or
other accounts and any powers of attorney granted by the Companies required to
be set forth on Schedule 4.27 hereto.
-------------
7.11. Material Adverse Change. There shall have been no material
-----------------------
adverse change in the financial condition, business, assets or prospects of the
Companies since September 30, 1999.
7.12. Minute Books and Stock Records; Certified Documents. The
---------------------------------------------------
Companies and the Shareholder shall have delivered to Buyer (i) true and
complete originals of the minute books, stock records, stock ledger and
corporate seal (if available) of each of Accurate and Market Trading, (ii) a
copy of the Certificate of Incorporation of each of Accurate and Market Trading,
each certified by the Secretary of State of the State of New York, (iii) good
standing certificates evidencing the good standing of each of Accurate and
Market Trading in the State of New York, certified by the Secretary of State and
(iv) a copy of the Bylaws of each of Accurate and Market Trading certified by
Accurate's Secretary and Market Trading's Secretary, respectively, as being true
and complete.
7.13. Repayment of Related Party Loans. The Companies shall have
--------------------------------
received repayment in full of all loans and other amounts owed to them by the
Shareholder as provided in Section 3.3, and any director, officer, and employee
of the Companies, and any affiliates or associates thereof.
7.14. Employment Agreement of Shareholder. Buyer shall have received
-----------------------------------
an executed Employment Agreement from Anthony Arena substantially in the form of
Exhibit D hereto (the "Arena Employment Agreement").
- ---------
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SHAREHOLDER TO
------------------------------------------------------------
CLOSE. The obligation of the Shareholder to complete the Closing is subject to
- -----
the fulfillment on or prior to the Closing Date of all of the following
conditions, any one or more of which (other than Section 8.3 hereof) may be
waived by the Shareholder in writing:
8.1. Agreements and Conditions. On or before the Closing Date, Buyer
-------------------------
shall have complied with and duly performed in all material respects all
agreements and conditions on its part to be complied with and performed by such
date pursuant to this Agreement.
24
<PAGE>
8.2. Representations and Warranties. The representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects (without giving effect to any materiality qualification
contained in any such representation or warranty) on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date.
8.3. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain, materially
delay or prohibit the transactions contemplated hereby.
8.4. Officer's Certificate. The Companies shall have received a
---------------------
certificate dated the Closing Date and executed by a duly authorized executive
officer of Buyer that the conditions set forth in Sections 8.1, 8.2 and 8.3
hereof have been fulfilled. Upon the delivery of such certificate, the
representations and warranties contained in Section 5 hereof shall be deemed to
have been made on and as of the Closing Date with the same force and effect as
if made on such date.
8.5. Payment of the Closing Payment. The Shareholder shall have
------------------------------
received from Buyer the Closing Payment and the interest due pursuant to Section
3.1 hereof in the manner provided in Section 3.2 hereof.
8.6. Opinion of Buyer's Counsel. The Shareholder shall have received
--------------------------
a legal opinion, dated the Closing Date, of Kirkpatrick & Lockhart LLP, special
counsel to Buyer, substantially in the form of Exhibit E hereto.
---------
8.7. Employment Agreement of Shareholder. The Shareholder shall have
-----------------------------------
received an executed Arena Employment Agreement from Buyer.
8.8. Option Agreement. The Shareholder shall have received an
----------------
executed stock option agreement substantially in the form of Exhibit F hereto.
---------
8.9 Payments and Mortgage Discharge. The Shareholder shall have
-------------------------------
received a mortgage discharge and satisfaction of the mortgage listed on
Schedule 3.3B from the Companies, in recordable form and otherwise in form and
- -------------
substance reasonably satisfactory to the Shareholder and his counsel, and the
Companies and Buyer shall have provided the acknowledgment referred to in
Section 3.3(b) hereof.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
------------------------------------------
right of Buyer fully to investigate the affairs and conditions of the Companies,
Buyer has the right to rely upon the representations, warranties, covenants and
agreements of the Companies and the Shareholder contained in this Agreement.
All representations and warranties contained in this Agreement (including the
Schedules hereto) and in any certificate required hereby to be delivered with
respect hereto will be deemed to be representations and warranties hereunder
and, except for those representations and warranties contained in Sections 4.1,
4.3, 4.7, 4.8, 4.25, 4.28, 5.2, 5.5 and 5.6 hereof, shall survive for 21 months
following the Closing Date. The representations and warranties contained in
Sections 4.1 and 4.3 hereof shall survive the Closing Date indefinitely, and the
representations and warranties contained in Sections 4.7, 4.8, 4.25, 4.28, 5.2,
5.5 and 5.6 hereof shall survive until
25
<PAGE>
the expiration of any applicable statute of limitations. All covenants and
agreements contained herein which are to be performed after the Closing shall
survive until fully performed in accordance with their terms, and all covenants
and agreements contained in Section 6.1 hereof which are, in accordance with
their terms, to be performed at or prior to the Closing shall expire at the
Closing, except Sections 6.1(g) and (h) which shall survive until fully
performed. No claim or cause of action resulting from a breach of any
representation or warranty hereunder may be asserted unless asserted in writing
to the party as to which or whom there is alleged a breach of representation or
warranty prior to the expiration of the applicable survival period; provided,
however, that all such representations and warranties shall survive after the
applicable survival period with respect to any claim made in writing in
accordance with this Agreement by a party prior to the expiration thereof until,
and shall expire when, such claim is finally resolved.
10. INDEMNIFICATION.
---------------
10.1. Obligations of the Companies and/or the Shareholder to
------------------------------------------------------
Indemnify. (a) Subject to the limitations and expiration dates contained in
- ---------
Section 9 hereof and to this Section 10, the Shareholder shall indemnify, defend
and hold harmless Buyer and each of its directors, officers, shareholders,
agents, affiliates (including the Companies), successors and permitted assigns
(collectively, "Buyer's Related Indemnitees") from and against, and shall pay
and/or reimburse the foregoing persons for, any and all losses, liabilities,
claims, obligations, penalties, damages and costs and expenses (including
reasonable attorneys' fees and disbursements and other costs incurred or
sustained by an Indemnitee (as defined below) in connection with the
investigation, defense or prosecution of any such claim or any action or
proceeding between the Indemnitee and the Indemnifying Party (as defined below)
or between the Indemnitee and any third party or otherwise), whether or not
involving a third-party claim (collectively, "Losses"), relating to or arising
out of the breach of any representation, warranty, covenant or agreement of the
Shareholder or the Companies contained in this Agreement.
(b) Subject to the limitations contained in this Section 10.1(b) and
in Sections 10.3 through 10.7 hereof, on and after the Closing, the Shareholder
shall indemnify, defend and hold harmless Buyer and each of its Related
Indemnitees from and against, and shall pay and/or reimburse them for, all
Losses arising from claims made by third parties on or prior to November 30,
1999 arising out of any product warranties in respect of goods sold by the
Companies, but only to the extent that such Losses exceed the portion of the
accounts receivable reserve allocated to product warranty reflected in the
Interim Financial Statements. In no event shall the Losses indemnified pursuant
to this Section 10.1(b) exceed the amount equal to the aggregate prices paid by
customers for such goods sold less any credits actually received by the
Companies from the vendor(s) thereof. The indemnity provided for in this
Section 10.1(b) shall be Buyer's sole and exclusive remedy (at law or equity)
against the Shareholder with respect to any and all Losses arising from any
product warranty claims asserted after the Closing.
(c) Notwithstanding anything in this Agreement to the contrary, the
parties agree that Buyer shall not be entitled to indemnification pursuant to
this Agreement for any Taxes which are payable but have not been paid by the
Companies incurred or attributable to periods (or portions of periods) prior to
the Closing Date and that the accruals for the matters covered by taxes payable,
as provided for in the Interim Financial Statements, are intended to be a final
settlement of any such liabilities for unpaid Taxes and for any breach of
representation or
26
<PAGE>
warranty with respect to such unpaid Taxes; provided, however, that the
-------- -------
representations and warranties contained in the first and third sentences of
Section 4.8 and Section 4.23 hereof, as such relate to Taxes (other than Taxes
that are the subject of the Agreed Tax Items), shall not be modified or
diminished in any way by the foregoing.
10.2. Obligation of Buyer to Indemnify. (a) Subject to the
--------------------------------
limitations and expiration dates contained in Section 9 hereof and to this
Section 10, Buyer shall indemnify, defend and hold harmless the Shareholder and
his heirs, legal beneficiaries and permitted assigns from and against, and shall
pay and/or reimburse the foregoing persons for, any and all Losses relating to
or arising out of (i) the breach of any representation, warranty, covenant or
agreement (other than the covenants and agreements contained in subsections (ii)
and (iii) of this Section 10.2(a)) of Buyer contained in this Agreement, (ii)
the operation of the Companies' business after the Closing, subject to, in
respect of any claim relating to or arising out of the operation of the
Companies' business prior to the Closing, the correctness of the representations
and warranties of the Shareholder contained herein and not resulting from any
action of the Shareholder taken after the Closing which he was not authorized by
Buyer to take, and (iii) subject to the correctness of the representations and
warranties of the Shareholder contained herein, any termination of an employee
of the Companies after the Closing by Buyer and/or the Companies and not
resulting from any action of the Shareholder taken after the Closing which he
was not authorized by Buyer to take.
(b) Subject to the limitations contained in this Section 10.2(b) and
in Sections 10.3 through 10.7 hereof, in the event that the Shareholder is,
following the Closing Date, made a party to any action or proceeding by any
third party (including, without limitation, any product liability actions) in
his capacity as an officer, director, shareholder and/or employee of the
Companies, the Shareholder shall be entitled to, and Buyer shall pay and
reimburse the Shareholder for, (A) all reasonable attorneys' fees and expenses
incurred in connection with such action or proceeding and the defense thereof
and (B) any other Losses incurred by the Shareholder in connection therewith;
provided, however, that Buyer shall be required to so indemnify the Shareholder
- -------- -------
only if (x) the Shareholder, in respect to the actions or omissions at issue in
such action or proceeding, acted in good faith and for a purpose which he
reasonably believed to be in the best interests of the Companies, and had no
reasonable cause to believe that his conduct was unlawful and (y) the actions or
omissions at issue in such action or proceeding do not constitute a breach of
any representation or warranty of the Shareholder contained herein; provided,
--------
further, that Buyer shall advance to the Shareholder the fees and expenses
- -------
referred to in clause (A) above, subject to the Shareholder's undertaking to
promptly repay to Buyer such fees and expenses in the event that the conditions
in clauses (x) and/or (y) above shall not be satisfied.
10.3. Notice to Indemnifying Party. If any party (the "Indemnitee")
----------------------------
receives notice of any claim or the commencement of any action or proceeding
with respect to which the other party (or parties) is obligated to provide
indemnification (the "Indemnifying Party") pursuant to Sections 10.1 or 10.2
hereof, the Indemnitee shall give the Indemnifying Party written notice thereof
within a reasonable period of time following the Indemnitee's receipt of such
notice. Such notice shall describe the claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the Losses that have been or may
be sustained by the Indemnitee. The Indemnifying Party may, subject to the
other provisions of this Section 10.3, compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying
27
<PAGE>
Party's own counsel, any such matter involving the asserted liability of the
Indemnitee in respect of a third-party claim. If the Indemnifying Party elects
to compromise or defend such asserted liability, it shall within thirty (30)
days (or sooner, if the nature of the asserted liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee, shall reasonably
cooperate, at the request and reasonable expense of the Indemnifying Party, in
the compromise of, or defense against, such asserted liability. The Indemnifying
Party will not be released from any obligation to indemnify the Indemnitee
hereunder with respect to a claim without the prior written consent of the
Indemnitee, unless the Indemnifying Party delivers to the Indemnitee a duly
executed agreement settling or compromising such claim with no monetary
liability to or injunctive relief against the Indemnitee and a complete release
of the Indemnitee with respect thereto. The Indemnifying Party shall have the
right, except as provided below in this Section 10.3, to conduct and control the
defense of any third-party claim made for which it has been provided notice
hereunder. All costs and fees incurred with respect to any such claim will be
borne by the Indemnifying Party. The Indemnitee will have the right to
participate, but not control, at its own expense, the defense or settlement of
any such claim; provided, that if the Indemnitee and the Indemnifying Party
--------
shall have conflicting claims or defenses, the Indemnifying Party shall not have
control of such conflicting claims or defenses and the Indemnitee shall be
entitled to appoint a separate counsel for such claims and defenses at the cost
and expense of the Indemnifying Party. If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are reasonably
required for such defense.
10.4. Limitation on Indemnification. Notwithstanding anything to the
-----------------------------
contrary contained in this Agreement, (a) the aggregate liability of the
Shareholder for any and all Losses incurred by Buyer (and all related
Indemnitees) and for which Buyer (and all related Indemnitees) would otherwise
be entitled to indemnification hereunder, except with respect to Losses arising
from a breach of the representations and warranties contained in Sections 4.1,
4.3, 4.7, 4.12 and 4.25 and/or the covenants of the Shareholder contained in
Section 6.2(a),(b) and (c) hereof, shall not exceed $3,200,000 and (b) the
aggregate liability of the Shareholder for any and all Losses incurred by Buyer
(and all related Indemnitees) arising from a breach of the representations and
warranties contained in Sections 4.1, 4.3, 4.7, 4.12 and 4.25 and/or the
covenants of the Shareholder contained in Section 6.2(a),(b) and (c) hereof and
for which Buyer (and all related Indemnitees) would otherwise be entitled to
indemnification hereunder shall not exceed the Closing Payment plus any
Contingent Payment(s) actually paid to the Shareholder less the amount of any
Losses actually indemnified pursuant to the preceding clause (a).
Notwithstanding anything to the contrary contained in this Agreement, (A) the
aggregate liability of Buyer for any and all Losses incurred by the Shareholder
(and all related Indemnitees) and for which the Shareholder (and all related
Indemnitees) would otherwise be entitled to indemnification hereunder, except
with respect to Losses arising from a breach of Sections 3.4, 10.2(a)(ii) and
(iii) and 10.2(b) hereof, shall not exceed $2,000,000 and (B) the aggregate
liability of Buyer for any and all Losses incurred by the Shareholder (and all
related Indemnitees) arising from a breach of Sections 10.2(a)(ii) and (iii) and
10.2(b) hereof and for which the Shareholder (and all related Indemnitees) would
otherwise be entitled to indemnification hereunder shall not exceed $1,500,000.
A breach of Section 3.4 hereof shall be fully indemnifiable hereunder, and shall
not be subject to, or covered by, the foregoing limitation on liability.
28
<PAGE>
The Shareholder, on the one hand, and Buyer, on the other hand, shall
be obligated to indemnify, defend and hold harmless any Indemnitee pursuant to
this Section 10 with respect to any Loss incurred by such Indemnitee only (i) if
the amount of Losses arising out of or resulting from an individual claim (or
series of related or similar claims) is equal to or greater than $7,500 and (ii)
to the extent that the aggregate amount of all Losses for all claims made by
Indemnitees shall exceed $200,000, in which case only the excess over $200,000
shall be subject to indemnification; provided, however, that the foregoing
-------- -------
$200,000 limitation shall not apply in respect of claims arising out of or
resulting from (x) a breach of Sections 4.1, 4.3, 4.28 or 5.5 hereof or (y) a
breach by Buyer of Section 3.4 or for indemnification pursuant to Sections
10.2(a) (ii) or (iii) or Section 10.2(b). In no event shall the Shareholder or
Buyer, as the case may be, be liable to any Indemnitee hereunder for special,
indirect, incidental or punitive damages.
10.5. Relationship with Purchase Price Adjustment. Notwithstanding
-------------------------------------------
any payment or purchase price reduction which has been made under the purchase
price adjustment provisions contained in Section 3.3 hereof, and irrespective of
whether any Contingent Payments shall have been earned or paid pursuant to
Section 3.4 hereof, the indemnification provisions of this Section 10 shall
remain in full force and effect without any modification or diminution thereof.
10.6. Other Provisions. (a) Buyer shall be entitled to offset and
----------------
reduce any Contingent Payment(s) payable by it pursuant to Section 3.4 hereof by
all amounts due in respect of Losses to which it is entitled to indemnification
under Section 10.1 hereof; provided, that if such Losses exceed such Contingent
--------
Payment(s), Buyer shall remain entitled to indemnification hereunder for such
excess amount subject to Section 10.4 hereof. Buyer shall additionally be
entitled to offset and reduce any amounts owed to the Shareholder hereunder by
all amounts due in respect of Losses to which Buyer (or any related Indemnitee)
is entitled to indemnification under Section 10.1 hereof. The Shareholder shall
be entitled to offset and reduce any amounts owed to Buyer or the Companies
hereunder by all amounts due in respect of Losses to which the Shareholder (or
any related Indemnitee) is entitled to indemnification under Section 10.2
hereof. For purposes of this Section 10.6(a), "amounts due" means (i) any amount
that the parties involved in the offset claim agree in writing is due and
payable or (ii) any amount determined to be due and payable pursuant to the
binding determination of three jointly selected arbitrators or a court of
competent jurisdiction.
(b) The parties agree that any indemnification payment(s) made by the
Shareholder or Buyer pursuant to this Agreement shall be treated for Tax
purposes as an adjustment to the Purchase Price, unless otherwise required by
applicable Law.
(c) Any indemnification payment(s) payable pursuant to this Agreement
shall be decreased if and to the extent of any insurance proceeds actually
received by the Indemnitee directly in respect of the Losses giving rise to such
indemnification payment(s).
(d) Subject to Section 10.2(b) hereof, the Shareholder hereby
irrevocably waives any and all rights to indemnification from the Companies in
his capacities as a director and/or officer of the Companies to which he would
otherwise have been entitled for all periods
29
<PAGE>
up through and including the Closing Date and including in respect of the
transactions contemplated hereby.
10.7. Exclusive Remedy. Each of the Shareholder, the Companies and
----------------
Buyer acknowledges and agrees that from and after the Closing that (absent
fraud) the Shareholder's, the Companies' and Buyer's sole exclusive remedy (at
law or equity) with respect to any and all claims against any other party
relating to this Agreement shall be made pursuant to the indemnification
provisions set forth in this Section 10 or as otherwise specifically provided in
this Agreement (including, without limitation, 6.2(d) hereof).
11. TERMINATION. This Agreement may be terminated prior to the
-----------
Closing:
(a) at any time by the mutual written consent of Buyer and the
Shareholder;
(b) by the Companies, the Shareholder or Buyer in writing if the
Closing shall not have occurred by November 30, 1999, but only if
the Closing shall not have occurred for a reason other than the
material breach by such terminating party of any of his/its
representations, warranties, covenants or agreements contained
herein;
(c) at any time by Buyer in writing upon a material breach of any of
the representations, warranties, covenants or agreements of the
Companies and/or the Shareholder contained in this Agreement; or
(d) at any time by the Companies or the Shareholder in writing upon a
material breach of any of the representations, warranties,
covenants or agreements of Buyer contained in this Agreement.
In the event of termination of this Agreement by a party as set forth
above, this Agreement shall forthwith terminate and there shall be no liability
on the part of the Shareholder, the Companies or Buyer, or any of their
respective equity owners (including the Shareholder), officers, directors,
affiliates and employees; provided, that no party shall be relieved of any
--------
Losses occurring or sustained as a result of a termination following such
party's refusal to close if the conditions to his/its obligation to close have
been fully satisfied. Notwithstanding any termination of this Agreement, the
provisions of Section 6.2(c), this Section 11 and Section 12 hereof shall
survive.
12. MISCELLANEOUS.
-------------
12.1. Consent to Jurisdiction. Any legal action, suit or proceeding
-----------------------
in equity or at law arising out of or relating to this Agreement and the
transactions contemplated hereby shall be instituted exclusively in the state or
Federal courts located in the State and County of New York and each party agrees
not to assert, by way of motion, as a defense, or otherwise, in any such action,
suit or proceeding, any claim that such party is not subject personally to the
jurisdiction of any such court, that the action, suit or proceeding is brought
in an inconvenient forum, that the venue of the action, suit or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by any such court. Each party further
30
<PAGE>
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective against any party if given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt, postage prepaid, mailed
to such party as herein provided. Nothing herein contained shall be deemed to
affect or limit the right of any party to serve process in any other manner
permitted by applicable law.
12.2. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following meanings unless the context otherwise clearly
requires:
(a) "affiliate," with respect to any person, means and includes any
---------
other person controlling, controlled by or under common control with such
person.
(b) "associate" shall have the meaning ascribed thereto in Rule 405 of
---------
the Securities Act of 1933, as amended.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and
----
the applicable Treasury Regulations (as hereinafter defined).
(d) "contracts and other agreements" means and includes all contracts,
------------------------------
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, commitments, obligations or other binding arrangements, oral
or written.
(e) "Environmental Claim" means any and all administrative, regulatory
-------------------
or judicial actions, suits, demands, demand letters, directives, claims, Liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any person alleging potential Liability (including Liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, or release or threatened release into the environment, of any
Hazardous Materials at any location (whether or not owned) presently or formerly
operated, leased or managed by the Companies in violation of any Environmental
Law or (ii) any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or release of any Hazardous Materials in violation of any
Environmental Law.
(f) "Environmental Laws" mean any laws, statutes, regulations, rules
------------------
or orders which relate to or otherwise impose Liability or a standard of conduct
concerning the discharge, emission, storage, treatment, transportation,
handling, release, threatened release, or disposal of Hazardous Materials,
including, but not limited to, the Air Pollution Control Act, as amended, the
Federal Water Pollution Control Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, and the Toxic Substances
Control Act of 1976, as amended, and any other similar Federal, state or local
statutes.
(g) "GAAP" means United States generally accepted accounting
----
principles.
31
<PAGE>
(h) "Hazardous Materials" means any pollutant, contaminant, hazardous,
-------------------
radioactive or toxic substance, material, constituent or waste, or any other
waste, substance, chemical or material regulated under any Environmental Law,
including (i) petroleum, crude oil and any fractions thereof, (ii) natural gas,
synthetic gas and any mixtures thereof, (iii) asbestos and/or asbestos-
containing material, (iv) radon and (v) polychlorinated biphenyls ("PCBs"), or
materials or fluids containing PCBs.
(i) "The Companies' and the Shareholder's knowledge" means with
-----------------------------------------------
respect to (i) the Companies, the actual knowledge of Anthony Arena after
conducting reasonable inquiries, including reasonable inquiries of the persons
listed on Exhibit B hereto and (ii) the Shareholder, the actual knowledge of the
---------
Shareholder after conducting a reasonable inquiry, it being understood that
reasonable inquiry shall not include inquiry of any employees other than those
listed on Exhibit B hereto.
---------
(j) "Liabilities" means debts, liabilities or obligations, whether
-----------
absolute or contingent, asserted or unasserted, accrued or unaccrued, known or
unknown, liquidated or unliquidated, matured or unmatured, due or to become due,
or fixed or unfixed.
(k) "Lien" means and includes any lien, pledge, mortgage, security
----
interest, claim, lease, charge, option, right of first refusal or offer,
easement, servitude, transfer restriction or voting requirement under any or
similar agreement, or any other encumbrance, restriction or limitation
whatsoever. "Lien" shall not include any liability pursuant to Section 630 of
the New York Business Corporation Law.
(l) "person" means any individual, corporation, partnership, firm,
------
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
(m) "property" means real, personal or mixed property, tangible or
--------
intangible.
(n) "Tax Returns" means all written returns, declarations, reports,
-----------
forms, estimates, information returns and statements filed in respect of any
Taxes and supplied to any taxing authority in connection with any Taxes.
(o) "Taxes" (or "Tax" where the context requires) means all Federal,
----- ---
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll-related and property
taxes, and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest and penalties with respect thereto.
(p) "Treasury Regulations" means the regulations promulgated under the
--------------------
Code.
12.3. Publicity. No publicity release or announcement concerning
---------
this Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof by Buyer and the Shareholder
jointly (which approval shall not be
32
<PAGE>
unreasonably withheld, delayed or conditioned) other than any announcement
required by applicable securities laws or the rules and regulations of any stock
or similar exchange to which a party is subject; provided, that the party making
--------
such disclosure shall notify the other than any in advance of such disclosure.
12.4. Notices. Any notice or other communication required or which
-------
may be given hereunder shall be in writing and shall be delivered personally,
sent by facsimile transmission, or by a recognized overnight courier for next
business day delivery, certified, registered, or express mail, postage or fees
prepaid, and shall be deemed given when so delivered personally, sent by
facsimile transmission with electronic confirmation of receipt or the next
business day after delivered to such overnight courier or express mail service
or, if mailed, five (5) days after the date of mailing, as follows:
if to Buyer, to:
PartMiner, Inc.
432 Park Avenue South
12/th/ Floor
New York, NY 10016
Attn: General Counsel
Fax: (212) 592-5833
with a copy to:
Kirkpatrick & Lockhart LLP
1251 Avenue of the Americas
New York, NY 10020
Attn: Stephen R. Connoni, Esq.
Fax: (212) 536-3901
if to the Shareholder, at the address listed on the signature page
hereto with a copy to:
Nixon Peabody LLP
437 Madison Avenue
New York, NY 10022
Attn: Lauren E. Wiesenberg, Esq.
Fax: (212) 940-3111
Any party may by notice given in accordance with this Section 12.4 to
the other parties designate another address or person for receipt of notices
hereunder.
33
<PAGE>
12.5. Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto) and the certificates executed in connection with the
consummation of the transactions contemplated hereby embody the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings between the parties
hereto, including that certain letter agreement, dated September 30, 1999, by
and between Accurate, the Shareholder and Buyer.
12.6. Waivers and Amendments. This Agreement may be amended,
----------------------
superseded or canceled only by a written instrument signed by Buyer, the
Companies and the Shareholder. Any of the terms or conditions hereof may be
waived only by a written instrument signed by the party or parties to be bound
thereby. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
12.7. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, legal beneficiaries and heirs. This Agreement and any rights
or obligations hereunder shall not be assignable or delegable by any party
except with the prior written consent of the other parties and except that after
the Closing Buyer may assign its rights hereunder to any affiliate thereof;
provided, that such assignment shall not release Buyer from its obligations
- --------
hereunder.
12.8. Variations in Pronouns. All pronouns and any variations
----------------------
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
12.9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
12.10. Headings. The headings in this Agreement are for reference
--------
purposes only and shall not in any way affect or limit the meaning or
interpretation of this Agreement.
12.11. No Strict Construction. The language used in the Agreement
----------------------
has been negotiated by the parties hereto and will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any party hereto.
12.12. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such jurisdiction.
12.13 No Third Party Beneficiaries. Except as provided in Sections
----------------------------
10.1 and 10.2 hereof, there are no intended third party beneficiaries to this
Agreement and this Agreement does not confer, and shall not be construed to
confer, upon any person or entity, other than the parties, any rights,
privileges or remedies hereunder or otherwise.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement on the date first above written.
PARTMINER, INC.
/s/ Daniel Nissanoff
By:________________________________________
Name: Daniel Nissanoff
Title: President and Chief Executive Officer
ACCURATE COMPONENTS INC.
/s/ Anthony Arena
By:________________________________________
Name: Anthony Arena
Title: President
MARKET TRADING CONCEPTS INC.
/s/ Anthony Arena
By:________________________________________
Name: Anthony Arena
Title: President
/s/ Anthony Arena
__________________________________________
Anthony Arena
ADDRESS OF ANTHONY ARENA FOR NOTICE:
Anthony Arena
30 Hallock Road
Patchogue, NY 11772
35
<PAGE>
EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT dated as of September 10, 1999 by and among PartMiner, Inc.,
f/k/a Dast Corporation, d/b/a Microcom Technologies, a New York corporation (the
"Company"), Elsevier Realty Information, Inc., a Delaware corporation (the
"Purchaser"), and Daniel Nissanoff (the "Stockholder").
Introduction
------------
Purchaser wishes to purchase an aggregate of 69,459 shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), and the Company and
------------
Stockholder each wish to sell shares of the Common Stock to Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF
COMMON STOCK; PURCHASE PRICE; CLOSING
Section 1.01. Purchase and Sale of Common Stock. In reliance upon the
------------ ---------------------------------
representations and warranties contained herein, and subject to the terms and
conditions hereof, the Company agrees to issue and sell to Purchaser, and the
Stockholder agrees to sell to Purchaser, and Purchaser agrees to purchase from
the Company and the Stockholder, respectively, the number of shares of Common
Stock indicated on Schedule 1.01 hereto.
-------------
Section 1.02. Purchase Price. The aggregate purchase price for the Common
------------ --------------
Stock shall be $15,000,000 (the "Purchase Price"), $10,000,000 to be paid to the
--------------
Company and $5,000,000 to be paid to Stockholder, each sum payable by wire
transfer in immediately available funds to an account designated by each of the
Company and the Stockholder. The Purchase Price shall be payable at the Closing
(as hereinafter defined).
Section 1.03. Closing. The purchase and sale of the Common Stock shall
------------ -------
take place at a closing (the "Closing") to be held at the offices of Purchaser
-------
at 275 Washington Street, Newton, Massachusetts, or such other place as is
agreed to by the parties, on September 9, 1999, or if the conditions to Closing
specified herein are not then satisfied or waived, such date which is five (5)
business days after the satisfaction or waiver of such conditions (the "Closing
-------
Date").
- -----
Section 1.04. Purchase Price Adjustment. In the event that the Company
------------ -------------------------
completes a private financing within ninety (90) days of the Closing at a
valuation of the Company of less than $150 million, the Company will refund to
Purchaser $100,000 in cash for every $1,000,000 by which $150 million exceeds
the valuation of the Company used for the purposes of such financing
(appropriately adjusted for any valuation which is not equal to a multiple of
-1-
<PAGE>
$1,000,000). The foregoing refund will be paid to Purchaser within ten (10)
days of the closing of such financing by wire transfer to an account designated
by Purchaser. In addition, for a period of twelve (12) months from the Closing
Date, the Company shall not complete an initial public offering of the Company's
securities pursuant to a registration statement under the Act (as defined below)
at a valuation of the Company of less than $110,000,000, without the consent of
Purchaser, which consent shall not be unreasonably withheld or delayed.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that the information
set forth in this Article II is true and correct as of the date hereof and will
be true and correct as of the Closing.
Section 2.01. Organization and Standing. The Company is a corporation
------------ -------------------------
duly organized, validly existing and in good standing under the laws of the
State of New York. The Company has all necessary corporate power and authority
to own its properties and to carry on its business as currently conducted and as
proposed to be conducted. The Company is qualified to do business as a foreign
corporation in the States of California, New Jersey and Massachusetts, and is
not required to be qualified to do business as a foreign corporation in any
other jurisdiction where the failure to qualify would have a material adverse
effect on the Company.
Section 2.02. Subsidiaries. Schedule 2.02 sets forth a list of each
------------ ------------ -------------
Subsidiary (as hereinafter defined). Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
incorporation of such Subsidiary, as set forth on Schedule 2.02. Each
-------------
Subsidiary has all necessary corporate power and authority to own its properties
and to carry on its business as currently conducted and as proposed to be
conducted. Except as set forth on Schedule 2.02, the Company has no
-------------
Subsidiaries, holds no securities of any other entity, is not a party to any
joint venture or partnership and has made no investment in any third party. As
used herein, "Subsidiary" means any corporation or other entity a majority of
----------
the voting securities or economic interest of which is held by the Company or
any Subsidiary.
Section 2.03. Charter and By-Laws. The copies of the Certificate of
------------ -------------------
Incorporation and the By-Laws of the Company furnished to the Purchaser are true
and correct in all respects.
Section 2.04. Validity and Enforceability. This Agreement is, and each of
------------ ---------------------------
the other agreements and instruments of the Company contemplated hereby will be
the valid and binding obligations of the Company, enforceable in accordance with
their respective terms, except as the enforcement thereof may be limited by
bankruptcy and other laws of general application relating to creditors' rights
or general principals of equity.
-2-
<PAGE>
Section 2.05. Capital Stock.
------------ -------------
(a) The authorized capital stock of the Company consists of (x)
106,122 shares of preferred stock, $.01 par value per share (the "Senior
------
Preferred Shares"), all of which is issued and outstanding and (y) 1,500,000
- ----------------
shares of Common Stock of which 302,041 is issued and outstanding and 114,714
shares are reserved for future issuance upon the exercise of outstanding stock
options and the conversion of the Senior Preferred Shares.
(b) Schedule 2.05(b) hereto sets forth a complete and accurate list of
----------------
all holders of the Company's outstanding capital stock, and all options,
warrants, convertible securities and other rights which may afford any person or
entity the right to acquire shares of any class of capital stock of the Company,
including, without limitation, any capital stock, option, warrant, convertible
security or other security or right which the Stockholder or the Company has a
current intention to issue or sell, in each case prior to and immediately after
the Closing.
(c) Schedule 2.05(c) hereto also sets forth the authorized capital
----------------
stock of each Subsidiary, the number of shares of each class outstanding and the
record and beneficial holder thereof. No Subsidiary has issued or granted any
option, warrant, convertible security or other right or agreement which affords
any person or entity the right to purchase or otherwise acquire any shares of
its capital stock.
(d) Neither the Company nor any Subsidiary is subject to any
obligation (contingent or otherwise) to purchase or otherwise acquire or retire
any of its equity securities (other than in accordance with the Company's
Certificate of Incorporation or this Agreement). Except as set forth on
Schedule 2.05(d), no person has any right of first refusal or preemptive right
- ----------------
in connection with the issuance of the Common Stock issuable upon exercise of
any stock options or the conversion of any Company indebtedness or with respect
to any future offer, sale or issuance of securities by the Company or its
shareholders, other than as set forth herein.
(e) The shares of Common Stock purchased by Purchaser hereunder, when
delivered, will be duly and validly issued and outstanding, fully paid and
nonassessable, and free to the holder thereof of any liens, encumbrances and
restrictions (other than under applicable securities laws or as set forth in any
stockholders agreements to be entered into by Purchaser in connection with the
consummation of the transactions contemplated by this Agreement).
(f) To the Company's knowledge, the offer and sale of all shares of
capital stock or other securities of the Company issued prior to the Closing
complied with or were exempt from all the registration provisions of federal and
state securities laws.
Section 2.06. Compliance With Law, etc. The Company and each Subsidiary
------------ ------------------------
are not, and the execution, delivery and performance by the Company of this
Agreement and the other agreements contemplated hereby, or the taking of any
other action contemplated by this Agreement or any of such other agreements will
not result in (i) violation of any term of the Company's Certificate of
Incorporation or Bylaws, the charter or bylaws of any Subsidiary, (ii)
-3-
<PAGE>
material violation of any material agreement, lease, license, mortgage,
instrument, arrangement, judgment, decree, or order, (iii) violation of any law,
statute, rule or governmental regulation to which the Company or any Subsidiary
is subject, which would result in a material adverse change in the condition
(financial or otherwise), business, properties or prospects of the Company and
its Subsidiaries, on a consolidated basis. The Company and each Subsidiary have
all governmental licenses, authorizations, registrations and permits
(collectively, "Permits") necessary for the conduct of their businesses, as
currently conducted and as proposed to be conducted, all of which licenses,
registrations and permits are listed on Schedule 2.06 hereto, except where the
-------------
failure to have any such Permit could not result in a material adverse change in
the condition (financial or otherwise), business, properties or prospects of the
Company and its Subsidiaries, on a consolidated basis. All such licenses,
registrations and permits are in full force and effect and there is no
proceeding pending or threatened (or any basis therefor) to revoke or limit any
such license, registration or permit which would result in a material adverse
change in the condition (financial or otherwise), business, properties or
prospects of the Company and its Subsidiaries, on a consolidated basis.
Section 2.07. Financial Statements. The Company has delivered to the
------------ --------------------
Purchaser (a) its consolidated balance sheet (the "Balance Sheet") as at June
-------------
30, 1999 (the "Balance Sheet Date"), and the audited, consolidated statement of
------------------
income, retained earnings and cash flows of the Company for the year then ended,
and (b) the audited, consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1998 and the related statement of income,
retained earnings and cash flows for the year then ended, audited by Ernst &
Young LLP. Such financial statements and the notes thereto are complete and
accurate in all material respects and fairly present the consolidated financial
condition of the Company and its Subsidiaries at the dates thereof and the
results of operations for the periods then ended, and were prepared in
accordance with the books and records of the Company and its Subsidiaries in
conformity with generally accepted accounting principles consistently applied
during the periods covered thereby.
Section 2.08. Material Adverse Changes. Except as set forth on Schedule
------------ ------------------------ --------
2.08, since the Balance Sheet Date, the Company and each Subsidiary have
- ----
conducted their business only in the usual and ordinary course and there has
been no (a) material adverse change in the condition (financial or otherwise),
business, properties or prospects of the Company and its Subsidiaries, on a
consolidated basis, (b) material increase in the compensation or commission rate
payable by the Company or any Subsidiaries to any officer, director, employee or
agent or bonus or similar payment (or commitment therefor) to any officer,
director, employee, agent or Affiliate (as hereinafter defined) thereof, (c)
dividend, distribution, redemption, recapitalization or other transaction
involving the Company's capital stock, except as otherwise expressly
contemplated by this Agreement, (d) material capital expenditure or commitment
therefor, or (e) material acquisition or disposition of assets or property or
commitment therefor.
Section 2.09. Assets.
------------ ------
(a) Personal Property. Except as set forth on Schedule 2.09(a), the
----------------- ----------------
Company and each Subsidiary owns, or has a valid leasehold or license interest
in, all assets necessary for the conduct of its business as presently conducted
and as proposed to be conducted, in each case free and clear of all liens,
claims, security interests, charges and encumbrances. All of such assets are
-4-
<PAGE>
reflected on the Balance Sheet, except to the extent acquired after the Balance
Sheet Date. All material operating assets of the Company and the Subsidiaries
are in good operating condition and repair, normal wear and tear excepted.
(b) Real Property. The Company and each Subsidiary enjoys peaceful and
-------------
quiet possession of their leased premises as shown on Schedule 2.09(b) and have
not received any notice asserting the existence of a default under any such
lease or indicating that the lessor thereunder has taken action or threatened
early termination of the lease.
Section 2.10. Litigation. Except as set forth on Schedule 2.10, no
------------ ---------- -------------
litigation, claims, actions, proceedings or investigations are pending, or to
the Company's knowledge, threatened against the Company or any Subsidiary.
Section 2.11. Tax Matters. The Company and each Subsidiary has correctly
------------ -----------
and timely prepared and filed all tax returns required to have been filed by it
with all appropriate federal, state and local governmental agencies and timely
paid all taxes owed by it. The charges, accruals and reserves on the books of
the Company and each Subsidiary in respect of taxes for all fiscal periods are
adequate, and there are no unpaid assessments of the Company or any Subsidiary
nor any basis for the assessment of any additional taxes, penalties or interest
for any fiscal period or audit by any federal, state or local taxing authority.
All taxes and other assessments and levies which the Company or any Subsidiary
is required to withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party. The
Company has furnished the Purchaser with true and correct copies of all of its
tax returns, including any amendments, for all open years. There are no tax
liens or claims pending, or to the Company's knowledge, threatened against the
Company, or any Subsidiary, or any of their respective assets or property.
There are no outstanding tax sharing agreements or other such arrangements
between the Company or any Subsidiary and any other corporation or entity (other
than between the Company and its Subsidiaries). The tax basis of the assets of
the Company by category, including the classification of such assets as being
depreciable or amortizable, as reflected in its tax returns, is true and correct
in all material respects. The Company does not have a current election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code") to
----
be taxed as an S corporation. Neither the Company, any Subsidiary nor the
Stockholder has ever filed a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations.
Section 2.12. Material Contracts. Schedule 2.12 is a complete and
------------ ------------------ -------------
accurate list of all of the following kinds of contracts, agreements and
arrangements (whether written or unwritten) of the Company or any Subsidiary:
(a) contracts with any employee, officer, director or stockholder, or
any known relative or Affiliate (which term is used in this Agreement as defined
in the Rules promulgated under the Securities Act of 1933, as amended (the
"Act")) thereof;
---
(b) licenses, leases, contracts and other arrangements with respect to
any property of the Company or any Subsidiary having a value or resulting in (or
required to
-5-
<PAGE>
generate) revenues to or expenses of the Company or its Subsidiaries of $100,000
or more, including without limitation, all real estate leases, and licenses
relating to the use of Intellectual Property (as defined in Section 2.21);
(c) agreements, contracts or instruments relating to the borrowing of
money, the capital lease or purchase on an installment basis of any asset or the
guarantee of any of the foregoing involving more than $75,000;
(d) contracts with respect to which the Company or any Subsidiary has
any liability or obligation, contingent or otherwise, or which may otherwise
have a continuing effect for one year or more after the date of this Agreement,
involving more than $75,000;
(e) contracts which place any material limitation on the method of
conducting or scope of the business of the Company or any Subsidiary; and
(f) any other contract which would be required to be disclosed as an
exhibit to a Registration Statement on Form S-1 under the Act filed by the
Company.
The Company has furnished to the Purchaser copies of all such contracts
(including all amendments and modifications thereto), or written descriptions
thereof, in the case of oral contracts, and each such contract (or written
description) sets forth the entire (or material terms in the case of an
unwritten agreement) agreement and understanding between the Company or a
Subsidiary and the other parties thereto. Each such contract is valid, binding
and in full force and effect, and there is no event which has occurred or
exists, which constitutes or which, with notice, the happening of any event
and/or the passage of time, would constitute a default or breach by the Company
or a Subsidiary under any such contract or would cause the acceleration of any
obligation of any party thereto or give rise to any right of any other party of
termination or cancellation thereof. Neither the Company nor the Stockholder
has any reason to believe that the parties to such contracts will not fulfill
their obligations thereunder in all material respects.
Section 2.13. Employees and Compensation. Schedule 2.13 sets forth a
------------ -------------------------- -------------
complete and accurate list of (a) all employment and consulting contracts,
arrangements or plans with any employee of or consultant to the Company or any
Subsidiary and (b) all employees of and consultants to the Company or any
Subsidiary, with 1998 compensation in excess of $100,000, showing date of hire,
hourly rate or salary or other basis of compensation and other benefits accrued
as of a recent date, each increase and bonus granted since January 1, 1998, and
job function of salaried employees. None of the employees of the Company or any
Subsidiary is represented by a union, and there is no labor strike, dispute,
slowdown, stoppage, organizational effort, dispute or proceeding by or with any
employee or former employee of the Company or any Subsidiary or any labor union
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary.
Section 2.14. Customers and Suppliers. Schedule 2.14 sets forth a list
------------ ----------------------- -------------
of all customers of the Company or any Subsidiary which accounted for at least
$500,000 of gross sales by the Company or each Subsidiary during the fiscal year
ended December 31, 1998. To the
-6-
<PAGE>
Company's knowledge, the Company's and each Subsidiary's relationships with such
customers and with its material suppliers are good commercial working
relationships. Except as set forth on Schedule 2.14, since December 31, 1997, no
-------------
supplier representing more than $500,000 of annualized purchases by the Company
or any Subsidiary (in the case of a supplier) has terminated or, to the
Company's knowledge, threatened to terminate, its relationship with the Company
or any Subsidiary, or has decreased materially or threatened to decrease or
limit materially the services, supplies or materials supplied to or purchased
from the Company or any Subsidiary.
Section 2.15. Environmental Matters. Except as provided on Schedule 2.15,
------------ --------------------- -------------
(a) the ownership or use of the Company's and the Subsidiaries' premises and
assets, the occupancy and operation thereof, and the conduct of the Company's
and the Subsidiaries' business are in compliance in all material respects with
all applicable federal, state and local laws, ordinances, regulations, standards
and requirements relating to safety, health, pollution, environmental
protection, hazardous substances and related matters and (b) there is no
liability attaching to such premises or assets or the ownership, use or
operation thereof as a result of any hazardous substance that may have been
discharged on or released from such premises, or disposed of on-site or off-
site, or any other circumstances occurring prior to the Closing or existing as
of the Closing. For purposes of this Section, "hazardous substance" shall mean
oil or any other substance which is included within the definition of a
"hazardous substance," "pollutant," "toxic substance," "toxic waste," "hazardous
waste," "contaminant" or other words of similar import in any federal, state or
local environmental law, ordinance or regulation.
Section 2.16. Insurance. Schedule 2.16 lists all insurance policies
------------ --------- -------------
maintained by the Company or any Subsidiary, all of which are valid and in full
force. All premiums due to date under such policies have been paid, and no
default exists thereunder. To the Company's knowledge, the insurance listed on
Schedule 2.16 is in amounts adequate and appropriate for the business, and to
- -------------
avoid the operation of any coinsurance provision. Neither the Company nor any
Subsidiary has received any notice of any proposed material increase in the
premiums payable for coverage, or proposed reduction in the scope (or
discontinuance entirely) of coverage, under any of such insurance policies.
Section 2.17. Employee Benefit Plans.
------------ ----------------------
(a) Schedule 2.17 sets forth all employee benefit plans, agreements,
-------------
commitments, practices or arrangements of any type (including, but not limited
to, plans described in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") maintained by the Company or any Subsidiary
------
for the benefit of current or former employees or directors of the Company or
any Subsidiary, or with respect to which the Company or any Subsidiary has a
liability, whether direct or indirect, actual or contingent (including, but not
limited to, liabilities arising from affiliation under Section 414(b), (c), (m)
or (o) of the Code or Section 4001 of ERISA) (collectively, the "Benefit
-------
Plans"). There are no material benefit plans, agreements, commitments,
- -----
practices or arrangements of any type providing benefits to employees or
directors of the Company or any Subsidiary, other than the Benefit Plans.
-7-
<PAGE>
(b) With respect to each Benefit Plan, the Company has delivered to
the Purchaser true and complete copies of: (i) any and all plan texts and
agreements; (ii) any and all material communications to employees (including all
summary plan descriptions and material modifications thereto); (iii) the two
most recent annual reports, if applicable; (iv) the most recent annual and
periodic accounting of plan assets, if applicable; and (v) the most recent
determination letter received from the Internal Revenue Service (the "Service"),
-------
if applicable.
(c) With respect to each Benefit Plan: (i) if intended to qualify
under Section 401(a) of the Code, such plan so qualifies, and its trust is
exempt from taxation under Section 501(a) of the Code; (ii) such plan has been
administered and enforced in accordance with its terms and all applicable laws
in all material respects; (iii) no breach of fiduciary duty by the Company has
occurred with respect to which the Company, any Subsidiary or any Benefit Plan
may be liable or otherwise damaged in any material respect; (iv) no material
disputes are pending or threatened; (v) no "prohibited transaction" (within the
meaning of either Section 4975(c) of the Code or Section 406 of ERISA) has
occurred with respect to which the Company or any Benefit Plan may be liable or
otherwise damaged in any material respect; (vi) all contributions, premiums, and
other payment obligations have been accrued on the financial statements of the
Company in accordance with generally accepted accounting principles, and, to the
extent due, have been made on a timely basis, in all material respects; (vii)
all contributions made or required to be made under such plan meet the
requirements for deductibility under the Code; (viii) the Company has expressly
reserved in itself the right to amend, modify or terminate such plan, or any
portion of it, without liability to itself; (ix) no such plan requires the
Company to continue to employ any employee or director.
(d) With respect to each Benefit Plan which provides welfare benefits
of the type described in Section 3(1) of ERISA: no such plan provides medical or
death benefits with respect to current or former employees or directors of the
Company beyond their termination of employment, other than coverage mandated by
Sections 601-608 of ERISA and 4980B(f) of the Code, (ii) each such plan has been
administered in compliance with Sections 601-608 of ERISA and 4980B(f) of the
Code; and (iii) no such plan has reserves, assets, surpluses or prepaid
premiums.
Section 2.18. Registration Rights. Except as set forth on Schedule 2.18,
------------ ------------------- -------------
the Company is not a party to any agreement or commitment which obligates the
Company to register under the Act any of its outstanding securities or any of
its securities which may hereafter be issued.
Section 2.19. Offering. Subject to the accuracy of the Purchaser's
------------ --------
representations in Article IV of this Agreement, the offer, issuance and sale of
the Common Stock constitutes, and will constitute, transactions exempt from the
registration requirements of Section 5 of the Act and the Company has obtained
all qualifications, permits, and other consents, if any, required by all
applicable state securities laws.
Section 2.20. Affiliate Transactions. Except as set forth on Schedule
------------ ---------------------- --------
2.20, neither the Company nor any Subsidiary is a party to any material contract
- ----
or arrangement, either directly or indirectly, with any of the officers,
directors or stockholders of the Company or any Subsidiary,
-8-
<PAGE>
their known relatives or Affiliates.
Section 2.21. Intellectual Property. Schedule 2.21 sets forth all
------------ --------------------- -------------
patents, trademarks, service marks, trade names, copyrights, domain names,
franchises and licenses, all royalties and license agreements, all applications
therefor, and all other rights with respect to the foregoing owned or used by
the Company or any Subsidiary ("Intellectual Property"). The intellectual
---------------------
property and rights set forth on Schedule 2.21 include all of the foregoing
-------------
necessary for the operation of the Company's and the Subsidiaries' business as
now conducted and as proposed to be conducted. To the Company's knowledge, the
Company's and each Subsidiary's ownership and use of the foregoing does not
infringe or conflict with the rights of others; neither the Company nor any
Subsidiary is or will be obligated to make any royalty, fee or other payments in
connection with its ownership or use of any patent, trademark, trade name,
copyright or other intangible asset in connection with the conduct of its
business as now conducted and as proposed to be conducted, except as described
on Schedule 2.21. Except as set forth on Schedule 2.21, neither the Company nor
------------- -------------
any Subsidiary has been notified of any claim by any person or entity that the
Company or any Subsidiary is violating any trademark, service mark, trade name,
patent or copyright, or other intangible asset or right owned by any other
person or entity or that is using any name that is confusingly similar to that
of any other person or entity, and, to the Company's knowledge, there is no
basis for any such claim.
Section 2.22. Proprietary Information of Third Parties. Except as set
------------ ----------------------------------------
forth on Schedule 2.22, no third party has claimed or, to the Company's
-------------
knowledge, has reason to claim that any person employed by or affiliated with
the Company or any Subsidiary has (a) violated or, to the Company's knowledge,
may be violating any of the terms or conditions of such person's employment,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or, to the Company's knowledge, may be disclosing or utilized or, to the
Company's knowledge, may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or, to the
Company's knowledge, may be interfering in the employment relationship between
such third party and any of its employees. To the Company's knowledge, no
person or entity employed by or affiliated with the Company or any Subsidiary
has employed or proposes to employ any trade secret or any information or
documentation proprietary to any other person or entity in connection with the
business of the Company or any Subsidiary.
Section 2.23. Brokers. Except as set forth on Schedule 2.23, no finder,
------------ ------- -------------
broker, agent, financial advisor or other intermediary has acted, directly or
indirectly, on behalf of the Company or any Subsidiary in connection with the
offering of the Common Stock or the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby, or is entitled to any
fee, payment, commission or other consideration with respect thereto.
Section 2.24. Absence of Material Undisclosed Liabilities. Except for (a)
------------ -------------------------------------------
any and all liabilities, accounts payable and accrued expenses reflected on the
Balance Sheet or incurred in the ordinary course of business since the Balance
Sheet Date, and (b) obligations of future performance under contracts set forth
on a Schedule hereto and other contracts entered into in the ordinary course of
business which are not required to be listed on a Schedule hereto, as of the
-9-
<PAGE>
Closing Date, the Company will have no material liabilities or obligations,
whether absolute, accrued, contingent or otherwise and whether due or to become
due.
Section 2.25. Year 2000 Compliance. Except as otherwise disclosed on
------------ --------------------
Schedule 2.25, the Company, its Subsidiaries and its Management Systems and
- -------------
Production and Distribution Systems are or will be Year 2000 Compliant on or
before December 31, 1999. As used in this Section the following terms have the
following meanings:
"Year 2000 Compliant" means, with respect to any person, that neither the
year change from 1999 to 2000 (the arrival of the date January 1, 2000) nor leap
year dates thereafter will (i) impair such person's ability to meet its
obligations to third parties or (ii) result in errors or corruption in
processing internally generated data or otherwise have a material adverse effect
on the operations or functionality of such person or its Management Systems or
Production and Distribution Systems, all of which will continue to operate as
intended prior to, during and after January 1, 2000.
"Management Systems" include, but are not limited to, all computer hardware
(including integrated circuit/chip and firmware) and software applications that
a person uses for managing and operating its business, including without
limitation, functions such as accounting and billing, inventory tracking and
maintenance and vendor and supplier sourcing.
"Production and Distribution Systems" include, but are not limited to, all
computer hardware (including integrated circuit/chip and firmware) and software
applications, and all automated or electronic equipment, controls and other
systems used by a person in its production or distribution process, from the
point of input or raw material to final products and merchandise offered for
sale and distributed to customers.
Section 2.26. Required Consents. Except for the consents specified on
------------ -----------------
Schedule 2.26, no consent, order, authorization, approval, declaration or
- -------------
filing, including, without limitation, any consent, approval or authorization of
or declaration or filing with any governmental authority or any party to a
material contract, is required on the part of the Company or any Subsidiary (and
no notices to or consents or other approvals from any of the lessors or any of
such lessors' mortgagees under any of the real property leases are required) for
or in connection with the execution, delivery or performance of this Agreement
and each of the other agreements contemplated hereby or the conduct of the
business by the Company or any Subsidiary after the Closing, or to prevent a
material default. The Company has no reason to believe that all of the required
consents and approvals not obtained as of the Closing will not be obtained
within six (6) months of Closing without material cost to the Company. Subject
to obtaining the consents specified on Schedule 2.26, the execution, delivery
-------------
and performance of this Agreement and the other instruments and agreements
contemplated hereby by the Company will not result in any material violation of,
be in material conflict with or constitute a material default under, any law,
statute, regulation, ordinance, contract, agreement, instrument, judgment,
decree or order to which the Company is a party or by which the Company is
bound.
-10-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder represents and warrants to the Purchaser that the information
set forth in this Article III is true and correct as of the date hereof and will
be true and correct as of the Closing.
Section 3.01. Ownership of Stock. Stockholder is the record and
------------ ------------------
beneficial owner of the number of shares of Common Stock listed in the preamble
to this Agreement, free and clear of all liens, encumbrances, restrictions and
claims of every kind, excluding the Stockholders Agreement, dated March 16,
1999, by and among the Company, Boston Ventures Limited Partnership V, Seacoast
Capital Partners Limited Partnership, Thybo New Ventures Limited and
Stockholder.
Section 3.02. Authority. Stockholder has full legal right, power and
------------ ---------
authority to make, execute, deliver and perform this Agreement and to sell,
assign, transfer and convey the shares of Common Stock owned by the Stockholder
pursuant to this Agreement. This Agreement has been duly and validly executed
and delivered by the Stockholder and, assuming due execution and delivery by the
Purchaser, constitutes a legal, valid and binding agreement of the Stockholder
enforceable against the Stockholder in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that that the
information set forth in this Article IV is true and correct as of the date
hereof and will be true and correct as of the Closing:
Section 4.01. Investment Intent. The Common Stock to be acquired by it
------------ -----------------
is being acquired solely for its own account, for investment purposes only and,
with no present intention of distributing, selling, transferring or otherwise
disposing of it, and the Purchaser has no present plans to enter into any such
contract, undertaking, agreement or arrangement with respect thereto.
Section 4.02. Economic Risk; Sophistication. The Purchaser is able to
------------ -----------------------------
bear the economic risk of an investment in the Common Stock to be acquired by
it, can afford to sustain a total loss on such investment and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment.
Section 4.03. Authority. The Purchaser is duly organized, validly
------------ ---------
existing and in good standing under the laws of the State of Massachusetts. The
Purchaser has all requisite power and
-11-
<PAGE>
authority to enter into this Agreement and perform its obligations hereunder,
and this Agreement constitutes the valid and binding obligation of the Purchaser
enforceable against it in accordance with its terms.
Section 4.04. Brokers. No finder, broker, agent, financial advisor or
------------ -------
other intermediary has acted on behalf of the Purchaser in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby, and no such person is entitled to any fee, payment,
commission or other consideration with respect thereto as a result of any
arrangement made by the Purchaser.
Section 4.05. Limited Liquidity. The Purchaser understands that the
------------ -----------------
Common Stock to be acquired by it may not be sold, transferred or otherwise
disposed of without registration under the Act and any state securities laws, or
an exemption therefrom (supported by an opinion of counsel satisfactory to the
Company), and that in the absence of an effective registration statement
covering such securities or an available exemption from registration, such
securities may be required to be held indefinitely. The Purchaser is aware that
the Common Stock to be acquired by it may not be sold pursuant to Rule 144
promulgated under the Act, unless all of the conditions of that Rule are met and
that among the conditions for use of Rule 144 is the availability of current
information to the public about the Company and that the Company has no
obligation to make such information available. The Purchaser represents that,
in the absence of an effective registration statement covering the Common Stock,
they shall sell, transfer or otherwise dispose of such securities only in a
manner consistent with the representations set forth herein, and the
certificates for the Common Stock shall bear a legend to such effect.
Section 4.06. Accredited Investor. Purchaser is an "accredited investor"
------------ -------------------
as defined in Regulation D under the Act, and, together with its financial
advisors, if any, has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks involved in
purchasing the Common Stock.
Section 4.07. Purchaser Information. All of the information furnished by
------------ ---------------------
Purchaser in response to the Company's questionnaire is true and complete in all
material respects.
ARTICLE V
CLOSING CONDITIONS
Section 5.01. Conditions to Closing. Purchaser's obligation to purchase
------------ ---------------------
the Common Stock to be acquired by it at the Closing is subject to the
satisfaction, as of the Closing Date, of the following conditions:
(a) Stockholders Agreement. A Stockholders Agreement substantially in the
----------------------
form of Exhibit 5.01 (a) attached hereto shall have been executed by the
----------------
parties named therein.
(b) Registration Rights Agreement. A Registration Rights Agreement
-----------------------------
substantially in the form of Exhibit 5.01 (b) attached hereto shall have been
----------------
executed by the parties named therein.
-12-
<PAGE>
(c) Joint Marketing Agreement. The Company and Cahners Business
-------------------------
Information shall agree to and execute a Joint Marketing Agreement substantially
in the form of Exhibit 5.01(c) attached hereto.
---------------
(d) Representations and Warranties. The representations and warranties
------------------------------
contained in Articles II, III, and IV shall be true and correct in all material
respects on and as of the Closing Date as though made on and as of such date
(except representations and warranties made as of a specified date, which shall
be true as of such date), except that the representations and warranties
contained in Sections 2.05 and 3.01 will be true and complete in all respects on
and as of the Closing Date.
(e) Certificate; Documents. The Purchaser shall have received copies of
----------------------
each of the following, certified by the Secretary of the Company: (i) the
Company's Certificate of Incorporation, (ii) a certificate of the Secretary of
State of the State of New York as to the legal existence and good standing of
the Company; (iii) the Company's Bylaws; (iv) the resolutions adopted by the
directors of the Company authorizing the execution, delivery and performance of
this Agreement and the other agreements contemplated hereby, the issuance, sale
and delivery of the Common Stock hereunder; and (v) evidence of the
qualification of the Company as a foreign corporation in the States of
California, Massachusetts and New Jersey. The Purchaser shall also have received
such other certificates and documents as the Purchaser shall reasonably request.
(f) Legal Opinion. The Purchaser shall have received a legal opinion in
-------------
form and substance satisfactory to the Purchaser from Gould & Wilkie LLP,
counsel for the Company, substantially in the form set forth in Exhibit 5.01(f)
---------------
hereof.
(g) Stock Certificates. The Purchaser shall have received one or more
------------------
duly executed certificates representing the Common Stock to be acquired by it.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Notices. All notices, demands or other communications
------------ -------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, or by nationally recognized overnight courier services, or
otherwise actually delivered:
(a) if to Stockholder, to:
PartMiner, Inc.
432 Park Avenue South, 12/th/ floor
New York, N.Y. 10016
Attention: Daniel Nissanoff
if to the Company, to:
-13-
<PAGE>
PartMiner, Inc.
432 Park Avenue South, 12/th/ floor
New York, N.Y. 10016
Attention: Michael R. Manley, Esq.
Vice President and General Counsel
with a copy to:
Gould & Wilkie LLP
One Chase Manhattan Plaza
New York, N.Y. 10005-1401
Attention: George J. Walsh, III, Esq.
(b) if to Purchaser, to:
Elsevier Realty Information, Inc.
c/o Cahners Business Information
275 Washington Street
Newton, MA 02458
Attention: Chief Executive Officer and Chief Legal Counsel
with a copy to:
Cahners Business Information
1350 East Touhy Avenue
Des Plaines, IL 60018
Attention: Mr. Brian Nairn
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
deposited with the courier, as the case may be.
Section 6.02. Severability and Governing Law. If any provision of this
------------ ------------------------------
Agreement is rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render invalid or
unenforceable any other provision of this Agreement. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without regard to its conflicts of laws provisions.
Section 6.03. Amendments, Etc. This Agreement may be changed, waived or
------------ ---------------
terminated only with the written consent of the Stockholder, the Company and the
Purchaser.
Section 6.04. Survival. All agreements, representations and warranties
------------ --------
contained herein and in any certificate, documentation or agreement delivered
pursuant hereto shall survive the execution and delivery of this Agreement, any
investigation at any time made, and the sale and
-14-
<PAGE>
purchase of the Common Stock until two (2) years from the Closing or if earlier,
until the Closing of the initial public offering of the Company's securities.
Section 6.05. The Company agrees to pay (a) the reasonable fees, up to
------------
$12,500, and expenses of counsel to Purchaser incurred with respect to any
amendments or waivers required by the Company (whether or not they become
effective) under or with respect to the Company's Certificate of Incorporation,
Bylaws, this Agreement or any agreement or instrument contemplated hereby and
(b) in the event of a proven material breach or default of the Company's
obligations to Purchaser under the Certificate of Incorporation, the Bylaws,
this Agreement or any agreement or instrument contemplated hereby, the
reasonable fees and expenses of Purchaser incurred in connection with the
enforcement of the rights granted under any of the foregoing.
Section 6.06. Successors and Assigns. This Agreement, and all provisions
------------ ----------------------
hereof, shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, provided that, the Purchaser may
not assign its right to purchase the Common Stock without the consent of the
Company in its sole discretion.
Section 6.07. Entire Agreement. This Agreement, the attached exhibits
------------ ----------------
and schedules and the other agreements, documents and instruments contemplated
hereby contain the entire understanding of the parties, and there are no further
or other agreements or understandings, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
Section 6.08. Counterparts. This Agreement may be executed in one or more
------------ ------------
counterparts by facsimile signature, and with counterpart signature pages, each
of which shall be an original, and all of which together shall constitute one
and the same Agreement.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as a sealed instrument as of the date first above written.
PARTMINER, INC., f/k/a Dast Corporation
/s/ Daniel Nissanoff
By:______________________________________
(Title)
ELSEVIER REALTY INFORMATION, INC.
/s/ Charles P. Fontaine
By:______________________________________
(Title)
/s/ Daniel Nissanoff
_________________________________________
Daniel Nissanoff
-16-
<PAGE>
EXHIBIT 10.11
JOINT MARKETING AGREEMENT
THIS JOINT MARKETING AGREEMENT ("Agreement") is dated this 10th day of
September, 1999 ("Effective Date") and is by and between Cahners Business
Information, a division of Reed Elsevier Inc., a Massachusetts corporation
("Cahners"), and PartMiner, Inc., a New York corporation (the "Company").
WHEREAS, Cahners is publisher of certain online and print publications
which Cahners makes available to customers on a subscription or access basis;
and
WHEREAS, the Company has developed a component sourcing software
application known as PartMiner, and is engaged in building e-commerce
marketplaces; and
WHEREAS, Cahners and the Company desire to create interfaces to each
other's products for marketing purposes, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements hereinafter set forth, the sufficiency of which is
mutually acknowledged, Cahners and the Company hereby agree as follows:
1. Definitions. When used in this Agreement, the following terms shall have
-----------
the meanings indicated below:
1.1 "Aggregated E-Commerce Web Site" shall mean a web site that is
accessible to the general public (with or without a registration fee)
which aggregates pricing and availability data for electronic
components from multiple distributors for the sale of such electronic
components on or at such web site.
1.2 "Cahners Content" shall mean the Cahners' proprietary content
generally described in Exhibit A to this Agreement, containing
---------
information regarding electronic components, including any updates of
such content, as the same may be modified from time to time by Cahners
in its sole discretion.
1.3 "Cahners Publications" shall mean the properties (both print and
electronic) owned by Cahners described on Exhibit B attached hereto.
---------
1.4 "e-inSITE" shall mean the Cahners' online network of web sites and
related publications accessible through the URL www.e-insite.net and
----------------
indicated in section 1 of Exhibit B attached hereto.
---------
1.5 "PartMiner" shall mean the Company's proprietary software application
interface and web site, and any updates, enhancements, derivatives, or
new versions thereof, and any software applications and interfaces
which the
<PAGE>
Company acquires, generates, creates or otherwise develops to
facilitate e-commerce for the electronic components market.
1.6 The Cahners Publications, e-inSITE and PartMiner may be collectively
referred to hereinafter as the "Products".
2. Development and Support. Within thirty (30) days of the Effective Date,
-----------------------
each of the parties will use their commercially best efforts to jointly
develop an implementation plan for establishing the interface between e-
inSITE and PartMiner (the "Plan").
2.1 The Plan will be in the form set forth in the attached Exhibit C, and
---------
will be expanded to include product release schedules for
functionality, integration strategy, and allocation of resources for
development and support, and milestone dates for completion of, among
other things, the following tasks:
2.1.1 The establishment by the Company of a custom link to e-inSITE
from PartMiner through Cahners' Internet interface. The Company
will, at its sole expense, use commercially reasonable efforts
to develop the software, applications, and interfaces with
respect to PartMiner necessary to link e-inSITE with PartMiner;
provided that, the Company will not be responsible for
--------
developing the interface with respect to e-inSITE necessary to
allow PartMiner to link with e-inSITE; and
2.1.2 The development by Cahners of an interface with respect to e-
inSITE that will allow PartMiner to link with e-inSITE. Cahners
will, at its sole expense, use commercially reasonable efforts
to develop the software, applications and interfaces needed to
link e-inSITE with PartMiner; provided that, Cahners will not
-------- ----
be responsible for developing the interface with respect to
PartMiner necessary to allow e-inSITE to link with PartMiner.
2.2 Except as otherwise agreed to by the parties or with respect to links
established under Section 2.1 above (which links will not allow access
to IHS data other than in the same manner that any other registered
user of PartMiner accesses such data), the parties agree that any such
links from the Cahners website to the PartMiner website will be
established in accordance with the following terms and conditions:
2.2.1 Articles from Cahners publications appearing on e-inSITE that
provide product reviews on specific electronic components shall, to
the extent practicable, include in such reviews on e-inSITE a
hyperlink to PartMiner.
2
<PAGE>
2.2.2 Each web page in which such articles appear will reference a
caption at a location that need not be at such hyperlinks that reads
substantially as follows: "click here to order product or to access
PartMiner for product pricing and availability information, including
technical information provided by IQXpert." The hyperlink will further
identify PartMiner and IQXpert in such a manner as shall be approved
by the Company, such approval not to be unreasonably withheld or
delayed.
2.2.3 An e-inSITE user that has accessed the product review on e-
inSITE may click on the hyperlink and be transported to PartMiner.
2.2.4 The Company will verify whether or not the e-inSITE user
transported from e-inSITE is a registered PartMiner user.
2.2.5 If the e-inSITE user is not a registered PartMiner user,
PartMiner will display a registration page.
2.2.6 After the e-inSITE user completes the registration process or
the Company verifies that the e-inSITE user is a registered PartMiner
user, such user may click on a hyperlink to the page generally
described below in Section 2.2.7, which page will be identical to the
page where any registered PartMiner user conducting a general part
number search from the PartMiner home page would arrive.
2.2.7 Following completion of the registration process or
verification by the Company that the e-inSITE user is a registered
PartMiner user, PartMiner will display a page that allows the user to
click an icon to enter an RFQ for purchase of the reviewed product or
click an icon to view the specific datasheet for the single reviewed
product.
2.2.8 The user will not be permitted to view multiple datasheets.
2.2.9 After the user has entered an RFQ for the reviewed product or
viewed the datasheet for the reviewed product, the user shall be able
to "click" to access other resources on the PartMiner site or
hyperlink back to e-inSITE. Cahners will not incorporate features into
e-inSITE that substantially enhance or are otherwise specific to the
use of PartMiner by e-inSITE users, other than the features described
in this Section 2.2 or established pursuant to Section 2.1 above that
will permit such e-inSITE user that has linked to PartMiner to
purchase the product or view the specific datasheet for the electronic
component reviewed in the article on e-inSITE that contains the link.
2.3 Certain data, including but not limited to product datasheets,
contained on PartMiner is licensed by the Company from Information Handling
Services, Inc. and/or its affiliates ("IHS"). The terms set forth in Section 2.2
above provide the only basis on which Cahners may provide or facilitate access
to any data of IHS. Cahners agrees that
3
<PAGE>
any advertising, marketing, promotional or other materials, as well as any
references on its website, that refer to the link to any data of IHS will be
subject to the prior written approval of the Company, such approval not to be
unreasonably withheld or delayed.
2.4 Cahners shall use commercially reasonable efforts to provide the
Company with a list of part numbers for all electronic components included in
the product reviews referred to in Section 2.2.1 above, prior to the publication
of such articles. The Company shall have the right to provide IHS on a regular
basis with such list of part numbers for use by IHS in identifying additional
parts for inclusion in its databases.
2.5 To the extent that any approvals of the Company under this Section 2
relate to IHS or any products owned by IHS, the parties acknowledge that the
Company will need to obtain IHS' approval. The Company will use commercially
reasonable efforts to obtain such approvals as promptly as possible.
3. Sales and Marketing.
-------------------
3.1 Cahners shall prominently promote and identify the Company as e-
inSITE's e-commerce business partner for electronic components to the
EOEM market in the Cahners Publications. Subject to the agreement of
the parties, Cahners shall have the right to determine the frequency
and placement of such promotional materials. Notwithstanding the
foregoing, such promotion shall include, without limitation, the
following: (i) PartMiner shall be identified on all appropriate e-
inSITE advertisements in which e-inSITE's network partners are
identified; and (ii) an introductory advertisement shall be included
in appropriate e-inSITE publications introducing the Company as a
partner of Cahners, including, without limitation, in EDN, Electronic
Business, ECN and Electronic News. The Company shall prominently
promote and identify Cahners as PartMiner's e-commerce business
partner for electronic components to the EOEM market on PartMiner and
in any advertisements for PartMiner in which its network partners are
identified.
3.2 The Company agrees that Cahners shall be the Company's exclusive
advertising agent to electronic component distributors and
manufacturers for the sale of advertising on PartMiner; provided that,
Cahners meets or exceeds the annual performance targets set forth on
Exhibit D attached hereto. In the event Cahners does not meet or
---------
exceed the targets set forth on Exhibit D attached hereto, Cahners'
---------
appointment as advertising agent for PartMiner will become non-
exclusive. Cahners shall be entitled to a representation fee of twenty
percent (20%) of all advertising sold by Cahners on behalf of the
Company. All advertising sold by Cahners on behalf of the Company
shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld or delayed. Cahners shall submit a
monthly invoice for such representation fees to the Company
accompanied by a statement prepared by Cahners identifying
4
<PAGE>
the advertisements for which the fees are being paid and the
computation of such fees. The Company shall pay such invoices within
thirty (30) days of receipt. The obligation of the Company to pay the
foregoing fees shall survive termination of this Agreement for all
advertisements sold by Cahners during the term of this Agreement.
3.3 The Company shall purchase a minimum of $500,000 in advertising from
Cahners for each twelve (12) month period during the term of this
Agreement commencing on the date of this Agreement ("Ad Minimum").
The Company will consider an increase in this Ad Minimum in the event
that an increase in the Company's aggregated advertising/marketing
budget as of the date of this Agreement is approved by the Board of
Directors during the term of this Agreement. Cahners shall charge the
Company for such advertising at the rates set forth on Exhibit E
---------
attached hereto.
3.4 The parties shall exchange user information collected from registered
users of PartMiner and e-inSITE, respectively (the "User Information")
(except for users who "opt out" of such lists under a party's privacy
policy or any applicable laws); provided, however, such User
-------- -------
Information will not include the e-mail addresses of any registered
user of either PartMiner or e-inSITE. The User Information provided to
Cahners will be branded as PartMiner or Company information and will
include aggregated purchasing pattern information, specifically
including aggregated data related to (i) products purchased, (ii) the
top 100 part numbers searched, (iii) page views, and (iv) user
sessions. This User Information will be restricted to the parties and
will not be distributed, disclosed or otherwise provided to any third
party, except that Cahners will be permitted to use this information
to develop editorial content for the Cahners Publications, provided
that, such content does not contain any user-identifying information.
Notwithstanding the foregoing, on a quarterly basis, each party will
allow the other party to send one promotional e-mail to the other
party's complete registered user list (except for users who "opt out"
of such lists under a party's privacy policy or any applicable laws).
Such promotional e-mail shall be subject to the approval of the other
party, which approval shall not be unreasonably withheld or delayed.
3.5 During the term of this Agreement, Cahners will have a right of first
refusal to make a development proposal with respect to any commercial
data products to be developed from information or data of the Company
which are intended to be sold or licensed to third parties. The
parties will negotiate in good faith on a product-by-product basis a
mutually acceptable compensation arrangement with respect to the
development of such commercial data products. If the parties cannot
agree on a mutually acceptable compensation arrangement within sixty
(60) days from commencement of such negotiations, then the Company may
offer the development rights to a third party at a price, which for
purposes of this
5
<PAGE>
section would include royalty payments, no more favorable than the
price offered to Cahners.
3.6 The Company and Cahners will jointly develop marketing announcements
as follows:
3.6.1 The parties will issue a mutually acceptable joint press
release within fifteen (15) business days of the Effective Date
announcing that they have entered into a joint marketing
agreement, which, among other things, provides for the
integration of certain products of Cahners and the Company; and
3.6.2 Unless otherwise agreed to by the parties, the parties will
issue a joint capability statement within sixty (60) days of
the Effective Date announcing the functionality of the links
between PartMiner and e-inSITE.
3.7 Each of the Company and Cahners will consider (but will not be
obligated to) allowing the other party to participate in its tradeshow
booth in at least three (3) tradeshows per year, including, but not
limited to, the Design Automation Conference, the Wescon Show, and the
Embedded Systems West Show.
3.8 The Parties will work together in good faith to identify and create
new content opportunities (e.g., real-time indices of part demand and
consumption) to be used in the Products with appropriate editorials or
other textual description.
3.9 The Company will be responsible for and shall bear the expense of
producing marketing materials for its use in connection with its
relationship with Cahners. Cahners will select and provide Cahners
materials for inclusion in the Company's marketing material at no cost
to the Company.
3.10 Neither party may disseminate or make available to third parties any
marketing materials, brochures, pamphlets, flyers, users' manuals,
"splash screens," or websites offering any of the other party's
Products (including without limitation materials offering both
parties' Products) without the prior written approval of the other
party. The party which proposes to disseminate or make available any
such material shall give notice of such desire to the other party and
provide copies of the materials such party proposes to disseminate. If
the non-disseminating party fails to respond to the disseminating
party within five (5) business days of receiving such notice and
materials, the non-disseminating party shall be deemed to consent to
such dissemination. Any reproduction of Cahners' or the Company's
trademarks, logos, symbols and other identifying marks must be true
reproductions. Neither party shall remove, make, or permit
6
<PAGE>
alterations to any labels or identifying markings placed by the other
party on such party's products.
4. Licenses granted.
----------------
4.1 Cahners hereby grants to the Company a limited, nontransferable, non-
exclusive, license to create interfaces to link PartMiner with e-
inSITE:
4.1.1 The Company shall pay Cahners a fee equal to one percent (1%)
of the total consolidated revenue received by the Company and
its affiliates from purchases of electronic components by
customers (i) through PartMiner, or (ii) who have accessed
PartMiner at least three (3) times during the calendar quarter
in which the customer's purchase was made. The Company will use
its best efforts to implement as soon as possible, at the
Company's cost and expense, the procedures and technology
necessary to identify and compute the fees due to Cahners
hereunder.
4.1.2 The Company agrees that it will make the Cahners Content
available only to end-users of PartMiner and will not sell,
license or make available to redistributors, online aggregators
or other third parties all or any portion of the Cahners
Content, e-inSITE or the Cahners Publications, except as
otherwise permitted under this Agreement.
4.1.3 Nothing in this Agreement shall be construed as giving the
Company any license or other rights with respect to e-inSITE,
the Cahners Content or the Cahners Publications, other than
those expressly granted in this Agreement. All rights not
expressly granted to the Company under this Agreement are
expressly reserved by Cahners.
4.2 The Company hereby grants Cahners a limited, nontransferable, non-
exclusive, royalty-free license to create interfaces to link e-inSITE
with PartMiner:
4.2.1 Cahners agrees that it will not sell, license or make available
to third parties all or any portion of PartMiner, except as
otherwise permitted under this Agreement.
4.2.2 Nothing in this Agreement shall be construed as giving Cahners
any license or other rights with respect to PartMiner, other
than those expressly granted in this Agreement. All rights not
expressly granted to Cahners under this Agreement are expressly
reserved by the Company.
5. Restrictions and Responsibilities.
---------------------------------
7
<PAGE>
5.1 Cahners Restrictions. During the term of this Agreement, without the
--------------------
prior written approval of the Company, which approval shall not be
unreasonably withheld or delayed, Cahners will not: (i) acquire,
develop or operate, alone or in conjunction with any company or
entity, other than the Company, an Aggregated E-Commerce Web Site the
primary focus of which is directed to the EOEM marketplace, which
marketplace consists primarily of the computer, communications,
industrial, and consumer electronics manufacturing industries
(hereinafter in this Section 5.1 referred to as an "EOEM Aggregated E-
Commerce Web Site"), and/or (ii) acquire, maintain, create, develop or
generate an interface between e-inSITE and any EOEM Aggregated E-
Commerce Web Site other than PartMiner. The foregoing provisions of
this Section 5.1 shall not limit Cahners' ability to acquire any
company, the operations of which would violate the foregoing
provisions; provided that, Cahners shall use commercially reasonable
efforts to cease such operations by merger or other consolidation of
such operations with PartMiner, sale or discontinuance of such
operations as soon as practicable, but in no event later than nine (9)
months following such acquisition.
5.2 Company Restrictions. During the term of this Agreement, without the
--------------------
prior written approval of Cahners, which approval shall not be
unreasonably withheld or delayed, the Company will not: (i) create an
interface between its web site(s) and any web site serving as an
editorial content provider or navigational hub for a network of web
sites offering editorial content primarily focusing on the electronics
components market, and /or (ii) create any web site serving as an
editorial content provider or navigational hub for a network of web
sites offering editorial content primarily focusing on the electronic
components market or publish any print periodicals covering such
subject matter; except for such printed promotional and marketing
materials as may be necessary to promote registration or use of
PartMiner. Notwithstanding the foregoing, any interface between
PartMiner and IHS shall not be considered a breach of this Agreement.
5.3 Definition of Interface. For the avoidance of doubt, "interface" does
-----------------------
not include (A) advertisements placed by the Company or Cahners on
third party web sites which link back to PartMiner (in the case of the
Company), or back to a product of Cahners (in the case of Cahners);
(B) advertisements by a third party on PartMiner or a Cahners web
site, provided any links in connection with such advertisements are
limited to links included within such advertisements and not elsewhere
on the site on which the advertisement appears; (C) hyperlinks
contained in editorial content or on-line directories, listings or
databases; and nothing in this Agreement shall prevent either party
from creating any of the foregoing with any third party.
8
<PAGE>
5.4 Other Duties and Responsibilities. The parties agree to coordinate
---------------------------------
and take all reasonable precautions (consistent with the precautions
it ordinarily takes to safeguard its own products) to safeguard the
Products from piracy and misuse. Such precautions shall include,
without limitation, password protection devices.
6. Representations and Warranties, Liability Limitation.
----------------------------------------------------
6.1 Each party represents and warrants to the other that it has full power
and authority to enter into this Agreement.
6.2 To its knowledge, the Company represents and warrants that PartMiner
does not infringe or misappropriate any third party's rights,
including intellectual property rights. Notwithstanding the foregoing,
the Company makes no representations or warranties as to the continued
availability or accessibility through PartMiner of any third party
products or services. The Company will defend, indemnify and hold
Cahners, its affiliates and their respective directors, officers,
employees and agents harmless from and against, any and all judgments,
claims, demands, causes of action, costs and expenses (including
reasonable attorney's fees) arising from or related to any claims of
third party infringement in connection with PartMiner, except for
claims related to the availability or accessibility through PartMiner
of any third party products or services.
6.3 To its knowledge, Cahners represents and warrants that e-inSITE does
not infringe or misappropriate any third party's rights, including
intellectual property rights. Cahners will defend, indemnify and hold
the Company, its affiliates and their respective directors, officers,
employees and agents harmless from and against, any and all judgments,
claims, demands, causes of action, costs and expenses (including
reasonable attorney's fees) arising from or related to any claims of
third party infringement related to e-inSITE.
6.4 THE COMPANY UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, E-INSITE AND THE CAHNERS CONTENT ARE OFFERED "AS
IS," WITHOUT WARRANTIES OF ANY KIND, AND ALL WARRANTIES, WHETHER
EXPRESS OR IMPLIED, ORAL OR WRITTEN, ARE HEREBY DISCLAIMED AND
NEGATED, INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. CAHNERS UNDERSTANDS AND AGREES THAT, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, PARTMINER IS OFFERED "AS IS,"
WITHOUT WARRANTIES OF ANY KIND, AND ALL WARRANTIES, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, ARE
9
<PAGE>
HEREBY DISCLAIMED AND NEGATED, INCLUDING WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE AND MERCHANTABILITY.
6.5 EXCEPT FOR CLAIMS INVOLVING THIRD PARTIES UNDER SECTION 6.2 OR 6.3, IN
NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER OR TO ANY THIRD
PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL
OR LOST PROFIT DAMAGES.
7. Confidentiality and Intellectual Property Ownership.
----------------------------------------------------
7.1 The parties agree to keep strictly confidential any and all
information relating to the other party's products as well as the
business and operations (including customer lists, sales and pricing
schemes) of the other party hereto disclosed to the other party in
connection with the transactions contemplated by this Agreement. The
parties agree that all such confidential information shall remain the
sole and absolute property of the party disclosing the same. During
the term of this Agreement, or any extensions or renewals thereof, the
parties shall not use, disclose, disseminate, publish, reproduce or
otherwise make available such information to any person, firm,
corporation, or other entity, except for the purposes contemplated
hereby. Following expiration or earlier termination of this Agreement,
neither party shall use, disclose, disseminate, publish, reproduce or
otherwise make available such information to any person, firm,
corporation or other entity. The terms of this Section 7.1 shall
survive the termination of this Agreement. Notwithstanding anything in
this Agreement, the confidentiality obligations of this Article 7 are
subject to any applicable legal requirements or court or
administrative order to which a party may be subject.
7.2 The foregoing covenant of confidentiality shall not apply to: (i) any
information in the public domain prior to the date of this Agreement,
(ii) any information that enters the public domain subsequent to the
date of this Agreement through no fault of the recipient thereof;
(iii) any information that was in the possession of the recipient
prior to the disclosure by the other party hereto without violating
the terms of this Agreement; (iv) any information that is obtained
from a third person that, to the knowledge of the recipient, had a
right to disclose such information; (v) any information the recipient
is otherwise permitted to use or disclose under the terms of this
Agreement; and (vi) any information independently developed by the
recipient without violating the terms of this Agreement.
7.3 Nothing in this Agreement shall alter the ownership of or intellectual
property rights in and to: (i) e-inSITE or the Cahners Content,
which shall be and remain the sole and exclusive property of Cahners;
or (ii)
10
<PAGE>
PartMiner, which shall be and remain the sole and exclusive property
of the Company. All use of the Company's and Cahners' trademarks shall
inure to the benefit of the Company and Cahners, respectively. Any use
of a party's marks or logos will be subject to the approval of such
party, such approval not to be unreasonably withheld or delayed.
7.4 Each party agrees that it will not use the confidential information of
the other party for any purpose other than that authorized by this
Agreement, nor disclose or make available the confidential information
of the other party to third parties. Each party shall not, nor shall
it allow a third party to, decompile, reverse engineer, disassemble,
duplicate or otherwise reduce any code or functionality made available
to it under this Agreement.
7.5 The parties agree that the provisions of this Article 7 are necessary
and reasonable to protect the Company and Cahners in the conduct of
their businesses. Each party acknowledges that damages at law may be
an inadequate remedy for the breach of any of the covenants contained
in this Article 7 and, accordingly, in addition to any other remedies
to which such party would be otherwise entitled, such party shall be
entitled to injunctive relief for any breach or threatened breach by
the other party of any of the provisions contained herein.
1. Term and Termination.
- -------------------------
8.1 This Agreement shall commence on the Effective Date, and shall
continue for an initial term of three (3) years from the sixtieth day
after the Effective Date. Thereafter, this Agreement may be renewed
for successive periods of three (3) years (or such lesser or greater
term as the parties may agree in advance) upon mutual agreement of the
parties.
8.2 This Agreement may also be terminated by notice in accordance with the
following:
8.2.1 by either party hereto, upon the occurrence of a breach by the
other party of the provisions of Section 7.1 hereof;
8.2.2 by either party hereto, upon the occurrence of a material
breach by the other party (other than breaches of Section 7.1
hereof), which breach is not cured within thirty (30) days
after receipt of written notice of the breach from the non-
breaching party; or
8.2.3 by either party hereto, in the event the other party ceases to
function as a going concern, is adjudged a bankrupt or makes an
assignment for the benefit of creditors; or
11
<PAGE>
8.2.4 by either party in the event the other party transfers or
assigns, directly or indirectly, by operation of law (e.g.,
merger, acquisition) or otherwise, all or a substantial portion
of its assets, which in the case of Cahners includes the sale of
all or substantially all of the assets of e-inSITE, to a
competitor of the non-transferring party (including but not
limited to, the parties listed on Exhibit F attached hereto); or
---------
8.2.5 by either party in the event the other party undergoes a change
in control reasonably unacceptable to the other party. For
purposes of this Agreement, a "change in control" shall mean a
merger or consolidation in which the applicable party is not the
surviving entity, or a sale of fifty percent (50%) or more of
the assets or capital stock of either party.
8.3 Upon termination of this Agreement for any reason, each party shall disable
and destroy all custom interfaces and links with the other party's product,
and shall immediately return any and all property of the other party.
Notwithstanding the foregoing, the parties shall have 180 days from the
date notice of termination is received by the non-terminating party to
remove any links between PartMiner and e-inSITE.
9. Miscellaneous.
-------------
9.1 Each of the parties hereto agrees to execute instruments and take such
further actions, if any, as may be reasonably requested by the other
party in order to assure such requesting party of the rights and
benefits intended by this Agreement, it being understood that the
expense of any such action shall be borne by the party requesting the
same.
9.2 The relationship between the Company and Cahners established by this
Agreement is solely that of independent contractors. Neither party is
in any way the partner or agent of the other, nor is either party
authorized or empowered to create or assume any obligation of any
kind, implied or express, on behalf of any other party, without the
express prior written consent of such party. The relationship created
by this Agreement is not intended by the parties to constitute the
granting of a franchise to one party by the other, and no federal or
state law, regulation or rule relating to franchise is intended to be
applicable to such relationship or this Agreement.
9.3 This Agreement is the entire agreement between the parties hereto with
respect to the subject matter hereof, and shall supersede any and all
prior written or oral promises or representations. No amendments or
modifications of the terms of this Agreement shall be binding upon a
party unless in writing signed by both parties.
12
<PAGE>
9.4 Neither the waiver by a party hereto of any breach of or default under
any of the provisions of this Agreement, nor the failure of a party to
enforce any of the provisions of this Agreement or to exercise any
rights hereunder, shall be construed as a waiver of any subsequent
breach, or as a waiver of any such rights or provisions hereunder.
9.5 If any part of this Agreement shall be held to be invalid or
unenforceable under applicable law, such part shall be ineffective to
the extent of such invalidity or unenforceability only, without in any
way affecting the remaining parts of this Agreement.
9.6 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. Each party irrevocably consents
that any legal action or proceeding against it under, arising out of,
or in any matter relating to this Agreement may only be brought in the
federal and state courts in New York County, State of New York. Each
of the parties hereto, by execution and delivery hereof, expressly and
irrevocably assents and submits to the personal jurisdiction of any of
such courts in any action or proceeding.
9.7 Neither party may assign or transfer this Agreement in whole or in
part without the prior written consent of the other party; provided,
--------
however, that either party may assign this Agreement to any purchaser
-------
of all of the stock or assets of the assigning party without the
consent of the non-assigning party, which in the case of Cahners
includes the sale of all or substantially all of the assets of e-
inSITE; provided, that, (i) such purchaser is not, in the non-
assigning party's sole judgment, a competitor of the non-assigning
party, and (ii) such purchaser agrees to be bound by the terms of this
Agreement.
9.8 The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.9 Any notices or other communications required or permitted hereunder
must be in writing and shall be deemed given (a) on the third business
day after mailing, if given by certified mail, return receipt
requested, postage prepaid, (b) when sent if given by facsimile with
confirmation, or (c) when personally delivered, addressed as follows,
or to such other address as any party shall designate by notice duly
given hereunder:
If to the Company to: PartMiner, Inc.
432 Park Avenue South
New York, New York 10016
Attn: General Counsel
Facsimile No.: 212-592-5859
13
<PAGE>
With a copy to: Gould & Wilkie LLP
One Chase Manhattan Plaza
58th Floor
New York, New York 10005
Attn: George J. Walsh, Esq.
Facsimile No.: 212-809-6890
-and-
If to Cahners to: Cahners Business Information
275 Washington Street
Newton, Massachusetts 02458
Attn: Chief Executive Officer and
Chief Legal Counsel
Facsimile No.: (617) 558-4622
With a copy to: Cahners Business Information
1350 East Touhy Avenue
Des Plaines, Illinois 60018
Attn: Brian Nairn
Facsimile No.: (847) 390-2200
9.10 Any prevention of or delay in either party's performance hereunder
due to labor disputes, acts of God, governmental restrictions, enemy
or hostile governmental action, fire or other casualty or other
causes beyond such party's control shall excuse such party's
performance of its obligations hereunder for a period equal to the
duration of any such prevention or delay. The foregoing provision
shall not apply to and shall not justify a delay in making a
required financial payment to the other party. Notwithstanding
anything in this Agreement, any prevention of or delay in a party's
performance hereunder which continues for ninety (90) days or more,
regardless of the reason, shall entitle the other party to terminate
this agreement without liability to the non-performing party, except
for obligations to make payments under this Agreement which arose
prior to the date of termination.
9.11 The terms, covenants and provisions of this Agreement are binding on
and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.12 This Agreement may be executed in counterparts each of which shall
be deemed an original and all of which shall constitute one and the
same agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be effective on
the Effective Date.
Cahners Business Information, PartMiner, Inc.
a division of Reed Elsevier Inc.
/s/ Brian Nairn /s/ Daniel Nissanoff
By: ___________________________ By: _____________________________________
Brian Nairn Daniel Nissanoff
Name:___________________________ Name: ___________________________________
Chief Operating Officer President & Chief Executive Officer
Title:__________________________ Title: ___________________________________
September 10, 1999 September 10, 1999
Date: __________________________ Date: ___________________________________
15
<PAGE>
EXHIBIT 10.12
IBM Customer Agreement
- --------------------------------------------------------------------------------
Thank you for doing business with us. We strive to provide you with high quality
Products and Services. If, at any time, you have any questions or problems, or
are not completely satisfied, please let us know. Our goal is to do our best for
you.
This IBM Customer Agreement (called the "Agreement") covers business
transactions you may do with us to purchase Machines, license Programs, and
acquire Services.
This Agreement and its applicable Attachments and Transaction Documents are the
complete agreement regarding these transactions, and replace any prior oral or
written communications between us.
By signing below for our respective Enterprises, both of us agree to the terms
of this Agreement. Once signed, 1) any reproduction of this Agreement, an
Attachment, or Transaction Document made by reliable means (for example,
photocopy or facsimile) is considered an original and 2) all Products and
Services you order under this Agreement are subject to it.
<TABLE>
<S> <C>
Agreed to: Agreed to:
MICROCOM TECHNOLOGIES INC International Business Machines Corporation
By /s/ Daniel Nissanoff By /s/ Jeff Russell
--------------------------------------- ------------------------------------------
Authorized Signature Authorized Signature
Name (type or print): DAN NISSANOFF Name (type or print): JEFF RUSSELL
Date: 5/20/99 Date: 5/20/99
Enterprise number: Agreement number: 4840518
Enterprise address: IBM address:
MICROCOM TECHNOLOGIES INC TWO JERICHO PLAZA
16 EAST 52ND ST JERICHO, NY 11753
NEW YORK, NY 10022
---------------------------------------------------------------------------------------------------
After signing, please return a copy of this Agreement to the "IBM address" shown above.
---------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 17
<PAGE>
IBM Customer Agreement
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Section Title Page
<S> <C>
Part 1 - General....................................................... 3
1.1 Definitions..................................................... 3
1.2 Agreement Structure............................................. 4
1.3 Delivery........................................................ 4
1.4 Charges and Payment............................................. 5
1.5 Changes to the Agreement Terms.................................. 5
1.6 IBM Business Partners........................................... 6
1.7 Mutual Responsibilities......................................... 6
1.8 Your Other Responsibilities..................................... 6
1.9 Patents and Copyrights.......................................... 7
1.10 Limitation of Liability......................................... 7
1.11 Agreement Termination........................................... 8
1.12 Geographic Scope................................................ 8
1.13 Governing Law................................................... 8
Part 2 - Warranties.................................................... 9
2.1 The IBM Warranties.............................................. 9
2.2 Extent of Warranty.............................................. 9
2.3 Items Not Covered by Warranty................................... 10
Part 3 - Machines...................................................... 11
3.1 Title and Risk of Loss.......................................... 11
3.2 Production Status............................................... 11
3.3 Installation.................................................... 11
3.4 Licensed Internal Code.......................................... 11
3.5 Machine Code.................................................... 12
Part 4 - Programs...................................................... 13
4.1 License......................................................... 13
4.2 License Details................................................. 13
4.3 Program Components Not Used on the Designated Machine........... 13
4.4 Distributed System License Option............................... 13
4.5 Program Testing................................................. 14
4.6 Packaged Programs............................................... 14
4.7 Program Protection.............................................. 14
4.8 Program Services................................................ 14
4.9 License Termination............................................. 14
Part 5 - Services...................................................... 15
5.1 IBM Services.................................................... 15
5.2 Personnel....................................................... 15
5.3 Materials Ownership and License................................. 15
5.4 Changes to Service Terms........................................ 15
5.5 Renewal......................................................... 16
5.6 Termination and Withdrawal...................................... 16
5.7 Service for Machines (during and after warranty)................ 16
5.8 Maintenance Coverage............................................ 17
</TABLE>
<PAGE>
IBM Customer Agreement
Part 1 - General
- -------------------------------------------------------------------------------
1.1 Definitions
Customer-set-up Machine is an IBM Machine that you install according to our
instructions.
Date of Installation is the following:
1. for an IBM Machine we are responsible for installing, the business day
after the day we install it or, if you defer installation, make it
available to you for subsequent installation by us;
2. for a Customer-set-up Machine and a non-IBM Machine, the second
business day after the Machine's standard transit allowance period;
and
3. for a Program, the latest of -
a. the day after its testing period ends,
b. the second business day after the Program's standard transit
allowance period,
c. the date, specified in a Transaction Document, on which we
authorize you to make a copy of the Program, or
d. the date you distribute a copy of a chargeable component in support
of your authorized use of the Program.
Designated Machine is either 1) the machine on which you will use a Program
for processing and which we require you to identify to us by type/model and
serial number, or 2) any machine on which you use the Program if we do not
require you to provide this identification to us.
Enterprise is any legal entity (such as a corporation) and the subsidiaries
it owns by more than 50 percent. The term "Enterprise" applies only to the
portion of the enterprise location in the United States or Puerto Rico.
Machine is a machine, its features, conversions, upgrades, elements, or
accessories, or any combination of them. The term "Machine" includes an IBM
Machine and any non-IBM Machine (including other equipment) that we may
provide to you.
Materials are literary works or other works of authorship (such as
programs, program listings, programming tools, documentation, reports,
drawings and similar works) that we may deliver to you as part of a
Service. The term "Materials" does not include Programs or Licensed
Internal Code.
Product is a Machine or a Program.
Program is the following, including the original and all whole or partial
copies:
1. machine-readable instructions and data;
2. components;
3. audio-visual content (such as images, text, recordings, or pictures);
and
4. related licensed materials.
The term "Program" includes an IBM Program and any non-IBM Program that we
may provide to you. The term does not include Licensed Internal Code or
Materials.
Service is performance of a task, provision of advice and counsel,
assistance, or access to a resource (such as access to an information
database) we make available to you.
Specifications is a document that provides information specific to a
Product. For an IBM Machine, we call the document "Official Published
Specifications." For an IBM Program, we call it "Licensed Program
Specifications," or "License Information."
Page 3 of 17
<PAGE>
Specified Operating Environment is the Machines and Programs with which a
Program is designed to operate, as described in the Program's
Specifications.
1.2 Agreement Structure
Attachments
Some Products and Services have terms in addition to those we specify in
this Agreement. We provide the additional terms in documents called
"Attachments," which are also part of this Agreement. Attachments will be
signed by both of us if requested by either of us.
Transaction Documents
For each business transaction, we will provide you with the appropriate
"Transaction Documents" that confirm the specific details of the
transaction. Transaction Documents will be signed by both of us if
requested by either of us. The following are examples of Transaction
Documents with examples of the information they may contain:
1. addenda (contract-period duration, start date, and total quantity);
2. exhibits (eligible Products by category);
3. invoices (item, quantity, and amount due);
4. statements of work (scope of Services, responsibilities, deliverables,
completion criteria, estimated schedule or contract period, and
charges); and
5. supplements (Machine quantity and type ordered, price, estimated
shipment date, and warranty period).
Conflicting Terms
If there is a conflict among the terms in the various documents, those of
an Attachment prevail over those of this Agreement. The terms of a
Transaction Document prevail over those of both of these documents.
Our Acceptance of Your Order
A Product or Service becomes subject to this Agreement when we accept your
order by doing any of the following:
1. sending you a Transaction Document;
2. shipping the Machine or making the Program available to you; or
3. providing the Service.
Your Acceptance of Additional Terms
You accept the additional terms in an Attachment or Transaction Document by
doing any of the following:
1. signing the Attachment or Transaction Document;
2. using the Product or Service, or allowing others to do so; or
3. making any payment for the Product or Service.
1.3 Delivery
We will try to meet your delivery requirements for Products and Services
you order, and will inform you of their status. Transportation charges, if
applicable, will be specified in a Transaction Document.
<PAGE>
1.4 Charges and Payment
The amount payable for a Product or Service will be based on one or more of
the following types of charges:
1. one-time (for example, the price of a Machine);
2. recurring (for example, a periodic charge for Programs or measured use
of Services);
3. time and materials (for example, charges for hourly Services); or
4. fixed price (for example, a specific amount agreed to between us for a
custom Service).
Depending on the particular Product, Service, or circumstance, additional
charges may apply (such as special handling or travel related expenses). We
will inform you in advance whenever additional charges apply.
Recurring charges for a Product begin on its Date of Installation. Charges
for Services are billed as we specify which may be in advance, periodically
during the performance of the Service, or after the Service is completed.
Amounts are due upon receipt of invoice and payable as we specify in a
Transaction Document. You agree to pay accordingly, including any late
payment fee.
If any authority imposes a duty, tax, levy, or fee, excluding those based
on our net income, upon any transaction under this Agreement, then you
agree to pay that amount as specified in the invoice or supply exemption
documentation. You are responsible for personal property taxes for each
Product from the date we ship it to you.
One-time and recurring charges may be based on measurements of actual or
authorized use (for example, number of users or processor size for
Programs, meter readings for maintenance Services, or connect time for
network Services). You agree to provide actual usage data if we specify. If
you make changes to your environment that impact use charges (for example,
change processor size or configuration for Programs), you agree to promptly
notify us and pay any applicable charges. Recurring charges will be
adjusted accordingly. Unless we agree otherwise, we do not give credits or
refunds for charges already due or paid. In the event that we change the
basis of measurement, our terms for changing charges will apply.
We may increase recurring charges for Products and Services, as well as
labor rates and minimums for Services provided under this Agreement, by
giving you three months' written notice. An increase applies on the first
day of the invoice or charging period on or after the effective date we
specify in the notice.
We may increase one-time charges without notice. However, an increase to
one-time charges does not apply to you if 1) we receive your order before
the announcement date of the increase and 2) one of the following occurs
within three months after our receipt of your order:
1. we ship you the Machine or make the Program available to you;
2. you make an authorized copy of a Program or distribute a chargeable
component of a Program to another Machine; or
3. a Program's increased use charge becomes due.
You receive the benefit of a decrease in charges for amounts which become
due on or after the effective date of the decrease.
Services for which you prepay must be used within the applicable contract
period. Unless we specify otherwise, we do not give credits or refunds for
unused prepaid Services.
1.5 Changes to the Agreement Terms
In order to maintain flexibility in our business relationship, we may
change the terms of this Agreement by giving you three months' written
notice. However, these changes are not retroactive. They apply, as of the
effective date we specify in the notice, only to new orders
Page 5 of 17
<PAGE>
and on-going transactions (such as licenses, except that changes to license
termination terms are effective only for new orders). Part 5 of this
Agreement contains additional provisions for changes to the terms of
individual Service transactions.
Otherwise, for a change to be valid, both of us must sign it. Additional or
different terms in any written communication from you (such as an order)
are void.
1.6 IBM Business Partners
We have signed agreements with certain organizations (called "IBM Business
Partners") to promote, market, and support certain Products and Services.
When you order our Products or Services (marketed to you by IBM Business
Partners) under this Agreement, we confirm that we are responsible for
providing the Products or Services to you under the warranties and other
terms of this Agreement. We are not responsible for 1) the actions of IBM
Business Partners, 2) any additional obligations they have to you, or 3)
any products or services that they supply to you under their agreements.
1.7 Mutual Responsibilities
Both of us agree that under this Agreement:
1. neither of us grants the other the right to use its trademarks, trade
names, or other designations in any promotion or publication without
prior written consent;
2. all information exchanged is nonconfidential. If either of us requires
the exchange of confidential information, it will be made under a
signed confidentiality agreement;
3. each is free to enter into similar agreements with others;
4. each grants the other only the licenses and rights specified. No other
licenses or rights (including licenses or rights under patents) are
granted;
5. each may communicate with the other by electronic means and such
communication is acceptable as a signed writing. An identification
code (called a "user ID") contained in an electronic document is
sufficient to verify the sender's identity and the document's
authenticity;
6. each will allow the other reasonable opportunity to comply before it
claims that the other has not met its obligations;
7. neither of us will bring a legal action more than two years after the
cause of action arose; and
8. neither of us is responsible for failure to fulfill any obligations
due to causes beyond its control.
1.8 Your Other Responsibilities
You agree:
1. not to assign, or otherwise transfer, this Agreement or your rights
under this Agreement, delegate your obligations, or resell any
Service, without our prior written consent. Any attempt to do so is
void;
2. to acquire Machines with the intent to use them within your Enterprise
and not for reselling, leasing, or transferring to a third party,
unless either of the following applies --
a. you are arranging lease-back financing for the Machines, or
b. you purchase them without any discount or allowance, and do not
remarket them in competition with our authorized remarketers;
3. to allow us to install mandatory engineering changes (such as those
required for safety) on a Machine. Any parts we remove become our
property. You represent that you have the permission from the owner
and any lien holders to transfer ownership and possession of removed
parts to us;
4. that you are responsible for the results obtained from the use of the
Products and Services;
<PAGE>
5. to provide us with sufficient, free, and safe access to your
facilities for us to fulfill our obligations; and
6. to comply with all applicable export and import laws and regulations.
1.9 Patents and Copyrights
For purposes of this Section, the term "Product" includes Materials (alone
or in combination with Products we provide to you as a system) and Licensed
Internal Code.
If a third party claims that a Product we provide to you infringes that
party's patent or copyright, we will defend you against that claim at our
expense and pay all costs, damages, and attorney's fees that a court
finally awards, provided that you:
1. promptly notify us in writing of the claim; and
2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.
If such a claim is made or appears likely to be made, you agree to permit
us to enable you to continue to use the Product, or to modify it, or
replace it with one that is at least functionally equivalent. If we
determine that none of these alternatives is reasonably available, you
agree to return the Product to us on our written request. We will then give
you a credit equal to:
1. for a Machine, your net book value provided you have followed
generally-accepted accounting principles;
2. for a Program, the amount paid by you or 12 months' charges (whichever
is less); and
3. for Materials, the amount you paid us for the Materials.
This is our entire obligation to you regarding any claim of infringement.
Claims for Which We are Not Responsible
We have no obligation regarding any claim based on any of the following:
1. anything you provide which is incorporated into a Product;
2. your modification of a Product, or a Program's use in other than its
Specified Operating Environment;
3. the combination, operation, or use of a Product with other Products
not provided by us as a system, or the combination, operation, or use
of a Product with any product, data, or apparatus that we did not
provide; or
4. infringement by a non-IBM Product alone, as opposed to its combination
with Products we provide to you as a system.
1.10 Limitation of Liability
Circumstances may arise where, because of a default on our part or other
liability, you are entitled to recover damages from us. In each such
instance, regardless of the basis on which you are entitled to claim
damages from us (including fundamental breach, negligence,
misrepresentation, or other contract or tort claim), we are liable for no
more than:
1. payments referred to in our patents and copyrights terms described
above;
2. damages for bodily injury (including death) and damage to real
property and tangible personal property; and
3. the amount of any other actual direct damages up to the greater of
$100,000 or the charges (if recurring, 12 months' charges apply) for
the Product or Service that is the subject of the claim. For purposes
of this item, the term "Product" includes Materials and Licensed
Internal Code.
This limit also applies to any of our subcontractors and Program
developers. It is the maximum for which we and our subcontractors and
Program developers are collectively responsible.
Page 7 of 17
<PAGE>
Items for Which We are Not Liable
Under no circumstances are we, our subcontractors, or Program developers liable
for any of the following:
1. third-party claims against you for damages (other than those under
the first two items listed above):
2. loss of, or damage to, your records or data; or
3. special, incidental, or indirect damages or for any economic
consequential damages (including lost profits or savings), even if we
are informed of their possibility.
1.11 Agreement Termination
You may terminate this Agreement on written notice to us following the
expiration or termination of your obligations.
Either of us may terminate this Agreement if the other does not comply
with any of its terms, provided the one who is not complying is given
written notice and reasonable time to comply.
Any terms of this Agreement which by their nature extend beyond the
Agreement termination remain in effect until fulfilled, and apply to both
of our respective successors and assignees.
1.12 Geographic Scope
All your rights, all our obligations, and all licenses (except for
Licensed Internal Code and as specifically granted) are valid only in the
United States and Puerto Rico.
1.13 Governing Law
The laws of the State of New York govern this Agreement.
Nothing in this Agreement affects any statutory rights of consumers that
cannot be waived or limited by contract.
<PAGE>
IBM Customer Agreement
Part 2 - Warranties
- ------------------------------------------------------------------------------
2.1 The IBM Warranties
Warranty for IBM Machines
For each IBM Machine, we warrant that it:
1. is free from defects in materials and workmanship; and
2. conforms to its Specifications.
The warranty period for a Machine is a specified, fixed period commencing
on its Date of installation. During the warranty period, we provide repair
and exchange Service for the Machine, without charge, under the type of
service we designate for the Machine.
If a Machine does not function as warranted during the warranty period and
we are unable to either 1) make it do so, or 2) replace it with one that is
at least functionally equivalent, you may return it to us and we will
refund your money.
Additional terms regarding Service for Machines during and after the
warranty period are contained in Part 5.
Warranty for IBM Programs
For each warranted IBM Program, we warrant that when it is used in the
Specified Operating Environment, it will conform to its Specifications.
The warranty period for a Program expires when its Program Services are no
longer available. During the warranty period, we provide defect-related
Program Services without charge. Program Services are available for a
warranted Program for at least one year following its general availability.
If a Program does not function as warranted during the first year after you
obtain your license and we are unable to make it do so, you may return the
Program to us and we will refund your money. To be eligible, you must have
obtained your license while Program Services (regardless of the remaining
duration) were available for it. Additional terms regarding Program
Services are contained in Part 4.
Warranty for IBM Services
For each IBM Service, we warrant that we perform it:
1. using reasonable care and skill; and
2. according to its current description (including any completion
criteria) contained in this Agreement, an Attachment, or a Transaction
Document.
Warranty for Systems
Where we provide Products to you as a system, we warrant that they are
compatible and will operate with one another. This warranty is in addition
to our other applicable warranties.
2.2 Extent of Warranty
If a Machine is subject to federal or state consumer warranty laws, our
statement of limited warranty included with the Machine applies in place of
these Machine warranties.
Page 9 of 17
<PAGE>
The warranties will be voided by misuse, accident, modification, unsuitable
physical or operating environment, operation in other than the Specified
Operating Environment, improper maintenance by you, removal or alteration
of Product or parts identification labels, or failure caused by a product
for which we are not responsible.
THESE WARRANTIES ARE YOUR EXCLUSIVE WARRANTIES AND REPLACE ALL OTHER
WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
2.3 Items Not Covered by Warranty
We do not warrant uninterrupted or error-free operation of a Product or
Service or that we will correct all defects.
We will identify IBM Products that we do not warrant.
Unless we specify otherwise, we provide Materials, non-IMB Products, and
non-IBM Services WITHOUT WARRANTIES OF ANY KIND. However, non-IBM
manufacturers, suppliers, or publishers may provide their own warranties to
you.
<PAGE>
IBM Customer Agreement
Part 3 - Machines
- -------------------------------------------------------------------------------
3.1 Title and Risk of Loss
When we accept your order, we agree to sell you the Machine described in a
Transaction Document. We transfer title to you or, if you choose, your
lessor when we ship the Machine. However, we reserve a purchase money
security interest in the Machine until we receive the amounts due. For a
feature, conversion, or upgrade involving the removal of parts which become
our property, we reserve the security interest until we receive the amounts
due and the removed parts. You agree to sign an appropriate document to
permit us to perfect our purchase money security interest.
We bear the risk of loss for the Machine up to and including its Date of
Installation. Thereafter, you assume the risk.
3.2 Production Status
Each IBM Machine is manufactured from new parts, or new and used parts. In
some cases, a Machine may not be new and may have been previously
installed. Regardless of a Machine's production status, our appropriate
warranty terms apply.
3.3 Installation
For the Machine to function properly, it must be installed in a suitable
physical environment. You agree to provide an environment meeting the
specified requirements for the Machine.
We have standard installation procedures. We will successfully complete
these procedures before we consider an IBM Machine (other than a Machine
for which you defer installation or a Customer-set-up Machine) installed.
You are responsible for installing a Customer-set-up Machine (we provide
instructions to enable you to do so) and a non-IBM Machine.
Machine Features, Conversions, and Upgrades
We sell features, conversions, and upgrades for installation on Machines,
and, in certain instances, only for installation on a designated, serial-
numbered Machine. Many of these transactions involve the removal of parts
and their return to us. As applicable, you represent that you have the
permission from the owner and any lien holders to 1) install features,
conversions, and upgrades and 2) transfer ownership and possession of
removed parts (which become our property) to us. You further represent that
all removed parts are genuine, unaltered, and in good working order. A part
that replaces a removed part will assume the warranty or maintenance
Service status of the replaced part. You agree to allow us to install the
feature, conversion, or upgrade within 30 days of its delivery. Otherwise,
we may terminate the transaction and you must return this feature,
conversion, or upgrade to us at your expense.
3.4 Licensed Internal Code
Certain Machines we specify (called "Specific Machines") use Licensed
Internal code (called "Code"). We own copyrights in Code or have the right
to license Code. We or a third party own all copies of Code, including all
copies made from them.
We will identify each Specific Machine in a Transaction Document. If you
are the rightful possessor of a Specific Machine, we grant you a license to
use the Code (or any replacement we provide) on, or in conjunction with,
only the Specific Machine, designated by serial
Page 11 of 17
<PAGE>
number, for which the Code is provided. We license the Code to only one
rightful possessor at a time.
Under each license, we authorize you to do only the following:
1. execute the Code to enable the Specific Machine to function according
to its Specifications;
2. make a backup or archival copy of the Code (unless we make one
available for your use), provided you reproduce the copyright notice
and any other legend of ownership on the copy. You may use the copy
only to replace the original, when necessary; and
3. execute and display the Code as necessary to maintain the Specific
Machine.
You agree to acquire any replacement for, or additional copy of, Code
directly from us in accordance with our standard policies and practices.
You also agree to use that Code under these terms.
You may transfer possession of the Code to another party only with the
transfer of the Specific Machine. If you do so, you must 1) destroy all
your copies of the Code that were not provided by us, 2) either give the
other party all your IBM-provided copies of the Code or destroy them, and
3) notify the other party of these terms. We license the other party when
it accepts these terms by initial use of the Code. These terms apply to all
Code you acquire from any source.
Your license terminates when you no longer rightfully possess the Specific
Machine.
Actions You May Not Take
You agree to use the Code only as authorized above. You may not do, for
example, any of the following:
1. otherwise copy, display, transfer, adapt, modify, or distribute the
Code (electronically or otherwise), except as we may authorize in the
Specific Machine's Specifications or in writing to you;
2. reverse assemble, reverse compile, or otherwise translate the Code
unless expressly permitted by applicable law without the possibility
of contractual waiver;
3. sublicense or assign the license for the Code; or
4. lease the Code or any copy of it.
3.5 Machine Code
For certain Machines we may provide basic input/output system code,
utilities, diagnostics, device drivers, or microcode (collectively called
"Machine Code"). This Machine Code is licensed under the terms of the
agreement provided with it.
<PAGE>
IBM Customer Agreement
Part 4 - Programs
- --------------------------------------------------------------------------------
4.1 License
When we accept your order, we grant you a nonexclusive, nontransferable
license to use the Program. Programs are owned by International Business
Machines Corporation or one of its subsidiaries ("IBM") or an IBM supplier
and are copyrighted and licensed (not sold).
4.2 License Details
Under each license, we authorize you to:
1. use the Program's machine-readable portion on only the Designated
Machine. If the Designated Machine is inoperable, you may use another
Machine temporarily. If the Designated Machine cannot assemble or
compile the Program, you may assemble or compile the Program on
another Machine.
If you change a Designated Machine previously identified to us, you
agree to notify us of the change and its effective date;
2. use the Program to the extent of authorizations you have acquired;
3. make and install copies of the Program, to support the level of use
authorized, provided you reproduce the copyright notices and any other
legends of ownership on each copy or partial copy; and
4. use any portion of the Program we 1) provide in source form, or 2)
mark restricted (for example, "Restricted Materials of IBM") only to
--
a. resolve problems related to the use of the Program, and
b. modify the Program so that it will work together with other
products.
You agree to comply with any additional terms we may place on a Program. We
identify these in the Program's Specifications or in a Transaction
Document.
Actions You May Not Take
You agree not to:
1. reverse assemble, reverse compile, or otherwise translate the
Program; or
2. sublicense, rent or lease the Program.
4.3 Program Components Not Used on the Designated Machine
Some Programs have components that are designed for use on machines other
than the Designated Machine on which the Program is used. You may make
copies of a component and its documentation in support of your authorized
use of the Program provided you notify us of the component's actual date of
distribution.
4.4 Distributed System License Option
For some Programs, you may make a copy under a Distributed System License
Option (called a "DSLO" copy). We charge less for a DSLO copy than we do
for the original license (called the "Basic" license). In return for the
lesser charge, you agree to do the following while licensed under a DSLO:
1. have a Basic license for the Program;
2. provide problem documentation and receive Program Services (if any)
only through the location of the Basic license; and
Page 13 of 17
<PAGE>
3. distribute to, and install on, the DSLO's Designated Machine, any
release, correction, or bypass that we provide for the Basic license.
4.5 Program Testing
We provide a testing period for certain Programs to help you evaluate if
they meet your needs. If we offer a testing period, it will start 1) the
second business day after the Program's standard transit allowance period,
or 2) on another date specified in a Transaction Document. We will inform
you of the duration of the Program's testing period.
We do not provide testing periods for DSLO copies.
4.6 Packaged Programs
We provide certain Programs together with their own license agreements.
These Programs are licensed under the terms of the agreements provided with
them.
4.7 Program Protection
For each Program, you agree to:
1. ensure that anyone who uses it (accessed either locally or remotely)
does so only for your authorized use and complies with our terms
regarding Programs; and
2. maintain a record of all copies and provide it to us at our request.
4.8 Program Services
We provide Program Services for warranted Programs and for selected other
Programs. If we can reproduce your reported problem in the Specified
Operating Environment, we will issue defect correction information, a
restriction, or a bypass. We provide Program Services for only the
unmodified portion of a current release of a Program.
We provide Program Services 1) on an on-going basis (with at least six
months' written notice before we terminate Program Services), 2) until the
date we specify, or 3) for a period we specify.
4.9 License Termination
You may terminate the license for a Program on one month's written notice,
or at any time during the Program's testing period.
Licenses for certain replacement Programs may be acquired for an upgrade
charge. When you acquire these replacement Programs, you agree to terminate
the license of the replaced Programs when charges become due, unless we
specify otherwise.
We may terminate your license if you fail to comply with its terms. If we
do so, your authorization to use the Program is also terminated.
<PAGE>
IBM Customer Agreement
Part 5 - Services
- --------------------------------------------------------------------------------
5.1 IBM Services
Services may be either standard offerings or customized to your specific
requirements. Each Service transaction may include one or more Services
that:
1. expire at task completion or an agreed upon date;
2. automatically renew as another transaction with a specified contract
period. Renewals will continue until either of us terminates the
Service; or
3. do not expire and are available for your use until either of us
terminates the Service.
5.2 Personnel
Each of us is responsible for the supervision, direction, and control of
our respective personnel.
We reserve the right to determine the assignment of our personnel.
We may subcontract a Service, or any part of it, to subcontractors selected
by us.
5.3 Materials Ownership and License
We will specify Materials to be delivered to you. We will identify them as
being "Type I Materials," "Type II Materials," or otherwise as we both
agree. If not specified, Materials will be considered Type II Materials.
Type I Materials are those, created during the Service performance period,
in which you will have all right, title, and interest (including ownership
of copyright). We will retain one copy of the Materials. You grant us 1) an
irrevocable, nonexclusive, worldwide, paid-up license to use, execute,
reproduce, display, perform, distribute (internally and externally) copies
of, and prepare derivative works based on Type I Materials and 2) the right
to authorize others to do any of the former.
Type II Materials are those, created during the Service performance period
or otherwise (such as those that preexist the Service), in which we or
third parties have all right, title, and interest (including ownership of
copyright). We will deliver one copy of the specified Materials to you. We
grant you an irrevocable, nonexclusive, worldwide, paid-up license to use,
execute, reproduce, display, perform, and distribute, within your
Enterprise only, copies of Type II Materials.
Each of us agrees to reproduce the copyright notice and any other legend of
ownership on any copies made under the licenses granted in this Section.
Any idea, concept, know-how, or technique which relates to the subject
matter of a Service and is developed or provided by either of us, or
jointly by both of us, in the performance of a Service may (subject to
applicable patents and copyrights) be freely used by either of us.
5.4 Changes to Service Terms
We may change the terms of Services that are renewable or non-expiring by
giving you three months' written notice. However, these changes are not
retroactive. They apply immediately to renewal transactions and as of the
effective date we specify in the notice to all existing transactions. If we
make a change to the terms of a renewable Service that 1) affects your
current contract period and 2) you consider unfavorable, on your request,
we will defer it until the end of that contract period.
Page 15 of 17
<PAGE>
When both of us agree to change any Services statement of work other than
as described above, we will prepare a written description of the agreed
change (called a "Change Authorization"), which both of us must sign. The
terms of a Change Authorization prevail over those of the statement of work
and any of its previous Change Authorizations.
5.5 Renewal
Renewable Services renew automatically for a same length contract period
unless either of us provides written notification (at least one month prior
to the end of the current contract period) to the other of its decision not
to renew.
5.6 Termination and Withdrawal
Either of us may terminate a Service if the other does not meet its
obligations concerning the Service.
You may terminate a non-expiring Service, without adjustment charge, on one
month's written notice to us provided you have met all minimum requirements
specified in the applicable Attachments and Transaction Documents.
You may terminate a renewable Service or a non-expiring maintenance
Service, without adjustment charge, on notice to us provided you have met
all minimum requirements specified in the applicable Attachments and
Transaction Documents and any of the following circumstances occur:
1. you permanently remove the eligible Product, for which the Service is
provided, from productive use within your Enterprise;
2. the eligible location, for which the Service is provided, is no longer
controlled by you (for example, because of sale or closing of the
facility);
3. an increase in the Service charges, either alone or in combination
with prior increases over the previous twelve months, is more than the
maximum specified in the applicable Service Transaction Document. If
no maximum is specified, then this circumstance does not apply; or
4. the Machine has been under maintenance Services for at least six
months and you give us one month's written notice prior to terminating
the maintenance Service.
For all other circumstances, you may terminate an expiring or renewable
Service on one month's written notice to us but such termination will
result in adjustment charges equal to the lesser of:
1. the charges remaining to complete the contract period; or
2. one of the following if specified in the Transaction Document --
a. the charges remaining to complete the contract period multiplied
by the adjustment factor specified, or
b. the amount specified.
You agree to pay us for all Services we provide and any Products and
Materials we deliver through Service termination and any charges we incur
in terminating subcontracts.
We may withdraw a renewable or non-expiring Service or support for an
eligible Product on three months' written notice to you. If we withdraw a
Service for which you have prepaid and we have not yet fully provided it to
you, we will give you a prorated refund.
Any terms which by their nature extend beyond termination or withdrawal
remain in effect until fulfilled and apply to respective successors and
assignees.
5.7 Service for Machines (during and after warranty)
We provide certain types of repair and exchange Service either at your
location or at a service center to keep Machines in, or restore them to,
conformance with their Specifications. We will inform you of the available
types of Service for a Machine. We may repair the failing Machine or
exchange it at our discretion.
Page 16 of 17
<PAGE>
When the type of Service requires that you deliver the failing Machine to
us, you agree to ship it suitably packaged (prepaid unless we specify
otherwise) to a location we designate. After we have repaired or exchanged
the Machine, we will return it to you at our expense unless we specify
otherwise. We are responsible for loss of, or damage to, your Machine while
it is 1) in our possession or 2) in transit in those cases where we are
responsible for the transportation charges.
You agree to:
1. obtain authorization from the owner to have us service a Machine that
you do not own; and
2. where applicable, before we provide Service --
a. follow the problem determination, problem analysis, and service
request procedures that we provide,
b. secure all programs, data, and funds contained in a Machine, and
c. inform us of changes in a Machine's location.
When Service involves the exchange of a Machine or part, the item we
replace becomes our property and the replacement becomes yours. You
represent that all removed items are genuine and unaltered. The replacement
may not be new, but will be in good working order and at least functionally
equivalent to the item replaced. The replacement assumes the warranty or
maintenance Service status of the replaced item. Before we exchange a
Machine or part, you agree to remove all features, parts, options,
alterations, and attachments not under our service. You also agree to
ensure that the item is free of any legal obligations or restrictions that
prevent its exchange.
Any feature, conversion, or upgrade we service must be installed on a
Machine which is 1) for certain Machines, the designated, serial-numbered
Machine and 2) at an engineering-change level compatible with the feature,
conversion, or upgrade.
Repair and exchange Services do not cover:
1. accessories, supply items, and certain parts, such as batteries,
frames, and covers;
2. Machines damaged by misuse, accident, modification, unsuitable
physical or operating environment, or improper maintenance by you;
3. Machines with removed or altered Machine or parts identification
labels;
4. failures caused by a product for which we are not responsible; or
5. service of Machine alterations.
We manage and install engineering changes that apply to IBM Machines and
may also perform preventive maintenance.
We provide maintenance Services for selected non-IBM Machines.
5.8 Maintenance Coverage
When you order Machine maintenance Services under this Agreement, we will
inform you of the date on which the maintenance Services will begin. We may
inspect the Machine within one month following that date. If the Machine is
not in an acceptable condition for service, you may have us restore it for
a charge. Alternatively, you may withdraw your request for maintenance
Services. However, you will be charged for any maintenance Services which
we have performed at your request.
Page 17 of 17
<PAGE>
EXHIBIT 10.13
AMENDMENT TO IBM CUSTOMER AGREEMENT
BY AND BETWEEN
PARTMINER, INC.
AND
INTERNATIONAL BUSINESS MACHINES CORPORATION
The parties mutually agree that this Amendment supplements, and to the extent it
differs, amends the IBM Customer Agreement signed between both parties on
05/20/99.
SECTION 1.1, DEFINITIONS - Add the following at the conclusion of the definition
of "Enterprise": Notwithstanding the above, the definition of "Enterprise" does
not apply to the licenses granted under any Statement of Work for Services which
are "global" and valid worldwide."
SECTION 1.2, AGREEMENT STRUCTURE - In the 2nd sentence of the 1st paragraph,
delete the word "provide" and replace it with the word "purpose". Delete the
last sentence in the 1st paragraph and replace it with the following:
"Attachments must be approved and signed by both of us if reasonably requested
by either of us.
SECTION 1.2, AGREEMENT STRUCTURE - In the subsection entitled "Transaction
Documents", delete the 2nd sentence and replace it with the following:
"Transaction Documents must be approved and signed by both of us if reasonably
requested by either of us."
SECTION 1.2, AGREEMENT STRUCTURE - In the subsection entitled "Your Acceptance
of Additional Terms", delete item number 2 and item number 3.
SECTION 1.4, CHARGES AND PAYMENTS - In the 2nd paragraph, add the following at
the conclusion of the paragraph: "and after such notification, you may inform
IBM that you do not wish to incur these additional charges and, therefore, do
not wish to receive this particular Product or Service."
SECTION 1.4, CHARGES AND PAYMENTS - In the 3rd sentence, delete the word
"authority" and replace it with "government entity".
SECTION 1.5, CHANGES TO THE AGREEMENT TERMS - Add the following at the beginning
of this section: "Changes in this section apply to all customers generally."
<PAGE>
SECTION 1.5, CHANGES TO THE AGREEMENT TERMS - In the final paragraph in the
section, after the word "order" in the parenthetical, add the following: "or
form us such as a bill of lading)".
SECTION 1.7, MUTUAL RESPONSIBILITIES - In item number 1, add the word "the"
prior to the word "prior". Add the phrase "of the other", after the word
"consent".
SECTION 1.7, MUTUAL RESPONSIBILITIES - Add the following prior to item number 5:
"except for notices required hereunder which will be sent in accordance with
Section 5.9 below,"
SECTION 1.7, MUTUAL RESPONSIBILITIES - Delete item number 7 and replace it with
the following: "Neither party will bring a legal action more than two (2) years
after the cause of action arose, except in the case of infringement of
copyright, trademark, trade secrets or patent rights".
SECTION 1.7, MUTUAL RESPONSIBILITIES - In item number 8, add the word
"reasonable" prior to the word "control".
SECTION 1.7, MUTUAL RESPONSIBILITIES - Add an additional item, item number 9
with the following: "not to assign, or otherwise transfer this Agreement or your
rights under this Agreement, delegate your obligations, or resell any Service,
without the prior written consent of the other. However, it is not considered an
assignment for IBM to divest a portion of its business in a manner that
similarly effects all of its customers. Notwithstanding the above, IBM may
assign its rights to receive payments hereunder without PartMiner, Inc.'s
consent."
SECTION 1.8, YOUR OTHER RESPONSIBILITIES - Delete item 1 from the section.
SECTION 1.8, YOUR OTHER RESPONSIBILITIES - Add the following after the word
"obligations" in item number 5: "during normal business hours, unless otherwise
agreed to by the parties".
SECTION 1.9, PATENTS AND COPYRIGHTS - In the 1st sentence of the 2nd paragraph,
delete the word "and" prior to the word "patent" and add the following:
",copyright or trade secret".
SECTION 1.9, PATENTS AND COPYRIGHTS - In item number 2 in the 2nd paragraph, add
the phrase "reasonably" prior to the word "cooperate". At the conclusion of the
item, add the following: "at our sole expense".
SECTION 1.9, PATENTS AND COPYRIGHTS - In the 2nd paragraph, after the word
"costs", add the following in a parenthetical: "(including, but not limited to
reasonable travel expenses and living expenses related to any actions brought in
this section at IBM's direction)".
<PAGE>
SECTION 1.9, PATENTS AND COPYRIGHTS - Add the following at the conclusion of
paragraph number 2: "All costs, damages and attorney's fees referenced above
apply equally to proceedings that are settled prior to trial at IBM's
direction."
SECTION 1.9, PATENTS AND COPYRIGHTS - In the subsection entitled "Claims for
Which We are Not Responsible", add the following at the conclusion of item
number 2: "without our consent".
SECTION 1.10, LIMITATION OF LIABILITY - Add the following as item number 4 in
the 1st paragraph: "4. damages due to a breach of the IBM Agreement for Exchange
of Confidential Information signed by both parties dated 05/99."
SECTION 1.11, AGREEMENT TERMINATION - Add the following as an additional
paragraph, paragraph number 4: "This Agreement shall be binding on and inure to
the benefit of the successors and assigns of the parties hereto."
SECTION 1.12, GEOGRAPHIC SCOPE - Add the following at the conclusion of this
section: "Notwithstanding the above, licenses for Materials granted in
accordance with section 5.3 of this Agreement are not limited to the United
States and Puerto Rico since they are worldwide licenses".
SECTION 2.2, EXTENT OF WARRANTY - Add the following at the beginning of the 2nd
paragraph in the section, add the following: "With the exception of Services",.
SECTION 3.1, TITLE AND RISK OF LOSS - Add the following at the conclusion of the
1st paragraph in the section: "Notwithstanding the above, it is IBM's
administrative practice to file UCC - 1's only when the purchase price of a
Machine exceeds $100,000."
SECTION 4.2, LICENSE DETAILS - At the conclusion of item number 2, add the
following phrase: "from us".
SECTION 4.2, LICENSE DETAILS - In the 2nd paragraph, after the word "Program" in
the 1st line, add a comma and the following: "provided such terms are identified
in the Program's Specifications or in a Transaction Document". Delete the 2nd
sentence in its entirety.
SECTION 5.2, PERSONNEL - In the 3rd paragraph of the section, add the following
as an additional sentence: "We will provide you with prior written notice when
we subcontract a Service or any part of it."
SECTION 5.3, MATERIALS OWNERSHIP AND LICENSE - In the 1st sentence of the 1st
paragraph, add the following at its conclusion: ",subject to your approval". In
the 2nd sentence of the 1st paragraph, delete the word "We" and replace it with
the phrase "The parties".
<PAGE>
SECTION 5.3, MATERIALS OWNERSHIP AND LICENSE - Delete the last sentence in the
1st paragraph and replace it with the following: "Materials ownership will be
specified in individual Statements of Work signed by both parties."
SECTION 5.3, MATERIALS OWNERSHIP AND LICENSE - Delete the last paragraph in the
section.
SECTION 5.6, TERMINATION AND WITHDRAWAL - In the 5th paragraph of the section,
add the word "reasonable" prior to the word "charges". Add the following at the
conclusion of the 5th paragraph: ", provided that, you do not in good faith
dispute any such payment or charge".
SECTION 5.9, NOTICE - Add the following as an additional section of the
Agreement: "All notices, requests demands or other communications hereunder
shall be in writing, and shall be deemed to have been adequately given and
delivered as follows: (i) upon personal delivery, including personal delivery by
overnight messenger, to the party to be notified at the address set forth below;
or (ii) upon the expiration of five (5) business days after deposit with the
United States Postal Service, via certified mail with a return receipt
requested, with postage prepaid and addressed to the party to be notified at the
address as set forth below; or (iii) immediately upon transmission and receipt
of confirmation if sent by facsimile to the party to be notified at the address
set forth below.
If to PartMiner, Inc.: If to IBM:
Michael R. Manley Michael Cleary
General Counsel Client Representative
PartMiner, Inc. IBM Corporation
432 Park Ave. South 2 Jericho Plaza
New York, NY 10016 Jericho, New York 11753
Telephone: (212) 724-8884 Telephone: (516) 349-3509
Facsimile: (212) 592-5859 Facsimile: (516) 349-3990
AGREED TO: AGREED TO:
PARTMINER, INC. IBM CORPORATION
BY: /s/ Daniel Nissanoff BY: /s/ Jeff Russell
----------------------------- -------------------------------
NAME: Daniel Nissanoff NAME: Jeff Russell
--------------------------- -----------------------------
TITLE: President TITLE: Principal
-------------------------- ----------------------------
DATE: July 28, 1999 DATE: 8-2-99
--------------------------- -----------------------------
<PAGE>
EXHIBIT 10.14
July 26, 1999
Mr. Fred Couples
c/o Mr. O. Lynn Roach, Jr.
Players Group Inc.
1851 Alexander Bell Drive
Suite 410
Reston, Virginia 22091
Re: Agreement between PartMiner, Inc. (the "Company") and Fred
Couples
Dear Mr. Couples:
This letter will confirm the agreement between us (the "Agreement") as to
the following:
(i) You will make yourself available for not less than three (3) days on
mutually agreed dates designated by the Company that are reasonably convenient
to you to promote the Company and its business (the "Appearances"). We agree
that the location for all such Appearances shall be within the State of
California. Each such Appearance shall be made between the hours of 9:00 a.m.
and 7:00 p.m. and shall consist of at least eight (8) hours, unless otherwise
agreed to by the parties. The first Appearance shall be at the Wescon Trade Show
in San Jose, California on October 20, 1999. The Company will pay all of your
reasonable travel and accommodation expenses incurred in connection with the
Appearances; provided that, any such reimbursement in excess of $1,000.00 shall
require the Company's prior written approval. The Company's obligation to
reimburse you pursuant to this paragraph shall be subject to the presentation to
the Company by you of an itemized account of such expenditures, together with
supporting vouchers or receipts, in accordance with the Company's procedures in
effect from time to time. The Company will advise you as to the proposed dates
for the other two (2) Appearances as soon as possible.
(ii) You hereby grant to the Company a worldwide, nonexclusive license to
use your full and formal name, nicknames, biography, signatures, images,
likenesses and any and all attributes of your personal personality and
appearance ("Celebrity Content") on the Company web site located at
www.partminer.com (the "Web Site") to promote the Company and its business. This
- -----------------
promotion shall be in the form of a contest in which customers of the Company
may win a chance to play golf with you, the time and place for such golf outing
to be mutually agreed upon between us. Upon execution of this Agreement, we
shall mutually agree upon a schedule for delivering the Celebrity Content (as
defined above) to the Company, which Celebrity Content will be subject to the
prior review of Mr. O. Lynn Roach, Jr. or any other authorized designee of the
Players Group Inc. The Company will make any reasonable changes to the Celebrity
Content requested by O. Lynn Roach, Jr. for the correct representation of your
personal and biographical information, and to ensure your comments in speaking
in support of the Company are consistent.
(iii) The Company will grant to you options to acquire common stock of the
Company pursuant to a nonqualified stock option agreement, such grant to be
effective on the date you execute such nonqualified stock option agreement. The
options shall vest, if at all, commencing on the effective date of the Company's
initial public offering. The options shall be exercisable at a price equal to
the public offering price per share (the "Option Price"). The number of shares
subject to the options shall be an amount equal
<PAGE>
2
Mr. Fred Couples July 26, 1999
to $200,000 divided by the Option Price. In the event the Company's initial
public offering consists of units, the Option Price shall be based upon the
portion of the unit price allocable to the Company's common stock, as determined
by the underwriters of the initial public offering at that time.
(iv) This Agreement shall commence on October 20, 1999 and shall
terminate on October 20, 2000.
Nothing in this Agreement shall be construed as granting you any rights of
attribution with respect to the Web Site. You shall not, by virtue of this
Agreement or otherwise, acquire any proprietary rights whatsoever in any aspect
of the Web Site, including, without limitation, any copyrights, trademark rights
and other intellectual property rights inherent therein and appurtenant thereto.
Independently from any consideration to you hereunder, you hereby release the
Company from any claim or cause of action, whether known or unknown, for
defamation, invasion of or right to privacy, publicity or personality or any
similar matter. You agree, in the course of the Appearances and thereafter, that
you will, at no time, take any action or make any statement to the discredit of
the reputation of the Company or its products or services. In like fashion, the
Company also hereby releases you from any claim or cause of action, whether
known or unknown, for defamation, invasion of or right to privacy, publicity or
personality or any similar matter. The Company also agrees that it will at no
time take any action or make any statement to the discredit of your reputation.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER OR TO ANY THIRD PARTY
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR LOST PROFIT
DAMAGES.
It is expressly agreed that you are acting as an independent contractor in
performing the services described herein. The Company shall carry no Worker's
Compensation insurance or any health or accident insurance to cover you. The
Company shall not pay any contributions to Social Security, unemployment
insurance or federal or state withholding taxes, nor provide other contributions
or benefits which might be expected in an employer-employee relationship.
This Agreement shall terminate upon the death, disability or other
incapacity resulting in the inability of you to perform the duties set forth
herein without payment of further compensation. Notwithstanding anything in this
Agreement to the contrary, in the event that you fail to perform all three (3)
Appearances, there will be (i) a pro rata reduction in the number of shares
subject to any unexercised options granted to you, (ii) a refund to the Company
of a pro rata portion of the profits you realize upon the sale of the subject
shares, or (iii) a combination thereof, if applicable. For example, if you fail
to perform one Appearance, either one-third of any unexercised options will be
terminated, one-third of the profits you realize from the sale of the subject
shares will be refunded to the Company, or, to the extent certain options are
unexercised and certain shares have been sold, one-third of the remaining
unexercised options will be terminated and one-third of the profits you realize
from the sale of such shares will be refunded to the Company.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York. If any part of
this Agreement shall be held to be invalid or unenforceable under the applicable
law, such part shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining parts of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties. Neither party will be permitted
to delegate its duties or assign its rights hereunder without the express
written consent of the other party. This Agreement contains the entire
understanding between us in connection with the subject matter hereof and cannot
be amended except by a written instrument signed by both of us.
<PAGE>
3
Mr. Fred Couples July 26, 1999
Please indicate your acceptance of and agreement to the foregoing by
signing in the indicated space below. Please fax me a copy of the executed
original at your earliest convenience and send the executed original to me by
mail.
Thank you.
Very truly yours,
PartMiner, Inc.
/s/ William Barron
By:______________________
William Barron
Chief Marketing Officer
ACCEPTED AND AGREED:
/s/ Fred Couples
_____________________________
Fred Couples
<PAGE>
EXHIBIT 10.15
AGREEMENT OF SUBLEASE
---------------------
THIS AGREEMENT OF SUBLEASE, made as of the 20th day of April, 1999,
between BURRELL COMMUNICATIONS GROUP, INC., a Delaware corporation, having an
office at 432 Park Avenue South, New York, New York ("Sublessor") and MICROCOM
TECHNOLOGIES, INC. a New York corporation, having an office at 16 East 52nd
Street, New York, New York ("Sublessee"),
W I T N E S S E T H :
WHEREAS, Sublessor is the holder of the lessee's interest in, to, and
under a Lease, dated as of March 15, 1996, between 432 Park South Realty Co.,
LLC ("Landlord") and Sublessor, as amended by an Amendment to Lease dated May 5,
1998 (as amended, the "Lease"), covering the entire rentable area of the 16th
and 12th Floors (collectively, the "Leased Premises") in the building commonly
known and referred to as 432 Park Avenue South, New York, New York (the
"Building"); and
WHEREAS, Sublessor desires to lease to Sublessee and Sublessee desires
to lease from Sublessor, the entire rentable area of the 12th Floor (the
"Demised Premises") as more specifically set forth in the sketch attached hereto
as Exhibit A on the terms and conditions and for the term as hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties for themselves and, as permitted
hereunder, their successors and assigns, covenant and agree as follows:
1. Sublessor does hereby lease to Sublessee and Sublessee does
hereby hire and take from Sublessor the Demised Premises for a term (the "Term")
commencing as of the date written approval of this Sublease is received by
Sublessee from Landlord (the "Commencement Date") and ending on April 19, 2004
(the "Expiration Date") unless such term shall sooner terminate as herein
provided.
2. A. Sublessee shall pay to Sublessor base rent for the Demised
Premises ("Base Rent"), in advance in equal monthly installments on the first
day of each and every month during the Term (except that the first monthly
installment coming due hereunder shall be paid at execution hereof), without
prior demand therefor and without set off or reduction whatsoever, at the
following annual rental rates: during the period commencing with the
Commencement Date
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and ending with April 19, 2000, $261,000.00 per year ($21,750.00 each month);
during the period commencing with April 20, 2000, and ending with April 19,
2001, $268,830.00 per year ($22,402.50 each month); during the period commencing
with the April 20, 2001 and ending with April 19, 2002, $276,894.90 per year
($23,074.58 each month); during the period commencing with the April 20, 2002
and ending with April 19, 2003 $285,201.75 per year ($23,766.81 each month); and
during the period commencing with the April 20, 2003 and ending with April 19,
2004, $293,757.80 per year ($24,479.82 each month);
B. Notwithstanding anything contained in paragraph A of this Article
2 to the contrary, Sublessor agrees that Sublessee shall be entitled to an
abatement of the Base Rent for a period of one full month immediately following
the Commencement Date.
C. If the Commencement Date shall not occur on the first day of a
calendar month, the monthly rent installment for such calendar month (or the
month for which Base Rent is first payable pursuant to the terms of paragraph B
of this Article 2) shall be prorated on a per diem basis and Sublessor shall
credit the excess amount paid on the execution of this Lease for the payment of
Base Rent for the next succeeding calendar month.
D. If the Base Rent or any additional rent shall be or become
uncollectible, reduced or required to be refunded by virtue of any law,
governmental order or regulation, or direction of any public officer or body
pursuant to law, Sublessee shall enter into such agreement or agreements and
take such other action (without additional expense to Sublessee) as Sublessor
may reasonably request, as may be legally permissible, to permit Sublessor to
collect the maximum annual rent and additional rent which may from time to time
during the continuance of such rent restriction be legally permissible, but not
in excess of the amounts of Base Rent or additional rent payable under this
Sublease. Upon the termination of such rent restriction prior to the termination
of the Term of this Sublease, (a) the annual rent and additional rent, after
such termination, shall become payable under this Sublease in the amount of the
Base Rent and additional rent set forth in this Sublease for the period
following such termination, and (b) Sublessee shall pay to Sublessor, to the
maximum extent legally permissible, an amount equal to (i) the additional annual
rent and additional rent which would have been paid pursuant to this Sublease,
but for such rent restriction, less (ii) the annual rent and additional rent
paid by Sublessee to Sublessor during the period that such rent restriction was
in effect.
3. Sublessee shall also pay to Sublessor, Sublessee's proportionate
share of, as and when the same shall become due under the Lease, additional
rents,
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escalations and other charges and costs required to be paid by Sublessor to
Landlord under the Lease for the Leased Premises (hereinafter referred to
collectively as "additional rent"), which amounts shall be based on statements,
bills or invoices of Landlord which will be provided by Sublessor to Sublessee
from time to time upon request, except that for the purposes of this
subparagraph (i) Sublessee's pro rata share of additional rent shall be
calculated on the basis that the Demised Premises constitute 6.25% of the
Building, and (ii) the Base Tax Year (as such term is defined in the Standard
Escalation Clause Rider attached to the Lease) shall be deemed to be July 1,
1999 to June 30, 2000, and Sublessee's pro rata share of increases over the Base
Tax Year shall be 6.25% with respect to the Demised Premises). Notwithstanding
the foregoing, Sublessor shall pay to Sublessee 100% of the additional rent due
to Landlord from Sublessor with respect to consumption of electricity shown on
the submeter which has been or is to be installed by Sublessor at Sublessor's
sole cost and expense and which submeter Sublessor represents measures the
consumption of electricity in the Demised Premises only. The remedies afforded
Sublessor for the non-payment of such additional rent by Sublessee shall be the
same as for non-payment of Base Rent. Sublessee shall also pay Sublessor within
fifteen days after demand therefor, all charges, costs and expenses incurred by
Sublessee with respect to services or repairs directly provided by Landlord or
Sublessor to the Demised Premises including, but not limited to, additional
cleaning charges, additional heating or overtime charges for heating,
electricity or guard service, supplies and materials, freight elevator services,
electricity, oil, gas and water consumption.
4. A. Sublessee agrees to secure and keep in force from and after the
date Sublessor shall deliver possession of the Demised Premises to Sublessee
and throughout the term, at Sublessee's own cost and expense (A) Comprehensive
General Liability Insurance, in the broadest form available in the State of New
York, with a minimum limit of liability in amounts set by Sublessor and in no
event less than the amount of $1,000,000 combined single limit for injury or
death to any one person and $3,000,000 combined single limit for injury or death
arising out of any one occurrence; and which insurance shall contain (1)
personal injury liability including libel and slander, false arrest, defamation
of character, wrongful eviction, invasion of privacy and deletion of the
employee/agent/contractor exclusion, (2) fire damage legal liability on real
property in the minimum amount of $1,000,000, (3) Worker's Compensation
Insurance, as required by law; and (4) such other insurance in such amounts as
Sublessor, Landlord, any superior mortgagee or any superior landlord may
reasonably require from time to time. Sublessor, Landlord, or any superior
mortgagee and any superior landlord shall be named as additional insured under
such policies.
B. All policies of insurance procured by Sublessee shall be issued
in forms and by insurance carriers reasonably acceptable to Sublessor.
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Before Sublessor shall deliver possession of the Demised Premises to Sublessee,
Sublessee shall provide Sublessor with certificates of insurance evidencing the
insurance coverages set forth in this Article. Such certificates shall provide
that, in the event of cancellation or material change, thirty days prior written
notice shall be given to Sublessor and all such other named insureds. Each
policy of insurance shall contain a waiver of the insurance carrier's right of
subrogation against the Sublessor, Landlord, superior mortgagee and superior
landlord as respects loss, damage or destruction by fire or other insured
casualty occurring while this Sublease is in effect.
C. Sublessor's insurance, if any, shall contain waivers of
subrogation with respect to Sublessee.
5. Sublessee acknowledges it has read and examined the Lease, and is
fully familiar with the terms, covenants and conditions on the Sublessor's part
to be performed thereunder, and all of the applicable terms, covenants and
conditions of the Lease are included herein as if set forth in such Lease,
except that the following articles of the Lease shall not be part of this
Sublease: the entire preface to the Lease and Articles 1, 48, 49, 58, 60, 62,
75, 108, 114, 117, 122, 123, 125, 127, 128, 129 and the entire Work Letter.
Unless the context requires otherwise or specific provisions to the contrary are
set forth in full in this Sublease, (i) all rights and remedies reserved to the
"Owner" under the Lease shall be deemed reserved to Sublessor hereunder as if
set for in full and (ii) all duties and obligations imposed upon the "Tenant"
under the Lease (to the extent relating to the Demised Premises) shall be deemed
impose upon Sublessee hereunder; provided, however, that any notice, grace or
--------- -------
cure periods available to Sublessee shall be deemed shorted by two business
days. To the extent that any provision of the Lease requires the "Tenant"
thereunder to obtain the consent of the "Owner", such provision shall be deemed
to require the consent of both the Landlord and the Sublessor.
6. Sublessee shall not assign, sublet, mortgage or allow others to
use the Demised Premises without Sublessor's prior written consent, which
consent shall not be unreasonably withheld or delayed, and shall not use or
permit or suffer the use of the Demised Premises for any other business or
purpose. Sublessee agrees to conduct Sublessee's business in the Demised
Premises under Sublessee's trade name first above appearing, which Sublessee
represents that it has the right so to use.
7. Sublessee does hereby assume and agree to be bound by and perform
all the aforesaid terms, covenants and conditions on the Sublessor's part (as
tenant under the Lease) to be performed under the Lease with respect to the
Demised Premises except as otherwise herein specified, and Sublessee agrees to
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indemnify, defend (by counsel reasonable acceptable to Sublessor) and hold
Sublessor harmless against any claim or liability asserted against Sublessor by
reason of Sublessee's failure to perform such obligations. Sublessee agrees that
this Sublease is separate from and subordinate in all respects to the Lease (and
amendments thereto) and to any agreement to which the Lease is subject.
In the event Sublessee shall default in the full performance of any of the
terms, covenants and conditions on its part to be performed under this Sublease,
then Sublessor shall have the same rights and remedies with respect to such
default as are given to Landlord with respect to defaults by Sublessor herein
and as tenant under the Lease, all with the same force and effect as though the
provisions of the Lease with respect to defaults, and the rights and remedies of
Landlord in the event thereof, were set forth at length herein. Sublessee
further agrees that Sublessor shall have no liability of any nature whatsoever
to Sublessee as a consequence of Landlord's default under the Lease, including,
but not limited to, Landlord's breach of a covenant of quiet enjoyment. Any
conflicts between the terms and conditions of this Sublease and the Lease
shall be resolved in favor of this Sublease.
8. If Sublessee shall default (beyond any applicable grace period in
the Lease) in the performance of any of Sublessee's obligations hereunder,
Sublessor, without thereby waiving such default, may, at Sublessor's option,
after 20 days notice to Sublessee, perform the same for the account of
Sublessee. If Sublessor makes any expenditures or incurs any obligations for the
payment of money, including reasonable attorneys' fees, in connection with
curing Sublessee's defaults or in instituting, prosecuting or defending any
action or proceeding, by reason of any default of Sublessee hereunder, such sums
paid or obligations incurred, with interest thereon at 2% per month, shall be
paid by Sublessee to Sublessor as additional rent within ten days of rendition
of any bill or statement to Sublessee therefor and Sublessor shall have the same
rights with respect thereto and Sublessee shall have the same obligations
therefor as if same constituted Base Rent hereunder.
9. Sublessee shall be entitled to receive all services to be
rendered to the Sublessor under the Lease in so far as such services pertain to
the Demised Premises and Sublessee shall be responsible for all charges relating
thereto as provided in the Lease. Sublessor shall have no liability of any
nature whatsoever to Sublessee for Landlord's failure to perform or render such
services and Sublessee shall look solely to Landlord for all such services and
shall not, under any circumstances, seek nor require Sublessor to perform any of
such services, nor shall Sublessee make any claim upon Sublessor for any damages
which may arise by reason of Landlord's default under the Lease, or Landlord's
negligence, whether by omission or commission. If Landlord shall default in the
performance or observance of any of its agreements or obligations under the
Lease, Sublessor shall have no liability therefor to Sublessee and there shall
not be in any event construed
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to exist any corresponding obligation by Sublessor to Sublessee for any such
services or other obligations under this Sublease. No such default of Landlord
shall excuse Sublessee from the performance of any of its obligations to be
performed under this Sublease or entitle Sublessee to terminate this Sublease or
to reduce or abate or offset any of the rents provided for in this Sublease. In
furtherance of the foregoing, Sublessee does, to the extent permitted by law,
and except for the willful acts of Sublessor, hereby waive any cause of action
and any right to bring any action against Sublessor by reason of any act or
omission of Landlord. The foregoing notwithstanding, Sublessor shall use its
best efforts and will cooperate in all respects with Sublessee, the costs of
which to be reimbursed by Sublessee as additional rent, to obtain services to be
provided by Landlord under the Lease and take all actions necessary with respect
thereto.
10. A. Sublessee agrees that if by reason of default on the part
of Sublessor or Landlord under any ground, superior or underlying lease or any
mortgage on the Building, land and/or improvements or on any such ground,
superior or underlying lease, a ground, superior or underlying lessor or a
mortgagee shall enter into and become possessed of the real property of which
the Demised Premises form a part, or any part or parts of such real property
either through possession or foreclosure action or proceedings, or through the
issuance and delivery of a deed or a new lease of the premises covered by the
ground, superior or underlying lease, then, if this Sublease is in full force
and effect at such time, Sublessee shall attorn to such lessor or such
mortgagee, as its landlord; in such event, such lessor or mortgagee shall not be
liable to Sublessee for any defaults theretofore committed by Sublessor and no
such default shall give rise to any rights of offset or deduction against the
Basic Rent and additional rent payable under this sublease.
B. The provisions for attornment hereinbefore set forth shall
not require the execution of any further instrument. However, if any such lessor
or mortgagee to which Sublessee agrees to attorn, as aforesaid, requests a
further instrument expressing such attornment, Sublessee agrees to execute the
same promptly.
11. Landlord's consent to this Sublease is a condition precedent to
the effectiveness hereof. If Landlord's consent or waiver thereof is not
received within thirty days after the date hereof, this Sublease will be void.
In such event, neither party shall have any rights against, or obligations to
the other, except Sublessor shall return all monies deposited hereunder.
12. A. Sublessee covenants, warrants and represents to Sublessor
that, other than Signature Partners, Inc., there was no broker, finder or
similar person entitled to a commission, fee or other compensation, instrumental
in
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consummating this Sublease, that no conversations or prior negotiations were had
by Sublessee or anyone acting on behalf of Sublessee with any broker, finder or
similar person concerning the renting of the Demised Premises. Sublessee shall
indemnify and hold Sublessor harmless against and from all costs, expenses,
damages and liabilities, including reasonable attorney's fees and court costs,
arising from any claims for brokerage commissions, finder's fees or other
compensation resulting from or arising out of any conversations, negotiations or
actions had by Sublessee or anyone acting on behalf of Sublessee with any
broker, finder or similar person. Sublessee shall defend against any such claim
by attorneys reasonably satisfactory to Sublessor and shall not enter into any
settlement agreement with respect thereto without either (i) depositing the
amount of such claim together with all costs of Sublessor associated with
defense of such claim, in trust, with Sublessor for payment of such settlement
or (ii) first receiving written authorization therefor, specific in scope and
authority, from Sublessor. Sublessor agrees to pay the broker's commission(s) by
separate agreements.
B. Sublessor covenants, warrants and represents to Sublessee
that, other than Signature Partners, Inc., there was no broker, finder or
similar person entitled to a commission, fee or other compensation, instrumental
in consummating this Sublease, that no conversations or prior negotiations were
had by Sublessor or anyone acting on behalf of Sublessor with any broker, finder
or similar person concerning the renting of the Demised Premises. Sublessor
shall indemnify and hold Sublessee harmless against and from all costs,
expenses, damages and liabilities, including reasonable attorney's fees and
court costs, arising from any claims for brokerage commissions, finder's fees
or other compensation resulting from or arising out of any conversations,
negotiations or actions had by Sublessor or anyone acting on behalf of Sublessor
with any broker, finder or similar person. Sublessor shall defend against any
such claim by attorneys reasonably satisfactory to Sublessee and shall not enter
into any settlement agreement with respect thereto without either (i) depositing
the amount of such claim together with all costs of Sublessee associated with
defense of such claim, in trust, with Sublessee for payment of such settlement
or (ii) first receiving written authorization therefor, specific in scope and
authority, from Sublessee.
13. Sublessee acknowledges and agrees that Sublessor shall have no
obligations, liability or responsibility with respect to the condition of the
Demised Premises or the installations therein, at the commencement of the Term
or at any time thereafter, it being agreed that Sublessee shall accept the
Demised Premises in "as is" condition. Sublessee acknowledges that neither
Sublessor, nor Sublessor's agents, have made any representations or promises in
regard to the Demised Premises. The taking of possession of the Demised Premises
by Sublessee shall be conclusive evidence as against Sublessee that Sublessee
accepts the same "as-is" and that the Demised Premises were in good and
satisfactory
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condition at the time such possession was taken.
14. A. Notwithstanding anything contained in any provision of this
Sublease to the contrary, Sublessee agrees, with respect to the Demised
Premises, to comply with and remedy any default claimed by Landlord under the
Lease and caused by Sublessee, within the period allowed to Sublessor as tenant
under the Lease minus three days, even if such time period is shorter than the
period otherwise allowed in the Lease due to the fact that notice of default
from Sublessor to Sublessee is given after the corresponding notice of default
from Landlord to Sublessor as tenant under the Lease. Sublessor agrees to
forward to Sublessee, by hand promptly upon receipt thereof by Sublessor, a copy
of each notice of default received by Sublessor in its capacity as tenant under
the Lease. Sublessee agrees to forward to Sublessor, upon receipt thereof,
copies of any notices received by Sublessee with respect to the Demised Premises
from Landlord or from any governmental authorities.
B. Sublessee shall deposit with Sublessor $65,250.00 as security
deposit (the "Security Deposit" or "security") at execution of this Sublease to
be held as security for the faithful performance and observance by Sublessee of
the terms, provisions and conditions of this Sublease; it is agreed that in the
event Sublessee defaults in respect of any of the terms, provisions and
conditions of this Sublease, including, but not limited to, the payment of Base
Rent and additional rent, Sublessor may use, apply or retain the whole or any
part of the security so deposited to the extent required for the payment of any
Base Rent and additional rent or any other sum as to which Sublessee is in
default or for any sum which Sublessor may expend or may be required to expend
by reason of Sublessee's default in respect of any of the terms, covenants and
conditions of this Sublease, including but not limited to, any damages or
deficiency in the re-letting of the Demised Premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Sublessor. In the event that Sublessee shall fully and faithfully comply with
all of the terms, provisions, covenants and conditions of this Sublease, the
security shall be returned to Sublessee after the date fixed as the end of the
Sublease and after delivery of entire possession of the Demised Premises to
Sublessor. In the event of a sale of the leased premises, of which the Demised
Premises form a part, Sublessor shall have the right to transfer the security to
the vendee or lessee and Sublessor shall thereupon be released by Sublessee from
all liability for the return of such security, and Sublessee agrees to look to
the new Sublessor solely for the return of said security; and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
security to a new Sublessor. Sublessee further covenants that it will not assign
or encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Sublessor nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
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Sublessee shall have the right, in lieu therefore or at any time thereafter in
substitution for such funds, to deposit and maintain with Sublessor as the
Security Deposit referred to in the Lease, an irrevocable commercial letter of
credit in the aggregate amount of $65,250.00 in form and substance, and issued
by a member bank of the New York Clearinghouse Association, acceptable to
Sublessor, payable upon the presentation by Sublessor to such bank of a sight-
draft, without presentation of any other documents, statements or
authorizations, which letter of credit shall provide (i) for the continuance of
such credit for the period of at least one year from the date of execution
hereof, (ii) for the automatic extension of such letter of credit for additional
periods of one year from the initial and each future expiration date thereof
(the last such extension to provide for the continuance of such letter of credit
for at least 30 days beyond the expiration date of the Term) unless such bank
gives Sublessor notice of its intention not to renew such letter of credit, not
less than 30 days prior to the initial or any future expiration date of such
letter of credit and (iii) that in the event such notice is given by such bank,
Sublessor shall have the right to draw on such bank at sight for the balance
remaining in such letter of credit and hold and apply the proceeds thereof in
accordance with the provisions of this Sublease. Each letter of credit to be
deposited and maintained with Sublessor (or the proceeds thereof) shall be held
by Sublessor as security for the faithful performance and observance by
Sublessee of the terms, provisions and conditions of this Sublease and in the
event that (x) any default occurs as provided in this Sublease, or (y) Sublessor
transfers its right, title and interest under this Sublease to a third party and
the bank issuing such letter of credit does not consent to the transfer of such
letter of credit to such third party, or (z) notice is given by the bank issuing
such letter of credit that it does not intend to renew the same, as above
provided, then, in any such event, Sublessor may draw on such letter of credit,
and the proceeds of such letter of credit shall then be held and applied as
security (and be replenished, if necessary) as herein provided. Sublessor shall
deposit the security (if cash) in a segregated interest bearing account and the
interest shall be paid to Sublessee on an annual basis, subject to the rights of
Sublessor in the security as herein provided.
15. All notices required by, or provided in connection with, this
Sublease shall be sent by certified mail, return receipt requested, and
personally delivered to the Sublessor at its address first appearing herein and
to Sublessee at the Demised Premises or such other address as either party may
designate by notice as provided herein and notice shall be deemed effected upon
such delivery and such posting with the U.S. Postal Service and if to Sublessor,
after a copy has been sent to Winston & Strawn, 200 Park Avenue, New York, New
York 10166, attn: John C. Phelan and if to Sublessee, after a copy has been sent
to Gould & Wilkie LLP, One Chase Manhattan Plaza, New York, New York 10005,
attn: Michael R. Manley.
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16. In the event Sublessee, or anyone claiming status through or on
behalf of Sublessee, remains in possession of the Demised Premises after the
expiration or earlier termination of this Sublease without the execution of a
new sublease or a direct lease with Landlord, (i) Sublessor shall be entitled
to all of the rights and remedies which are available to a landlord against a
tenant holding over after the expiration of a term and to such other rights and
remedies as may be provided for in this Sublease at law or in equity, and (ii)
Sublessee, at the option of Sublessor, shall be deemed to be occupying the
Demised Premises as a tenant from month to month, at a monthly rental equal to
two times the Base Rent, plus the additional rentals payable hereunder, subject
to all of the other terms of this Sublease insofar as the same are applicable to
a month-to-month tenancy.
17. The provisions of the Lease notwithstanding, and in addition thereto,
with respect to any provision of this Sublease which provides, in effect, that
Sublessor shall not unreasonably withhold or unreasonably delay any consent or
any approval, Sublessee shall, in no event, be entitled to make, nor shall
Sublessee claim any money damages by way of setoff, counterclaim or defense,
based upon any claim or assertion by Sublessee that Sublessor has unreasonably
withheld or unreasonably delayed any consent or approval; but Sublessee's sole
remedy shall be an action or proceeding to enforce any such provision, or for
specific performance, injunction or declaratory judgment. In any event where
Landlord grants it consent to any request of Sublessee, Sublessor's consent
shall be deemed granted so long as Sublessee holds Sublessor harmless from any
costs associated with or resulting therefrom.
18. The provisions of the Lease notwithstanding, and in addition thereto,
Sublessee agrees that Sublessee shall make no claim against Sublessor for any
injury or damage to Sublessee or to any other person(s) or for any damage to, or
loss (by theft or otherwise) of any property of Sublessee or of any other
person. Sublessee further agrees to indemnify and save harmless Sublessor
against and from any and all claims by or on behalf of any person(s), firm(s) or
corporation(s) arising from the conduct or management of or from any work or
thing whatsoever done (other than by Sublessor or its agents or employees) in
and on the Demised Premises during the term of this Sublease, and to indemnify
and save harmless Sublessor against and from any and all claims arising from any
condition of the Demised Premises due to or arising from any act or negligence
of Sublessee or any of its agents, contractors, servants, employees, licensees
or invitees, and from and against all costs, expenses and liabilities incurred
in or in connection with any such claim or claims or action or proceeding
brought thereon; and, in case any action or proceeding be brought against
Sublessor by reason of any claim, Sublessee upon notice from Sublessor agrees to
resist or defend such action or proceeding and to employ counsel therefor
reasonably satisfactory to Sublessor; it being understood that counsel for
Sublessee's insurers shall be deemed to be satisfactory
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to Sublessor.
19. Whenever Sublessee requests the consent or approval of Sublessor,
Sublessee shall pay to Sublessor, as additional rent within 10 days after
Sublessor has submitted an invoice or bill to Sublessee, Sublessor's costs of
review and/or approval including, but not limited to, costs of architects,
Landlord, attorneys, engineers or others, and shall pay all costs assessed by
Landlord against Sublessor resulting therefrom. This provision shall not apply
to initial alterations of the Demised Premises or any alterations to which
Landlord shall have consented so long as Sublessee shall remove the same if
Landlord so requires.
20. A. Sublessee shall have the right, at both Sublessee and Sublessor's
option, to renew this Sublease, for the Demised Premises for a renewal term
("Renewal Term") of four years. The Renewal Term shall commence on the day after
the Expiration Date ("Renewal Term Commencement Date") and shall terminate on
the fourth anniversary of the Expiration Date. Sublessee shall exercise the
option described herein by giving Sublessor written notice of such election to
renew (the "Election Notice"), not later than six months prior to the Expiration
Date. Upon receipt of such Election Notice by Sublessor, Sublessor shall have
the option to renew this Sublease for the Renewal Term by giving Sublessee
written notice of its acceptance of Sublessee's Election Notice (the "Acceptance
Notice"). Upon the giving of the Election Notice and the Acceptance Notice, this
Sublease shall thereupon be deemed renewed for the Renewal Term with the same
force and effect as if the Renewal Term had originally been included in the term
of this Sublease. The right of Sublessee to renew this Sublease shall be
conditioned upon Sublessee not being in default beyond any applicable grace
periods under the Sublease and upon the Sublease being in full force and effect
at the time of the exercise of such option and as of the Renewal Term
Commencement Date.
B. All of the terms, covenants and conditions of this Sublease shall
continue in full force and effect during the Renewal Term, except that (i) the
Base Rent for the Renewal Term shall be in an amount equal to three percent
increases each year over the Renewal Term, and (ii) Sublessee shall have no
further right to renew the Term of this Sublease. Any termination, cancellation
or surrender of the entire interest of Sublessee under this Sublease at any time
during the Term hereof shall terminate any right of renewal of Sublessee
hereunder. Upon the determination of the Base Rent in accordance with this
Article 20 for the Renewal Term, Sublessor and Sublessee, upon the demand of
either of them, shall execute and deliver an instrument setting forth the Base
Rent for the Renewal Term.
21. Sublessee, for itself and on behalf of any and all persons claiming
through or under Sublessee, including creditors of all kinds, does hereby
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waive and surrender all right and privilege it or they or any of them might have
under or by reason of any present or future law, to redeem the Demised Premises
or to have a continuance of this Sublease for the term hereby demised after
being dispossessed or ejected therefrom by process of law or under the terms of
this Sublease or after the termination of the Term of this Sublease as herein
provided.
22. Any provision of the Lease to the contrary notwithstanding,
Sublessee covenants and agrees that Sublessee shall not assign, mortgage, or
pledge this Sublease, or sublease or allow others to occupy all or any part of
the Demised Premises, without the prior written consent of Landlord and
Sublessor in each instance first obtained. In the event Landlord grants its
consent, Sublessor's shall be deemed granted.
23. Sublessee agrees to pay all commercial occupancy taxes due in
connection with Sublessee's occupancy of the Demised Premises.
24. Unless otherwise stated, the terms, covenants and conditions
contained in this Sublease shall bind and inure to the benefit of the parties
hereto and their respective heirs, distributees, executors, administrators and,
only as permitted herein, successors and assigns.
25. Sublessor has made no representations, agreements or promises
with respect to the Building or the Demised Premises other than those expressly
set forth in this Sublease and no rights are to be deemed acquired by Sublessee,
by implication or otherwise, except those expressly granted herein. This
Sublease and the appropriate provisions of the Lease contain the entire
agreement between Sublessor and Sublessee with respect to the Demised Premises.
Any executory agreement hereafter made between Sublessor and Sublessee shall be
ineffective to change, modify, waive, release, discharge, terminate or effect an
abandonment or surrender of this Sublease, in whole or in part, unless such
agreement is in writing and signed by the party against whom enforcement thereof
is sought.
26. If Sublessee is a corporation, the persons executing this
Sublease on behalf of Sublessee hereby covenant, represent and warrant that
Sublessee is a duly incorporated or duly qualified (if foreign) corporation and
is authorized to do business in the State of New York (a copy of evidence
thereof to be supplied to Sublessor upon request); and that the person or
persons executing this Sublease on behalf of Sublessee is an officer or are
officers of such Sublessee, and that he or they as such officers are duly
authorized to execute, acknowledge and deliver this Sublease to Sublessor (a
copy of a resolution or secretary's certificate to that effect to be supplied to
Sublessor upon request).
27. Under no circumstances shall Sublessee be required to pay any
12
<PAGE>
charges required under the Lease and shall only pay such charges specifically
reserved in this Sublease. If the Lease is ever amended, Sublessor shall provide
Sublessee with notice of such amendment and promptly deliver a copy of same to
Sublessee. In addition, Sublessor shall provide Sublessee with copies of any
notices Sublessor receives from or delivers to Landlord. Throughout the term of
this Sublease, Sublessor covenants that it will actively pursue its rights
against Landlord under the Lease (i.e., repair obligations, heat, air
conditioning, etc.). Sublessor represents to Sublessee that so long as Sublessee
shall fully comply with and perform all of Sublessee's obligations hereunder,
Sublessee shall not be in violation of any of the terms of the Lease.
28. Sublessor represents to Sublessee that, to the best of Sublessor's
knowledge, it is not in default under the terms of the Lease. In addition,
Sublessor represents to Sublessee that it has not received any default notices
or petitions from Landlord.
29. Sublessor acknowledges and agrees that this Sublease is contingent
upon the Sublessee's receipt of valid and binding Non-Disturbance Agreement from
the Landlord with respect to Sublessee's subtenancy in substantially the same
form as set forth on Exhibit B attached hereto.
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<PAGE>
IN WITNESS WHEREOF, Sublessor and Sublessee have executed and
delivered this Agreement of Sublease as of the date first hereinabove written.
BURRELL COMMUNICATIONS GROUP, INC.,
as Sublessor
By: /s/ John Stanek
--------------------------
Name: John Stanek
Title: EVP CFO
MICROCOM TECHNOLOGIES, INC.,
as Sublessee
By: /s/ Thomas Egan
--------------------------
Name: Thomas Egan
Title: President/COO
14
<PAGE>
EXHIBIT 10.16
Lease made as of the 23rd day of July, 1999, between INVESTMENT PROPERTIES
ASSOCIATES hereinafter referred to as "Landlord" or "Lessor", and PARTMINER,
INC. hereinafter referred to as "Tenant" or "Lessee".
Witnesseth: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord ROOM 1901-3 (said space is hereinafter called the "premises") in the
building known as 245 Fifth Avenue ("the building") in the County of New York,
City of New York, for a term of 2 years & 6 months to commence on the 1st day of
September 1999, and to expire on the 28th day of February 2002, or until such
term shall sooner end as in Article 12 and elsewhere herein provided, both dates
inclusive, at a fixed annual rental (subject to Articles 23 and 41) at the
annual rate of $248,064.00 per annum (9/1/99-2/28/02) payable in equal monthly
installments in advance on the first day of each month, except that the first
installment of rent due under this lease shall be paid by Tenant upon its
execution of this lease, unless this lease be a renewal.
Landlord and Tenant covenant and agree:
PURPOSE.
1. Tenant shall use and occupy the premises only for offices relating to
Tenant's business, and for no other purpose. Office for tenant's internet firm.
RENT AND ADDITIONAL RENT.
2. Tenant agrees to pay rent as herein provided at the office of Landlord
or such other place as Landlord may designate, payable in United States legal
tender, by cash, or by good and sufficient check drawn on a New York City
Clearing House Bank, and without any set off or deduction whatsoever. Any sum
other than fixed rent payable hereunder shall be deemed additional rent and due
on demand.
ASSIGNMENT.
3. Neither Tenant nor Tenant's legal representatives or successors in
interest by operation of law or otherwise, shall assign, mortgage or otherwise
encumber this lease, or sublet or permit all or part of the premises to be used
by others, without the prior written consent of Landlord in each instance. The
transfer of a majority of the issued and outstanding capital stock of any
corporate tenant or sublessee of this lease or a majority of the total interest
in any partnership tenant or sublessee, however accomplished, and whether in a
single transaction or in a series of related or unrelated transactions, and the
conversion of a tenant or sublessee entity to either a limited liability company
or a limited liability partnership shall be deemed an assignment of this lease
or of such sublease. The merger or consolidation of a corporate tenant or
sublessee where the net worth of the resulting corporation is less than the net
worth of the tenant or sublessee immediately prior to such merger or
consolidation shall be deemed an assignment of this lease or of such sublease.
If without Landlord's written consent this lease is assigned, or the premises
are sublet or occupied by anyone other than Tenant, Landlord may accept the rent
from such assignee, subtenant or occupant, and apply the net amount thereof to
the rent herein reserved, but no such assignment, subletting, occupancy or
acceptance of rent shall be deemed a waiver of this covenant. Consent by
Landlord to an assignment or subletting shall not relieve Tenant from the
obligation to obtain Landlord's written consent to any further assignment or
subletting. In no event shall any permitted sublessee assign or encumber its
sublease or further sublet all or any portion of its sublet space, or otherwise
suffer or permit the sublet space or any part thereof to be used or occupied by
others, without Landlord's prior written consent in each instance. A
modification, amendment or extension of a sublease shall be deemed a sublease.
DEFAULT.
4. Landlord may terminate this lease on three (3) days' notice: (a) if
rent or additional rent is not paid within ten (10) days after written notice
from Landlord; or (b) if Tenant shall have failed to cure a default in the
performance of any covenant of this lease (except the payment of rent), or any
rule or regulation hereinafter set forth, within fifteen (15) days after written
notice thereof from Landlord, or if default cannot be completely cured in such
time, if Tenant shall not promptly proceed to cure such default within said
fifteen (15) days or shall not complete the curing of such default with due
diligence; or (c) when and to the extent permitted by law, if a petition in
bankruptcy shall be filed by or against Tenant or if Tenant shall make a general
assignment for the benefit of creditors, or receive the benefit of any
insolvency or reorganization act; or (d) if a receiver or trustee is appointed
for any portion of Tenant's property and such appointment is not vacated within
twenty (20) days; or (e) if an execution or attachment shall be issued under
which the premises shall be taken or occupied or attempted to be taken or
occupied by anyone other than Tenant; or (f) if the premises become and remain
vacant or deserted for a period often (10) days; or (g) if Tenant shall default
beyond any grace period under any other lease between Tenant and Landlord; or
(h) if Tenant shall fail to move into or take possession of the premises within
fifteen (15) days after commencement of the term of this lease.
At the expiration of the three (3) day notice period, this lease and any
rights of renewal or extension thereof shall terminate as completely as if that
were the date originally fixed for the expiration of the term of this lease, but
Tenant shall remain liable as hereinafter provided.
RELETTING, ETC.
5. If Landlord shall re-enter the premises on the default of Tenant, by
summary proceedings or otherwise: (a) Landlord may re-let the premises or any
part thereof as Tenant's agent, in the name of Landlord, or otherwise, for a
term shorter or longer than the balance of the term of this lease, and may grant
concessions or free rent. (b) Tenant shall pay Landlord any deficiency between
the rent hereby reserved and the net amount of any rents collected by Landlord
for the remaining term of this lease, through such reletting. Such deficiency
shall become due and payable monthly, as it is determined. Landlord shall have
no obligation to re-let the premises, and its failure or refusal to do so, or
failure to collect rent on re-letting, shall not affect Tenant's liability
hereunder. In computing the net amount of rents collected through such
re-letting. Landlord may deduct all expenses incurred in obtaining possession
or re-letting the premises, including legal expenses and fees, brokerage fees,
the cost of restoring the premises to good order, and the cost of all
alterations and decorations deemed necessary by Landlord to effect re-letting.
In no event shall Tenant be entitled to a credit or repayment for rerental
income which exceeds the sums payable by Tenant hereunder or which covers a
period after the original term of this lease. (c) Tenant hereby expressly waives
any right of redemption granted by any present or future law. "Re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. In the event of a breach or threatened breach of any of the covenants
or provisions hereof Landlord shall have the right of injunction. Mention herein
of any particular remedy shall not preclude Landlord from any other available
remedy. (d) Landlord shall recover as liquidated damages, in addition to accrued
rent and other charges, if Landlord's re-entry is the result of Tenant's
bankruptcy, insolvency, or reorganization, the full rental for the maximum
period allowed by any act relating to bankruptcy, insolvency or reorganization.
If Landlord re-enters the premises for any cause, or if Tenant abandons or
vacates the premises, and after the expiration of the term of this lease, any
property left in the premises by Tenant shall be deemed to have been abandoned
by Tenant, and Landlord shall have the right to retain or dispose of such
property in any manner without any obligation to account therefor to Tenant. If
Tenant shall at any time default hereunder, and if Landlord shall institute an
action or summary proceedings against Tenant based upon such default, then
Tenant will reimburse Landlord for the legal expenses and fees thereby incurred
by Landlord.
LANDLORD MAY CURE DEFAULTS.
6. If Tenant shall default in performing any covenant or condition of
this lease, subject to prior written notice to Tenant by Landlord, Landlord may
perform the same for the account of Tenant, and if Landlord, in connection
therewith, or in connection with any default by Tenant, makes any expenditures
or incurs any obligations for the payment of money, including but not limited to
attorney's fees, such sums so paid or obligations incurred shall be deemed to be
additional rent hereunder, and shall be paid by Tenant to Landlord within five
(5) days of rendition of any bill or statement therefor, and if Tenant's lease
term shall have expired at the time of the making of such expenditures or
incurring of such obligations, such sums shall be recoverable by Landlord as
damages.
<PAGE>
ALTERATIONS.
7. Tenant shall make no alteration, addition or improvement in the
premises, without the prior written consent of Landlord, and then only by
contractors or mechanics and in such manner and with such materials as shall be
approved by Landlord. All alterations, additions or improvements to the
premises, including window and central air conditioning equipment and duct work,
except movable office furniture and equipment installed at the expense of
Tenant, shall, unless Landlord elects otherwise in writing, become the property
of Landlord, and shall be surrendered with the premises at the expiration or
sooner termination of the term of this lease. Any such alterations, additions
and improvements which Landlord shall designate, shall be removed by Tenant and
any damage repaired, at Tenant's expense, prior to the expiration of the term of
this lease. 1
LIENS.
8.2 With respect to contractors, subcontractors, materialmen and laborers,
and architects, engineers and designers, for all work or materials to be
furnished to Tenant at the premises, Tenant agrees to obtain and deliver to
Landlord written and unconditional waiver of mechanics liens upon the premises
or the building, after payments to the contractors, etc., subject to any then
applicable provisions of the Lien law. Notwithstanding the foregoing, Tenant at
its expense shall cause any lien filed against the premises or the building, for
work or materials claimed to have been furnished to Tenant, to be discharged of
record within thirty (30) days after notice thereof.
REPAIRS.
9. Tenant shall take good care of the premises and the fixtures and
appurtenances therein, and shall make all repairs necessary to keep them in good
working order and condition, including structural repairs when those are
necessitated by the act, omission or negligence of Tenant or its agents,
employees or invitees. During the term of this lease, Tenant may have the use of
any air-conditioning equipment located in the premises, and Tenant, at its own
cost and expense, shall maintain and repair such equipment and shall reimburse
Landlord, in accordance with Article 41 of this lease, for electricity consumed
by the equipment. The exterior walls of the building, the windows and the
portions of all window sills outside same are not part of the premises demised
by this lease, and Landlord hereby reserves all rights to such parts of the
building.
DESTRUCTION.
10. If the premises shall be partially damaged by fire or other casualty,
the damage shall be repaired at the expense of Landlord, but without prejudice
to the rights of subrogation, if any, of Landlord's insurer. Landlord shall not
be required to repair or restore any of Tenant's property or any alteration or
leasehold improvement made by or for Tenant at Tenant's expense. The rent shall
abate in proportion to the portion of the premises not usable by Tenant.
Landlord shall not be liable to Tenant for any delay in restoring the premises,
Tenant's sole remedy being the right to an abatement of rent, as above provided.
If the premises are rendered wholly untenantable by fire or other casualty and
if Landlord shall decide not to restore the premises, or if the building shall
be so damaged that Landlord shall decide to demolish it or to rebuild it
(whether or not the premises have been damaged), Landlord may within ninety (90)
days after such fire or other cause give written notice to Tenant of its
election that the term of this lease shall automatically expire no less than ten
(10) days after such notice is given. Notwithstanding the foregoing, each party
shall look first to any insurance in its favor before making any claim against
the other party for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and collectible and
to the extent permitted by law, Landlord and Tenant each hereby releases and
waives all right of recovery against the other or any one claiming through or
under each of them by way of subrogation or otherwise. The foregoing release and
waiver shall be in force only if both releasors' insurance policies contain a
clause providing that such a release or waiver shall not invalidate the
insurance and also, provided that such a policy can be obtained without
additional premiums. Tenant hereby expressly waives the provisions of Section
227 of the Real Property law and agrees that the foregoing provisions of this
Article shall govern and control in lieu thereof.
END OF TERM.
11. Tenant shall surrender the premises to Landlord at the expiration or
sooner termination of this lease in good order and condition, except for
reasonable wear and tear and damage by fire or other casualty, and Tenant shall
remove all of its property. Tenant agrees it shall indemnify and save Landlord
harmless against all costs, claims, loss or liability resulting from delay by
Tenant in so surrendering the premises, including, without limitation, any
claims made by any succeeding tenant founded on such delay. Additionally, the
parties recognize and agree that other damage to Landlord resulting from any
failure by Tenant timely to surrender the premises will be substantial, will
exceed the amount of monthly rent theretofore payable hereunder, and will be
impossible of accurate measurement. Tenant therefore agrees that if possession
of the premises is not surrendered to Landlord within one (1) day after the date
of the expiration or sooner termination of the term of this lease, then Tenant
will pay Landlord as liquidated damages for each month and for each portion of
any month during which Tenant holds over in the premises after expiration or
termination of the term of this lease, a sum equal to two (2) times the average
rent and additional rent which was payable per month under this lease during the
last six months of the term thereof. The aforesaid obligations shall survive the
expiration or sooner termination of the term of this lease. At any time during
the term of this lease, Landlord may exhibit the premises to prospective
purchasers or mortgagees of Landlord's interest therein. During the last year of
the term of this lease, Landlord may exhibit the premises to prospective
tenants.
SUBORDINATION AND ESTOPPEL, ETC.
12. Tenant has been informed and understands that Landlord is the Tenant
under a lease of the land and entire building of which the premises form a part
(hereinafter called the "Master Lease"). This lease is and shall be subject and
subordinate to the Master Lease and all other ground and underlying leases and
to all mortgages which may now or hereafter affect such leases or the real
property of which the premises form a part, and to all renewals, modifications,
consolidations, replacements and extensions thereof. This Article shall be
self-operative and no further instrument of subordination shall be necessary. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Landlord may request. In the event that the Master Lease or
any other ground or underlying lease is terminated or any mortgage foreclosed,
this lease shall not terminate or be terminable by Tenant (except as hereinafter
provided as to Master Lease expiration of term) unless Tenant was specifically
named in any termination or foreclosure judgment or final order. In the event
that the Master Lease or any other ground or underlying lease is terminated as
aforesaid, or expires (as hereinafter provided), or if the interests of Landlord
under this lease are transferred by reason of or assigned in lieu of foreclosure
or other proceedings for enforcement of any mortgage, or if the holder of any
mortgage acquires a lease in substitution therefor, then tenant will, at the
option to be exercised in writing by the landlord under the Master Lease or such
purchaser, assignee or lessee, as the case may be, (i) attorn to it and will
perform for its benefit all the terms, covenants and conditions of this lease on
the Tenant's part to be performed with the same force and effect as if said
landlord or such purchaser, assignee or lessee, were the landlord originally
named in this lease, or (ii) enter into a new lease with said lessor or such
purchaser, assignee or lessee, as landlord, for the remaining term of this
lease and otherwise on the same terms, conditions and rentals as herein
provided. If the current term of the Master Lease shall expire prior to the date
set forth herein for the expiration of this lease, then, unless Landlord, at its
sole option, shall have elected to extend or renew the term of the Master Lease,
or unless the lessor under the Master Lease elects that the Tenant attorn or
enter into a new lease as aforesaid, the term of this lease shall expire on the
date of expiration of the Master Lease, notwithstanding the later expiration
date hereinabove set forth. If the Master Lease is renewed, then the term of
this lease shall expire as hereinabove set forth. From time to time, Tenant, on
at least ten (10) days' prior written request by Landlord will deliver to
Landlord a statement in writing certifying that this lease is unmodified and in
full force and effect (or if there shall have been modifications, that the same
is in full force and effect as modified and stating the modification) and the
dates to which the rent and other charges have been paid and stating whether or
not the Landlord is in default in performance of any covenant, agreement, or
condition contained in this lease and, if so, specifying each such default of
which Tenant may have knowledge. 3
CONDEMNATION.
13. If the whole or any substantial part of the premises shall be condemned
by eminent domain or acquired by private purchase in lieu thereof for any public
or quasi-public purpose, this lease shall terminate on the date of the vesting
of title through such proceeding or purchase, and Tenant shall have no claim
against Landlord for the value of any unexpired portion of the term of this
lease, nor shall Tenant be entitled to any part of the condemnation award or
private purchase price. If less than a substantial part of the premises is
condemned, this lease shall not terminate, but rent shall abate in proportion to
the portion of the premises condemned.
REQUIREMENTS OF LAW.
14. (a) Tenant at its expense shall comply with all laws, orders and
regulations of any governmental authority having or asserting jurisdiction over
the premises, which shall impose any violation, order or duty upon Landlord or
Tenant with respect to the premises or the use or occupancy thereof including,
without limitation, compliance in the premises with all City, State and Federal
laws, rules and regulations on the disabled or handicapped, on fire safety and
on hazardous materials. The foregoing shall not require Tenant to do structural
work.
(b) Tenant shall require every person engaged by him to clean any window in
the premises from the outside, to use the equipment and safety devices required
by Section 202 of the labor law and the rules of any governmental authority
having or asserting jurisdiction.
(c) Tenant at its expense shall comply with all requirements of the New
York Board of Fire Underwriters, or any other similar body affecting the
premises and shall not use the premises in a manner which shall increase the
rate of fire insurance of Landlord or of any other tenant, over that in effect
prior to this lease. If Tenant's use of the premises increases the fire
insurance rate, Tenant shall reimburse Landlord for all such increased costs.
That the premises are being used for the purpose set forth in Article 1 hereof
shall not relieve Tenant from the foregoing duties, obligations and expenses.
CERTIFICATE OF OCCUPANCY.
15. Tenant will at no time use or occupy the premises in violation of the
certificate of occupancy issued for the building. The statement in this lease of
the nature of the business to be conducted by Tenant shall not be deemed to
constitute a representation or guaranty by Landlord that such use is a lawful or
permissible in the premises under the certificate of occupancy for the building.
<PAGE>
POSSESSION.
16. If Landlord shall be unable to give possession of the premises on the
commencement date of the term because of the retention of possession of any
occupant thereof alteration or construction work, or for any other reason except
as hereinafter provided, Landlord shall not be subject to any liability for such
failure. 4 In such event, this lease shall stay in full force and effect,
without extension of its term. However, the rent hereunder shall not commence
until the premises are available for occupancy by Tenant. If delay in possession
is due to work, changes or decorations being made by or for Tenant, or is
otherwise caused by Tenant, there shall be no rent abatement and the rent shall
commence on the date specified in this lease. If permission is given to Tenant
to occupy the demised premises or other premises prior to the date specified as
the commencement of the term, such occupancy shall be deemed to be pursuant to
the terms of this lease, except that the parties shall separately agree as to
the obligation of Tenant to pay rent for such occupancy. The provisions of this
Article are intended to constitute an "express provision to the contrary" within
the meaning of Section 223(a), New York Real Property Law. 5
QUIET ENJOYMENT.
17. Landlord covenants that if Tenant pays the rent and performs all of
Tenant's other obligations under this lease, Tenant may peacebly and quietly
enjoy the demised premises, subject to the terms, covenants and conditions of
this lease and to the ground leases, underlying leases and mortgages
hereinbefore mentioned.
RIGHT OF ENTRY.
18. Tenant shall permit Landlord to erect and maintain pipes and conduits
in and through the premises. Landlord or its agents shall have the right to
enter or pass through the premises at all times, by master key, by reasonable
force or otherwise, to examine the same, and to make such repairs, alterations
or additions as it may deem necessary or desirable to the premises or the
building, and to take all material into and upon the premises that may be
required therefor. Such entry and work shall not constitute an eviction of
Tenant in whole or in part, shall not be grounds for any abatement of rent, and
shall impose no liability on Landlord by reason of inconvenience or injury to
Tenant's business. Landlord shall have the right at any time, without the same
constituting an actual or constructive eviction, and without incurring any
liability to Tenant, to change the arrangement and/or location of entrances or
passageways, windows, corridors, elevators, stairs, toilets, or other public
parts of the building, and to change the name or number by which the building is
known.
VAULT SPACE.
19. Anything contained in any plan or blueprint to the contrary
notwithstanding, no vault or other space not within the building property line
is demised hereunder. Any use of such space by Tenant shall be deemed to be
pursuant to a license, revocable at will by Landlord, without diminution of the
rent payable hereunder. If Tenant shall use such vault space, any fees taxes or
charges made by any governmental authority for such space shall be paid by
Tenant.
INDEMNITY.
20. Tenant shall indemnify, defend and save Landlord harmless from and
against any liability or expense arising from the use or occupation of the
premises by Tenant, or anyone on the premises with Tenant's permission, or from
any breach of this lease.
LANDLORD'S LIABILITY.
21. This lease and the obligations of Tenant hereunder shall in no way be
affected because Landlord is unable to fulfill any of its obligations or to
supply any service, by reason of strike or other cause not within Landlord's
control. Landlord shall have the right, without incurring any liability to
Tenant, to stop any service because of accident or emergency, or for repairs,
alterations or improvements, necessary or desirable in the judgment of Landlord,
until such repairs, alterations or improvements shall have been completed.
Landlord shall not be liable to Tenant or anyone else, for any loss or damage
to person, property or business, unless due to the negligence of Landlord nor
shall Landlord be liable for any latent defect in the premises or the building.
Tenant, during the term of this lease, shall carry public liability and property
damage insurance, from a company authorized to do business in New York, with
limitations acceptable to Landlord, which policy or policies shall name the
Landlord and its designees as additional insureds. Evidence of the policies,
and of their timely renewal, shall be delivered to Landlord. All such insurance
shall contain an agreement by the insurance company that the policy or policies
will not be cancelled or the coverage changed, without thirty (30) days' prior
written notice to the Landlord. Tenant agrees to look solely to Landlord's
estate and interest in the land and building, or the lease of the building or of
the land and building, and the demised premises, for the satisfaction of any
right or remedy of Tenant for the collection of a judgment (or other judicial
process) requiring the payment of money by Landlord, in the event of any
liability by Landlord, and no other property or assets of Landlord shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to this lease, the relationship of
landlord and tenant hereunder, or Tenant's use and occupancy of the demised
premises or any other liability of Landlord to Tenant (except for negligence).
CONDITION OF PREMISES.
22. Tenant acknowledges that Landlord has made no representation or
promise, except as herein expressly set forth. Tenant agrees to accept the
premises "as is", except for any work which Landlord has expressly agreed in
writing to perform, and, provided that, the premises must be broom clean with
all mechanical systems in good working order.
COST OF LIVING ADJUSTMENTS.
23. The fixed annual rent reserved in this lease and payable hereunder
shall be adjusted, as of the times and in the manner set forth in this Article:
(a) Definitions: For the purposes of this Article, the following
definitions shall apply:
(i) The term "Base Year" shall mean the full calendar year 2000.
(ii) The term "Price Index" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the U.S. Department of Labor, All
Items. New York, N.Y.--Northeastern, N.J., all urban consumers (presently
denominated "CPI-U"), or a successor or substitute index appropriately adjusted.
(iii) the term "Price Index for the Base Year" shall mean the average of
the monthly All Items Price Indexes for each of the 12 months of the Base Year.
(b) Effective as of each January and July subsequent to the Base Year,
there shall be made a cost of living adjustment of the fixed annual rental rate
payable hereunder. The July adjustment shall be based on the percentage
difference between the Price Index for the preceding month of June and the Price
Index for the Base Year. The January adjustment shall be based on such
percentage difference between the Price Index for the preceding month of
December and the Price Inded for the Base Year.
(i) In the event the Price Index for June in any calendar year during the
term of this lease reflects an increase over the Price Index for the Base Year,
then the fixed annual rent herein provided to be paid as of the July 1st
following such month of June (unchanged by any adjustments under this Article)
shall be multiplied by the percentage difference between the Price Index for
June and the Price Index for the Base Year, and the resulting sum shall be added
to such fixed annual rent, effective as of such July 1st. Said adjusted fixed
annual rent shall thereafter be payable hereunder, in equal monthly
installments, until it is readjusted pursuant to the terms of this lease.
(ii) In the event the Price Index for December in any calendar year during
the term of this lease reflects an increase over the Price Index for the Base
Year, then the fixed annual rent herein provided to be paid as of the January
1st following such month of December (unchanged by any adjustments under this
Article) shall be multiplied by the percentage difference between the Price
Index for December and the Price Index for the Base Year, and the resulting sum
shall be added to such fixed annual rent effective as of such January 1st. Said
adjusted fixed annual rent shall thereafter be payable hereunder, in equal
monthly installments, until it is readjusted pursuant to the terms of this
lease.
The following illustrates the intentions of the parties hereto as to the
computation of the aforementioned cost of living adjustment in the annual rent
payable hereunder.
Assuming that said fixed annual rent is $10,000, that the Price Index
for the Base Year was 102.0 and that the Price Index for the month of June
in a calendar year following the Base Year was 105.0, then the percentage
increase thus reflect, i.e., 2.941% (3.0/102.0) would be multiplied by
$10,000, and said fixed annual rent would be increased by $294.10 effective
as of July 1st of said calendar year.
In the event that the Price Index ceases to use 1982-84=100 as the basis
of calculation, or if a substantial change is made in the terms or number of
items contained in the Price Index, then the Price Index shall be adjusted to
the figure that would have been arrived at had the manner of computing the
Price Index in effect at the date of this lease not been altered. In the event
such Price Index (or a successor or substitute index) is not available, a
reliable governmental or other non-partisan-publication evaluating the
information theretofore used in determining the Price Index shall be used.
(c) Landlord will cause statements of the cost of living adjustments
provided for in subdivision (b) to be prepared in reasonable detail and
delivered to Tenant.
(d) In no event shall the fixed annual rent originally provided to be paid
under this lease (exclusive of the adjustments under this Article) be reduced
by virtue of this Article.
(e) Any delay or failure of Landlord, beyond July or January of any year,
computing or billing for the rent adjustments hereinabove provided, shall not
constitute a waiver of or in any way impair the continuing obligation of
Tenant to pay such rent adjustments hereunder.
(f) Notwithstanding any expiration or termination of this lease prior to
the lease expiration date (except in the case of a cancellation by mutual
agreement) Tenant's obligation to pay rent as adjusted under this Article shall
continue and shall cover all periods up to the lease expiration date, and shall
survive any expiration or termination of this lease.
TAX ESCALATION.
24. Tenant shall pay to Landlord, as additional rent, tax escalation in
accordance with this Article:
(a) For purposes of this lease the rentable square foot area of the
presently demised premises shall be deemed to be 7752 square feet.
(b) Definitions: For the purpose of this Article, the following definitions
shall apply:
(i) The term "base tax year" as hereinafter set forth for the
determination of real estate tax escalation, shall mean the New York City real
estate tax year commencing July 1, 1999 and ending June 30, 2000.
<PAGE>
(ii) The term "The Percentage", for purposes of computing tax
escalation, shall mean .0273 percent (2.73%). The Percentage has been computed
on the basis of a fraction, the numerator of which is the rentable square foot
area of the demised premises and the denominator of which is the total rentable
square foot area of the office and commercial space in the building project. The
parties acknowledge and agree that the total rentable square foot area of the
office and commercial space in the building project shall be deemed to be
283,756 sq. ft.
(iii) The term "the building project" shall mean the aggregate
combined parcel of land on a portion of which are the improvements of which the
demised premises form a part, with all the improvements thereon, said
improvements being a part of the block and lot for tax purposes which are
applicable to the aforesaid land.
(iv) The term "comparative year" shall mean the twelve (12) months
following the base tax year, and each subsequent Period of twelve (12) months
(or such other Period of twelve (12) months occurring during the term of this
lease as hereafter may be duly adopted as the tax year for real estate tax
purposes by the City of New York).
(v) The term "real estate taxes" shall mean the total of all taxes and
special or other assessments levied, assessed or imposed at any time by any
governmental authority upon or against the building project, and also any tax or
assessment levied, assessed or imposed at any time by any governmental authority
in connection with the receipt of income or rents from said building project to
the extent that same shall be in lieu of all or a portion of any of the
aforesaid taxes or assessments, or additions or increases thereof, upon or
against said building project. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however
designated, shall be levied against landlord in substitution in whole or in part
for the real estate taxes, or in lieu of additions to or increases of said real
estate taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"real estate taxes" for the purposes hereof. As to special assessments which are
payable over a period of time extending beyond the term of this lease, only a
pro rata portion thereof covering the portion of the term of this lease
unexpired at the time of the imposition of such assessment, shall be included in
"real estate taxes". If by law, any assessment may be paid in installments,
then, for the purposes hereof (a) such assessment shall be deemed to have been
payable in the maximum number of installments permitted by law and (b) there
shall be included in real estate taxes, for each comparative year in which such
installments may be paid, the installments of such assessment so becoming
payable during such comparative year, together with interest payable during such
comparative year.
(vi) Where more than one assessment is imposed by the City of New York
for any tax year, whether denominated an "actual assessment" or a "transitional
assessment" or otherwise, then the phrases herein "assessed value" and
"assessments" shall mean whichever of the actual, transitional or other
assessment is designated by the City of New York as the taxable assessment for
that tax year.
(vii) The phrase "real estate taxes payable during the base tax year"
shall mean that amount obtained by multiplying the assessed value of the land
and buildings of the building project for the base tax year by the tax rate for
the base tax year for each $100 of such assessed value.
(c) 1. In the event that the real estate taxes payable for any comparative
year shall exceed the amount of the real estate taxes payable during the base
tax year, tenant shall pay to landlord, as additional rent for such comparative
year, an amount equal to The Percentage of the excess. Before or after the start
of each comparative year, Landlord shall furnish to Tenant a statement of the
real estate taxes payable for such comparative year, and a statement of the real
estate taxes payable during the base tax year. If the real estate taxes payable
for such comparative year exceed the real estate taxes payable during the base
tax year, additional rent for such comparative year, in an amount equal to The
Percentage of the excess, shall be due from Tenant to Landlord, and such
additional rent shall be payable by Tenant to Landlord with ten (10) days after
receipt of the aforesaid statement. The benefit of any discount for any earlier
payment or prepayment of real estate taxes shall accrue solely to the benefit of
Landlord, and such discount shall not be subtracted from the real estate taxes
payable for any comparative year.
Additionally, Tenant shall pay to Landlord, on demand, a sum equal to The
Percentage of any business improvement district assessment payable by the
building project.
2. Should the real estate taxes payable during the base tax year be reduced
by final determination of legal proceedings, settlement or otherwise, then, the
real estate taxes payable during the base tax year shall be correspondingly
revised, the additional rent theretofore paid or payable hereunder for all
comparative years shall be recomputed on the basis of such reduction, and tenant
shall pay to Landlord as additional rent, within ten (10) days after being
billed therefor, any deficiency between the amount of such additional rent as
theretofore computed and the amount thereof due as the result of such
recomputations. Should the real estate taxes payable during the base tax year be
increased by such final determination of legal proceedings, settlement or
otherwise, then appropriate recomputation and adjustment also shall be made.
3. If after Tenant shall have made a payment of additional rent under this
subdivision (c), Landlord shall receive a refund of any portion of the real
estate taxes payable for any comparative year after the base tax year on which
such payment of additional rent shall have been based, as a result of a
reduction of such real estate taxes by final determination of legal proceedings,
settlement or otherwise, Landlord shall within ten (10) days after receiving the
refund pay to Tenant The Percentage of the refund less The Percentage of
expenses (including attorneys' and appraisers' fees) incurred by Landlord in
connection with any such application or proceeding. If prior to the payment of
taxes for any comparative year, Landlord shall have obtained a reduction of that
comparative year's assessed valuation of the building project, and therefore of
said taxes, then the term "real estate taxes" for that comparative year shall be
deemed to include the amount of Landlord's expenses in obtaining such reduction
in assessed valuation, including attorneys' and appraisers' fees.
4. The statements of the real estate taxes to be furnished by Landlord as
provided above shall be certified by Landlord and shall constitute a final
determination as between Landlord and Tenant of the real estate taxes for the
Periods represented thereby, unless Tenant within thirty (30) days after they
are furnished shall give a written notice to Landlord that it disputes their
accuracy or their appropriateness, which notice shall specify the particular
respects in which the statement is inaccurate or inappropriate. If Tenant shall
so dispute said statement then, pending the resolution of such dispute, tenant
shall pay the additional rent to Landlord in accordance with the statement
furnished by Landlord.
5. In no event shall the fixed annual rent under this lease (exclusive of
the additional rents under this Article) be reduced by virtue of this Article.
6. If the commencement date of the term of this lease is not the first day
of the first comparative year, then the additional rent due hereunder for such
first comparative year shall be a proportionate share of said additional rent
for the entire comparative year, said proportionate share to be based upon the
length of time that the lease term will be in existence during such first
comparative year. Upon the date of any expiration or termination of this lease
(except termination because of Tenant's default) whether the same be the date
hereinabove set forth for the expiration of the term or any prior or subsequent
date, a proportionate share of said additional rent for the comparative year
during which such expiration or termination occurs shall immediately become due
and payable by Tenant to Landlord, if it was not theretofore already billed and
paid. The said proportionate share shall be based upon the length of time that
this lease shall have been in existence during such comparative year. Landlord
shall promptly cause statements of said additional rent for that comparative
year to be prepared and furnished to lessee. Landlord and Tenant shall thereupon
make appropriate adjustments of amounts then owing.
7. Landlord's and Tenant's obligations to make the adjustments referred to
in subdivision (6) above shall survive any expiration or termination of this
lease.
8. Any delay or failure of lessor in billing any tax escalation hereinabove
provided shall not constitute a waiver of or in any way impair the continuing
obligation of lessee to pay such tax escalation hereunder.
JURY WAIVER.
26. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim involving any matter whatsoever arising out of or in
any way connected with this lease, the relationship of landlord and tenant,
Tenant's use or occupancy of the premises (except for personal injury or
property damage) or involving the right to any statutory relief or remedy.
Tenant will not interpose any counterclaim of any nature in any summary
proceeding.
NO WAIVER, ETC.
27. No act or omission of Landlord or its agents shall constitute an actual
or constructive eviction, unless Landlord shall have first received written
notice of Tenant's claim and shall have had a reasonable opportunity to meet
such claim. In the event that any payment herein provided for by Tenant to
Landlord shall become overdue for a period in excess of ten (10) days, then at
Landlord's option a "late charge" shall become due and payable to Landlord, as
additional rent, from the date it was due until payment is made at the following
rates: for individual and partnership Tenants, said late charge shall be
computed at the maximum legal rate of interest; for corporate or governmental
entity Tenants the late charge shall be computed at one point twenty-five
percent (1.25%) per month unless there is an applicable maximum legal rate of
interest which then shall be used. No act or omission of Landlord or its agents
shall constitute an acceptance of a surrender of the premises, except a writing
signed by Landlord. The delivery of keys to Landlord or its agents shall not
constitute a termination of this lease or a surrender of the premises.
Acceptance by Landlord of less than the rent herein provided shall at Landlord's
option be deemed on account of earliest rent remaining unpaid. No endorsement on
any check, or letter accompanying rent, shall be deemed an accord and
satisfaction, and such check may be cashed without prejudice to Landlord. No
waiver of any provision of this lease shall be effective,
<PAGE>
unless such waiver be in writing signed by Landlord. This lease contains the
entire agreement between the parties, and no modification thereof shall be
binding unless in writing and signed by the party concerned. Tenant shall
comply with the rules and regulations printed in this lease, and any reasonable
modifications thereof or additions thereto. Landlord shall not be liable to
Tenant for the violation of such rules and regulations by any other tenant.
Failure of Landlord to enforce any provision of this lease, or any rule or
regulation, shall not be construed as the waiver of any subsequent violation of
a provision of this lease, or any rule or regulation. This lease shall not be
affected by nor shall Landlord in any way be liable for the closing, darkening
or bricking up of windows in the premises, for any reason, including as the
result of construction on any property of which the premises are not a part or
by Landlord's own acts.
OCCUPANCY AND USE BY TENANT.
(A) The parties recognize and agree that the damage to Landlord resulting
from any breach of the covenants in subdivision (A) (deleted) hereof will be
extremely substantial, will be far greater that the rent payable for the balance
of the term of this lease, and will be impossible of accurate measurement. The
parties therefore agree that in the event of a breach or threatened breach of
the said covenants, in addition to all of Landlord's other rights and remedies,
at law or in equity or otherwise, Landlord shall have the right of injunction to
preserve Tenant's occupancy and use. The words "become vacant or deserted" as
used elsewhere in this lease shall include Tenant's failure to occupy or use as
by this Article required.
(B) If Tenant breaches either of the covenants in subdivision (A)
(deleted) above, and this lease be terminated because of such default, then, in
addition to Landlord's rights of reentry, restoration, preparation for and
rerental, and anything elsewhere in this lease to the contrary notwithstanding,
Landlord shall retain its right to judgment on and collection of Tenant's
aforesaid obligation to make a single payment to Landlord of a sum equal to the
total of all rent and additional rent reserved for the remainder of the original
term of this lease, subject to future credit or repayment to Tenant in the event
of any rerenting of the premises by Landlord, after first deducting from
rerental income all expenses incurred by Landlord in reducing to judgment or
otherwise collecting Tenant's aforesaid obligation, and in obtaining possession
of restoring, preparing for and re-letting the premises. In no event shall
Tenant be entitled to a credit or repayment for rerental income which exceeds
the sums payable by Tenant hereunder or which covers a period after the original
term of this lease.
NOTICES.
29. Any bill, notice or demand from Landlord to Tenant, may be delivered
personally at the premises or sent by registered or certified mail. 6. Such
bill, notice or demand shall be deemed to have been given at the time of
delivery or mailing. Any notice from Tenant to Landlord must be sent by
registered or certified mail to the last address designated in writing by
Landlord.
WATER.
30. Tenant shall pay the amount of Landlord's cost for all water used by
Tenant for any purpose other than ordinary lavatory uses, and any sewer rent or
tax based thereon. Landlord may install a water meter to measure Tenant's water
consumption for all purposes and Tenant agrees to pay for the installation and
maintenance thereof and for water consumed as shown on said meter. If water is
made available to Tenant in the building or the demised premises through a meter
which also supplies other premises, or without a meter, then Tenant shall pay to
Landlord $75.00 per month for water.
SPRINKLER SYSTEM.
31. If there shall be a "sprinkler system" in the demised premises for any
period during this lease, Tenant shall pay $75.00 per month, for sprinkler
supervisory service. If such sprinkler system is damaged by any act or omission
of Tenant or its agents, employees, licensees or visitors, Tenant shall restore
the system to good working condition at its own expense. If the New York Board
of Fire Underwriters, the New York Fire Insurance Exchange, the Insurance
Services Office or any governmental authority requires the installation or any
alteration to a sprinkler system by reason of Tenant's occupancy or use of the
premises, including any alteration necessary to obtain the full allowance for a
sprinkler system in the fire insurance rate of Landlord, or for any other
reason, Tenant shall make such installation or alteration promptly, and at its
own expense.
HEAT, ELEVATOR, ETC.
32. Landlord shall provide elevator service during all usual business
hours including Saturdays until 1 P.M., except on Sundays, State holidays,
Federal holidays, or Building Service Employees Union Contract holidays.
Landlord shall furnish heat to the premises during the same hours on the same
days in the cold season in each year. Landlord may remove Tenant's extraordinary
refuse from the building and Tenant shall pay the cost thereof. If the elevators
in the building are manually operated, Landlord may convert to automatic
elevators at any time, without in any way affecting Tenant's obligations
hereunder.
SECURITY DEPOSIT.
33. Tenant has deposited with Landlord the sum of $45,713.80 as security
for the performance by Tenant of the terms of this lease. Landlord may use any
part of the Security to satisfy any default of Tenant and any damages or rent
deficiency before or after re-entry by Landlord. Tenant shall, upon demand,
deposit with Landlord the full amount so used, in order that Landlord shall have
the full security deposit on hand at all times during the term of this lease. If
Tenant shall comply fully with the terms of this lease, the security shall be
returned to Tenant after the date fixed as the end of the lease. In the event of
a sale or lease of the building containing the premises, Landlord may transfer
the security to the purchaser or tenant, and Landlord shall thereupon be
released from all liability for the return of the security. This provision shall
apply to every transfer or assignment of the security to a new Landlord, Tenant
shall have no legal power to assign or encumber the security herein described.
ELECTRICITY.
34. Terms and conditions with respect to electricity rent inclusion, or
with respect to sub-meeting, as the case may be, and general conditions with
respect to either, are set forth in Article 41 in the Rider annexed to and made
part of this lease.
RENT CONTROL.
35. In the event the fixed annual rent or additional rent or any part
thereof provided to be paid by Tenant under the provisions of this lease during
the demised term shall become uncollectible or shall be reduced or required to
be reduced or refunded by virtue of any Federal, State, County or City law,
order or regulation, or by any direction of a public officer or body pursuant to
law, or the orders, rules, code or regulations of any organization or entity
formed pursuant to law, whether such organization or entity be public or
private, then Landlord, at its option, may at any time thereafter terminate this
lease, by not less than thirty (30) days' written notice to Tenant, on a date
set forth in said notice, in which event this lease and the term hereof shall
terminate and come to an end on the date fixed in said notice as if the said
date were the date originally fixed herein for the termination of the demised
term. Landlord shall not have the right so to terminate this lease if Tenant
within such period of thirty (30) days shall in writing lawfully agree that the
rentals, herein reserved are a reasonable rental and agree to continue to pay
said rentals, and if such agreement by Tenant shall then be legally enforceable
by Landlord.
SHORING.
36. Tenant shall permit any person authorized to make an excavation on
land adjacent to the building containing the premises to do any work within the
premises necessary to preserve the wall of the building from injury or damage,
and Tenant shall have no claim against Landlord for damages or abatement of rent
by reason thereof.
EFFECT OF CONVEYANCE, ETC.
37. If the building containing the premises shall be sold, transferred or
leased, or the lease thereof transferred or sold, Landlord shall be relieved of
all future obligations and liabilities hereunder and the purchaser, transferee
or tenant of the building shall be deemed to have assumed and agreed to perform
all such obligations and liabilities of Landlord hereunder. In the event of such
sale, transfer or lease, Landlord shall also be relieved of all existing
obligations and liabilities hereunder, provided that the purchaser, transferee
or tenant of the building assumes in writing such obligations and liabilities.
RIGHTS OF SUCCESSORS AND ASSIGNS.
38. This lease shall bind and inure to the benefit of the heirs,
executors, administrators, successors, and, except as otherwise provided herein,
the assigns of the parties hereto. If any provision of any Article of this lease
or the application thereof to any person or circumstances shall, to any extent,
be invalid or unenforceable, the remainder of that Article, or the application
of such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each provision
of said Article and of this lease shall be valid and be enforced to the fullest
extent permitted by law.
CAPTIONS.
39. The captions herein are inserted only for convenience, and are in no
way to be construed as a part of this lease or as a limitation of the scope of
any provision of this lease.
LEASE SUBMISSION.
40. Landlord and Tenant agree that this lease is submitted to Tenant on
the understanding that it shall not be considered an offer and shall not bind
Landlord in any way unless and until (i) Tenant has duly executed and delivered
duplicate originals thereof to Landlord and (ii) Landlord has executed and
delivered one of said originals to Tenant.
<PAGE>
SEE RIDER(S) ANNEXED HERETO AND MADE A PART HEREOF
In Witness Whereof, Landlord and Tenant have executed this lease as of the
day and year first above written.
<TABLE>
<S> <C>
INVESTMENT PROPERTIES ASSOCIATES
- --------------------------------------------------- C/O HELMSLEY SPEAR, INC. AGENTS (L.S.)
Witness for Landlord ----------------------------------------------
- --------------------------------------------------- BY: /s/ Irving Schneider (L.S.)
Witness for Tenant ------------------------------------------
IRVING SCHNEIDER, C.O.O.
BY: /s/ Darold R. Stagner CFO (L.S.)
------------------------------------------
PARTMINER, INC.
ACKNOWLEDGEMENTS.
State of New York )
County of New York ) ss.:
State of New York ) On the day of , 19 , before me
County of New York ) ss.: personally came
On the day of ,19 , before me to me known, who being by me duly sworn, did depose and say that he
personally came resides at No.
to me known and known to me to be the individual described that he is the of
in, and who executed, the foregoing instrument, and the corporation described in, and which executed, the foregoing
acknowledged to me that he executed the same. instrument; and that he signed h name thereto by authority
of the Board of Directors of said corporation.
---------------------- ----------------------
Notary Public Notary Public
</TABLE>
GUARANTY.
For Value Received and in consideration of the letting of the premises
within mentioned to the within named Tenant, the undersigned do hereby covenant
and agree, to and with the Landlord and the Landlord's legal representatives,
that if default shall at any time be made by the said Tenant in the payment of
the rent and the performance of the covenants contained in the within lease, on
the Tenant's part to be paid and performed, that the undersigned will well and
truly pay the said rent, or any arrears thereof that may remain due unto said
Landlord, and also pay all damages that may arise in consequence of the
non-performance of said covenants, or either of them, without requiring notice
of any such default from the Landlord. The undersigned hereby waives all right
to trial by jury in any action or proceeding hereinafter instituted by the
Landlord, to which the undersigned may be a party.
IN WITNESS WHEREOF, the undersigned has set hand and seal this
day of 19
<TABLE>
<S> <C>
___________________________________________________ ________________________________________________(L.S.)
___________________________________________________ ________________________________________________(L.S.)
to me known and known to me to be the individual described in, and
State of New York ) who executed the foregoing Guaranty and acknowledged to me that he
County of New York ) ss.: executed the same.
On the day of ,19 ,before me
personally came
----------------------
Notary Public
</TABLE>
<PAGE>
---------------------------------------------------------
RIDER ANNEXED TO AND MADE A PART OF LEASE BETWEEN
INVESTMENT PROPERTIES ASSOCIATES LANDLORD
----------------------------------------------
AND PARTMINER, INC. TENANT
------------------------------------------
---------------------------------------------------------
RULES AND REGULATIONS REFERRED
TO IN THIS LEASE
1. No animals, birds, bicycles or vehicles shall be brought into or kept in
the premises. The premises shall not be used for manufacturing or commercial
repairing or for sale or display of merchandise or as a lodging place, or for
any immoral or illegal purpose, nor shall the premises be used for a public
stenographer or typist; barber or beauty shop; telephone, secretarial or
messenger service; employment, travel or tourist agency; school or classroom;
commercial document reproduction; or for any business other than specifically
provided for in the tenant's lease. Tenant shall not cause or permit in the
premises any disturbing noises which may interfere with occupants of this or
neighboring buildings, any cooking or objectionable odors, or any nuisance of
any kind, or any inflammable or explosive fluid, chemical or substance.
Canvassing, soliciting and peddling in the building are prohibited, and each
tenant shall cooperate so as to prevent the same.
2. The toilet rooms and other water apparatus shall not be used for any
purposes other than those for which they were constructed, and no sweepings,
rags, ink, chemicals or other unsuitable substances shall be thrown therein.
Tenant shall not throw anything out of doors, windows or skylights, or into
hallways, stairways or elevators, nor place food or objects on outside window
sills. Tenant shall not obstruct or cover the halls, stairways and elevators, or
use them for any purpose other than ingress and egress to or from tenant's
premises, nor shall skylights, windows, doors and transoms that reflect or admit
light into the building be covered or obstructed in any way.
3. Tenant shall not place a load upon any floor of the premises in excess of
the load per square foot which such floor was designed to carry and which is
allowed by law. Landlord reserves the right to prescribe the weight and position
of all safes in the premises. Business machines and mechanical equipment shall
be placed and maintained by tenant, at tenant's expense, only with Landlord's
consent and in settings approved by Landlord to control weight, vibration, noise
and annoyance. Smoking or carrying lighted cigars, pipes or cigarettes in the
elevators of the building is prohibited. If the premises are on the ground floor
of the building the tenant thereof at its expense shall keep the sidewalks and
curb in front of the premises clean and free from ice, snow, dirt and rubbish.
4. Tenant shall not move any heavy or bulky materials into or out of the
building without Landlord's prior written consent, and then only during such
hours and in such manner as Landlord shall approve. If any material or equipment
requires special handling, tenant shall employ only persons holding a Master
Rigger's License to do such work, and all such work shall comply with all legal
requirements. Landlord reserves the right to inspect all freight to be brought
into the building, and to exclude any freight which violates any rule,
regulation or other provision of this lease.
5. No sign, advertisement, notice or thing shall be inscribed, painted or
affixed on any part of the building, without the prior written consent of
Landlord. Landlord may remove anything installed in violation of this provision,
and Tenant shall pay the cost of such removal. Interior signs on doors and
directories shall be inscribed or affixed by Landlord at Tenant's expense.
Landlord shall control the color, size, style and location of all signs,
advertisements and notices. No advertising of any kind by Tenant shall refer to
the building, unless first approved in writing by Landlord.
6. No article shall be fastened to, or holes drilled or nails or screws
driven into, the ceilings, walls, doors or other portions of the premises, nor
shall any part of the premises be painted, papered or otherwise covered, or in
any way marked or broken, without the prior written consent of Landlord.
7. No existing locks shall be changed, nor shall any additional locks or
bolts of any kind be placed upon any door or window by Tenant, without the prior
written consent of Landlord. At the termination of this lease, Tenant shall
deliver to Landlord all keys for any portion of the premises or building. Before
leaving the premises at any time, Tenant shall close all windows and close and
lock all doors.
8. No Tenant shall purchase or obtain for use in the premises any spring
water, ice, towels, food, bootblacking, barbering or other such service
furnished by any company or person not approved by Landlord. Any necessary
exterminating work in the premises shall be done at Tenant's expense, at such
times, in such manner and by such company as Landlord shall require. Landlord
reserves the right to exclude from the building, from 6:00 p.m. to 8:00 am., and
at all hours on Sunday and legal holidays, all persons who do not present a pass
to the building signed by Landlord. Landlord will furnish passes to all persons
reasonably designated by Tenant. Tenant shall be responsible for the acts of all
persons to whom passes are issued at Tenant's request.
9. Whenever Tenant shall submit to Landlord any plan, agreement or other
document for Landlord's consent or approval, Tenant agrees to pay Landlord as
additional rent, on demand, an administrative fee equal to the sum of the
reasonable fees of any architect, engineer or attorney employed by Landlord to
review said plan, agreement or document and Landlord's administrative costs for
same.
10. The use in the demised premises of auxiliary heating devices, such as
portable electric heaters, heat lamps or other devices whose principal function
at the time of operation is to produce space heating, is prohibited.
In case of any conflict or inconsistency between any provisions of this lease
and any of the rules and regulations as originally or as hereafter adopted, the
provisions of this lease shall control.
<PAGE>
RIDER ANNEXED TO AND MADE
PART OF A LEASE BETWEEN
INVESTMENT PROPERTIES ASSOCIATES, LANDLORD
AND PARTMINER, INC., TENANT
ELECTRICITY
41. Tenant agrees that Landlord may furnish electricity to Tenant on a
"submetering" basis or on a "rent inclusion" basis. Electricity and electric
service, as used herein, shall mean any element affecting the generation,
transmission, and/or distribution or redistribution of electricity, including
but not limited to services which facilitate the distribution of service.
(A). Submetering: If and so long as Landlord provides electricity to the
demised premises on a submetering basis, Tenant covenants and agrees to purchase
the same from Landlord or Landlord's designated agent at charges, terms and
rates set, from time to time, during the term of this lease by Landlord but not
more than those specified in the service classification in effect on January 1,
1970 pursuant to which Landlord then purchased electric current from the public
utility corporation serving the part of the city where the building is located;
provided however, said charges shall be increased in the same percentage as any
percentage increase in the billing to Landlord for electricity for the entire
building, by reason of increase in Landlord's electric rates or service
classifications, subsequent to January 1, 1970, and so as to reflect any
increase in Landlord's electric charges, including changes in market prices for
electricity from utilities and/or other providers, in fuel adjustments, or by
taxes or charges of any kind imposed on Landlord's electricity purchases or
redistribution, or for any other such reason, subsequent to said date. Any such
percentage increase in Landlord's billing for electricity due to changes in
rates, service classifications, or market prices, shall be computed by the
application of the average consumption (energy and demand) of electricity for
the entire building for the twelve (12) full months immediately prior to the
rate and/or service classification change, or any changed methods of or rules
on billing for same, applied on a consistent basis to the new rate and/or
service classification or market price, and to the service classification and
rate in effect on January 1, 1970. If the average consumption of electricity for
the entire building for said prior twelve (12) months cannot reasonably be
applied and used with respect to changed methods of or rules on billing, then
the percentage shall be computed by the use of the average consumption (energy
and demand) for the entire building for the first three (3) months after such
change, projected to a full twelve (12) months, so as to reflect the different
seasons; and that same consumption, so projected, shall be applied to the
service classification and rate in effect on January 1, 1970. Where more than
one meter measures the service of Tenant in the building, the service rendered
through each meter may be computed and billed separately in accordance with the
rates herein specified. Bills therefore shall be rendered at such times as
Landlord may elect and the amount, as computed from a meter, shall be deemed to
be, and be paid as, additional rent. In the event that such bills are not paid
within five (5) days after the same are rendered, Landlord may, without further
notice, discontinue the service of electric current to the demised premises
without releasing Tenant from any liability under this lease and without
-1-
<PAGE>
Landlord or Landlord's agent incurring any liability for any damage or loss
sustained by lessee by such discontinuance of service. If any tax is imposed
upon Landlord's receipt from the sale, resale or redistribution of electricity
or gas or telephone service to Tenant by any Federal, State, or Municipal
authority, Tenant covenants and agrees that where permitted by law, Tenant's
pro-rata share of such taxes shall be passed on to and included in the bill of,
and paid by, Tenant to Landlord.
(B). Rent Inclusion: If and so long as Landlord provides electricity to the
demised premises on a rent inclusion basis, Tenant agrees that the fixed annual
rent shall be increased by the amount of the Electricity Rent Inclusion Factor
("ERIF"), as hereinafter defined. Tenant acknowledges and agrees (i) that the
fixed annual rent hereinabove set forth in this lease does not yet, but is to
include an ERIF of $3.15 per rentable square foot per annum to compensate
Landlord for electrical wiring and other installations necessary for, and for
its obtaining and making available to Tenant the redistribution of electric
current as an additional service; and (ii) that said ERIF, which shall be
subject to periodic adjustments as hereinafter provided, has been partially
based upon an estimate of the Tenant's connected electrical load, in whatever
manner delivered to Tenant, which shall be deemed to be the demand (KW), and
hours of use thereof, which shall be deemed to be the energy (KWH), for ordinary
lighting and light office equipment and the operation of the usual small
business machines, including Xerox or other copying machines (such lighting and
equipment are hereinafter called "Ordinary Equipment") during ordinary business
hours ("ordinary business hours" shall be deemed to mean 50 hours per week),
with Landlord providing an average connected load of 4 1/2 watts of electricity
for all purposes per rentable square foot. Any installation and use of equipment
other than Ordinary Equipment and/or any connected load and/or energy usage by
Tenant in excess of the foregoing shall result in adjustment of the ERIF as
hereinafter provided. For purposes of this lease the rentable square foot area
of the presently demised premises shall be deemed to be 7752 square feet.
If the cost to Landlord of electricity shall have been, or shall be,
increased or decreased subsequent to May 1, 1999 (whether such change occurs
prior to or during the term of this Lease), by change in Landlord's electric
rates or service classifications, or electricity charges, including changes in
market prices, or by any increase, subsequent to the last such electric rate or
service classification change or market price change, in fuel adjustments or
charges of any kind, or by taxes, imposed on Landlord's electricity purchases or
on Landlord's electricity redistribution, or for any other such reason, then the
aforesaid ERIF portion of the fixed annual rent shall be changed in the same
percentage as any such change in cost due to changes in electric rates, service
classifications or market prices, and, also Tenant's payment obligation, for
electricity redistribution, shall change from time to time so as to reflect any
such increase in fuel adjustments or charges, and such taxes. Any such
percentage change in Landlord's cost due to change in Landlord's electric rates
or service classifications or market prices, shall be computed on the basis of
the average consumption of electricity for the building for the twelve full
months immediately prior to the rate change or other such changes in cost,
energy and demand, and any changed methods of or rules on billing for same,
applied on a consistent basis to the new electric rate or service classification
or market price and to the immediately prior existing electric rate or service
classification or market price. If the average consumption (energy and demand)
for the entire building for said prior (12) months cannot reasonably be applied
and used with respect to changed methods of or rules on billing, then the
percentage increase shall be computed by the use of the average consumption
(energy and demand) for the entire building for the first three (3) months after
such change, projected to a full twelve (12) months, so as to reflect the
different seasons; and that same consumption, so projected, shall be applied to
the rate and/or service classification or market price which existed immediately
prior to the change. The parties agree that a reputable,
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<PAGE>
independent electrical consultant firm, selected by Landlord, ("Landlord's
electrical consultant"), shall determine the percentage change for the changes
in ERIF due to Landlord's changed costs, and that Landlord's electrical
consultant may from time to time make surveys in the demised premises of the
electrical equipment and fixtures and use of current. (i) If such survey shall
reflect a connected electrical load in the demised premises in excess of 4 1/2
watts of electricity for all purposes per rentable square foot and/or energy
usage in excess of ordinary business hours (each such excess hereinafter called
"excess electricity") then the connected electrical load and/or the hours of use
portion(s) of the then existing ERIF shall be increased by an amount which is
equal to a fraction of the then existing ERIF, the numerator of which is the
excess electricity (i.e. excess connected load and/or excess usage) and the
denominator of which is the connected load and/or the energy usage which was the
basis of the then existing ERIF. Such fractions shall be determined by
Landlord's electrical consultant. The fixed annual rent shall then be
appropriately adjusted, effective as of the date of any such change in connected
load and/or usage, as disclosed by said survey. (ii) If such survey shall
disclose installation and use of other than Ordinary Equipment, then effective
as of the date of said survey, there shall be added to the ERIF portion of fixed
annual rent (computed and fixed as hereinbefore described) an additional amount
equal to what would be paid under the SC-4 Rate I Service Classification in
effect on May l, 1999 (and not the time-of-day rate schedule) for such load and
usage of electricity, with the connected electrical load deemed to be the demand
(KW) and the hours of use thereof deemed to be the energy (KWH), as
hereinbefore provided, (which addition to the ERIF shall be increased or
decreased by all electricity cost changes of Landlord, as hereinabove provided,
from May 1, 1999 through the date of billing).
In no event, whether because of surveys, rates or cost changes, or for any
other reason, is the originally specified $3.15 per annum per rentable square
foot ERIF portion of the fixed annual rent (plus any net increase thereof, but
not decrease, by virtue of all electricity rate, service classification or
market price changes of Landlord subsequent to May 1, l999) to be reduced.
(C). General Conditions: The determinations by Landlord's electrical
consultant shall be binding and conclusive on Landlord and Tenant from and after
the delivery of copies of such determinations to Landlord and Tenant, unless,
within fifteen (15) days after delivery thereof; Tenant disputes such
determination. If Tenant so disputes the determination, it shall, at its own
expense, obtain from a reputable, independent electrical consultant its own
determinations in accordance with the provisions of this Article. Tenant's
consultant and Landlord's consultant then shall seek to agree. If they cannot
agree within thirty (30) days they shall choose a third reputable electrical
consultant, whose cost shall be shared equally by the parties, to make similar
determinations which shall be controlling. (If they cannot agree on such third
consultant within ten (10) days, than either party may apply to the Supreme
Court in the County of New York for such appointment) However, pending such
controlling determinations, Tenant shall pay to Landlord the amount of
additional rent or ERIF in accordance with the determinations of Landlord's
electrical consultant. If the controlling determinations differ from Landlord's
electrical consultant, then the parties shall promptly make adjustment for any
deficiency owed by Tenant or overage paid by Tenant.
At the option of Landlord, Tenant agrees to purchase from Landlord or its
agents all lamps and bulbs used in the demised premises and to pay for the cost
of installation thereof. Supplementing Article 35 hereof, if all or part of the
submetering additional rent or the ERIF payable in accordance with Subdivision
(A) or (B) of this Article becomes uncollectible or reduced or refunded by
virtue of any law, order or regulation, the parties agree that, at Landlord's
option, in lieu of submetering additional rent or ERIF, and in consideration of
Tenant's use of the building's electrical distribution system and receipt of
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<PAGE>
redistributed electricity and payment by Landlord of consultant's fees and other
redistribution costs, the fixed annual rental rate(s) to be paid under this
lease shall be increased by an "alternative charge" which shall be a sum equal
to $3.15 per year per rentable square foot of the demised premises, changed in
the same percentage as any increases in the cost to Landlord for electricity for
the entire building subsequent to May 1, 1999, because of electric rate, service
classification or market price changes, such percentage change to be computed as
in Subdivision (B) provided.
Landlord shall not be liable to Tenant for any loss or damage or expense
which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant's
requirements. Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of existing feeders to the building or
wiring installation. Tenant agrees not to connect any additional electrical
equipment to the building electric distribution system, other than lamps,
typewriters and other small office machines which consume comparable amounts of
electricity, without Landlord's prior written consent, which consent shall not
be unreasonably withheld. Any riser or risers to supply Tenant's electrical
requirements, upon written request of Tenant, will be installed by Landlord, at
the sole cost and expense of Tenant, if, in Landlord's sole judgment, the same
are necessary and will not cause permanent damage or injury to the building or
demised premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants or occupants. In addition to the installation of such
riser or risers, Landlord will also at the sole cost and expense of Tenant,
install all other equipment proper and necessary in connection therewith subject
to the aforesaid terms and conditions. The parties acknowledge that they
understand that it is anticipated that electric rates, charges, etc., may be
changed by virtue of time-of-day rates or changes in other methods of billing,
and/or electricity purchases and the redistribution thereof, and fluctuation in
the market price of electricity, and that the references in the foregoing
paragraphs to changes in methods of or rules on billing are intended to
include any such changes. Anything hereinabove to the contrary notwithstanding,
in no event is the submetering additional rent or ERIF, or any "alternative
charge", to be less than an amount equal to the total of Landlord's payments to
public utilities and/or other providers for the electricity consumed by Tenant
(and any taxes thereon or on redistribution of same) plus 5% thereof for
transmission line loss, plus 10% thereof for other redistribution costs. The
Landlord reserves the right, at any time upon thirty (30) days' written notice,
to change its furnishing of electricity to Tenant from a rent inclusion basis to
a submetering basis, or vice versa, or to change to the distribution of less
than all the components of the existing service to Tenant. The Landlord reserves
the right to terminate the furnishing of electricity on a rent inclusion,
submetering, or any other basis at any time, upon thirty (30) days' written
notice to the Tenant, in which event the Tenant may make application directly to
the public utility and/or other providers for the Tenant's entire separate
supply of electric current and Landlord shall permit its wires and conduits, to
the extent available and safely capable, to be used for such purpose, but only
to the extent of Tenant's then authorized load. Any meters, risers, or other
equipment or connections necessary to furnish electricity on a submetering basis
or to enable Tenant to obtain electric current directly from such utility and/or
other providers shall be installed at Landlord's sole cost and expense. Only
rigid conduit or electricity metal tubing (EMT) will be allowed. The Landlord,
upon the expiration of the aforesaid thirty (30) days' written notice to the
Tenant may discontinue furnishing the electric current but this lease shall
otherwise remain in full force and effect. If Tenant was provided electricity on
a rent inclusion basis when it was so discontinued, then commencing when Tenant
receives such direct service and as long as Tenant shall continue to receive
such service, the fixed annual rent payable under this lease shall be reduced by
the amount of the ERIF which was payable immediately prior to such
discontinuance of electricity on a rent inclusion basis.
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<PAGE>
DATED JULY, 1999
BETWEEN
INVESTMENT PROPERTIES ASSOCIATES
AND
PARTMINER, INC.
PAR 42 The tenant agrees that the minimum charge for electricity for said
premises shall be $2,034.90 per month, which ERIF shall be subject to increase
because of rate changes after the date of this lease, or based on tenant's
consumption, as provided in Article 41.
PAR 43 This agreement is prepared by the managing agent for the tenant. It is
not binding upon either party until it is signed by the tenant and the landlord
and returned to the tenant.
PAR 44 Lessor shall cause the public halls and public portions of the
building to be kept clean in accordance with Landlord's customary standards for
the building. Tenant shall at its own expense keep demised premises clean, in
order, to the satisfaction of the Landlord. It is expressly agreed that the
Tenant shall keep the public corridors free of all refuse and shall at no time
store any furniture, cartons, displays or any other articles in said public
corridors. It is the Tenant's sole responsibility for the removal of all its
refuse. In the event that any such item is found in the public corridor or
freight halls, then the Landlord shall have the right to remove such items to
the basement and charge Tenant for storage and moving costs for such work or
arrange with a carting company to remove such refuse for which the Tenant shall
reimburse the Lessor for such expenses. It is also agreed and understood that
hand truck may not be used in the passenger elevators by the Tenant, its
invitees, or any person making deliveries to the Tenant.
PAR 45 Landlord and Tenant each represent and warrant that it has had no
dealings with respect to this transaction with any broker (person, firm or
corporation) other than Helmsley-Spear Inc., and Newmark & Company, and each
party does hereby indemnify and hold the other harmless against all claims for
commissions or other compensation that may be made by anyone else with whom the
other party may have dealt in connection with this transaction. Lessor agrees to
pay a commission to said brokers in accordance with the terms of a separate
agreement.
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<PAGE>
PAR 46 Lessee expressly acknowledges and agrees that Lessor has not made and
is not making, and Lessee, in executing and delivering this Lease, is not
relying upon, any warranties, representations, promises or statements, except,
to the extent that the same are expressly set forth in this lease or on any
other written agreement which may be made between the parties concurrently with
the execution and delivery of this Lease and shall expressly refer to this
Lease. This Lease and said other written agreement(s) made concurrently herewith
are hereinafter referred to as the "lease documents." It is understood and
agreed that all understandings and agreements heretofore had between the parties
are merged in the lease documents, which alone fully and completely express
their agreements and that the same are entered into after full investigation,
neither party relying upon any statement or representation not embodied in the
lease documents, made by the other. Lessor is not required to perform work of
any kind, nature or description to prepare the demised premises for Lessee's
occupancy except as set forth in Paragraph 53 of this Rider hereto.
PAR 47 Lessee shall maintain comprehensive general public liability insurance
against claims for personal injury or death or property damage, occurring in the
premises or the building such insurance to afford protection to the single limit
of not less than One Million Dollars ($1,000,000.00) with respect to any one
occurrence and to the limit of Three Hundred Thousand Dollars ($300,000.00) with
respect to property damage. In addition to the foregoing, the insurance coverage
required under this paragraph shall extend to any contractual liability of
Lessee arising out of the indemnities provided for in this Lease, and the policy
shall be so endorsed. Any insurance coverage required under this paragraph may
be provided under a blanket insurance policy or policies maintained by Lessee
covering other premises, property or assureds in addition to the demised
premises, provided that amounts of insurance are at least equal to the amounts
to be provided by Lessee pursuant to this Article are allocated to the demised
premises under such blanket policy or policies and all such insurance coverage
may be affected by any combination of basic and excess or umbrella coverage.
Lessor and Lessee hereby each release, and each hereby represent that their
respective casualty insurance policy related to the building and the premises
contains provisions to release (or waive subrogation) and to waive its right to
recover against the other party, its tenants, invitees, customers, its visitors,
agents and employees, from all liability from damage from fire or casualty to
the building or the demised premises, whether the same is caused by negligence
of Lessor or Lessee, and no insurer shall be subrogated to any rights against
Lessor or Lessee with respect to such damage.
PAR 48 Supplementing the provisions of Article 3 hereof, Lessor shall not
unreasonably withhold consent to an assignment of this lease or to subletting of
all or part of the demised premises, provided that, Lessee shall not need
Lessor's consent to assign or sublet all or part of the demised premises to any
parent, subsidiary or other entity of which lessee owns more than fifty percent
(50%), and provided that:
I. Any such assignment or subletting shall be made solely upon the
following terms and conditions;
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<PAGE>
A. (1) No assignment or subletting shall become effective unless and
until Lessee shall have given Lessor at least 30 days' notice of such proposed
assignment or proposed bona fide subletting, including the terms thereof.
Following Lessor's receipt of such notice, Lessor shall thereupon have the
option, exercisable by written notice within 30 days after receipt of the notice
from Lessee, (i) to terminate this lease (and release Lessee from obligations
under this Lease accruing on or after the date of termination) effective as of
the date of the proposed assignment or the commencement date of the term of such
proposed subletting if the proposed subletting is for the entire demised
premises for the balance of the term.
(2) If Lessor shall serve Lessee notice of its exercise of
Lessor's option pursuant to paragraph (1) (i), of this Article 48 (I) (A), then
Lessee shall vacate and surrender the demised premises or the portion thereof to
which Lessor's notice related, on or before the date fixed in the Lessor's
notice (which date fixed in Lessor's notice shall be the commencement date of
Lessee's proposed subletting or assignment).
(3) No proposed sublease or proposed assignment shall be
effective unless and until any option of Lessor provided in subparagraph (I) (A)
(1) has expired or has been expressly waived by Lessor.
(4) In the event that Lessor has not elected to terminate this
Lease, Lessee shall pay to lessor a sum equal to the following:
a. In the case of a sublease or assignment, an amount
equal to one half of (i) any rents, additional charges of other consideration
paid under the sublease or assignment to Lessee by the Subtenant or assignee
which is in excess of the fixed rent and additional rent payable by Lessee to
Lessor during the term of the sublease or assignment in respect to the subleased
or assigned space pursuant to the terms hereof, and (ii) any other profit or
gain realized by Lessee from any such subletting or assignment, excluding
amounts realized on the sale of Lessee's personal property.
b. The sum payable under this subparagraph (4) shall
be paid to Lessor as additional rent promptly upon receipt thereof, reduced by
the amount of any brokerage, concessions, work costs, and reasonable attorneys'
fees actually paid by Lessee in connection with such assignment or subletting.
B. There shall be no material default by Lessee under any of the
terms, covenants and conditions of this lease (continuing beyond the applicable
grace and cure periods) at the time that Lessor's consent to any such
subletting or assignment is requested and on the date of the commencement of
the term of any such proposed sublease or the effective date of any such
proposed assignment.
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<PAGE>
C. Any such sublease shall provided that the subtenant shall comply
with all applicable terms and conditions of this Lease thereafter to be
performed by the Lessee hereunder. Any such assignment of Lease shall contain an
assumption by the assignee of all of the terms and obligations of this lease to
be performed by the Lessee from and after the effective date thereof.
D. (i) Lessee shall, at its cost and expense, make such alterations
as may be required or reasonably deemed necessary by Lessor to physically
separate any sublet space from the balance of the premises demised hereunder and
(ii) comply with any laws or requirements of public authorities relating to such
separation. Lessor shall not be obligated in any way to provide to the sublessee
means of access and egress on the floor to such space.
PAR 49 Lessee shall use the demised premises solely for general office use.
It is expressly agreed by Lessee that the demised premises shall not be used in
whole or in part as a showroom for the sale of display of merchandise of for the
conduct of business requiring significant shipping activities or freight service
to or from the demised premises or the building.
PAR 50 Lessor's Obligations
--------------------
(A) Lessor's Basic Obligation
-------------------------
As more specifically provided in this paragraph, Lessor shall
operate and maintain the building (other than that required of lessee in the
demised premises) in a manner appropriate for a first-class office building in
the City of New York. Lessor also agrees that if any building equipment or
machinery outside the demised premises and serving the demised premises and or
common areas shall break down or for any cause (except due to Lessee's
negligence) cease to function properly, Lessor will use reasonable diligence to
repair the same promptly.
(B) Maintenance of Building
-----------------------
Except with respect to maintenance or repairs made or to be made
by Lessee as indicated in this Lease, and except where necessitated by Lessee's
negligence, Lessor shall maintain and repair or cause to be maintained and
repaired the public portion and structural elements of the building and, insofar
as such is not the obligation of the provider of the utility, building systems
serving the demised premises within the building which are located outside the
boundary of the building.
(C) Interruption in Services
------------------------
Should any of the building equipment, machinery, electrical
wiring, pipes or ducts serving the demised premises, or any of the equipment,
machinery, electrical wiring, pipes or ducts installed in the premises by
Lessor, for any cause (except by reason of Lessee's acts or omissions) or reason
cease to function or operate properly, Lessee shall have no claim for abatement
or rebate or rent or damages on account of any interruptions in service
occasioned thereby
-8-
<PAGE>
or resulting therefrom unless such cessation or improper operation has been
caused by Lessor's negligent acts or omissions. Lessor reserves the right to
temporarily suspend any services for repairs, alterations or replacement deemed
necessary or desirable. Lessor shall give notice of such suspension of services
whenever possible.
(D) Elevator Service
----------------
Lessor shall provide automatic elevator service to the premises on a
twenty-four (24) hours per day, seven (7) days per week basis.
(E) Maintenance Services
--------------------
Except where such requirements are caused by Lessee's negligent acts
or omissions, Lessor shall provide maintenance services for the premises and for
the building in which said premises are located which serve the demised premises
as provided below.
(i) Elevators shall be kept in good maintenance and repair under an
elevator service contract.
(ii) All heating for the premises and the building shall be kept in
good repair adequate to provide the services required under the Lease.
(F) Water Services
--------------
On a twenty-four (24) hours per day, seven (7) days a week basis,
Lessor shall furnish at no extra charge to Lessee hot and cold domestic water at
all points of supply made available for the general use of Lessee in the
building or otherwise specified in the Lease.
(G) Basic Heating Services
----------------------
Heating adequate to heat the premises to 68 degrees during the heating
season (unless a change in the above temperature standards are necessitated by
governmental regulations or guidelines) shall be available at the times
specified in Article 31 of the Lease at no additional charge to Lessee.
(H) Access
------
Lessor agrees that Lessee shall have access to the building and the
premises twenty-four (24) hours a day, seven (7) days a week.
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<PAGE>
PAR 51 Lessee agrees to accept these premises "AS IS" in all respects except
for the following:
1. Existing space shall be in broom clean condition.
2. All mechanical systems shall be placed in good working order.
3. Place existing air cooled air conditioning units in good working order and
maintain same for one full year following commencement date of said lease.
PAR 52 In the event of any inconsistency between the printed portion of this
Lease and this Rider, the terms of this Rider shall control.
INVESTMENT PROPERTIES ASSOCIATES
By: Helmsley-Spear, Inc., as agent
By: /s/ Irving Schneider
-------------------------------
Irving Schneider, C.O.O.
PARTMINER, INC.
By: /s/ Darold R. Stagner
-------------------------------
CFO
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<PAGE>
RIDER ANNEXED TO AND MADE
PART OF A LEASE BETWEEN
INVESTMENT PROPERTIES ASSOCIATES,
LANDLORD AND PARTMINER, INC., TENANT
1. ALTERATIONS. Paragraph 7. At the end of paragraph, add the following:
"Notwithstanding the foregoing, (i) structural renovations of Tenant in
amounts less than $10,000 shall not require the prior written approval of
Landlord, and (ii) Tenant shall not be required to remove any alterations,
additions and/or improvements which Landlord has approved."
2. LIENS. Paragraph 8. Delete the first sentence and replace it with the
following:
"Prior to commencement of Tenant's structural renovations in the demised
premises, Tenant shall obtain and deliver to Landlord a copy of the renovation
plan or its equivalent, signed by architects to become involved in such work."
3. SUBORDINATION AND ESTOPPEL, ETC. Paragraph 12. Add the following at
the end of the paragraph.
"Notwithstanding the foregoing, the Landlord represents and warrants to
Tenant that no Master Lease exists."
4. POSSESSION. Paragraph 16. At the end of the first sentence, add the
following:
"; provided that, Landlord shall provide Tenant with temporary premises
rent free for a period of up to three (3) weeks in the event that Landlord is
unable to give possession of the premises to Tenant on the commencement date."
5. POSSESSION. Paragraph 16. At the end of the paragraph, add the
following:
"Notwithstanding the foregoing, in the event that the Landlord is unable to
give possession of the premises to Tenant by November 30, 1999, Tenant shall
have the right to terminate the Lease without further obligation, and Tenant's
full security deposit shall be immediately returned to Tenant."
<PAGE>
6. NOTICES. Paragraph 29. At the end of the first sentence, add the
following language: ", with a copy sent to the following address:
PartMiner, Inc.
432 Park Avenue South, 12/th/ Floor
New York, New York 10016
Attention: General Counsel"
INVESTMENT PROPERTIES ASSOCIATES
By: Helmsley-Spear, Inc., as agent
By: /s/ Irving Schneider
------------------------------
Irving Schneider, C.O.O.
PARTMINER, INC.
By: /s/ Darold R. Stagner CFO
------------------------------
<PAGE>
EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT dated as of March 16, 1999 by and among Dast Corporation, d.b.a.
Microcom Technologies, a New York corporation (the "Company"), Boston Ventures
-------
Limited Partnership V ("Boston Ventures") and Thybo New Ventures Limited
---------------
("Thybo" and together with Boston Ventures, the "Purchasers") and Daniel
----- ----------
Nissanoff (the "Founder").
-------
Introduction
------------
Boston Ventures wishes to purchase an aggregate of 81,632 shares of
the Company's Preferred Stock, $.01 par value per share (the "Senior Preferred
----------------
Shares"), and the Company wishes to sell the Senior Preferred Shares to Boston
- ------
Ventures. Thybo wishes to purchase an aggregate of 102,041 shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), and the
------------
Company wishes to sell the Common Stock to Thybo. The Founder, as director,
officer and principal stockholder of the Company, wishes to induce the
Purchasers to purchase the Senior Preferred Shares and Common Stock and to cause
the Company to sell the Senior Preferred Shares and Common Stock to the
Purchasers.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SENIOR PREFERRED SHARES
AND COMMON STOCK; PURCHASE PRICE; CLOSING
Section 1.01. Purchase and Sale of Senior Preferred Shares and Common
------------ -------------------------------------------------------
Stock. In reliance upon the representations and warranties contained herein,
- -----
and subject to the terms and conditions hereof, the Company agrees to issue and
sell to the Purchasers, and each Purchaser agrees to purchase from the Company,
the number of Senior Preferred Shares or Common Stock, as the case may be,
indicated next to such Purchaser's name on Schedule 1.01 hereto.
-------------
<PAGE>
Section 1.02. Purchase Price. The aggregate purchase price for the Senior
------------ --------------
Preferred Shares and the Common Stock shall be $17,150,000 (the "Purchase
--------
Price"). The portion of the Purchase Price to be paid by each Purchaser is set
- -----
forth on Schedule 1.01 hereto and shall be payable at the Closing (as
-------------
hereinafter defined) by wire transfer of immediately available funds to an
account designated by the Company.
Section 1.03. Closing. The Purchase and sale of the Senior Preferred Shares
------------ -------
and Common Stock shall take place at a closing (the "Closing") to be held at the
-------
offices of Choate, Hall & Stewart, Exchange Place, Boston, Massachusetts, or
such other place as is agreed to by the parties, on March 16, 1999, or if the
conditions to Closing specified herein are not then satisfied or waived, such
date which is five (5) business days after the satisfaction or waiver of such
conditions (the "Closing Date").
------------
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that the information
set forth in this Article II is true and correct as of the date hereof and will
be true and correct as of the Closing.
Section 2.01. Organization and Standing. The Company is a corporation duly
------------ -------------------------
organized, validly existing and in good standing under the laws of the State of
New York. The Company has all necessary corporate power and authority to own
its properties and to carry on its business as currently conducted and as
proposed to be conducted. The Company is qualified to do business as a foreign
corporation in the States of New Jersey and Massachusetts, and is not required
to be qualified to do business as a foreign corporation in any other
jurisdiction where the failure to qualify would have a material adverse effect
on the Company.
Section 2.02. Subsidiaries. Schedule 2.02 sets forth a list of each
------------ ------------ -------------
subsidiary (as hereinafter defined). Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
incorporation of such Subsidiary, as set forth on Schedule 2.02. Each Subsidiary
-------------
has all necessary corporate power and authority to own its properties and to
carry on its business as currently conducted and as proposed to be conducted.
Except as set forth on Schedule 2.02, the Company has no Subsidiaries, holds no
-------------
securities of any other entity, is not a party to any joint venture or
partnership and has made no investments in any third party. As used herein,
"Subsidiary" means any corporation or other entity a majority of
----------
-2-
<PAGE>
the voting securities or economic interest of which is held by the Company or
any Subsidiary.
Section 2.03. Charter and By-Laws. The copies of the Certificate of
------------ -------------------
Incorporation and the By-Laws of the Company furnished to the Purchasers are
true and correct in all respects. As of the Closing, the Company will amend its
Certificate of Incorporation, as amended from time to time, the "Certificate of
--------------
Incorporation", in the form attached as Exhibit 2.03 hereto. The Senior
- ------------- ------------
Preferred Shares shall have the rights, preferences, privileges and restrictions
set forth in such amendment.
Section 2.04. Validity and Enforceability. This Agreement is, and each of
------------ ---------------------------
the other agreements and instruments of the Company and the Founder contemplated
hereby will be the valid and binding obligations of the Company and the Founder,
enforceable in accordance with their respective terms, except as the enforcement
thereof may be limited by bankruptcy and other laws of general application
relating to creditor's rights or general principals of equity.
Section 2.05. Capital Stock.
------------ -------------
(a) As of the Closing, the authorized capital stock of the Company
consists of (x) 106,122 shares of preferred stock, $.01 par value per share, all
of which shall be issued and outstanding and (y) 1,500,000 shares of Common
Stock of which 408,163 will be issued and outstanding or reserved for future
issuance upon the exercise of outstanding stock options and the conversion of
the Senior Preferred Shares.
(b) Schedule 2.05(b) hereto sets forth a complete and accurate list
----------------
of all holders of the Company's outstanding capital stock, and all options,
warrants, convertible securities and other rights which may afford any person or
entity the right to acquire shares of any class of capital stock of the Company,
including, without limitation, any capital stock, option, warrant, convertible
security or other security or right which the Founder or the Company has a
current intention to issue or sell, in each case prior to and immediately after
the Closing.
(c) Schedule 2.05(c) hereto also sets forth the authorized capital
----------------
stock of each Subsidiary, the number of shares of each class outstanding and the
record and beneficial holder thereof. No Subsidiary has issued or granted any
option, warrant, convertible security or other right or agreement which affords
any person or entity the right to purchase or otherwise acquire any shares of
its capital stock.
(d) Neither the Company nor any Subsidiary is subject to any
obligation (contingent or otherwise) to purchase or
-3-
<PAGE>
otherwise acquire or retire any of its equity securities (other than in
accordance with the Company's Certificate of Incorporation or this Agreement).
Except as set forth on Schedule 2.05(d), no person has any right of first
----------------
refusal or preemptive right in connection with the issuance of the Senior
Preferred Shares, conversion of Senior Preferred Shares into any class of
Common Stock, Common Stock issuable upon exercise of any stock options or the
conversion of any Company indebtedness or with respect to any future offer, sale
or issuance of securities by the Company or its shareholders, other than as set
forth herein.
(e) The Senior Preferred Shares, when delivered, will be duly and
validly issued and outstanding, fully paid and nonassessable, and free to the
holders thereof of any liens, encumbrances and restrictions (other than under
applicable securities laws or as set forth in any stockholders agreements to be
entered into by and between the Company, Boston Ventures and Thybo in connection
with the consummation of the transactions contemplated by this Agreement). The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon conversion of the Senior Preferred Shares and, when so issued, the shares
of Common Stock will be duly authorized, validly issued and outstanding, fully
paid and nonassessable, and free to the holders thereof of any liens,
encumbrances and restrictions (other than under applicable securities laws or as
set forth in any stockholders agreements to be entered into by and between the
Company, Boston Ventures and Thybo in connection with the consummation of the
transactions contemplated by this Agreement).
(f) To the Company's knowledge, the offer and sale of all shares of
capital stock or other securities of the Company issued prior to the Closing
complied with or were exempt from all the registration provisions of federal and
state securities laws.
Section 2.06. Compliance With Law, etc. The Company and each Subsidiary
------------ -------------------------
are not, and the execution, delivery and performance by the Company of this
Agreement and the other agreements contemplated hereby, the issuance and sale of
the Senior Preferred Shares, or the taking of any other action contemplated by
this Agreement or any of such other agreements will not result in the violation
of any term of the Company's Certificate of Incorporation or Bylaws, the charter
or bylaws of any Subsidiary, or any material agreement, lease, license,
mortgage, instrument, arrangement, judgment, decree, order, law, statute, rule
or governmental regulation to which the Company or any Subsidiary is subject.
The Company and each Subsidiary have all governmental licenses, authorizations,
registrations and permits material to or necessary for the conduct of their
businesses, as currently conducted and as proposed to be conducted, all of which
licenses, registrations and permits are
-4-
<PAGE>
listed on Schedule 2.06 hereto. All such licenses, registrations and permits are
-------------
in full force and effect and there is no proceeding pending or, to the Company's
knowledge, threatened (or any basis therefor) to revoke or limit any such
license, registration or permit.
Section 2.07. Financial Statements. The Company has delivered to the
------------ --------------------
Purchasers (a) its draft audited, consolidated balance sheet (the "Balance
-------
Sheet") as at December 31, 1998 (the "Balance Sheet Date"), and the draft
- ----- ------------------
audited, consolidated statement of income, retained earnings and cash flows of
the Company for the year then ended and (b) the consolidated balance sheet of
the Company and its Subsidiaries as at December 31, 1997 and the related
statement of income, retained earnings and cash flows for the year then ended,
audited by Ernst & Young LLP. Such financial statements and the notes thereto
are complete and accurate in all material respects and fairly present the
consolidated financial condition of the Company and its Subsidiaries at the
dates thereof and the results of operations for the periods then ended, and were
prepared in accordance with the books and records of the Company and its
Subsidiaries in conformity with generally accepted accounting principles
consistently applied during the periods covered thereby. There will be no
material difference between the information contained in the draft audited
financial statements for fiscal year 1998 and the audited financial statements
for such fiscal year.
Section 2.08. Material Adverse Changes. Except as set forth on Schedule
------------ ------------------------ --------
2.08, since the Balance Sheet Date, the Company and each Subsidiary have
- ----
conducted their business only in the usual and ordinary course and there has
been no (a) material adverse change in the condition (financial or otherwise),
business, properties or prospects of the Company and its Subsidiaries, on a
consolidated basis (b) material increase in the compensation or commission rate
payable by the Company or any Subsidiaries to any officer, director, employee or
agent or bonus or similar payment (or commitment therefor) to any officer,
director, employee, agent or Affiliate (as hereinafter defined) thereof, (c)
dividend, distribution, redemption, recapitalization or other transaction
involving the Company's capital stock, except as otherwise expressly
contemplated by this Agreement, (d) material capital expenditure or commitment
therefor, or (e) material acquisition or disposition of assets or property or
commitment therefor.
Section 2.09. Assets.
------------ ------
(a) Personal Property. Except as set forth on Schedule 2.09 (a), the
----------------- -----------------
Company and each Subsidiary owns, or has a valid leasehold or license interest
in, all assets necessary for the conduct of its business as presently conducted
and as
-5-
<PAGE>
proposed to be conducted, in each case free and clear of all liens, claims,
security interests, charges and encumbrances. All of such assets are reflected
on the Balance Sheet, except to the extent acquired after the Balance Sheet
Date. All material operating assets of the Company and the Subsidiaries are in
good operating condition and repair, normal wear and tear expected.
(b) Real Property. The Company and each Subsidiary enjoys peaceful
-------------
and quiet possession of their leased premises as shown on Schedule 2.09(b) and
have not received any notice asserting the existence of a default under any such
lease or indicating that the lessor thereunder has taken action or threatened
early termination of the lease.
Section 2.10. Litigation. Except as set forth on Schedule 2.10, no
------------ ---------- -------------
litigation, claims, actions, proceedings or investigations are pending, or to
the Company's knowledge, threatened against the Company or any Subsidiary.
Section 2.11. Tax Matters. The Company and each Subsidiary has correctly
------------ -----------
and timely prepared and filed all tax returns required to have been filed by it
with all appropriate federal, state and local governmental agencies and timely
paid all taxes owed by it. The charges, accruals and reserves on the books of
the Company and each Subsidiary in respect of taxes for all fiscal periods are
adequate, and there are no unpaid assessments of the Company or any Subsidiary
nor any basis for the assessment of any additional taxes, penalties or interest
for any fiscal period or audit by any federal, state or local taxing authority.
All taxes and other assessments and levies which the Company or any Subsidiary
is required to withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party. The Company
has furnished the Purchasers with true and correct copies of all of its tax
returns, including any amendments, for all open years. There are no tax liens or
claims pending, or to the Company's knowledge, threatened against the Company,
or any Subsidiary, or any of their respective assets or property. There are no
outstanding tax sharing agreements or other such arrangements between the
Company or any Subsidiary and any other corporation or entity (other than
between the Company and its Subsidiaries). The tax basis of the assets of the
Company by category, including the classification of such assets as being
depreciable or amortizable, as reflected in its tax returns, is true and correct
in all material respects. The Company does not have a current election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code") to
----
be taxed as an S corporation. Neither the Company, any Subsidiary nor the
Founder has ever filed a consent pursuant to Section 341 (f) of the Code
relating to collapsible corporations.
-6-
<PAGE>
Section 2.12. Material Contracts. Schedule 2.12 is a complete and
------------ ------------------ -------------
accurate list of all of the following kinds of contracts, agreements and
arrangements (whether written or unwritten) of the Company or any Subsidiary:
(a) contracts with any employee, officer, director or stockholder, or
any known relative or Affiliate (which term is used in this Agreement as defined
in the Rules promulgated under the Securities Act of 1933, as amended (the
"Act")) thereof;
(b) licenses, leases, contracts and other arrangements with respect to
any property of the Company or any Subsidiary having a value or resulting in (or
required to generate) revenues to or expenses of the Company or its Subsidiaries
of $100,000 or more, including without limitation, all real estate leases, and
licenses relating to the use of Intellectual Property (as defined in Section
2.21);
(c) agreements, contracts or instruments relating to the borrowing of
money, the capital lease or purchase on an installment basis of any asset or the
guarantee of any of the foregoing involving more than $75,000;
(d) contracts with respect to which the Company or any Subsidiary has
any liability or obligation, contingent or otherwise, or which may otherwise
have a continuing effect for one year or more after the date of this Agreement,
involving more than $75,000;
(e) contracts which place any material limitation on the method of
conducting or scope of the business of the Company or any Subsidiary; and
(f) any other contract which would be required to be disclosed as an
exhibit to a Registration Statement on Form S-1 under the Act filed by the
Company.
The Company has furnished to the Purchasers copies of all such contracts
(including all amendments and modifications thereto), or written descriptions
thereof, in the case of oral contracts, and each such contract (or written
description) sets forth the entire (or material terms in the case of an
unwritten agreement) agreement and understanding between the Company or a
subsidiary and the other parties thereto. Each such contract is valid, binding
and in full force and effect, and there is no event which has occurred or
exists, which constitutes or which, with notice, the happening of any event
and/or the passage of time, would constitute a default or breach by the Company
or a Subsidiary under any such contract or would cause the acceleration of any
obligation of any party thereto or give rise to any right of any other party of
termination or cancellation
-7-
<PAGE>
thereof. Neither the Company nor the Founder has any reason to believe that the
parties to such contracts will not fulfill their obligations thereunder in all
material respects.
Section 2.13. Employees and Compensation. Schedule 2.13 sets forth a
------------ -------------------------- -------------
complete and accurate list of (a) all employment and consulting contracts,
arrangements or plans with any employee of or consultant to the Company or any
Subsidiary and (b) all employees of and consultants to the Company or any
Subsidiary, with 1998 compensation in excess of $100,000, showing date of hire,
hourly rate or salary or other basis of compensation and other benefits accrued
as of a recent date, each increase and bonus granted since January 1, 1998, and
job function of salaried employees. None of the employees of the Company or any
Subsidiary is represented by a union, and there is no labor strike, dispute,
slowdown, stoppage, organizational effort, dispute or proceeding by or with any
employee or former employee of the Company or any Subsidiary or any labor union
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary.
Section 2.14. Customers and Suppliers. Schedule 2.14 sets forth a list of
------------ ----------------------- -------------
all customers of the Company or any Subsidiary which accounted for at least
$500,000 of gross sales by the Company or each Subsidiary during the fiscal year
ended December 31, 1998. To the Company's knowledge, the Company's and each
Subsidiary's relationships with such customers and with its material suppliers
are good commercial working relationships. Except as set forth on Schedule 2.14,
-------------
since December 31, 1997, no supplier representing more than $500,000 of
annualized purchases by the Company or any Subsidiary (in the case of a
supplier) has terminated or, to the Company's knowledge, threatened to
terminate, its relationship with the Company or any Subsidiary, or has decreased
materially or threatened to decrease or limit materially the services, supplies
or materials supplied to or purchased from the Company or any Subsidiary.
Section 2.15. Environmental Matters. Except as provided on Schedule 2.15,
------------ --------------------- -------------
(a) the ownership or use of the Company's and the Subsidiaries' premises and
assets, the occupancy and operation thereof, and the conduct of the Company's
and the Subsidiaries' business are in compliance in all material respects with
all applicable federal, state and local laws, ordinances, regulations, standards
and requirements relating to safety, health, pollution, environmental
protection, hazardous substances and related matters and (b) there is no
liability attaching to such premises or assets or the ownership, use or
operation thereof as a result of any hazardous substance that may have been
discharged on or released from such premises, or disposed of on-site or off-
site, or any other circumstance occurring prior to the Closing or existing as of
the Closing. For purposes of this
-8-
<PAGE>
Section, "hazardous substance" shall mean oil or any other substance which is
included within the definition of a "hazardous substance", "pollutant", "toxic
substance", "toxic waste", "hazardous waste", "contaminant" or other words of
similar import in any federal, state or local environmental law, ordinance or
regulation.
Section 2.16. Insurance. Schedule 2.16 lists all insurance policies
------------ --------- -------------
maintained by the Company or any Subsidiary, all of which are valid and in full
force. All premiums due to date under such policies have been paid, and no
default exists thereunder. To the Company's knowledge, the insurance listed on
Schedule 2.16 is in amounts adequate and appropriate for the business, and to
- -------------
avoid the operation of any coinsurance provision. Neither the Company nor any
Subsidiary has received any notice of any proposed material increase in the
premiums payable for coverage, or proposed reduction in the scope (or
discontinuation entirely) of coverage, under any of such insurance policies.
Section 2.17. Employee Benefit Plans.
------------ ----------------------
(a) Schedule 2.17 sets forth all employee benefit plans, agreements,
-------------
commitments, practices or arrangements of any type (including, but not limited
to, plans described in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) maintained by the Company or any Subsidiary
-----
for the benefit of current or former employees or directors of the Company or
any Subsidiary, or with respect to which the Company or any Subsidiary has a
liability, whether direct or indirect, actual or contingent (including, but not
limited to, liabilities arising from affiliation under Section 414(b), (c), (m)
or (o) of the Code or Section 4001 of ERISA) (collectively, the "Benefit
-------
Plans"). There are no material benefit plans, agreements, commitments, practices
- -----
or arrangements of any type providing benefits to employees or directors of the
Company or any Subsidiary, other than the Benefit Plans.
(b) With respect to each Benefit Plan, the Company has delivered to
the Purchasers true and complete copies of: (i) any and all plan texts and
agreements; (ii) any and all material communications to employees (including all
summary plan descriptions and material modifications thereto); (iii) the two
most recent annual reports, if applicable; (iv) the most recent annual and
periodic accounting of plan assets, if applicable; and (v) the most recent
determination letter received from the Internal Revenue Service (the "Service"),
-------
if applicable.
(c) With respect to each Benefit Plan: (i) if intended to qualify
under Section 401(a) of the code, such plan so qualifies, and its trust is
exempt from taxation under Section
-9-
<PAGE>
501(a) of the Code; (ii) such plan has been administered and enforced in
accordance with its terms and all applicable laws in all material respects;
(iii) no breach of fiduciary duty by the Company has occurred with respect to
which the Company, any Subsidiary or any Benefit Plan may be liable or otherwise
damaged in any material respect; (iv) no material disputes are pending or
threatened; (v) no "prohibited transaction" (within the meaning of either
Section 4975(c) of the Code or Section 406 of ERISA) has occurred with respect
to which the Company or any Benefit Plan may be liable or otherwise damaged in
any material respect; (vi) all contributions, premiums, and other payment
obligations have been accrued on the financial statements of the Company in
accordance with generally accepted accounting principles, and, to the extent
due, have been made on a timely basis, in all material respects; (vii) all
contributions made or required to be made under such plan meet the requirements
for deductibility under the Code; (viii) the Company has expressly reserved in
itself the right to amend, modify or terminate such plan, or any portion of it,
without liability to itself; (ix) no such plan requires the Company to continue
to employ any employee or director.
(d) No Benefit Plan is, or has ever been, subject to Title IV of
ERISA.
(e) With respect to each Benefit Plan which provides welfare benefits
of the type described in Section 3(1) of ERISA: no such plan provides medical or
death benefits with respect to current or former employees or directors of the
Company beyond their termination of employment, other than coverage mandated by
Sections 601-608 of ERISA and 4980B(f) of the Code, (ii) each such plan has been
administered in compliance with Sections 601-608 of ERISA and 4980B(f) of the
Code; and (iii) no such plan has reserves, assets, surpluses or prepaid
premiums.
Section 2.18. Registration Rights. Except as set forth on Schedule 2.18,
------------ ------------------- -------------
the Company is not a party to any agreement or commitment which obligates the
Company to register under the Act any of its outstanding securities or any of
its securities which may hereafter be issued.
Section 2.19. Offering. Subject to the accuracy of the Purchasers'
------------ --------
representations in Section 3 of this Agreement, the offer, issuance and sale of
the Senior Preferred Shares and the Common Stock constitutes, and will
constitute, transactions exempt from the registration requirements of Section 5
of the Act and the Company has obtained all qualifications, permits, and other
consents, if any, required by all applicable state securities laws.
Section 2.20. Affiliate Transactions. Except as set forth on Schedule 2.20,
------------ ---------------------- -------------
neither the Company nor any Subsidiary is a
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<PAGE>
party to any material contract or arrangement, either directly or indirectly,
with any of the officers, directors or stockholders of the Company or any
Subsidiary, their known relatives or Affiliates.
Section 2.21. Intellectual Property. Schedule 2.21 sets forth all patents,
------------ --------------------- -------------
trademarks, service marks, trade names, copyrights, domain names, franchises and
licenses, all royalties and license agreements, all applications therefor, and
all other rights with respect to the foregoing owned or used by the Company or
any Subsidiary ("Intellectual Property"). The intellectual property and rights
set forth on Schedule 2.21 include all of the foregoing necessary for the
-------------
operation of the Company's and the Subsidiaries' business as now conducted and
as proposed to be conducted. To the Company's knowledge, the Company's and each
Subsidiary's ownership and use of the foregoing does not infringe or conflict
with the rights of others; neither the Company nor any Subsidiary is or will be
obligated to make any royalty, fee or other payments in connection with its
ownership or use of any patent, trademark, trade name, copyright or other
intangible asset in connection with the conduct of its business as now conducted
and as proposed to be conducted, except as described on Schedule 2.21. Except as
-------------
set forth on Schedule 2.21, neither the Company nor any Subsidiary has been
-------------
notified of any claim by any person or entity that the Company or any Subsidiary
is violating any trademark, service mark, trade name, patent or copyright, or
other intangible asset or right owned by any other person or entity or that it
is using any name that is confusingly similar to that of any other person or
entity, and, to the Company's knowledge, there is no basis for any such claim.
Section 2.22. Proprietary Information of Third Parties. Except as set forth
------------ ----------------------------------------
on Schedule 2.22, no third party has claimed or, to the Company's knowledge, has
-------------
reason to claim that any person employed by or affiliated with the Company or
any Subsidiary has (a) violated or, to the Company's knowledge, may be violating
any of the terms or conditions of such person's employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or, to the
Company's knowledge, may be disclosing or utilized or, to the Company's
knowledge, may be utilizing any trade secret or proprietary information or
documentation of such third party or (c) interfered or, to the Company's
knowledge, may be interfering in the employment relationship between such third
party and any of its employees. To the Company's knowledge, no person or entity
employed by or affiliated with the Company or any Subsidiary has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any other person or entity in connection with the business of the
Company or any Subsidiary.
-11-
<PAGE>
Section 2.23. Brokers. Except as set forth on Schedule 2.23, no finder,
------------ ------- -------------
broker, agent, financial advisor or other intermediary has acted, directly or
indirectly, on behalf of the Company or any Subsidiary in connection with the
offering of the Senior Preferred Shares and the Common Stock or the negotiation
or consummation of this Agreement or any of the transactions contemplated
hereby, or is entitled to any fee, payment, commission or other consideration
with respect thereto.
Section 2.24. Absence of Material Undisclosed Liabilities. Except for (a)
------------ -------------------------------------------
any and all liabilities, accounts payable and accrued expenses reflected on the
Balance Sheet or incurred in the ordinary course of business since the Balance
Sheet Date, and (b) obligations of future performance under contracts set forth
on a Schedule hereto and other contracts entered into in the ordinary course of
business which are not required to be listed on a Schedule hereto, as of the
Closing Date, the Company will have no material liabilities or obligations,
whether absolute, accrued, contingent or otherwise and whether due or to become
due.
Section 2.25. Year 2000 Compliance. Except as otherwise disclosed on
------------ --------------------
Schedule 2.25, the Company, its Subsidiaries and its Management Systems and
- -------------
Production and Distribution Systems are or will be Year 2000 Compliant on or
before December 31, 1999. As used in this Section the following terms have the
following meanings:
"Year 2000 Compliant" means, with respect to any person, that neither the
year change from 1999 to 2000 (the arrival of the date January 1, 2000) nor leap
year dates thereafter will (i) impair such person's ability to meet its
obligations to third parties or (ii) result in errors or corruption in
processing internally generated data or otherwise have a material adverse effect
on the operations or functionality of such person or its Management Systems or
Production and Distribution Systems, all of which will continue to operate as
intended prior to, during and after January 1, 2000.
"Management Systems" include, but are not limited to, all computer hardware
(including integrated circuit/chip and firmware) and software applications that
a person uses for managing and operating its business, including without
limitation functions such as accounting and billing, inventory tracking and
maintenance and vendor and supplier sourcing.
"Production and Distribution Systems" include, but are not limited to, all
computer hardware (including integrated circuit/chip and firmware) and software
applications, and all automated or electronic equipment, controls and other
systems used by a person in its production or distribution process, from
-12-
<PAGE>
the point of input or raw material to final products and merchandise offered for
sale and distributed to customers.
Section 2.26. Required Consents. Except for the consents specified on
------------ -----------------
Schedule 2.26, no consent, order, authorization, approval, declaration or
- -------------
filing, including, without limitation, any consent, approval or authorization of
or declaration or filing with any governmental authority or any party to a
material contract, is required on the part of the Company or any Subsidiary (and
no notices to or consents or other approvals from any of the Lessors or any of
such lessors' mortgagees under any of the real property leases are required) for
or in connection with the execution, delivery or performance of this Agreement
and each of the other agreements contemplated hereby or the conduct of the
business by the Company or any Subsidiary after the Closing, or to prevent a
material default. The Company has no reason to believe that all of the required
consents and approvals not obtained as of the Closing will not be obtained
within six (6) months of Closing without material cost to the Company. Subject
to obtaining the consents specified on Schedule 2.26, the execution, delivery
-------------
and performance of this Agreement and the other instruments and agreements
contemplated hereby by the Company will not result in any material violation of,
be in material conflict with or constitute a material default under, any law,
statute, regulation, ordinance, contract, agreement, instrument, judgment,
decree or order to which the Company is a party or by which the Company is
bound.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and warrants to the
Company that:
Section 3.01. Investment Intent. The Senior Preferred Shares and Common
------------ -----------------
Stock to be acquired by it are being acquired solely for its own account, for
investment purposes only and, with no present intention of distributing,
selling, transferring or otherwise disposing of them, and the Purchasers have no
present plans to enter into any such contract, undertaking, agreement or
arrangement with respect thereto.
Section 3.02. Economic Risk; Sophistication. The Purchasers are able to
------------ -----------------------------
bear the economic risk of an investment in the Senior Preferred Shares and
Common Stock to be acquired by them, can afford to sustain a total loss on such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment.
-13-
<PAGE>
Section 3.03. Authority. Each of the Purchasers is duly organized, validly
------------ ---------
existing and in good standing under the laws of its respective state of
organization. Each Purchaser has all requisite power and authority to enter into
this Agreement and perform its obligations hereunder, and this Agreement
constitutes the valid and binding obligation of each Purchaser enforceable
against it in accordance with its terms.
Section 3.04. Brokers. No finder, broker, agent, financial advisor or
------------ -------
other intermediary has acted on behalf of Purchasers in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby, and no such person is entitled to any fee, payment,
commission or other consideration with respect thereto as a result of any
arrangement made by the Purchaser.
Section 3.05. Limited Liquidity. The Purchasers understand that the Senior
------------ -----------------
Preferred Shares and the Common Stock to be acquired by them may not be sold,
transferred or otherwise disposed of without registration under the Act and any
state securities laws, or an exemption therefrom (supported by an opinion of
counsel satisfactory to the Company), and that in the absence of an effective
registration statement covering such securities or an available exemption from
registration, such securities may be required to be held indefinitely. The
Purchasers are aware that the Senior Preferred Shares and the Common Stock to be
acquired by them may not be sold pursuant to Rule 144 promulgated under the Act,
unless all of the conditions of that Rule are met and that among the conditions
for use of Rule 144 is the availability of current information to the public
about the Company and that the Company has no obligation to make such
information available. The Purchasers represent that, in the absence of an
effective registration statement covering the Senior Preferred Shares or the
Common Stock, they shall sell, transfer or otherwise dispose of such securities
only in a manner consistent with the representations set forth herein, and the
certificates for the Senior Preferred Shares or the Common Stock shall bear a
legend to such effect.
Section 3.06. Accredited Investor. Each Purchaser is an "accredited
------------ -------------------
investor" as defined in Regulation D under the Act, and, together with its
financial advisors, if any, has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks involved in
purchasing the Senior Preferred Shares and the Common Stock.
Section 3.07. Purchaser Information. All of the information furnished by
------------ ---------------------
such Purchaser in response to the Company's questionnaire is true and complete.
-14-
<PAGE>
ARTICLE IV
CLOSING CONDITIONS
Section 4.01. Conditions to Closing. Each Purchaser's obligation to
------------ ---------------------
purchase the Senior Preferred Shares and Common Stock to be acquired by it at
the Closing is subject to the satisfaction, as of the Closing Date, of the
following conditions:
(a) Amendment. The Certificate of Incorporation of the Company shall
---------
have been amended to include the provisions set forth in Exhibit 2.03 and,
------------
except as so amended, such Certificate of Incorporation shall not have been
further amended or modified.
(b) Seacoast Capital Transactions. Seacoast Capital Partners Limited
-----------------------------
Partnership ("Seacoast") shall have (i) converted the senior subordinated note
--------
(the "Note") of the Company in the principal amount of $3,000,000 held by it
----
into 24,490 Senior Preferred Shares, (ii) exercised the Warrant dated July 30,
1997 for 50,000 shares of Common Stock, and (iii) terminated all of its existing
contractual arrangements with the Company and the Subsidiaries that were entered
into in connection with Seacoast's purchase of the Note and the Warrant.
(c) Stockholders Agreement. The Company, the Purchasers, Seacoast and
----------------------
Daniel Nissanoff shall have entered into the Stockholders Agreement
substantially in the form of Exhibit 4.01 (c) attached hereto.
----------------
(d) Registration Rights Agreement. The Company, the Purchasers and
-----------------------------
Seacoast shall have entered into a registration rights agreement substantially
in the form of Exhibit 4.01 (d) attached hereto.
----------------
(e) Representations and Warranties. The representations and
------------------------------
warranties contained in Article II shall be true and correct in all material
respects on and as of the Closing Date as though made on and as of such date
(except representations and warranties made as of a specified date, which shall
be true as of such date) except that the representations and warranties
contained in Section 2.05 will be true and complete in all respects.
(f) Certificate; Documents. The Purchasers shall have received copies
----------------------
of each of the following, certified by the Secretary of the Company: (i) the
Company's Certificate of Incorporation, as amended, with evidence of filing with
the Secretary of State of the State of New York; (ii) a certificate of the
Secretary of State of the State of New York as to the legal existence and good
standing of the Company and listing all amendments to the Company's Certificate
of Incorporation then on
-15-
<PAGE>
file in his office; (iii) the Company's Bylaws; (iv) the votes adopted by the
stockholders and the resolutions adopted by the directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby, the amendment to the Certificate of
Incorporation and the issuance, sale and delivery of the Senior Preferred Shares
and the Common Stock hereunder; and (v) evidence of the qualification of the
Company as a foreign corporation in the States of Massachusetts and New Jersey.
The Purchasers shall also have received such other certificates and documents as
the Purchasers shall reasonably request.
(g) Legal Opinions. Each of the Purchasers shall have received a
--------------
legal opinion in form and substance satisfactory to the Purchasers from Gould &
Wilkie, LLP, counsel for the Company, substantially in the form set forth in
Exhibit 4.01 (g) hereof.
- ----------------
(h) Stock Certificates. Each Purchaser shall have received one or
------------------
more duly executed certificates representing the Senior Preferred Shares or
Common Stock to be acquired by it.
(i) License Agreement. The Company and Information Handling Services,
-----------------
Inc. shall have entered into a license agreement substantially in the form of
Exhibit 4.01 (i).
- ----------------
(j) Employment Agreement. Daniel Nissanoff and the Company shall have
--------------------
entered into an employment agreement substantially in the form of Exhibit 4.01
------------
(j).
- ---
(k) Repurchase of Shares. The Company shall have redeemed all of the
--------------------
shares of Common Stock owned by Stacy Jargowsky Nissanoff.
ARTICLE V
MISCELLANEOUS
Section 5.01. Notices. All notices, demands or other communications
------------ -------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, or by nationally recognized overnight courier services, or
otherwise actually delivered:
(a) if to the Company or to Daniel Nissanoff, to:
Dast Corporation
d.b.a Microcom Technologies
16 East 52nd Street
New York, N.Y. 10022
Attention: President
-16-
<PAGE>
with a copy to:
Gould & Wilkie, LLP
1 Chase Manhattan Plaza
New York, N.Y. 10005-1401
Attention: Michael R. Manley, Esq.
(b) if to Boston Ventures, to
Boston Ventures Management, Inc.
One Federal Street
23rd Floor
Boston, MA 02110-2003
Attention: James M. Wilson
with a copy to:
Choate, Hall & Stewart
Exchange Place
Boston, Massachusetts 02109
Attention: Stephen M. L. Cohen, Esq.
(c) if to Thybo, to:
Thybo New Ventures Limited
Par La Ville Place
14 Par La Ville Place
Hamilton HM JK Bermuda
Attention: Arthur E. M. Jones
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
deposited with the courier, as the case may be.
Section 5.02. Severability and Governing Law. If any provision of this
------------ ------------------------------
Agreement is rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render invalid or
unenforceable any other provision of this Agreement. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without regard to its conflicts of laws provisions.
Section 5.03. Amendments, Etc. This Agreement may be changed, waived or
------------ ---------------
terminated only with the written consent of the Founder, the Company and each of
the Purchasers.
Section 5.04. Survival. All agreements, representations and warranties
------------ --------
contained herein and in any certificate,
-17-
<PAGE>
documentation or agreement delivered pursuant hereto shall survive the execution
and delivery of this Agreement, any investigation at any time made, and the sale
and purchase of the Senior Preferred Shares and the Common Stock until two (2)
years from the Closing or if earlier, until the Closing of the initial public
offering of the Company's securities.
Section 5.05. Expenses. The Company agrees to pay (a) the reasonable costs
------------ --------
and expenses of Choate, Hall & Stewart as counsel to Boston Ventures in
connection with the due diligence, investigation, preparation, execution and
delivery of this Agreement and the other agreements, instruments and documents
relating thereto up to $60,000 (b) the reasonable fees, up to $25,000, and
expenses of counsel to the Purchasers incurred with respect to any amendments or
waivers required by the Company (whether or not they become effective) under or
with respect to the Certificate of Incorporation, Bylaws, this Agreement or any
agreement or instrument contemplated hereby, and (c) in the event of a proven
material breach or default of the Company's obligations to the Purchasers under
the Certificate of Incorporation, the Bylaws, this Agreement or any agreement or
instrument contemplated hereby, the reasonable fees and expenses of the
Purchasers incurred in connection with the enforcement of the rights granted
under any of the foregoing.
Section 5.06. Successors and Assigns. This Agreement, and all provisions
------------ ----------------------
hereof, shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, provided that, the Purchasers may
not assign their right to purchase Senior Preferred Shares and Common Stock
without the consent of the Company in its sole discretion.
Section 5.07. Entire Agreement. This Agreement, the attached exhibits and
------------ ----------------
schedules and the other agreements, documents and instruments contemplated
hereby contain the entire understanding of the parties, and there are no further
or other agreements or understandings, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
Section 5.08. Counterparts. This Agreement may be executed in one or more
------------ ------------
counterparts by facsimile signature, and with counterpart signature pages, each
of which shall be an original, and all of which together shall constitute one
and the same Agreement.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as a sealed instrument as of the date first above written.
DAST CORPORATION
d.b.a Microcom Technologies
/s/ Daniel Nissanoff
By:__________________________
(Title)
BOSTON VENTURES LIMITED
PARTNERSHIP V
By: Boston Ventures
Management, Inc.
By: /s/ James Wilson
--------------------------
THYBO NEW VENTURES LIMITED
/s/ J.A.M. Vijverberg
By:__________________________
(Title)
/s/ Daniel Nissanoff
_____________________________
Daniel Nissanoff
<PAGE>
EXHIBIT 10.18
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT dated as of March 16, 1999 by and among Dast Corporation, d.b.a.
Microcom Technologies, a New York corporation (the "Company") and Seacoast
-------
Capital Partners Limited Partnership, a Delaware limited partnership
(hereinafter referred to as either "Seacoast" or the "Purchaser") and Daniel
-------- ---------
Nissanoff (the "Founder")
-------
Introduction
------------
The Purchaser wishes to purchase an aggregate of (i) 24,490 shares of the
Company's preferred stock, $0.1 par value per share (the "Preferred Shares"),
and the Company wishes to sell the Preferred Shares to the Purchaser. The
Founder, as director, officer and principal stockholder of the Company, wishes
to induce the Purchaser to purchase the Preferred Shares and to cause the
Company to sell the Preferred Shares to the Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SENIOR PREFERRED SHARES;
PURCHASE PRICE; CLOSING; PRIOR AGREEMENTS
Section 1.01. Purchase and Sale of Preferred Shares. In reliance upon the
------------ -------------------------------------
representations and warranties contained herein, and subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Purchaser, and
Purchaser agrees to purchase from the Company, the number of Preferred Shares
indicated next to Purchaser's name on Schedule 1.01 hereto.
Section 1.02 Purchase Price. The aggregate purchase price for the
------------ --------------
Preferred Shares shall be $3,000.000 (the "Purchase Price") which shall be an
--------------
amount equal to the principal owed and outstanding as of the date first set
forth above on that certain Senior Subordinated Note, dated July 30, 1997, in
the original principal amount of $3,000.000, executed by the Company in favor of
Purchaser (the "Note"). The Purchase Price to be paid by Purchaser shall be
payable at the Closing (as hereinafter defined) by transferring the Note to the
Company marked "paid in full": provided that the Company has paid all accrued
-------- ----
interest and all accrued fees and expenses (including fees and expenses incurred
in connection with the pay off of the Note) owing on and in connection with the
Note to the Purchaser such that the only amount which remains owing on the Note
at the Closing is principal.
Section 1.03. Closing. The purchase price and sale of the Preferred Shares
------------ -------
shall take place at a closing (the "Closing") to be held at the offices of
Choate, Hall & Stewart, Exchange Place, Boston, Massachusetts, or such other
place as is agreed to by the parties, on March 16, 1999, or if the conditions to
Closing specified herein are not then satisfied or waived such date
1
<PAGE>
which is five (5) business days after the satisfaction or waiver of such
conditions (the "Closing Date").
------------
Section 1.04. Prior Agreements. In connection herewith, (i) Purchaser will
------------ ----------------
exercise its Warrant dated July 30, 1997 (the "Warrant") for 50,000 shares of
common stock (which represents the total number of shares, as adjusted, subject
to the Warrant Purchase Agreement dated July 30, 1997, by and among the Company,
Daniel Nissanoff, Stacy Jargowsky Nissanoff and Purchaser (the "Warrant Purchase
Agreement")), (ii) each party signing below hereby agrees that each pre-existing
contractual agreement (specifically excluding this Agreement and any other
agreement executed in conjunction herewith or in conjunction with the
transactions contemplated hereby) between the Company (and/or the Company's
affiliate[s]) and the Purchaser listed on Schedule 1.04, attached hereto and
-------------
incorporated herein, shall be terminated upon the Closing and (iii) termination
statements for each UCC-1 Financing Statement filed by the Purchaser in
connection with the Note shall be provided to the Company within fifteen (15)
business days of the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that the information
set forth in this Article II is true and correct as of the date hereof and will
be true and correct as of the Closing.
Section 2.01. Organization and Standing. The Company is a corporation
------------ -------------------------
duly organized, validly existing and in good standing under the laws of the
State of New York. The Company has all necessary corporate power and authority
to own its properties and to carry on its business as currently conducted and as
proposed to be conducted. The Company is qualified to do business as a foreign
corporation in the States of New Jersey and Massachusetts, and is not required
to be qualified to do business as a foreign corporation in any other
jurisdiction where the failure to qualify would have a material adverse effect
on the Company.
Section 2.02. Subsidiaries. Schedule 2.02 sets forth a list of each
------------ ------------ -------------
Subsidiary (as hereinafter defined). Each subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
incorporation of such Subsidiary, as set forth on Schedule 2.02. Each Subsidiary
-------------
has all necessary corporate power and authority to own its properties and to
carry on its business as currently conducted and as proposed to be conducted.
Except as set forth on Schedule 2.02, the Company has no Subsidiaries, holds no
-------------
securities of any other entity, is not a party to any joint venture or
partnership and has made no investment in any third party. As used herein,
"Subsidiary" means any corporation or other entity a majority of the voting
----------
securities or economic interest of which is held by the Company or any
Subsidiary.
Section 2.03. Charter and By-Laws. The copies of the Certificate of
------------ -------------------
Incorporation and the By-Laws of the Company furnished to the Purchaser are true
and correct in all respects. As of the Closing, the Company will amend its
Certificate of Incorporation, as amended from time
2
<PAGE>
to time, the "Certificate of Incorporation," in the form attached as Schedule
---------------------------- --------
2.03 hereto. The Class A Shares shall have the rights, preferences, privileges
- ----
and restrictions set forth in such amendment.
Section 2.04. Validity and Enforceability. This Agreement is, and each of
------------ ---------------------------
the other agreements and instruments of the Company and the Founder contemplated
hereby will be the valid and binding obligations of the Company and the Founder,
enforceable in accordance with their respective terms, except as the enforcement
thereof may be limited to bankruptcy and other laws of general application
relating to creditor's rights or general principals of equity.
Section 2.05. Capital Stock.
- ------------ -------------
(a) As of the Closing, the authorized capital stock of the
Company consists of (x) 106,122 shares of preferred stock, $.01 par value per
share, all of which shall be issued and outstanding and (y) 1,500,000 shares of
common stock (the "Common Stock") of which 408,163 will be issued and
------------
outstanding or reserved for future issuance upon the exercise of outstanding
stock options and the conversion of the Preferred Shares.
(b) Schedule 2.05(b) hereto sets forth a complete and accurate
----------------
list of all holders of the Company's outstanding capital stock, and all options,
warrants, convertible securities and other rights which may afford any person or
entity the right to acquire shares of any class of capital stock of the Company,
including, without limitation, any capital stock, option, warrant, convertible
security or other security or right which the Founder of the company has a
current intention to issue or sell, in each case prior to and immediately after
the Closing.
(c) Schedule 2.05(c) hereto also sets forth the authorized
----------------
capital stock of each Subsidiary, the number of shares of each class outstanding
and the record and beneficial holder thereof. No Subsidiary has issued or
granted any option, warrant, convertible security or other right or agreement
which affords any person or entity the right to purchase or otherwise acquire
any shares of its capital stock.
(d) Neither the Company nor any Subsidiary is subject to any
obligations (contingent or otherwise) to purchase or otherwise acquire or retire
any of its equity securities (other than in accordance with the Company's
Certificate of Incorporation of this Agreement). Except as set forth on Schedule
--------
2.05(d), no person has any right of first refusal or preemptive right in
- -------
connection with the issuance of the Preferred Shares, conversion of Preferred
Shares into any class of Common Stock, Common Stock issuable upon exercise of
any stock options or the conversion of any Company indebtedness or with respect
to any future offer, sale or issuance of securities by the Company or its
shareholders, other than as set forth herein.
(e) The Preferred Shares, when delivered, will be duly and
validly issued and outstanding, fully paid and nonassessable, and free to the
holders thereof of any liens, encumbrances and restrictions (other than under
applicable securities laws or as set forth in any stockholders agreements to be
entered into by and between the Company and Seacoast in connection with the
consummation of the transactions contemplated by this Agreement). The
3
<PAGE>
Company has reserved a sufficient number of shares of Common Stock for issuance
upon conversion of the Preferred Shares and, when so issued, the shares of
Common Stock will be duly authorized, validly issued and outstanding, fully paid
and nonassessable, and free to the holders thereof of any liens, encumbrances
and restrictions (other than under applicable securities laws or as set forth in
any stockholders agreement to be entered into between the Company and Seacoast
in connection with the consummation of the transactions contemplated by this
Agreement).
(f) To the Company's knowledge, the offer and sale of all shares
of capital stock or other securities of the Company issued prior to the Closing
complied with or were exempt from all the registration provisions of federal and
state securities laws.
Section 2.06. Compliance with Law, etc. The Company and each Subsidiary are
------------ ------------------------
not, and the execution, delivery and performance by the Company of this
Agreement and the other agreements contemplated hereby, the issuance and sale of
the Preferred Shares, or the taking of any other action contemplated by this
Agreement or any of such other agreements will not result in the violation of
any term of the Company's Certificate of Incorporation or Bylaws, the charter or
bylaws of any Subsidiary, or any material agreement, lease, license, mortgage,
instrument, arrangement, judgement, decree, order, law, statute, rule or
governmental regulation to which the Company or any Subsidiary is subject. The
Company and each Subsidiary have all governmental licenses, authorizations,
registrations and permits material to or necessary for the conduct of their
businesses, as currently conducted and as proposed to be conducted, all of which
licenses, registrations and permits are listed on Schedule 2.06 hereto. All such
-------------
licenses, registrations and permits are in full force and effect and there is no
proceeding pending or, to the Company's knowledge, threatened (or any basis
therefor) to revoke or limit any such license, registration or permit.
Section 2.07. Financial Statements. The Company has delivered to the
------------ --------------------
Purchaser (a) its draft audited, consolidated balance sheet (the "Balance
-------
Sheet") as at December 31, 1998 (the "Balance Sheet Date"), and the draft
- ----- ------------------
audited, consolidated statement of income, retained earnings and cash flows of
the Company for the year then ended and (b) the consolidated balance sheet of
the Company and its Subsidiaries as at December 31, 1997 and the related
statement of income, retained earnings and cash flows for the year then ended,
audited by Ernst & Young LLP. Such financial statements and the notes thereto
are complete and accurate in all material respects and fairly present the
consolidated financial condition of the Company and its Subsidiaries at the
dates thereof and the results of operations for the periods then ended, and were
prepared in accordance with the books and records of the Company and its
Subsidiaries in conformity with generally accepted accounting principles
consistently applied during the periods covered thereby. There will be no
material difference between the information contained in the draft audited
financial statements for fiscal year 1998 and the audited financial statements
for such fiscal year.
Section 2.08. Material Adverse Changes. Except as set forth on Schedule
------------ ------------------------ --------
2.08, since the Balance Sheet Date, the Company and each Subsidiary have
- ----
conducted their business only in the usual and ordinary course and there as been
no (a) material adverse change in the condition (financial or otherwise),
business, properties or prospects of the Company and its Subsidiaries,
4
<PAGE>
on a consolidated basis (b) material increase in the compensation or commission
rate payable by the Company or any Subsidiaries to any officer, director,
employee or agent or bonus or similar payment (or commitment therefor) to any
officer, director, employee, agent or Affiliate (as hereinafter defined)
thereof, (c) dividend, distribution, redemption, recapitalization or other
transaction involving the Company's capital stock, except as otherwise expressly
contemplated by this Agreement, (d) material capital expenditure or commitment
therefor, or (e) material acquisition or disposition of assets or property or
commitment therefor.
Section 2.09. Assets.
------------ ------
(a) Personal Property. Except as set forth on Schedule 2.09(a),
----------------- ----------------
the Company and each Subsidiary owns, or has a valid leasehold or license
interest in, all assets necessary for the conduct of its business as presently
conducted and as proposed to be conducted, in each case free and clear of all
liens, claims, security interests, charges and encumbrances. All of such assets
are reflected on the Balance Sheet, except to the extent acquired after the
Balance Sheet Date. All material operating assets of the Company and the
Subsidiaries are in good operating condition and repair, normal wear and tear
expected.
(b) Real Property. The Company and each Subsidiary enjoys peaceful
-------------
and quiet possession of their leased premises as shown on Schedule 2.09(b) and
----------------
have not received any notice asserting the existence of a default under any such
lease or indicating that the lessor thereunder has taken action or threatened
early termination of the lease.
Section 2.10. Litigation. Except as set forth on Schedule 2.10, no
------------ ---------- -------------
litigation, claims, actions, proceedings or investigations are pending or to the
Company's knowledge, threatened against the Company or any Subsidiary.
Section 2.11. Tax Matters. The Company and each Subsidiary has correctly
------------ -----------
and timely prepared and filed all tax returns required to have been filed by it
with all appropriate federal, state and local governmental agencies and timely
paid all taxes owed by it. The charges, accruals and reserves on the books of
the Company and each Subsidiary in respect of taxes for all fiscal periods are
adequate, and there are no unpaid assessments of the Company or any Subsidiary
nor any basis for the assessment of any additional taxes, penalties or interest
for any fiscal period or audit by any federal, state or local taxing authority.
All taxes and other assessments and levies which the Company or any Subsidiary
is required to withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party. The Company
has furnished the Purchaser with true and correct copies of all of its tax
returns, including any amendments, for all open years. There are no tax liens or
claims pending or to the Company's knowledge, threatened against the Company, or
any Subsidiary, or any of their respective assets or property. There are no
outstanding tax sharing agreements or other such arrangements between the
Company or any Subsidiary and any other corporation or entity (other than
between the Company and its Subsidiaries). The tax basis of the assets of the
Company by category, including the classification of such assets as being
depreciable or amortizable, as reflected in its tax returns, is true and correct
in all material respects. The Company does not have a current election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as
5
<PAGE>
amended (the "Code") to be taxed as an S corporation. Neither the Company, any
----
Subsidiary nor the Founder has ever filed a consent pursuant to Section 341(f)
of the Code relating to collapsible corporations.
Section 2.12. Material Contracts. Schedule 2.12 is a complete and accurate
------------ ------------------ -------------
list of all of the following kinds of contracts, agreements and arrangements
(whether written or unwritten) of the Company or any Subsidiary:
(a) contracts with any employee, officer, director or
stockholder, or any known relative or Affiliate (which term is used in this
Agreement as defined in the Rules promulgated under the Securities Act of 1933,
as amended (the "Act")) thereof;
---
(b) licenses, leases, contracts and other arrangements with
respect to any property of the Company or any Subsidiary having a value or
resulting in (or required to generate) revenues to or expenses of the Company or
its subsidiaries of $100,000 or more, including without limitation, all real
estate leases, and licenses relating to the use of Intellectual Property (as
defined in Section 2.21);
(c) agreements, contracts or instruments relating to the
borrowing of money, the capital lease or purchase on an installment basis of any
asset or the guarantee of any of the foregoing involving more than $75,000;
(d) contracts with respect to which the Company or any Subsidiary
has any liability or obligation, contingent or otherwise, or which may otherwise
have a continuing effect for one year or more after the date of this Agreement,
including more than $75,000;
(e) contracts which place any material limitation on the method
of conducting or scope of the business of the Company or any Subsidiary; and
(f) any other contract which would be required to be disclosed as
an exhibit to a Registration Statement on Form S-1 under the Act filed by the
Company.
The Company has furnished to the Purchaser copies of all such contracts
(including all amendments and modifications thereto), or written descriptions
thereof, in the case of oral contracts, and each such contract (or written
description) sets forth the entire (or material terms in the case of an
unwritten agreement) agreement and understanding between the Company or a
Subsidiary and the other parties thereto. Each such contract is valid, binding
and in full force and effect, and there is no event which has occurred or
exists, which constitutes or which, with notice, the happening of any event
and/or the passage of time, would constitute a default or breach by the Company
or a Subsidiary under any such contract or would cause the acceleration of any
obligation of any party thereto or give rise to any right to any other party of
termination or cancellation thereof. Neither the Company nor the Founder has any
reason to believe that the parties to such contracts will not fulfill their
obligations thereunder in all material respects.
6
<PAGE>
Section 2.13. Employees and Compensation. Schedule 2.13 sets forth a
------------ -------------------------- -------------
complete and accurate list of (a) all employment and consulting contracts,
arrangements or plans with any employee of or consultant to the Company or any
Subsidiary and (b) all employees of and consultants to the Company or any
Subsidiary, with 1998 compensation in excess of $100,000, showing date of hire,
hourly rate or salary or other basis of compensation and other benefits accrued
as of a recent date, each increase and bonus granted since January 1, 1998, and
job function of salaried employees. None of the employees of the Company or any
Subsidiary is represented by a union, and there is no labor strike, dispute,
slowdown, stoppage, organizational effort, dispute or proceeding by or with any
employee or former employee of the Company or any Subsidiary or any labor union
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary.
Section 2.14. Customers and Suppliers. Schedule 2.14 sets forth a list of
------------ ----------------------- -------------
all customers of the Company or any Subsidiary which accounted for at least
$500,000 of gross sales by the Company or each Subsidiary during the fiscal year
ended December 31, 1998. To the Company's knowledge, the Company's and each
Subsidiary's relationships with such customers and with its material suppliers
are good commercial working relationships. Except as set forth on Schedule 2.14,
-------------
since December 31, 1997, no supplier representing more than $500,000 of
annualized purchases by the Company or any Subsidiary (in the case of a
supplier) has terminated or, to the Company's knowledge, threatened to
terminate, its relationship with the Company or any Subsidiary, or has decreased
materially or threatened to decrease or limit materially the services, supplies
or materials supplied to or purchased from the Company or any Subsidiary.
Section 2.15. Environmental Matters. Except as provided on Schedule 2.15,
------------ --------------------- -------------
(a) the ownership or use of the Company's and the Subsidiaries' premises and
assets, the occupancy and operation thereof, and the conduct of the Company's
and the Subsidiaries' business are in compliance in all material respects with
all applicable federal, state and local laws, ordinances, regulations, standards
and requirements relating to safety, health, pollution, environmental
protection, hazardous substances and related matters and (b) there is no
liability attaching to such premises or assets or the ownership, use or
operation thereof as a result of any hazardous substance that may have been
discharged on or released from such premises, or disposed of on-site or
off-site, or any other circumstance occurring prior to the Closing or existing
as of the Closing. For purposes of this Section, "hazardous substance" shall
mean oil or any other substance which is included within the definition of a
"hazardous substance," "pollutant," "toxic substance," "toxic waste," "hazardous
waste," "contaminant" or other words of similar import in any federal, state or
local environmental law, ordinance or regulation.
Section 2.16. Insurance. Schedule 2.16 lists all insurance policies
------------ --------- -------------
maintained by the Company or any Subsidiary, all of which are valid and in full
force. All premiums due to date under such policies have been paid, and no
default exists thereunder. To the Company's knowledge, the insurance listed on
Schedule 2.16 is in amounts adequate and appropriate for the business, and to
- -------------
avoid the operation of any coinsurance provision. Neither the company nor any
Subsidiary has received any notice of any proposed material increase in the
premiums payable
7
<PAGE>
for coverage, or proposed reduction in the scope (or discontinuation entirely)
of coverage, under any of such insurance policies.
Section 2.17. Employee Benefit Plans.
------------ ----------------------
(a) Schedule 2.17 sets forth all employee benefit plans,
-------------
agreements, commitments, practices or arrangements of any type (including, but
not limited to, plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) maintained by the Company or
any Subsidiary for the benefit of current or former employees or directors of
the Company or any Subsidiary, or with respect to which the Company or any
Subsidiary has a liability, whether direct or indirect, actual or contingent
(including, but not limited to, liabilities arising from affiliation under
Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA)
(collectively, the "Benefit Plans"). There are no material benefit plans,
-------------
agreements, commitments, practices or arrangements of any type providing
benefits to employees or directors of the Company or any Subsidiary, other than
the Benefit Plans.
(b) With respect to each Benefit Plan, the Company has delivered to
the Purchaser true and complete copies of: (i) any and all plan texts and
agreements; (ii) any and all material communications to employees (including all
summary plan descriptions and material modifications thereto); (iii) the two
most recent annual reports, if applicable; (iv) the most recent annual and
periodic accounting of plan assets, if applicable; and (v) the most recent
determination letter received from the Internal Revenue Service (the
"Service"), if applicable.
-------
(c) With respect to each Benefit Plan: (i) if intended to qualify
under Section 401(a) of the Code, such plan so qualifies, and its trust is
exempt from taxation under Section 501(a) of the Code; (ii) such plan has been
administered and enforced in accordance with its terms and all applicable laws
in all material respects; (iii) no breach of fiduciary duty by the Company has
occurred with respect to which the Company, any Subsidiary or any Benefit Plan
may be liable or otherwise damaged in any material respect; (iv) no material
disputes are pending or threatened; (v) no "prohibited transaction" (within the
meaning of either Section 4975(c) of the Code or Section 406 of ERISA) has
occurred with respect to which the Company or any Benefit Plan may be liable or
otherwise damaged in any material respect; (vi) all contributions, premiums, and
other payment obligations have been accrued on the financial statements of the
Company in accordance with generally accepted accounting principles, and, to the
extent due, have been made on a timely basis, in all material respects; (vii)
all contributions made or required to be made under such plan meet the
requirements for deductibility under the Code; (vii) the Company has expressly
reserved in itself the right to amend, modify or terminate such plan, or any
portion of it, without liability to itself; (ix) no such plan requires the
Company to continue to employ any employee or director.
(d) No Benefit Plan is, or has ever been, subject to Title IV of
ERISA.
(e) With respect to each Benefit Plan which provides welfare
benefits of the type described in Section 3(1) of ERISA: no such plan provides
medical or death benefits with respect to current or former employees or
directors of the Company beyond their termination of
8
<PAGE>
employment, other than coverage mandated by Sections 601-608 of ERISA and
4980B(f) of the Code, (ii) each such plan has been administered in compliance
with Sections 601-608 of ERISA and 4980B(f) of the Code; and (iii) no such plan
has reserves, assets, surpluses or prepaid premiums.
Section 2.18. Registration Rights. Except as set forth on Schedule 2.18,
------------ ------------------- -------------
the Company is not a party to any agreement or commitment which obligates the
Company to register under the Act any of its outstanding securities or any of
its securities which may hereafter be issued.
Section 2.19. Offering. Subject to the accuracy of the Purchaser's
------------ --------
representations in Section 3 of this Agreement, the offer, issuance and sale of
the Preferred Shares constitutes, and will constitute, transactions exempt from
the registration requirements of Section 5 of the Act and the Company has
obtained all qualifications, permits, and other consents, if any, required by
all applicable state securities laws.
Section 2.20. Affiliate Transactions. Except as set forth on Schedule 2.20,
------------ ---------------------- -------------
neither the Company nor any Subsidiary is a party to any material contract or
arrangement, either directly or indirectly, with any of the officers, directors
or stockholders of the Company or any Subsidiary, their known relatives or
Affiliates.
Section 2.21. Intellectual Property. Schedule 2.21 sets forth all patents,
------------ --------------------- -------------
trademarks, service marks, trade names, copyrights, domain names, franchises and
licenses, all royalties and license agreements, all applications therefor, and
all other rights with respect to the foregoing owned or used by the Company or
any Subsidiary ("Intellectual Property"). The intellectual property and rights
---------------------
set forth on Schedule 2.21 include all of the foregoing necessary for the
-------------
operation of the Company's and the Subsidiaries' business as now conducted and
as proposed to be conducted. To the Company's knowledge, the Company's and each
Subsidiary's ownership and use of the foregoing does not infringe or conflict
with the rights of others; neither the Company nor any Subsidiary is or will be
obligated to make any royalty, fee or other payments in connection with its
ownership or use of any patent, trademark, trade name, copyright or other
intangible asset in connection with the conduct of its business as now conducted
and as proposed to be conducted, except as described on Schedule 2.21. Except as
-------------
set forth on Schedule 2.21, neither the Company nor any Subsidiary has been
-------------
notified of any claim by any person or entity that the Company or any Subsidiary
is violating any trademark, service mark, trade name, patent or copyright, or
other intangible asset or right owned by any other person or entity or that it
is using any name that is confusingly similar to that of any other person or
entity, and, to the Company's knowledge, there is no basis for any such claim.
Section 2.22. Proprietary Information of Third Parties. Except as set
------------ ----------------------------------------
forth on Schedule 2.22, no third party has claimed or, to the Company's
-------------
knowledge, has reason to claim that any person employed by or affiliated with
the Company or any Subsidiary has (a) violated or, to the Company's knowledge,
may be violating any of the terms or conditions of such person's employment,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or, to the Company's knowledge, may be disclosing or utilized or, to the
Company's knowledge, may be utilizing any trade secret or proprietary
information or documentation of
9
<PAGE>
such third party or (c) interfered or, to the Company's knowledge, may be
interfering in the employment relationship between such third party and any of
its employees. To the Company's knowledge, no person or entity employed by or
affiliated with the Company or any Subsidiary has employed or proposes to employ
any trade secret or any information or documentation proprietary to any other
person or entity in connection with the business of the Company or any
Subsidiary.
Section 2.23. Brokers. Except as set forth on Schedule 2.23, no finder,
------------ ------- -----
broker, agent, financial advisor or other intermediary has acted, directly or
indirectly, on behalf of the Company or any Subsidiary in connection with the
offering of the Preferred Shares or the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby, or is entitled to any
fee, payment, commission or other consideration with respect thereto.
Section 2.24. Absence of Material Undisclosed Liabilities. Except for (a)
------------ -------------------------------------------
any and all liabilities, accounts payable and accrued expenses reflected on the
Balance Sheet or amounts incurred in the ordinary course of business since the
Balance Sheet Date, and (b) obligations of future performance under contracts
set forth on a Schedule hereto and other contracts entered into in the ordinary
course of business which are not required to be listed on a Schedule hereto, as
of the Closing Date, the Company will have no material liabilities or
obligations, whether absolute, accrued, contingent or otherwise and whether due
or to become due.
Section 2.25. Year 2000 Compliance. Except as otherwise disclosed on
------------ --------------------
Schedule 2.25, the Company, its Subsidiaries and its Management Systems and
- -------------
Production and Distribution Systems are or will be Year 2000 Compliant on or
before December 31, 1999. As used in this Section, the following terms have the
following meanings:
"Year 2000 Compliant" means, with respect to any person, that neither the
year change from 1999 to 2000 (the arrival of the date January 1, 2000) nor leap
year dates thereafter will (i) impair such person's ability to meet its
obligations to third parties or (ii) result in errors or corruption in
processing internally generated data or otherwise have a material adverse effect
on the operations or functionality of such person or its Management Systems or
Production and Distribution Systems, all of which will continue to operate as
intended prior to, during and after January 1, 2000.
"Management Systems" include, but are not limited to, all computer
hardware (including integrated circuit/chip and firmware) and software
applications that a person uses for managing and operating its business,
including without limitation functions such as accounting and billing, inventory
tracking and maintenance and vendor and supplier sourcing.
"Production and Distribution Systems" include, but are not limited to, all
computer hardware (including integrated circuit/chip and firmware) and software
applications, and all automated or electronic equipment, controls and other
systems used by a person in its production or distribution process, from the
point or input or raw material to final products and merchandise offered for
sale and distributed to customers.
10
<PAGE>
Section 2.26. Required Consents. Except for the consents specified on
------------ -----------------
Schedule 2.26, no consent, order, authorization, approval, declaration or
- -------------
filing, including, without limitation, any consent, approval or authorization of
or declaration or filing with any governmental authority or any party to a
material contract, is required on the part of the Company or any Subsidiary (and
no notices to or consents or other approvals from any of the lessors or any of
such lessors' mortgagees under any of the real property leases are required) for
or in connection with the execution, delivery or performance of this Agreement
and each of the other agreements contemplated hereby or the conduct of the
business by the Company or any Subsidiary after the Closing, or to prevent a
material default. The Company has no reason to believe that all of the required
consents and approvals not obtained as of the Closing will not be obtained
within six (6) months of Closing without material cost to the Company. Subject
to obtaining the consents specified on Schedule 2.26, the execution, delivery
-------------
and performance of this Agreement and the other instruments and agreements
contemplated hereby by the Company will not result in any material violation of,
be in material conflict with or constitute a material default under, any law,
statute, regulation, ordinance, contract, agreement, instrument, judgment,
decree or order to which the Company is a party or by which the Company is
bound.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser represents and warrants to the Company that:
Section 3.01. Investment Intent. The Preferred Shares to be acquired by
------------ -----------------
it are being acquired solely for its own account, for investment purposes only
and, with no present intention of distributing, selling, transferring or
otherwise disposing of them, and the Purchaser has no present plans to enter
into any such contract, undertaking, agreement or arrangement with respect
thereto.
Section 3.02. Economic Risk; Sophistication. The Purchaser is able to
------------ -----------------------------
bear the economic risk of an investment in the Preferred Shares to be acquired
by it, can afford to sustain a total loss on such investment and have such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risk of the proposed investment.
Section 3.03. Authority. The Purchaser is duly formed, validly existing
------------ ---------
and in good standing under the laws of its state of formation. The Purchaser has
all requisite power and authority to enter into this Agreement and perform its
obligations hereunder, and this Agreement constitutes the valid and binding
obligation of the Purchaser enforceable against it in accordance with its terms.
Section 3.04. Brokers. No finder, broker, agent, financial advisor or
------------ -------
other intermediary has acted on behalf of the Purchaser in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby, and no such person is entitled to any
11
<PAGE>
fee, payment, commission or other consideration with respect thereto as a result
of any arrangement made by the Purchaser.
Section 3.05. Limited Liability. The Purchaser understands that the
------------ -----------------
Preferred Shares to be acquired by it may not be sold, transferred or otherwise
disposed of without registration under the Act and any state securities laws, or
an exemption therefrom (supported by an opinion of counsel satisfactory to the
Company), and that in the absence of an effective registration statement
covering such securities or an available exemption from registration, such
securities may be required to be held indefinitely. The Purchaser is aware that
the Preferred Shares to be acquired by it may not be sold pursuant to Rule 144
promulgated under the Act, unless all of the conditions of that Rule are met and
that among the conditions for use of Rule 144 is the availability of current
information to the public about the Company and that the Company has no
obligation to make such information available. The Purchaser represents that, in
the absence of an effective registration statement covering the Preferred
Shares, it shall sell, transfer or otherwise dispose of such securities only in
a manner consistent with the representations set forth herein, and the
certificates for the Preferred Shares shall bear a legend to such effect.
Section 3.06. Accredited Investor. Purchaser is an "accredited investor"
------------ -------------------
as defined in Regulation D under the Act, and, together with its financial
advisors, if any, has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks involved in
purchasing the Preferred Shares.
Section 3.07. Purchaser Information. All of the information furnished by
------------ ---------------------
Purchaser in response to the Company's questionnaire is true and complete.
ARTICLE IV
CLOSING CONDITIONS
Section 4.01. Conditions to Closing. Purchaser's obligation to purchase
------------ ---------------------
the Preferred Shares to be acquired by it at the Closing is subject to the
satisfaction, as of the Closing Date, of the following conditions:
(a) Amendment. The Certificate of Incorporation of the Company
---------
shall have been amended to include the provisions set forth in Schedule 2.03
-------------
and, except as so amended, such Certificate of Incorporation shall not have been
further amended or modified.
(b) Contracts Terminated. The Company (and its Subsidiaries)
--------------------
and Seacoast shall simultaneously herewith terminate all of their pre-existing
contractual arrangements (specifically excluding this Agreement and any other
agreement executed in conjunction herewith or in conjunction with the
transactions contemplated hereby) that were entered into in connection with
Seacoast's purchase of the Note and the Warrant.
(c) Stockholders Agreement. The Company, the Purchaser, Boston
----------------------
Ventures Limited Partnership V ("Boston Ventures"), Thybo New Ventures Limited,
---------------
("Thybo") and
-----
12
<PAGE>
Daniel Nissanoff shall have entered into the Stockholders Agreement
substantially in the form of Exhibit 4.01(c) attached hereto.
---------------
(d) Registration Rights Agreement. The Company, the Purchaser, Boston
-----------------------------
Ventures and Thybo shall have entered into a registration rights agreement
substantially in the form of Exhibit 4.01(d) attached hereto.
---------------
(e) Representations and Warranties. The representations and
------------------------------
warranties contained in Article II shall be true and correct in all material
respects on and as of the Closing Date as though made on and as of such date
(except representations and warranties made as of a specified date, which shall
be true as of such date) except that the representations and warranties
contained in Section 2.05 will be true and complete in all respects.
(f) Certificate; Documents. The Purchaser shall have received a copy
----------------------
of each of the following, certified by the Secretary of the Company: (i) the
Company's Certificate of Incorporation, as amended, with evidence of filing with
the Secretary of State of the State of New York; (ii) a certificate of the
Secretary of State of the State of New York as to the legal existence and good
standing of the Company and listing all amendments to the Company's Certificate
of Incorporation then on file in his office; (iii) the Company's Bylaws; (iv)
the votes adopted by the stockholders and the resolutions adopted by the
directors of the Company authorizing the execution, delivery and performance of
this Agreement and the other agreements contemplated hereby, the amendment to
the Certificate of Incorporation and the issuance, sale and delivery of the
Preferred Shares hereunder; and (v) evidence of the qualification of the Company
as a foreign corporation in the States of Massachusetts and New Jersey. The
Purchaser shall also have received such other certificates and documents as the
Purchaser shall reasonably request.
(g) Legal Opinions. The Purchaser shall have received a legal opinion
--------------
in form and substance satisfactory to the Purchaser from Gould & Wilkie, LLP,
counsel for the Company, substantially in the form set forth in Exhibit 4.01(g)
hereof.
(h) Stock Certificates. Purchaser shall have received one or more
------------------
duly executed certificates representing the Preferred Shares to be acquired by
it.
(i) License Agreement. The Company and Information Handling Services,
-----------------
Inc. shall have entered into a license agreement substantially in the form of
Exhibit 4.01(i).
- ---------------
(j) Employment Agreement. Daniel Nissanoff and the Company shall have
--------------------
entered into an employment agreement substantially in the form of Exhibit
-------
4.01(j).
- -------
(k) Repurchase of Shares. The Company shall have redeemed all of the
--------------------
shares of Common Stock owned by Stacy Jargowsky Nissanoff.
(l) Payment of Interest, Fees and Expenses. The Company shall have
--------------------------------------
paid all accrued interest and all accrued fees and expenses (including fees and
expenses incurred in
13
<PAGE>
connection with the pay off of the Note) fees owing on and in connection with
the Note to the Purchaser such that the only amount which remains owing on the
Note at the Closing is principal.
ARTICLE V
MISCELLANEOUS
Section 5.01. Notices. All notices, demands or other communications
------------- -------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, or by nationally recognized overnight courier services,
or otherwise actually delivered:
(a) if to the Company or to Daniel Nissanoff,
Dast Corporation
d.b.a. Microcom Technologies
16 East 52nd Street
New York, N.Y. 10022
Attention: President
with a copy to:
Gould & Wilkie, LLP
1 Chase Manhattan Plaza
New York, N.Y. 10005-1401
Attention: Michael R. Manley, Esq.
(b) if to Purchaser to:
Seacoast Capital Partners Limited Partnership
c/o Seacoast Capital Corporation
55 Ferncroft Road
Danvers, Massachusetts 01923
Attention: Eben S. Moulton
Fax: 508-750-1301
with a copy to:
Patton Boggs, LLP
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Fax: 214-871-2688
14
<PAGE>
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
deposited with the courier, as the case may be.
Section 5.02. Severability and Governing Law. If any provision of this
------------ ------------------------------
Agreement is rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render invalid or
unenforceable any other provision of this Agreement. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without regard to its conflicts of laws provisions.
Section 5.03. Amendments, Etc. This Agreement may be changed, waived or
------------ ---------------
terminated only with the written consent of the Founder, the Company and the
Purchaser.
Section 5.04. Survival. All agreements, representations and warranties
------------ --------
contained herein and in any certificate, documentation or agreement delivered
pursuant hereto shall survive the execution and delivery of this Agreement, any
investigation at any time made, and the sale and purchase of the Preferred
Shares until two (2) years from the Closing or if earlier, until the Closing of
the initial public offering of the Company's securities.
Section 5.05. Expenses. The Company agrees to pay (a) the reasonable costs
------------ --------
and expenses of Purchaser in connection with the due diligence, investigation,
preparation, execution and delivery of this Agreement and the other Agreements,
instruments and documents relating thereto, including the reasonable fees and
expenses of counsel, (b) the reasonable fees and expenses of counsel to
Purchaser incurred with respect to any amendments or waivers required by the
Company (whether or not they become effective) under or with respect to the
Certificate of Incorporation, Bylaws, this Agreement or any agreement or
instrument contemplated hereby, and (c) in the event of a proven material breach
or default of the Company's obligations to Purchaser under the Certificate of
Incorporation, the Bylaws, this Agreement or any agreement or instrument
contemplated hereby, the fees and expenses of Purchaser incurred in connection
with the enforcement of the rights granted under any of the foregoing.
Section 5.06. Successors and Assigns. This Agreement, and all provisions
------------ ----------------------
hereof, shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, provided that, the Purchaser may
not assign its right to purchase Preferred Shares without the consent of the
Company in its sole discretion.
Section 5.07. Entire Agreement. This Agreement, the attached exhibits and
------------ ----------------
schedules and the other agreements, documents and instruments contemplated
hereby contain the entire understanding of the parties, and there are no further
or other agreements or understandings, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
Section 5.08. Counterparts. The Agreement may be executed in one or more
------------ ------------
counterparts by facsimile signature, and with the counterpart signatures pages,
each of which shall be an original, and all of which together shall constitute
one and the same Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as sealed instrument as of the date first above written.
DAST CORPORATION
d.b.a Microcom Technologies
By: /s/ Daniel Nissanoff President
------------------------------------
(Title)
SEACOAST CAPITAL PARTNERS
LIMITED PARTNERSHIP
By: Seacoast Capital Corporation
its general partner
By: /s/ John P. Buckels
---------------------------
Name: JOHN P. BUCKELS
---------------------------
Title: PRINCIPAL
---------------------------
/s/ Daniel Nissanoff
---------------------------------------
Daniel Nissanoff
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
EXHIBIT 10.19
PREFERRED STOCK PURCHASE AGREEMENT
by and among
PARTMINER, INC.,
INTEGRAL CAPITAL PARTNERS IV, L.P.,
INTEGRAL CAPITAL PARTNERS IV MS SIDE FUND, L.P.,
AGILE SOFTWARE CORPORATION,
IMPACT VENTURE PARTNERS, L.P., OMI PARTNERSHIP HOLDINGS LTD.,
GENERATION CAPITAL PARTNERS L.P.,
STATE BOARD OF ADMINISTRATION OF FLORIDA,
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.,
BROADVIEW SLP, THE GOLDMAN SACHS GROUP, INC.,
CAHNERS INFORMATION HOLDINGS, INC.,
SEACOAST CAPITAL PARTNERS LIMITED PARTNERSHIP,
SEACOAST INVESTORS LLC,
BOSTON VENTURES LIMITED PARTNERSHIP V, and
VULCAN SECURITIES LIMITED
____________________
Dated as of: February 16, 2000
____________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. SALE AND PURCHASE OF THE PREFERRED SHARES............................................... 1
1.1. Sale and Purchase................................................................... 1
1.2. Purchase Price and Payment.......................................................... 1
(a) Purchase Price.................................................................. 1
(b) Payment of Purchase Price....................................................... 1
(c) Restated Certificate of Incorporation........................................... 1
2. CLOSING................................................................................. 2
2.1. Time and Place...................................................................... 2
3. DELIVERY OF SHARE CERTIFICATES.......................................................... 2
3.1. Delivery of Share Certificates...................................................... 2
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................................ 2
4.1. Due Organization.................................................................... 2
4.2. Power and Authority................................................................. 2
4.3. No Breach; Consents................................................................. 2
4.4. Brokers............................................................................. 3
4.5. Purchasers' Acknowledgment.......................................................... 3
4.6. Investment in Preferred Shares...................................................... 3
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 3
5.1. Authorization of Preferred Shares................................................... 3
5.2. Due Organization and Qualification.................................................. 3
5.3. Capitalization; Options; Shareholder Rights......................................... 4
5.4. Constituent Documents............................................................... 4
5.5. Financial Statements................................................................ 4
5.6. Absence of Changes.................................................................. 4
5.7. Power and Authority................................................................. 5
5.8. Tax Matters......................................................................... 5
5.9. Compliance with Laws; Permits....................................................... 6
5.10. No Breach; Consents; Payments...................................................... 7
5.11. Litigation; Claims................................................................. 7
5.12. Employment Matters................................................................. 7
5.13. Material Agreements................................................................ 7
5.14. Real Estate........................................................................ 8
5.15. Company Intangible Property........................................................ 8
5.16. Title to Properties and Assets..................................................... 9
5.17. Employee Benefit Plans............................................................. 9
5.18. Transactions with Related Parties.................................................. 10
5.19. Environmental Matters.............................................................. 10
5.20. Year 2000.......................................................................... 10
5.21. Brokers............................................................................ 10
6. COVENANTS AND AGREEMENTS................................................................ 10
6.1. Pre-Closing Covenants and Agreements................................................ 10
(a) Ongoing Company Operations...................................................... 10
(b) Investigation by the Purchasers................................................. 11
(c) Further Assurances.............................................................. 11
(d) Additional Disclosure........................................................... 11
</TABLE>
i
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<TABLE>
<S> <C>
(e) Maintenance of Insurance........................................................ 11
(f) Supplemental Disclosure......................................................... 11
(g) Amended and Restated Stockholders Agreement..................................... 12
(h) Amended and Restated Registration Rights Agreement.............................. 12
6.2. Post-Closing Covenants and Agreements............................................... 13
(a) Fees and Disbursements.......................................................... 13
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE; PURCHASER DELIVERIES.... 12
7.1. No Legal Proceedings................................................................ 12
7.2. Representations and Warranties...................................................... 12
7.3. Purchase Price...................................................................... 12
7.4. Related Agreements.................................................................. 13
7.5. Consents............................................................................ 13
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS TO CLOSE; COMPANY DELIVERIES.. 14
8.1. No Legal Proceedings................................................................ 13
8.2. Agreements and Covenants............................................................ 13
8.3. Representations and Warranties...................................................... 13
8.4. Officer's Certificate............................................................... 13
8.5. Preferred Shares.................................................................... 13
8.6. Opinion of the Company's Counsel.................................................... 13
8.7. Secretary's Certificate............................................................. 13
8.8. Valid Existence Certificate......................................................... 15
8.9. Related Agreements.................................................................. 14
8.10. Consents........................................................................... 14
8.11. Restated Certificate of Incorporation.............................................. 14
8.12. Common Stock Purchase Agreement.................................................... 14
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................. 14
10. INDEMNIFICATION........................................................................ 16
10.1. Obligation of the Company to Indemnify............................................. 16
10.2. [INTENTIONALLY OMITTED].............................................................. 15
10.3. Notice to Indemnifying Party....................................................... 15
10.4. Limitations on Indemnification..................................................... 17
10.5. Exclusive Remedy................................................................... 16
11. MISCELLANEOUS.......................................................................... 16
11.1. Certain Definitions................................................................ 16
11.2. Publicity.......................................................................... 18
11.3. Notices............................................................................ 18
11.4. Entire Agreement................................................................... 19
11.5. Waivers and Amendments............................................................. 19
11.6. Binding Effect; Assignment......................................................... 21
11.7. Variations in Pronouns............................................................. 20
11.8. Counterparts....................................................................... 20
11.9. Headings........................................................................... 20
11.10. No Strict Construction............................................................ 20
11.11. Governing Law..................................................................... 20
11.12. No Third-Party Beneficiaries...................................................... 20
11.13. Subsidiaries...................................................................... 20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
11.14. Actions by Purchasers............................................................. 20
11.15. Other Engagements and Activities; Use of Name..................................... 21
</TABLE>
SCHEDULES:
Schedule 5.2 Qualifications
Schedule 5.3 Options, etc.
Schedule 5.5 Company Financial Statements
Schedule 5.6 Absence of Changes
Schedule 5.9 Compliance with Laws
Schedule 5.9A Permits
Schedule 5.10 Consents
Schedule 5.11 Litigation; Claims
Schedule 5.14 Leases
Schedule 5.15 Intangible Property
Schedule 5.16 Liens
Schedule 5.17 Employee Benefit Plans
Schedule 5.18 Related Transactions
Schedule 11.3 Purchaser Notice Addresses
EXHIBITS:
Exhibit A Allocation of Preferred Shares
Exhibit B Restated Certificate of Incorporation
Exhibit C Amended and Restated Stockholders Agreement
Exhibit D Amended and Restated Registration Rights Agreement
Exhibit E Legal Opinion of Kirkpatrick & Lockhart LLP
iii
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
----------------------------------
PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 16, 2000, by and between PartMiner, Inc., a New York corporation (the
"Company"), and Integral Capital Partners IV, L.P., Integral Capital Partners IV
MS Side Fund, L.P., Agile Software Corporation, Impact Venture Partners, L.P.,
OMI Partnership Holdings Ltd., Generation Capital Partners L.P., State Board of
Administration of Florida, Generation Parallel Management Partners L.P.,
Broadview SLP, The Goldman Sachs Group, Inc., Cahners Information Holdings,
Inc., Seacoast Capital Partners Limited Partnership, Seacoast Investors LLC,
Boston Venture Limited Partnership V and Vulcan Securities Limited (each (other
than the Company) individually, a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers an
aggregate of 10,302,905 restricted shares (the "Preferred Shares") of the
Company's Series B Convertible Preferred Stock, $.01 par value, for an aggregate
purchase price of $50,000,000, and the Purchasers desire to purchase the
Preferred Shares from the Company, upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. SALE AND PURCHASE OF THE PREFERRED SHARES
-----------------------------------------
1.1. Sale and Purchase. On the Closing Date (as defined in Section
-----------------
2.1 hereof), subject to the terms and conditions contained herein, the Company
hereby agrees to issue and sell to the Purchasers the number of Preferred Shares
set forth opposite each Purchaser's name on Exhibit A hereto, and each Purchaser
---------
hereby agrees to purchase from the Company such number of Preferred Shares.
1.2. Purchase Price and Payment.
--------------------------
(a) Purchase Price. The aggregate purchase price for the
--------------
Preferred Shares (the "Purchase Price") shall be $50,000,000 (or $4.853 per
Preferred Share). Each Purchaser shall pay that portion of the Purchase Price
set forth opposite its name on Exhibit A hereto.
---------
(b) Payment of Purchase Price. The Purchase Price shall,
-------------------------
subject to Section 3.1 hereof, be paid to the Company by the Purchasers on the
Closing Date via federal funds wire transfers of immediately available funds in
accordance with written instructions to be provided to the Purchasers by the
Company at least two (2) business days prior to the Closing Date.
(c) Restated Certificate of Incorporation. The Company shall
-------------------------------------
duly adopt and file with the Secretary of State of the State of New York, on or
before the Closing Date, a Restated Certificate of Incorporation (the "Restated
Certificate") of the Company setting
<PAGE>
forth the preferences, rights and limitations of the Preferred Stock
substantially in the form attached hereto as Exhibit B.
---------
2. CLOSING.
-------
2.1. Time and Place. The closing of the sale and purchase of the
--------------
Preferred Shares (the "Closing") shall take place at the offices of Kirkpatrick
& Lockhart LLP, 1251 Avenue of the Americas, New York, New York 10020, and is
expected to occur at 10:00 a.m., local time, on February 16, 2000. The date upon
which the Closing shall occur is hereinafter referred to as the "Closing Date."
3. DELIVERY OF SHARE CERTIFICATES.
------------------------------
3.1. Delivery of Share Certificates. At the Closing, the Company
------------------------------
shall, subject to the terms and conditions hereof, issue and deliver to each of
the Purchasers a stock certificate evidencing that number of Preferred Shares
set forth opposite such Purchaser's name on Exhibit A hereto, against payment by
such Purchaser of its portion of the Purchase Price.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Subject to
------------------------------------------------
Section 10 hereof, each Purchaser hereby severally represents and warrants to
the Company as follows:
4.1. Due Organization. Such Purchaser is duly organized, validly
----------------
existing and in good standing under the laws of the jurisdiction of its
organization.
4.2. Power and Authority. Such Purchaser has the requisite company
-------------------
power and authority to execute and deliver this Agreement and all other
agreements and certificates referred to in, or contemplated by, this Agreement
and to perform its obligations hereunder and thereunder. The execution, delivery
and performance of this Agreement and all other agreements and certificates
referred to in, or contemplated by, this Agreement have been duly authorized by
all necessary company action on the part of such Purchaser. This Agreement has
been duly executed and delivered by such Purchaser and is (and such other
agreements and certificates, when executed and delivered, will be) the valid and
binding obligations of such party enforceable against such party in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, moratorium, insolvency, reorganization or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
4.3. No Breach; Consents. The execution, delivery and performance of
-------------------
this Agreement and all other agreements or certificates referred to in, or
contemplated by, this Agreement by such Purchaser, and the consummation of the
transactions contemplated hereby and thereby, will not violate or conflict with
any (a) provisions of such Purchaser's organizational documents or agreements;
or (b) Law (as defined in Section 11.1 hereof) applicable to such Purchaser or
any of its property or operations. Other than any blue-sky or other securities
law filings, no consent, approval or authorization of, or declaration or filing
with ("Consent"), any governmental authority is required on the part of such
Purchaser in connection with the
2
<PAGE>
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.4. Brokers. Such Purchaser (or affiliate (as defined in Section
-------
11.1 hereof) thereof) has not made any agreement or taken any other action
causing anyone to become entitled to a finder's or broker's fee or commission as
a result of any of the transactions contemplated hereby.
4.5. Purchasers' Acknowledgment. Such Purchaser hereby acknowledges
--------------------------
that the Company has informed it that the Company is contemplating an initial
public offering of its equity securities, and hereby agrees not to use or
disclose such information other than directly in connection with the
transactions contemplated hereby.
4.6. Investment in Preferred Shares. Such Purchaser hereby
------------------------------
acknowledges that the Preferred Shares are not registered under the Securities
Act of 1933, as amended (the "Securities Act"), or under any state or foreign
securities laws and that the Preferred Shares are being sold to each Purchaser
materially in reliance upon the representations and warranties contained in this
Section 4.6. Each Purchaser further understands and acknowledges that the offer
and sale of the Preferred Shares are intended to be exempt from registration
under the Securities Act and under any applicable state and foreign securities
laws. In furtherance thereof, each Purchaser hereby represents and warrants to,
and agrees with, the Company that (i) it is purchasing Preferred Shares for such
Purchaser's own account, for investment purposes only and not with a view to the
resale or distribution thereof, except in compliance with the Securities Act and
any applicable state and foreign securities laws; (ii) it is an "accredited
investor," as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act; and (iii) it has such knowledge and experience in financial,
tax, and business matters so as to enable it to evaluate the merits and risks of
acquiring Preferred Shares and to make an informed investment decision with
respect thereto.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Subject to
---------------------------------------------
Sections 10 and 11.13 hereof, the Company hereby represents and warrants to the
Purchasers as follows:
5.1. Authorization of Preferred Shares. All corporate action
necessary for the issuance and sale of the Preferred Shares has been taken by
the Company and, when issued and delivered against delivery to the Company of
the Purchase Price, the Preferred Shares will be validly issued, fully paid and
non-assessable (except as provided in Section 630 of the New York Business
Corporation Law (the "BCL")).
5.2. Due Organization and Qualification. The Company is duly
----------------------------------
organized, validly existing and in good standing under the laws of the State of
New York. The Company has all requisite corporate power and authority to own,
lease and operate its assets and property and to carry on its business as
presently conducted and as presently contemplated. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the nature of its business or the location of its property requires such
qualification, except those where the failure to be so qualified would not have
a material adverse effect on its business,
3
<PAGE>
operations, assets or condition (financial or otherwise), taken as a whole. The
jurisdictions in which the Company is qualified to do business are set forth on
Schedule 5.2 hereto.
- ------------
5.3. Capitalization; Options; Shareholder Rights. The authorized
-------------------------------------------
capital stock of the Company consists solely of 150,000,000 shares of common
stock, $.0001 par value per share (the "Common Stock"), and 10,409,027 shares of
preferred stock, $.01 par value per share, of which 106,122 shares are
designated as Series A Convertible Preferred Stock ("Series A Preferred Stock")
and 10,302,905 shares are designated as Series B Convertible Preferred Stock
("Series B Preferred Stock"). Immediately prior to the transactions
contemplated hereby, there are 46,553,700 shares of Common Stock, 106,122 shares
of Series A Preferred Stock and no shares of Series B Preferred Stock issued and
outstanding, and there are not any other shares of capital stock of the Company
issued or outstanding. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized, and are validly issued, fully
paid and non-assessable, except as provided in Section 630 of the BCL. Except
as set forth on Schedule 5.3 hereto, there are no outstanding obligations,
------------
options, warrants, convertible securities, subscriptions, or other commitments
or rights (matured or contingent) of any nature to acquire or subscribe for any
securities or other equity interest of or in the Company. Except as set forth
on Schedule 5.3, there are no bonds, debentures, notes or other indebtedness of
------------
the Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matter on which shareholders of the
Company may vote. Except as set forth on Schedule 5.3, there are no preemptive
------------
rights, rights of first refusal, voting rights, change of control or similar
rights, anti-dilution protections or other rights which any shareholder,
officer, employee or director of the Company or any other person (as defined in
Section 11.1 hereof) would be entitled to exercise or invoke as a result of the
issuance and sale by the Company of the Preferred Shares.
5.4. Constituent Documents. True and complete copies of the
---------------------
Company's Certificate of Incorporation and By-laws, as in effect on the date
hereof (collectively, the "Company Constituent Documents"), have been delivered
to the Purchasers (or a representative thereof).
5.5. Financial Statements. The audited consolidated balance sheet
--------------------
and related statements of income and cash flow for the Company as at and for the
fiscal year ended on December 31, 1998 (the "1998 Financial Statements") and the
unaudited consolidated balance sheet (the "December 31, 1999 Balance Sheet") and
related statements of income and cash flow for the Company as at and for the
fiscal year ended on December 31, 1999 (collectively, the "1999 Financial
Statements"; and together with the 1998 Financial Statements, the "Financial
Statements"), true and complete copies of all of which have been delivered to
the Purchasers (or a representative thereof) and which are attached hereto as
Schedule 5.5, present fairly in all material respects the consolidated financial
- ------------
condition of the Company as at the dates indicated therein and the consolidated
results of operation of the Company for the periods covered thereby. The
Financial Statements have been prepared in accordance with GAAP (as defined in
Section 11.1 hereof) consistently applied. The financial books and records of
the Company are in all material respects complete and correct, have been
maintained in accordance with good business
4
<PAGE>
practices, and accurately reflect in all material respects the bases for the
consolidated financial condition and results of operation set forth in the
Financial Statements.
5.6. Absence of Changes. Except as set forth on Schedule 5.6
------------------ ------------
hereto, since the date of the December 31, 1999 Balance Sheet, there has not
been (i) any significant adverse change in the financial condition, results of
operations, assets or business of the Company, (ii) any repayment of any
indebtedness or any borrowing of or agreement to borrow any money or any
material Liabilities (as defined in Section 11.1 hereof) incurred by the
Company, other than Liabilities incurred in the ordinary course of business,
(iii) any material asset or property of the Company made subject to a Lien, (iv)
any declaration or payment of dividends on, or other distributions with respect
to, or any direct or indirect redemption or repurchase of, any shares of the
capital stock of the Company, (v) any issuance of any stocks, bonds or other
securities of the Company, or any options, warrants or rights or agreements or
commitments to purchase or issue such securities (other than the Preferred
Shares), (vi) any mortgage, pledge, sale, assignment or transfer of any material
tangible or intangible assets of the Company, except with respect to assets
effected in the ordinary course of business to persons not related to the
Company, (vii) any loan by the Company to any officer, director, employee or
shareholder of the Company or any affiliate thereof, (viii) any material damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the assets, property or business of the Company, (ix) any purchase or other
acquisition of assets or property by the Company other than in the ordinary
course of business, (x) any significant change in the accounting methods or
practices followed by the Company, (xi) any operation of the business of the
Company outside of the ordinary course of business and inconsistent with past
practice, (xii) any waiver of any valuable right of the Company, or the
cancellation or reduction of any material debt or claim held by the Company, or
(xiii) except as provided by this Agreement, any commitment or agreement
(contingent or otherwise) to do any of the foregoing.
5.7. Power and Authority. The Company has the requisite corporate
-------------------
power and authority to execute and deliver this Agreement and all other
agreements and certificates referred to in, or contemplated by, this Agreement
and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and all other agreements and
certificates referred to in, or contemplated by, this Agreement have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and is (and such
other agreements and certificates, when executed and delivered, will be) the
valid and binding obligations of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law).
5.8. Tax Matters. The Company has timely filed all Tax Returns (as
-----------
defined in Section 11.1 hereof) that it has been required to file through the
date hereof, and has paid in full all Taxes (as defined in Section 11.1 hereof)
which were due and payable by it through the date hereof. The provisions for
Taxes reflected on the December 31, 1999 Balance Sheet are adequate to cover
accrued and unpaid Taxes of the Company for all periods ending on or before
5
<PAGE>
December 31, 1999 and, to the Company's knowledge (as defined in Section 11.1
hereof), nothing has occurred subsequent to that date to make such provisions
inadequate. The Company has established and is maintaining current accruals
that are accurately reflected in the books and records of the Company and are
adequate for the payment of any Taxes incurred but not yet due and payable with
respect to the property and operations of the Company through the date hereof.
No waivers or extensions of any applicable statute of limitations for the
assessment or collection of Taxes with respect to any Tax Returns of the Company
are currently in effect or are currently proposed. The Company has collected or
withheld and paid over to the proper governmental or regulatory bodies all Tax-
related amounts required to be so collected or withheld and paid over under all
applicable Laws. No action, suit, proceeding, investigation, audit, claim or
assessment is presently pending or, to the Company's knowledge, threatened with
regard to any Taxes that relate to the Company for which the Company is or could
reasonably be expected to be liable. There is no unresolved written claim by a
taxing authority in any jurisdiction where the Company does not anticipate to
file Tax Returns that it is or could reasonably be expected to be subject to
taxation by such jurisdiction. There are no Liens for Taxes (other than for
Taxes not yet due and payable) upon any assets or property of the Company. Each
Purchaser hereby acknowledges that the foregoing representations and warranties
made in this Section 5.8 do not apply in respect of Accurate Components Inc.
("Accurate") or Market Trading Concepts Inc. ("Market Trading") (recently
acquired, wholly-owned subsidiaries of the Company), but, to the knowledge of
the Company, such representations and warranties are true and correct with
respect to Accurate and Market Trading. Each Purchaser hereby further
acknowledges that the representations and warranties made in respect of Accurate
and Market Trading as to Tax matters in that certain Stock Purchase Agreement by
and between the Company, Accurate, Market Trading and Anthony Arena, dated
November 12, 1999, have been made available to the Purchasers (or a
representative thereof) for their review.
The Company (i) has not made any other election pursuant to the Code
(as defined in Section 11.1 hereof) other than elections that relate to matters
of accounting, depreciation, or amortization, that could reasonably be expected
to have a material adverse effect on its financial condition, its business as
presently conducted or presently proposed to be conducted or any of its property
or assets; and (ii) at no time has filed a consent to the application of Section
341(f)(2) of the Code to any property or assets held, acquired or to be acquired
by it, and will not file any such consent prior to Closing. The Company is not
a party to any tax allocation or sharing agreement, and has no liability for the
Taxes of any other entity under Treasury Regulation (S)1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
5.9. Compliance with Laws; Permits. Except as set forth on
-----------------------------
Schedule 5.9 hereto, the Company is in compliance in all material respects with
- ------------
all Laws applicable to it or any of its property or operations. The Company has
not received any written notice from any governmental authority of its violation
or alleged violation of any Law. The Company has all licenses, permits, orders
and approvals of federal, state, local and foreign governmental or regulatory
bodies necessary for the conduct of its business and operations as currently
conducted (collectively, "Permits"). All material Permits of the Company are
set forth on Schedule 5.9A hereto and are valid and in full force and effect.
-------------
No violations have occurred in respect of any
6
<PAGE>
such Permit and no action or proceeding is pending nor, to the Company's
knowledge, threatened to revoke or limit any such Permit. The representations
and warranties contained in the first two sentences of this Section 5.9 do not
cover matters relating to Environmental Laws (as defined in Section 11.1
hereof), which matters are covered by Section 5.19 hereof.
5.10. No Breach; Consents; Payments. The execution, delivery and
-----------------------------
performance of this Agreement and all other agreements or certificates referred
to in, or contemplated by, this Agreement by the Company and the consummation of
the transactions contemplated hereby and thereby will not (i) result in any Lien
upon any property of the Company; or (ii) violate, conflict with or otherwise
result in the breach of any of the terms and conditions of, result in a material
modification of or accelerate or trigger the rights of any person under, or
constitute (or, with the giving of notice or lapse of time or both, would
constitute) a default or termination under (a) any of the Company Constituent
Documents; (b) assuming the Consents and waivers listed on Schedule 5.10 hereto
-------------
are obtained on or prior to the Closing Date, any material contract or other
agreement to which the Company is a party or by or to which the Company or any
of its property is bound or subject; (c) any Law applicable to the Company or
any of its property or operations; or (d) any Permit. Except as set forth on
Schedule 5.10, and other than any blue-sky or other securities law filings, no
- -------------
Consent is required on the part of the Company in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby. There are no payments, Liabilities or
obligations under or pursuant to any Law or material contract or other agreement
to which the Company is a party which are required to be made or performed by
the Company to any person, arising out of or as a result of the transactions
contemplated by this Agreement.
5.11. Litigation; Claims. Except as set forth on Schedule 5.11
------------------ -------------
hereto, there are no suits or actions, administrative, arbitration or other
proceedings or governmental investigations pending or, to the Company's
knowledge, threatened against or affecting the Company or any of its property or
assets. Except as set forth on Schedule 5.11, to the Company's knowledge, no
-------------
person has notified the Company of a material claim against the Company alleging
any personal property or economic injury, loss or damage incurred as a result of
or relating to the use of any products sold by or on behalf of, or services
rendered by, the Company. There is no judgment, order, injunction, decree or
award against the Company which is not satisfied and remains outstanding.
5.12. Employment Matters. The Company has not at any time during
------------------
the last three (3) years had nor, to the Company's knowledge, is there now
threatened any walkout, strike, picketing, work stoppage, planned work slowdown
or any similar occurrence. There are no material controversies or grievances
pending or, to the Company's knowledge, threatened between the Company and any
of its employees. No union or other collective bargaining unit has been
certified or formally recognized by the Company.
5.13. Material Agreements. The Company is in compliance with the
-------------------
terms and conditions of its contracts and other agreements, except where the
failure to be in such compliance could not reasonably be expected to have a
material adverse effect on the business, operations, assets or condition
(financial or otherwise) of the Company, taken as a whole.
7
<PAGE>
5.14. Real Estate. The Company does not own, in fee or otherwise,
-----------
or have the right or obligation to acquire any real property or buildings.
Schedule 5.14 hereto sets forth all leases, subleases or other agreements (oral
- -------------
or written) pursuant to which the Company has the right to use or occupy any
real property (the "Leases"). True and correct copies of the Leases have been
delivered or made available to the Purchasers (or a representative thereof).
Each Lease is a valid agreement in full force and effect and creates a good and
valid leasehold estate in the property leased thereby. The Company is in
compliance in all material respects with the provisions of each Lease and no
other party thereto is, to the Company's knowledge, in material default
thereunder. The Company is not a real property holding company within the
meaning of Section 847 of the Code (as defined in Section 11.1 hereof).
5.15. Company Intangible Property. Schedule 5.15 hereto sets forth
--------------------------- -------------
all United States and foreign patents, registered copyrights, registered
trademarks, service marks and trade names, applications for any of the
foregoing, and material written permits, grants, options and licenses or other
rights in writing running to or from the Company relating to any Company
Intangible Property (as defined below). The Company has either all right, title
and interest in, or valid and binding rights under contract to use, all items of
Company Intangible Property material to, or necessary to conduct, the business
of the Company as presently conducted. No material item of the Company
Intangible Property (other than any patents and patent rights) infringes upon or
violates any rights owned or held by any other person. To the Company's
knowledge, none of the patents and patent rights included in the Company
Intangible Property infringes upon or violates any rights owned or held by any
other person. There is not pending nor, to the Company's knowledge, threatened
any claim, suit or action against the Company contesting or challenging the
rights of the Company in or to any Company Intangible Property or the validity
of any of the Company Intangible Property. To the Company's knowledge, there is
no infringement upon or unauthorized use of any material item of the Company
Intangible Property owned by the Company by any third party. The Company is not
in default (or, with the giving of notice or lapse of time or both, would be in
such default) under any material contract to use Company Intangible Property
required to be disclosed on Schedule 5.15. Neither the Company, nor any
-------------
associate (as defined in Section 11.1 hereof) thereof nor any officer, director
or affiliate or immediate family member, as the case may be, thereof has any
right to or interest in any Company Intangible Property, including, without
limitation, any right to payments (by royalty or otherwise) in respect of any
use or transfer thereof.
"Company Intangible Property" means all patents and patent rights,
trademarks and trademark rights, trade names and tradename rights, service marks
and service mark rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, designs, trade secrets, industrial
models, proprietary data, methodologies, computer programs and software
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how, inventions, works
of authorship, management information systems, and all pending applications for
and registrations of patents, trademarks, service marks and copyrights used in
the business of the Company, in each such case, including all forms (e.g.,
----
electronic media, computer disks) in which such items are recorded.
8
<PAGE>
5.16. Title to Properties and Assets. The Company has good title
------------------------------
to all of the property and assets owned or purported to be owned by it and
reflected as assets on the December 31, 1999 Balance Sheet and those not so
reflected on the December 31, 1999 Balance Sheet because not required to be
reflected thereon, but which are used in the Company's business, or because
acquired by the Company since the date of the December 31, 1999 Balance Sheet
(except for inventory or other assets disposed of or licensed in the ordinary
course of business since the date of the December 31, 1999 Balance Sheet), free
and clear of any Lien, except (i) Liens for Taxes not yet due and payable; (ii)
Liens of materialmen, mechanics, carriers, landlords and like persons which are
not due and payable or which are being contested in good faith and which are not
material in the aggregate; and (iii) Liens as set forth on Schedule 5.16 hereto.
-------------
Other than in the ordinary course of business and/or as disclosed on Schedules
---------
5.15 and 5.18 hereto, no person has any written or oral agreement, option,
- ----- ----
understanding, commitment or any right or privilege to purchase, lease or
license any material item of the Company's property or assets.
5.17. Employee Benefit Plans. Schedule 5.17 hereto contains a true
---------------------- -------------
and complete list of all Employee Benefit Plans maintained by the Company (or
any affiliate thereof) or under which the Company has any obligations (other
than obligations to make current wage or salary payments) in respect of any of
the employees of the Company or their beneficiaries (each individually, an
"Employee Benefit Plan" and collectively, the "Employee Benefit Plans"). The
Company has delivered or made available to the Purchasers (or a representative
thereof) copies of all material documents, as such may have been amended to the
date hereof, embodying the Employee Benefit Plans, all trust documents, all
reasonably available determination letters issued by the Internal Revenue
Service (the "IRS"), employee booklets, summaries and descriptions, the most
recent compliance and nondiscrimination tests (if any), the most recent Form
5500 reports, standard COBRA forms and notices, any correspondence or inquiry by
the IRS or the Department of Labor, and any material employee communications, in
each case relating to any Employee Benefit Plan.
All Employee Benefit Plans have complied in all material respects in
form, operation and administration with their respective provisions, any
applicable provisions of ERISA, the Code and all other applicable Laws. All
contributions to and payments from the Employee Benefit Plans that have been
required to be made in accordance with the provisions of the Employee Benefit
Plans and, where applicable, ERISA and the Code have been made or are adequately
accrued and reflected on the books and records of the Company. There are no
unfunded material Liabilities in respect of any such Employee Benefit Plan.
Neither the Company nor, to the Company's knowledge, any of its officers,
employees or agents has committed any breach of fiduciary responsibility with
respect to the Employee Benefit Plans to which ERISA is applicable which could
reasonably be expected to subject the Company to any material Liability under
ERISA. The Company is not obligated to make contributions to any Multiemployer
Plan (as defined in Section 11.1 hereof). There are options covering 2,167,300
shares of Common Stock eligible to be granted and which have not heretofore been
granted pursuant to existing stock option, stock appreciation, stock grant or
similar plans of the Company.
9
<PAGE>
5.18. Transactions with Related Parties. Except as set forth on
---------------------------------
Schedule 5.18 hereto, no director, officer or affiliate of the Company nor any
- -------------
of their immediate family members, as the case may be: (i) has borrowed money
from or loaned money to the Company that has not been repaid; (ii) has an
interest in any property, rights or assets owned and/or used by the Company in
its business; or (iii) is party to any contract or other agreement with the
Company or is engaged in any material transaction or arrangement with the
Company.
5.19. Environmental Matters. The Company has: (i) complied in all
---------------------
material respects with all Environmental Laws; (ii) not received any written
notice from any governmental authority that any real property now or formerly
owned, leased, managed, operated or otherwise used by it is on any federal,
state or foreign "superfund" or similar list or has been the site of any
activity giving rise to any Liability; (iii) not received any written notice of
any Environmental Claim (as defined in Section 11.1 hereof); and (iv) stored,
handled, used, released, discharged and disposed of all substances used in their
operations and wastes or by-products from their operations, whether Hazardous
Materials (as defined in Section 11.1 hereof) or not, in material compliance
with all Environmental Laws. To the Company's knowledge, no Hazardous Materials
or other substances or wastes have been spilled, released, discharged or
disposed of from, on or under any property owned, leased or operated by the
Company during the Company's occupancy. The Company has no material Liability
with respect to the clean-up or remediation of any treatment, storage or
disposal site or facility.
5.20. Year 2000. The Company's critical information technology
---------
systems that are used in, or required for the conduct of, its business as
currently conducted or presently proposed to be conducted may be used during and
after the calendar year 2000 without material error or delay relating to date
data and will not otherwise fail to: (i) deal with or account for transitions
or comparisons from, into and between the years 1999 and 2000 accurately; (ii)
recognize or accurately process any specific date in the year 1999 or 2000; or
(iii) account accurately for the year 2000's status as a leap year, including
recognition and processing of the correct date on February 29, 2000.
5.21. Brokers. The Company has not made any agreement or taken any
-------
other action causing anyone to become entitled to a finder's or broker's fee or
commission as a result of the transactions contemplated hereby.
6. COVENANTS AND AGREEMENTS.
------------------------
6.1. Pre-Closing Covenants and Agreements. The parties covenant
------------------------------------
and agree from the date hereof until the earlier of the Closing Date or the
termination of this Agreement (in accordance with its terms) as follows:
(a) Ongoing Company Operations. The Company shall conduct its
--------------------------
business diligently and substantially in the same manner as heretofore conducted
and use reasonable efforts to preserve the present relationships between the
Company and its suppliers, distributors, customers and others having significant
business relations with it, and shall not, except with the Purchasers' prior
written consent or as contemplated by this Agreement: (i) declare, make or pay
any distributions or dividends on its capital stock or any other equity
securities; (ii) enter into or
10
<PAGE>
amend any agreement or transaction with any person or entity who or which is an
associate or an affiliate of the Company; (iii) permit or engage in any of the
actions or transactions set forth in Section 5.6 hereof; (iv) issue or grant any
shares of capital stock or other securities, whether or not such are exercisable
for, convertible into or exchangeable for shares of capital stock or such other
securities of the Company or any of its subsidiaries, other than the Preferred
Shares and stock options granted to employees, officers or directors (or Common
Stock issued upon the exercise of stock options); (v) amend or repeal the
Company Constituent Documents; or (vi) enter into any agreement to take any of
the foregoing actions except as required by this Agreement.
(b) Investigation by the Purchasers. The Purchasers may, through
-------------------------------
their respective authorized representatives (including, without limitation,
their counsel, accountants and consultants), upon reasonable prior notice make
such investigations of the property, offices and operations of the Company and
such review of the financial condition of the Company as they deem necessary or
advisable in connection with the transactions contemplated hereby, including,
without limitation, any investigations enabling them to familiarize themselves
with such property, offices, operations and financial condition; provided, that
--------
no unreasonable interference with the normal business operations of the Company
shall thereby be caused. The Company shall permit the Purchasers and their
respective authorized representatives, subject to the foregoing provisions of
this Section 6.1(b), to have access to the premises and to the books and records
of the Company upon reasonable prior notice, and shall permit such Purchasers
the right to make copies of such books and records and excerpts therefrom.
(c) Further Assurances. Each of the parties shall prior to, on or
------------------
after the Closing, as may be appropriate, execute such documents and other
papers and take such other further actions as may be reasonably required to
carry out the provisions hereof and to effectuate the transactions contemplated
by this Agreement. Each party shall use its reasonable best efforts to fulfill
or obtain the fulfillment of the conditions to the Closing within such party's
control, including obtaining any Consents required in connection herewith.
(d) Additional Disclosure. The Company shall promptly notify the
---------------------
Purchasers and furnish the Purchasers with any information that such other party
may reasonably request with respect to the occurrence of any event or condition
or the existence of any fact that would cause any of the conditions to such
party's obligation to consummate the transactions contemplated by this Agreement
not to be fulfilled.
(e) Maintenance of Insurance. Until the Closing, the Company shall
------------------------
maintain in full force and effect its current insurance policies unless,
simultaneously with any termination or lapse thereof, replacement policies shall
be in full force and effect that provide coverage at levels and amounts equal to
or greater than the coverage under such current policies.
(f) Supplemental Disclosure. Each of the parties agrees that, with
-----------------------
respect to the representations and warranties made by it in this Agreement, it
will have a continuing obligation to promptly supplement and/or amend the
Schedules to this Agreement with respect to any matter hereafter arising or
discovered that, if existing or known on the date of this
11
<PAGE>
Agreement, would have been required to be set forth in, or described in the
Schedules to, this Agreement.
(g) Amended and Restated Stockholders Agreement. At the Closing,
-------------------------------------------
the Purchasers shall duly execute and deliver to the Company, and thereby agree
to be bound by, the Third Amended and Restated Stockholders Agreement, between
the Company and the current shareholders of the Company substantially in the
form of Exhibit C attached hereto (the "Stockholders Agreement").
(h) Amended and Restated Registration Rights Agreement. At the
--------------------------------------------------
Closing, the Purchasers shall duly execute and deliver to the Company, and
thereby agree to be bound by, the Third Amended and Restated Registration Rights
Agreement, between the Company and the current shareholders of the Company
substantially in the form of Exhibit D attached hereto (the "Registration Rights
---------
Agreement").
6.2. Post-Closing Covenants and Agreements. The Company and the
-------------------------------------
Purchasers hereby covenant and agree as follows:
(a) Fees and Disbursements. The Company and the Purchasers shall
----------------------
pay their own fees, costs and expenses, including the fees and disbursements of
any counsel and accountants retained by any of them, incurred in connection with
the preparation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby, whether or not the transactions contemplated
hereby are consummated; provided, however, that the Company shall reimburse the
-------- -------
Purchasers for up to an aggregate of $15,000 of their fees, costs and expenses
if the transactions contemplated hereby shall close.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE;
---------------------------------------------------------------
PURCHASER DELIVERIES. The obligation of the Company to complete the Closing is
- --------------------
subject to the fulfillment on or prior to the Closing Date of all of the
following conditions, any one or more of which (other than Section 7.1 hereof)
may be waived by the Company in writing:
7.1. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain, materially
delay or prohibit the transactions contemplated hereby.
7.2. Representations and Warranties. The representations and
------------------------------
warranties of the Purchasers contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties shall have been made
on and as of the Closing Date.
7.3. Purchase Price. The Company shall have received the full
--------------
Purchase Price from the Purchasers; provided, however, that if one or more of
the Purchasers shall, for any reason, fail to deliver its portion of the
Purchase Price, the Company may, in its sole discretion, elect to close the
transactions contemplated hereby and issue and sell the Preferred Shares to
those Purchasers who shall have delivered their respective portions of the
Purchase Price.
12
<PAGE>
7.4. Related Agreements. The Purchasers shall have duly executed and
------------------
delivered to the Company the Stockholders Agreement and the Registration Rights
Agreement.
7.5. Consents. The Company shall have received all Consents and
waivers from its existing shareholders necessary to effectuate the transactions
contemplated hereby.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS TO
------------------------------------------------------------
CLOSE; COMPANY DELIVERIES. The obligations of the Purchasers to complete the
- -------------------------
Closing are subject to the fulfillment on or prior to the Closing Date of all of
the following conditions, any one or more of which (other than Section 8.1
hereof) may be waived by the Purchasers, other than the condition set forth in
Section 8.5 below which may be waived only by a Purchaser severally, in writing:
8.1. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain, materially
delay or prohibit the transactions contemplated hereby.
8.2. Agreements and Covenants. On or before the Closing Date, the
------------------------
Company shall have complied with and duly performed in all material respects all
agreements and covenants on its part to be complied with and performed by such
date pursuant to this Agreement.
8.3. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties shall have been made on and as
of the Closing Date.
8.4. Officer's Certificate. The Purchaser shall have received a
---------------------
certificate, dated the Closing Date, executed by a duly authorized officer of
the Company certifying that the conditions set forth in Sections 8.1, 8.2 and
8.3 hereof shall have been fulfilled.
8.5. Preferred Shares. Each Purchaser shall have received from the
----------------
Company a stock certificate evidencing the number of Preferred Shares set forth
opposite such Purchaser's name on Exhibit A hereto; provided, that any Purchaser
--------- --------
in respect of which the Company shall be prepared to issue and sell Preferred
Shares pursuant hereto shall not be able to avail itself of this condition as it
may relate to other Purchasers.
8.6. Opinion of the Company's Counsel. The Purchasers shall have
--------------------------------
received a legal opinion, dated the Closing Date, of Kirkpatrick & Lockhart LLP,
corporate counsel to the Company, substantially in the form of Exhibit E
---------
attached hereto.
8.7. Secretary's Certificate. The Purchasers shall have received a
certificate, dated the Closing Date and executed by the Secretary of the
Company, setting forth a copy of the resolutions adopted by the Board of
Directors of the Company duly authorizing and approving the execution and
delivery of this Agreement and the consummation of the transactions
13
<PAGE>
contemplated hereby, a copy of the Company's Bylaws and a copy of the Restated
Certificate in the form filed with the New York Secretary of State.
8.8. Valid Existence Certificate. The Company shall have delivered
---------------------------
to the Purchasers a certificate evidencing the valid existence of the Company
certified by the Secretary of State of the State of New York.
8.9. Related Agreements. The Company and the other parties thereto
------------------
shall have duly executed and delivered to the Purchasers the Stockholders
Agreement and the Registration Rights Agreement.
8.10. Consents. The Company shall have received all Consents and
waivers from its existing shareholders necessary to effectuate the transactions
contemplated hereby.
8.11. Restated Certificate of Incorporation. The Company shall have
-------------------------------------
provided to the Purchasers evidence that the Company's Restated Certificate of
Incorporation has been filed with the New York Secretary of State.
8.12. Common Stock Purchase Agreement. As a condition to the
-------------------------------
obligations of Integral Capital Partners IV, L.P. and Integral Capital Partners
IV MS Side Funds, L.P. hereunder only, the Common Stock Purchase Agreement by
and among Bruce and Lynne Friedman and Integral Capital Partners IV, L.P. and
Integral Capital Partners IV MS Side Fund, L.P. shall have been executed by and
delivered to the parties thereto.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
------------------------------------------
right of the Purchasers fully to investigate the affairs and conditions of the
Company, the Purchasers have the right to rely upon the representations,
warranties, covenants and agreements of the Company expressly contained in this
Agreement. All representations and warranties contained in this Agreement
(including the Schedules hereto), except for those representations and
warranties contained in Sections 4.2, 4.4, 4.6, 5.1, 5.2, 5.3, 5.4, 5.7, 5.8,
5.10, 5.17, 5.18 and 5.21 hereof, shall survive for eighteen (18) months
following the Closing Date. The representations and warranties contained in
Section 5.18 hereof shall survive for three (3) years following the Closing
Date, the representations and warranties in Sections 4.2, 4.6, 5.1, 5.2, 5.3,
5.4, 5.7 and 5.10 hereof shall survive the Closing Date indefinitely, and the
representations and warranties contained in Sections 4.4, 5.8, 5.17 and 5.21
hereof shall survive until the expiration of any applicable statute of
limitations. All covenants and agreements contained herein which are to be
performed after the Closing shall survive until fully performed in accordance
with their terms, and all covenants and agreements contained herein which are,
in accordance with their terms, to be performed at or prior to the Closing shall
survive for eighteen (18) months following the Closing Date. No claim or cause
of action resulting from a breach hereunder may be asserted unless asserted in
writing to the party as to which there is alleged a breach prior to the
expiration of the applicable survival period; provided, however, that the
-------- -------
representations, warranties, covenants and agreements contained herein shall
survive after the applicable survival period with respect to any claim made in
writing in accordance with this Agreement by a party prior to the expiration
thereof until, and shall expire when, such claim or cause of action is finally
resolved.
14
<PAGE>
10. INDEMNIFICATION.
---------------
10.1. Obligation of the Company to Indemnify. Subject to the
limitations and expiration dates contained in Section 9 hereof and to this
Section 10, the Company shall indemnify, defend and hold harmless the Purchasers
and each of their respective directors, officers, equityholders, affiliates,
successors and permitted assigns from and against, and shall pay and/or
reimburse the foregoing persons for, any and all losses, liabilities, claims,
obligations, damages, costs and expenses (including reasonable attorneys' fees
and disbursements and other costs incurred or sustained by an Indemnitee (as
defined below) in connection with the defense or prosecution of any claim,
action or proceeding) (collectively, "Losses") relating to or arising out of the
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement.
10.2. [intentionally omitted]
10.3. Notice to Indemnifying Party. If a Purchaser (or any related
----------------------------
indemnitees) receives notice of any claim or the commencement of any action or
proceeding (the "Indemnitee") with respect to which the Company is obligated to
provide indemnification (the "Indemnifying Party") pursuant to Section 10.1
hereof, the Indemnitee shall give the Indemnifying Party written notice thereof
within a reasonable period of time following the Indemnitee's receipt of such
notice. Such notice shall describe the claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the Losses that have been or may
be sustained by the Indemnitee. The Indemnifying Party may, subject to the
other provisions of this Section 10.3, compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
any such matter involving the asserted liability of the Indemnitee in respect of
a third-party claim. If the Indemnifying Party elects to compromise or defend
such asserted liability, it shall within thirty (30) days (or sooner, if the
nature of the asserted liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee, shall reasonably cooperate, at the request
and reasonable expense of the Indemnifying Party, in the compromise of, or
defense against, such asserted liability. The Indemnifying Party will not be
released from any obligation to indemnify the Indemnitee hereunder with respect
to a claim without the prior written consent of the Indemnitee, unless the
Indemnifying Party delivers to the Indemnitee a duly executed agreement settling
or compromising such claim with no monetary liability to or injunctive relief
against the Indemnitee and a complete release of the Indemnitee with respect
thereto. The Indemnifying Party shall have the right, except as otherwise
provided below in this Section 10.3, to conduct and control the defense of any
third-party claim made for which it has been provided notice hereunder. All
reasonable costs and fees incurred with respect to any such claim will be borne
by the Indemnifying Party. The Indemnitee will have the right to participate,
but not control, at its own expense, the defense or settlement of any such
claim; provided, that if the Indemnitee and the Indemnifying Party shall have
--------
conflicting claims or defenses, the Indemnifying Party shall not have control of
such conflicting claims or defenses and the Indemnitee (and all related
Indemnitees) shall be entitled to appoint a separate counsel for such claims and
defenses at the reasonable cost and expense of the Indemnifying Party. If the
Indemnifying Party chooses to defend any claim, the Indemnitee
15
<PAGE>
shall make available to the Indemnifying Party any books, records or other
documents within its control that are reasonably required for such defense.
10.4. Limitations on Indemnification. (a) The Company shall be
------------------------------
obligated to indemnify any Indemnitee(s) pursuant to Section 10.1 hereof with
respect to any Losses incurred by such Indemnitee(s) only if and to the extent
that the aggregate amount of Losses for claims made by all Indemnitees shall
exceed $200,000, in which case only the excess over $200,000 shall be subject to
indemnification hereunder. The foregoing $200,000 minimum requirement shall not
apply in respect of claims or actions arising out of or resulting from
breach(es) of Sections 5.1, 5.2, 5.3, 5.4, 5.7, 5.10 and 5.21 hereof.
(b) In no event shall the Company or the Purchasers, as the case may
be, be liable to any Indemnitee(s) hereunder for special, consequential,
indirect, incidental or punitive damages or penalties.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the aggregate liability of the Company for any and all Losses
incurred by the Purchasers (and all related Indemnitees) and for which the
Purchasers (and all related Indemnitees) would otherwise be entitled to
indemnification hereunder shall not exceed $50,000,000.
(d) Any indemnification payment(s) payable pursuant to this Agreement
shall be decreased by and to the extent of any insurance proceeds or Tax
benefits obtained by an Indemnitee in respect of the Losses giving rise to such
indemnification payment(s).
(e) To the extent reasonably practicable, the Purchasers shall seek to
combine and jointly pursue any claims or actions that they may have in respect
of a breach by the Company of any of its representations, warranties or
agreements contained herein.
10.5. Exclusive Remedy. Each of the Purchasers acknowledges and
----------------
agrees that (absent securities or other fraud) the sole and exclusive remedy and
recourse (at law or in equity) with respect to any and all Losses relating to or
arising out of the subject matter of this Agreement shall be pursuant, and
subject, to the indemnification provisions set forth in this Section 10.
11. MISCELLANEOUS.
-------------
11.1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following meanings unless the context otherwise clearly
requires:
(a) "affiliate," with respect to any person, means and includes any
---------
other person, directly or indirectly, controlling, controlled by or under common
control with such person.
(b) "associate" shall have the meaning ascribed thereto in Rule 405 of
---------
the Securities Act.
16
<PAGE>
(c) "CAPSxpert Database" means the collection of information on
------------------
electronic components, including semiconductor devices and integrated circuits,
PCB-type connectors, multipin connectors, resistors, capacitators and inductors.
(d) "Code" means the Internal Revenue Code of 1986, as amended, and
----
the applicable Treasury Regulations (as hereinafter defined).
(e) "contract or other agreement" means and includes all contracts,
---------------------------
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, commitments, obligations or other binding arrangements, oral
or written.
(f) "Environmental Claim" means any and all administrative, regulatory
-------------------
or judicial actions, suits, demands, demand letters, directives, claims, Liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any person alleging potential Liability (including Liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, or release or threatened release into the environment, of any
Hazardous Materials at any location (whether or not owned) presently or formerly
operated, leased or managed by the Company, as applicable, or (ii) any and all
claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
release of any Hazardous Materials.
(g) "Environmental Laws" mean any laws, statutes, regulations, rules
------------------
or orders which relate to or otherwise impose Liability or a standard of conduct
concerning the discharge, emission, storage, treatment, transportation,
handling, release, threatened release, or disposal of Hazardous Materials,
including, but not limited to, the Air Pollution Control Act, as amended, the
Federal Water Pollution Control Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, and the Toxic Substances
Control Act of 1976, as amended, and any other similar federal, state or local
statutes.
(h) "GAAP" means United States generally accepted accounting
----
principles.
(i) "Hazardous Materials" means any pollutant, contaminant, hazardous,
-------------------
radioactive or toxic substance, material, constituent or waste, or any other
waste, substance, chemical or material regulated under any Environmental Law,
including (i) petroleum, crude oil and any fractions thereof, (ii) natural gas,
synthetic gas and any mixtures thereof, (iii) asbestos and/or asbestos-
containing material, (iv) radon and (v) polychlorinated biphenyls ("PCBs") or
materials or fluids containing PCBs.
(j) "Laws" means all federal, state, local and foreign laws, statutes,
----
ordinances, regulations, orders, judgments, injunctions, awards or decrees.
17
<PAGE>
(k) "Liabilities" means debts, liabilities or obligations, whether
-----------
absolute or contingent, asserted or unasserted, accrued or unaccrued, liquidated
or unliquidated, matured or unmatured, due or to become due, or fixed or
unfixed.
(l) "Lien" means and includes any lien, pledge, mortgage, security
----
interest, claim, lease, charge, option, right of first refusal or offer,
easement, servitude, transfer restriction or voting requirement under any or
similar agreement, or any other encumbrance, restriction or limitation
whatsoever. "Lien" shall not include any liability pursuant to Section 630 of
the BCL.
(m) "Multiemployer Plan" means a multiemployer plan within the meaning
------------------
of Section 3(37) or Section 4001(a)(3) of ERISA.
(n) "person" means any individual, corporation, partnership, firm,
------
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
(o) "property" means real, personal or mixed property, tangible or
--------
intangible.
(p) "Tax Returns" means all written returns, declarations, reports,
-----------
forms, estimates, information returns and statements filed in respect of any
Taxes and supplied to any taxing authority in connection with any Taxes.
(q) "Taxes" (or "Tax" where the context requires) means all federal,
----- ---
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll-related and property
taxes, and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest and penalties with respect thereto.
(r) "the Company's knowledge" means the actual knowledge of the
-----------------------
executive officers of the Company after reasonable investigation.
(s) "Treasury Regulations" means the regulations promulgated under the
--------------------
Code.
11.2. Publicity. "No publicity release or announcement concerning
---------
this Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof jointly by the Company and
the Purchasers (which approval shall not be unreasonably withheld, delayed or
conditioned) other than any announcement required by applicable securities laws
or the rules and regulations of any stock or similar exchange to which a party
is subject; provided, that the party making such disclosure shall notify the
--------
other party reasonably in advance of such disclosure.
11.3. Notices. Any notice or other communication required or which
-------
may be given hereunder shall be in writing and shall be delivered personally,
sent by facsimile
18
<PAGE>
transmission (with confirming copy by overnight courier), or by a recognized
overnight courier for next business day delivery, certified, registered, or
express mail, postage or fees prepaid, and shall be deemed given when so
delivered personally, sent by facsimile transmission with electronic
confirmation of receipt or the next business day after delivered to such
overnight courier or express mail service or, if mailed, five (5) days after the
date of mailing, as follows:
if to the Company, to:
PartMiner, Inc.
432 Park Avenue South
12th Floor
New York, NY 10016
Attn: General Counsel
Fax: (212) 592-5833
with a copy to:
Kirkpatrick & Lockhart LLP
1251 Avenue of the Americas
New York, NY 10020
Attn: Stephen R. Connoni, Esq.
Fax: (212) 536-3901
if to any of the Purchasers, to the respective addresses as set
forth on Schedule 11.3 hereto.
-------------
Any party may by notice given in accordance with this Section 11.3 to
the other parties designate another address or person for receipt of notices
hereunder.
11.4. Entire Agreement. This Agreement (including the Schedules
----------------
and Exhibits hereto) and the agreements and certificates executed in connection
with the consummation of the transactions contemplated hereby (the "Agreements")
embody the entire agreement and understanding of the parties with respect to the
subject matter hereof and shall supersede all prior agreements and
understandings, written or oral, between the parties. The parties hereby
acknowledge and agree that the only representations and warranties made by the
parties in connection with the transactions contemplated hereby are those
expressly made in writing and contained herein. No oral representations or
warranties have been made or implied by any party.
11.5. Waivers and Amendments. This Agreement may be amended,
----------------------
superseded or canceled only by a written instrument executed by the Company and
the Purchasers. Any of the terms or conditions hereof may be waived only by a
written instrument signed by the party or parties to be bound thereby. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right,
19
<PAGE>
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege
hereunder.
11.6. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither this Agreement nor any rights or obligations
hereunder shall be assignable (including by way of distribution or liquidation)
or delegable by any party except with the prior written consent of the other
party.
11.7. Variations in Pronouns. All pronouns and any variations
----------------------
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
11.8. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
11.9. Headings. The headings in this Agreement are for reference
--------
purposes only and shall not in any way affect or limit the meaning or
interpretation of this Agreement.
11.10. No Strict Construction. The language used in this Agreement
----------------------
has been negotiated by the parties and shall be deemed to be the language chosen
by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party.
11.11. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such jurisdiction.
11.12. No Third-Party Beneficiaries. Except as provided in Section
----------------------------
10.1 hereof, there are no intended third-party beneficiaries to this Agreement
and this Agreement does not confer, and shall not be construed to confer, upon
any person, other than the parties, any rights, privileges or remedies hereunder
or otherwise.
11.13. Subsidiaries. For purposes of this Agreement, all
------------
references to the Company in this Agreement shall, unless the context
specifically indicates otherwise, be deemed to be references to the Company and
its subsidiaries.
11.14. Actions by Purchasers. Unless otherwise specifically
---------------------
provided herein, all actions or determinations required or permitted herein to
be taken or made by the Purchasers, including, without limitation, Sections
6.1(b), 8, 11.2 and 11.5 hereof, shall be deemed to have been consented to by
all Purchasers if Purchasers holding (or shall have agreed to purchase, as the
case may be) 66 2/3% of the Preferred Shares shall agree to take such actions or
make such determinations; provided, however, that no amendment of this Agreement
-------- -------
which has a disproportionate adverse effect on a particular Purchaser shall be
effective against such Purchaser unless consented to by such Purchaser.
20
<PAGE>
11.15. Other Engagements and Activities; Use of Name.
---------------------------------------------
(a) The investment in the Company being made by The Goldman Sachs
Group, Inc. (together, with any affiliates thereof, a "GS Entity" of the "GS
Entities") pursuant to the Agreements, and any subsequent investments in the
Company by any GS Entity after the date hereof, is being made notwithstanding
any engagement, prior to or subsequent to the date hereof, by the Company of any
GS Entity as financial advisor, agent or underwriter to the Company.
Notwithstanding anything in any of the Agreements to the contrary (except for
Section 8.08 of the Stockholders Agreement), no GS Entity shall be restricted in
any way from engaging in any brokerage, investment advisory, financial advisory,
anti-raid advisory, financing, asset management, trading, market making,
arbitrage and other similar activities conducted in the ordinary course of its
business.
(b) Neither the Company nor any of its affiliates shall use the
names of any GS Entity in any press release, notice or other publication without
the prior written consent of such GS Entity, which such consent shall not be
unreasonably withheld or delayed; provided, however, that such GS Entity
-------- -------
acknowledges and agrees that the Company may issue a press release upon the
closing of the sale of the Preferred Shares stating the total amount invested in
the Company and a list of the purchasers, and may describe The Goldman Sachs
Group, Inc.'s relationship with the Company in any prospectus filed by or on
behalf of the Company in connection with its initial public offering.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
PARTMINER, INC.
By: /s/ Daniel Nissanoff
______________________________
Name: Daniel Nissanoff
Title: President and Chief Executive Officer
INTEGRAL CAPITAL PARTNERS IV, L.P.
By: Integral Capital Management IV, LLC
its General Partner
By: /s/ Pamela K. Hagenah
______________________________
Name: Pamela K. Hagenah
Title: Manager
INTEGRAL CAPITAL PARTNERS IV MS SIDE
FUND, L.P.
By: Integral Capital Partners NBT, LLC
its General Partner
By: /s/ Pamela K. Hagenah
______________________________
Name: Pamela K. Hagenah
Title: Manager
AGILE SOFTWARE CORPORATION
By: /s/ Thomas P. Shanahan
______________________________
Name:
Title:
IMPACT VENTURE PARTNERS, L.P.
By: /s/ Adam Dell
______________________________
Name:
Title:
22
<PAGE>
OMI PARTNERSHIP HOLDINGS LTD.
/s/ A.R. Melman
By:________________________________________
Name:
Title:
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P., as General Partner
By: Generation Capital Company LLC,
as General Partner
/s/ Mark Jennings
By:________________________________________
Name: Mark Jennings
Title: Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Parallel Management Partners L.P.,
as Manager
By: Generation Capital Company LLC,
as General Partner
/s/ Mark Jennings
By:________________________________________
Name: Mark Jennings
Title: Managing Director
GENERATION PARALLEL MANAGEMENT
PARTNERS L.P.
By: Generation Capital Company LLC,
as General Partner
/s/ Mark Jennings
By:________________________________________
Name: Mark Jennings
Title: Managing Director
BROADVIEW SLP
/s/ Peter Mooney
By:________________________________________
Name:
Title:
23
<PAGE>
THE GOLDMAN SACHS GROUP, INC.
/s/ Joseph Gleberman
By:________________________________________
Name:
Title:
CAHNERS INFORMATION HOLDINGS, INC.
/s/ Charles Fontaine
By:________________________________________
Name:
Title:
SEACOAST CAPITAL PARTNERS LIMITED
PARTNERSHIP
By: Seacoast I Advisors LLC,
its General Partner
/s/ Eben S. Moulton
By:________________________________________
Name:
Title:
SEACOAST INVESTORS LLC
/s/ Eben S. Moulton
By:________________________________________
Name:
Title:
BOSTON VENTURES LIMITED PARTNERSHIP V
By: Boston Ventures Management, Inc.
/s/ James Wilson
By:________________________________________
Name:
Title:
VULCAN SECURITIES LIMITED
/s/ Michael von Staudt
By:________________________________________
Name:
Title:
24
<PAGE>
EXHIBIT 10.20
THIS SOFTWARE LICENSE AGREEMENT entered into by and between MARKET MAKER
SYSTEMS CORPORATION ("Licensor"), a New York Corporation having its principal
office and place of business located at 16 East 52nd Street, 6th Floor, New
York, New York 10022 and the undersigned customer ("Licensee") determines the
rights and licenses granted to the Licensee in the Licensed Software
(hereinafter defined) supplied by the Licensor hereunder.
1. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Licensed Product" shall mean collectively the Licensed Software
and Licensed Documentation (as hereinafter defined).
(b) "Licensed Software" or "Software" shall mean the software
identified on Schedule A, annexed hereto and made a part hereof, in object and
source code forms, all updates and revisions thereto supplied by Licensor during
the term hereof, and all permitted copies of the foregoing.
(c) "Licensed Documentation" shall mean all documentation, other than
the Licensed Software, related to the Software supplied by Licensor hereunder.
(d) "Licensed CPU" shall mean the central processing unit and its
associated equipment that is identified by model and serial number on the
annexed Schedule A and any other central processing unit identified by Licensee
by model and serial number to Licensor.
<PAGE>
2. License. Licensor hereby grants to Licensee, and Licensee hereby
-------
accepts, a nonexclusive license to use the Licensed Software on the licensed CPU
during the term hereof and to use the Licensed Documentation during such term.
3. Annual License Fees, Charges and Taxes.
--------------------------------------
(a) The license fees and charges for the license herein granted and
for any extension thereof have heretofore been paid by the Licensee in
connection with the Licensee's prior contributions to Licensor in the research
and development of the Licensed Software.
(b) To this end, it is specifically understood and agreed between
Licensor and Licensee that the Licensee will not be required to pay any
additional consideration under this Agreement.
4. Term of License Agreement and Licenses. Unless otherwise terminated,
--------------------------------------
cancelled or extended as provided herein, the term hereof and of the licenses
granted herein shall commence on the effective date hereof and shall continue
for a period of fifty years. Such term and license may be extended for an
additional fifty-year period, at Licensee's option, upon notice to Licensor and
the payment of the annual license fees and charges therefor. Licensee may
temporarily transfer the license granted hereunder to a back-up CPU if the
Licensed CPU is inoperative for any reason.
5. Protection of Trade Secret.
--------------------------
(a) Licensee acknowledges Licensor's representations that the Licensed
Product and all permitted copies thereof are
<PAGE>
Licensor's exclusive property. Licensee shall not disclose or make available to
third parties the Licensed Software or any portion thereof without Licensor's
prior written consent.
(b) Upon any termination, cancellation, or expiration of this
Agreement, Licensee shall return the Licensed Software and all copies thereof to
Licensor, or destroy the same and submit evidence thereof to Licensor.
6. Reproduction and Modification of Licensed Product.
-------------------------------------------------
(a) Licensee may reproduce the Licensed Product for use only on the
Licensed CPU. All copies of the Licensed Software, in whole or in part, shall
contain all of Licensor's restrictive and proprietary notices as they appear on
the copies of the Software provided by Licensor.
(b) Licensee may modify the Licensed Software and merge it into
existing software, provided the Licensed Software shall continue to be subject
to all of the terms and conditions of this Agreement. Upon any termination,
cancellation or expiration hereof or any license granted hereunder, Licensee
shall remove the Licensed Software and all portions thereof from the modified
Licensed Software and resulting merged software.
7. Services. Licensor shall provide Licensee with technical support and
--------
services under the terms and conditions of a separate agreement and at
Licensor's then current charges therefor. Licensee will receive a fifty user
license and upgrades and Licensee will be used as a beta testing site.
8. Warranty.
--------
(a) Licensor warrants that:
<PAGE>
(1) Under normal use and service, the media on which the
Licensed Software is delivered shall be free from defects in material and
workmanship, and
(2) The Licensed Product will meet Licensor's published
specifications therefor in effect on the effective date of this Agreement.
(b) If the Licensed Product fails to meet the media warranty of
Paragraph 8(a)(1) and Licensee gives Licensor written notice thereof during the
applicable warranty period, Licensor shall replace such media. If the Licensed
Product fails to meet the warranty of Paragraph 8(a)(2) and Licensee gives
Licensor written notice thereof, Licensor shall correct the failure, provided
that Licensee gives Licensor detailed information regarding such failure.
(c) Licensor shall not be liable to Licensee for the warranty
provisions of this Paragraph 8 if:
(1) Modifications are made to the Licensed Product by someone
other than Licensor; or
(2) The media for the Licensed Product is subject to misuse or
above.
9. Proprietary Rights Indemnity.
----------------------------
(a) Licensor shall defend or settle, at its own expense, any claim
made against Licensee that the use of the Licensed Product infringes any patent,
copyright, trade secret or other proprietary right. Licensor shall indemnify and
hold Licensee harmless against all damages, judgments, and attorneys' fees,
arising out of the foregoing, provided that Licensee shall
<PAGE>
give Licensor prompt written notice of such claim.
(b) If a claim is made that the use of the Licensed Product infringes
any patent, copyright, trade secret or other proprietary right, Licensor shall
either procure for Licensee the right to continue using the Licensed Product,
modify it to make it noninfringing but continue to meet the specifications
therefor, or replace it with noninfringing software of like functionality that
meets the specifications for the Licensed Product.
10. Termination. This Agreement shall terminate upon expiration of the
-----------
term as set forth in Paragraph 4 of this Agreement and for no other reason
whatsoever.
11. Limitation of Liability. IN NO EVENT SHALL LICENSEE BE LIABLE TO
-----------------------
LICENSOR FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS,
ARISING OUT OF OR RELATED TO THIS LICENSE AGREEMENT OR THE PERFORMANCE OR BREACH
THEREOF, EVEN IF THE LICENSEE HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.
12. General.
-------
(a) The effective date of this Agreement shall be upon execution
hereof by Licensee.
(b) Any cause of action arising out of or related to this Agreement
must be brought no later than one year after the same has accrued.
(c) This Agreement is the sole agreement between the parties relating
to the subject matter hereof and supersedes all prior understandings, writings
proposals, representations or communications, oral or written, of either party.
This License
<PAGE>
Agreement may be amended only by a writing executed by the authorized
representatives of both parties. This Agreement shall inure to the benefit of
Licensee and its subsidiaries and affiliated business entities.
(d) This Agreement shall be interpreted in accordance with the substantive
laws of the State of New York.
DAST CORPORATION ("Licensee")
BY: /s/ Daniel Nissanoff
------------------------------------
Title: President
Date: October 30, 1995
Address: 16 East 52nd Street
6th Floor
New York, NY 10022
Accepted on behalf of Market Maker Systems Corporation
("Licensor")
BY: /s/ Ariel Zirel
------------------------------------
Title: Vice President
Date: October 30, 1995
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this 30/th/ day of October, 1995, before me personally came Daniel
Nissanoff to me known, who, being by me duly sworn, did depose and say that he
resides at c/o 16 East 52nd Street, 6th Floor, New York, New York; that he is
the President of DAST CORPORATION, the Corporation described in, and which
executed the within instrument; that he knows the seal of said Corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said Corporation; and that he
signed his name thereto by like order.
/s/ Ronald S. Kossar [STAMP ADDRESS OF RONALD S. KOSSAR]
- ---------------------------
Notary Public
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this 30/th/ day of October, 1995, before me personally came
[ILLEGIBLE]^^ to me known, who, being by me duly sworn, did depose
and say that he resides at c/o 16 East 52nd Street, 6th Floor, New York, New
York; that he is the President of MARKET MAKER SYSTEMS CORPORATION, the
Corporation described in, and which executed the within instrument; that he
knows the seal of said Corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said Corporation; and that he signed his name thereto by like order.
/s/ Ronald S. Kossar [STAMP ADDRESS OF RONALD S. KOSSAR]
- ---------------------------
Notary Public
<PAGE>
EXHIBIT 10.21
July 12, 1999
Mr. Earle Zucht
2009 Yacht Vigilant
Newport Beach, CA 92660
Dear Mr. Zucht:
This letter (the "Agreement") will confirm the agreement between PartMiner,
Inc., a New York corporation (the "Company"), and you relating to your
employment by the Company.
1. EMPLOYMENT. The Company hereby employs you, and you hereby agree
----------
to serve as the Executive Vice President of Business Development of the Company
during the Term of Employment (as hereinafter defined). In such capacity, you
shall be responsible for bringing to the Company and managing strategic
relationships with manufacturers, distributors, and other horizontal and
vertical organizations within the industry of the Company that might add value
to the business of the Company, including forming marketing alliances with such
organizations, managing relationships with such organizations, obtaining
franchises for products or services from such organizations, and managing the
sale of advertising space on the Partminer web site. In addition, your
responsibilities may include operational and strategic responsibilities
associated with the core business of the Company as it exists today. You shall
report directly to Daniel Nissanoff, President of the Company. In the event
that any changes in your responsibilities are made by the Company, such changes
will be commensurate with your demonstrated abilities. Any changes made by the
Company in the foregoing reporting arrangements will be discussed with you prior
to implementing such changes. You agree also to perform such senior executive
services customary to such position as shall from time to time be assigned to
you and, in the absence of such assignment, such senior executive services
customary to such position as are necessary to the operations of the Company.
You agree to use your best efforts to promote the interests of the Company and
to devote all of your working time and energies to the business and affairs of
the Company during the Term of Employment (as hereinafter defined). Although you
may be associated with or invest in other companies, you will not allow such
activities to interfere with your services to the Company.
2. TERM OF EMPLOYMENT. The term of employment hereunder shall be for
------------------
the period that commenced on April 5, 1999 and shall end on April 5, 2001 (the
"Term of Employment"), unless earlier terminated pursuant to the provisions of
Section 5 hereof.
<PAGE>
3. COMPENSATION; EXPENSES; BENEFITS.
--------------------------------
(a) Base Salary. As compensation for the services hereunder during
-----------
the Term of Employment, the Company shall pay you a base salary of $150,000 per
annum. Such salary shall be payable in appropriate bi-weekly installments to
conform with the regular payroll dates for salaried personnel of the Company and
will be considered for adjustment annually, in accordance with the Company
policy, based on the Company's evaluation of your performance for the preceding
fiscal year.
(b) Benefits. You will receive the benefits that the Company provides
--------
its senior executives generally, including employee health insurance benefits.
Your vacation will begin to accrue as of April 5, 1999, in accordance with the
Company's existing policy, up to a maximum of three (3) weeks per year.
(c) Expenses. During the Term of Employment, you shall be entitled to
--------
be reimbursed for all reasonable expenses incurred by you in performing services
hereunder in accordance with the policies and procedures established by the
Company from time to time.
(d) Stock Options. Subject to approval by the shareholders and
-------------
directors of the Company of a proposed 1999 Stock Plan of the Company (the
"Plan"), the Company shall grant or cause to be granted to you options to
purchase approximately 2000 shares of common stock of the Company. The exercise
price of these options shall be determined based on a valuation of the Company
of $50,000,000. The options shall be granted pursuant to the Plan and will be
subject to the terms and conditions of the Plan and of a mutually agreeable
nonqualified stock option agreement to be entered into between you and the
Company. Subject to the foregoing, the total number of shares covered by these
options shall vest as follows: (i) one third of such options shall vest on the
date of the executed nonqualified stock option agreement (the "Grant Date"),
(ii) one third of such options shall vest on the first anniversary of the Grant
Date, and (iii) one third of such options shall vest on the second anniversary
of the Grant Date.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY; CONFIDENTIALITY;
----------------------------------------------------------------
ENFORCEABILITY; BREACH.
- ----------------------
(a) Covenant Not To Compete. You acknowledge that you are expected to
-----------------------
play a very important role in the on-going development of the Company, that you
will have detailed knowledge of the Company's business and its plans for the
future, that you will have a fiduciary relationship with the Company, and you
will be receiving substantial compensation and other benefits under this
Agreement. During the Term of Employment, you shall not, directly or indirectly,
advise, manage, control, operate, be employed by or participate in the
2
<PAGE>
ownership, management, operation or control of, or be connected in any manner
with any business which competes with any business of the Company. The decision
of the Board of Directors of the Company as to what constitutes a competing
business shall be final and binding upon you. For these purposes, your
ownership of one percent (1%) or less of any class of securities of a public
company shall not be considered to be competition with the Company.
Notwithstanding anything contained herein to the contrary, in the event that
following the Term of Employment, you directly or indirectly advise, manage,
control, operate, become employed by or participate in the ownership,
management, operation or control of, or become connected in any manner with any
business which competes with any business of the Company, any and all options
granted to you hereunder shall terminate whether or not exercisable.
(b) Intellectual Property. You agree that all ideas, inventions, trade
---------------------
secrets, marketing plans and business plans developed by you during the Term of
Employment which relate directly or indirectly to the business of the Company,
including without limitation, any process, operation, product or improvement
which may be patentable or copyrightable, will be the property of the Company
and that you will at the Company's request and cost do whatever is necessary to
secure the rights thereto by patent, copyright or otherwise to the Company.
(c) Confidentiality. You agree that you will not divulge to anyone
---------------
(other than the Company or any persons employed or designated by the Company)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of the Company, including, without limitation, all
types of ideas, inventions, trade secrets, marketing plans, business plans, and
processes, operations, products or improvements which may be patentable or
copyrightable ("Confidential Information"). You further agree not to disclose,
publish or make use of any such Confidential Information without the prior
written consent of the Company. The term "Confidential Information" does not
include any information which (i) at the time of disclosure or thereafter is
generally available to and known to the public (other than as a result of
disclosure directly or indirectly by you), (ii) was available to you on a non-
confidential basis from a source other than the Company or its representatives
and advisors, provided that such source is not in breach of any obligations of
confidentiality to the Company, or (iii) has been independently acquired or
developed by you without violating any of your obligations pursuant to this
Agreement. The provisions set forth in this section shall survive the
termination or cancellation of this Agreement.
(d) Enforceability. You recognize and agree that the limitations
--------------
placed on you by this Section 4 are reasonable and are required for the
protection of the Company. You agree that if any such limitation is determined
in arbitration or by a court of competent jurisdiction to be unenforceable, you
agree and submit to the reduction of such limitation as the court or
arbitrator(s) deem reasonable. The limitations placed on you by this Section 4
are of the essence of this Agreement and they shall be construed and enforced
independently. The existence of any claim or cause of action against the
Company by you shall not constitute a defense against the enforcement of these
limitations on you.
3
<PAGE>
(e) Breach. You acknowledge and agree that money damages would not
------
adequately compensate the Company in the event of breach by you of any provision
of this Section 4. Consequently, you agree that the Company shall be entitled,
without the necessity of proving actual damages, to obtain damages for any
breach of this Section 4, to enforce specific performance by you of any
provision of this Section 4, or to obtain temporary and permanent injunctive
relief from any court of competent jurisdiction for enforcement of the
provisions of this Section 4.
5. Termination.
-----------
(a) General. Your employment hereunder shall terminate as provided in
-------
Section 2 hereof and may be earlier terminated in accordance with the provisions
of this Section 5. Unless earlier terminated in accordance with the provisions
of this Section 5, the Company shall provide you with at least thirty (30) days
notice prior to the termination of your employment as provided in Section 2 if
the Company does not intend to renew this Agreement.
(b) Death and Disability. Your employment under this Agreement shall
--------------------
terminate upon (i) your death; or (ii) in the event you become disabled, at the
option of the Company, thirty (30) days after the date on which the Company
shall have given you written notice of the termination of your employment
because of your physical or mental incapacity on a permanent basis. You shall
be deemed to be physically or mentally incapacitated on a permanent basis if you
are unable, by reason of any physical or mental incapacity, for a period of
ninety (90) substantially consecutive days or for shorter periods aggregating
one hundred twenty (120) days or more during any twelve (12) month period, to
perform your duties as Executive Vice President of Business Development of the
Company in a reasonably satisfactory manner. In the event of any disagreement
between you and the Company as to whether you are physically or mentally
incapacitated on a permanent basis so as to permit the Company to terminate your
employment pursuant to this subparagraph (b), the question of such permanent
incapacity shall be submitted for decision to an impartial and reputable
physician in New York County, New York (the "Deciding Doctor") chosen by mutual
agreement of the Company and you or, failing such agreement, the Deciding Doctor
shall be chosen by two physicians from New York County, New York (one of whom
shall be selected by the Company and the other by you). The decision of the
Deciding Doctor regarding your capacity or incapacity shall be final and binding
on the Company and you. You shall submit to any medical examinations reasonably
necessary to enable the Deciding Doctor to make a decision regarding your
capacity or incapacity.
(c) Termination by the Company for "Cause". The Company may
--------------------------------------
terminate your employment for "cause"; provided, however, the Company shall have
-------- -------
given you written notice specifying in reasonable detail the reason therefor,
and ten (10) days after receipt of such notice in which to cure such "cause", if
capable of cure. For the purposes of this Agreement, an event or occurrence
constituting "cause" shall mean knowingly or
4
<PAGE>
recklessly causing material injury to the Company; willful misconduct in the
performance of, or a willful failure to perform, your duties; commission of
dishonest or fraudulent conduct, whether or not in connection with your
employment, or unlawful behavior involving moral turpitude, whether or not in
connection with your employment; or breach or violation of this Agreement. If
your employment is terminated under this Section 5(c), all compensation and
rights to benefits from the Company shall cease on the date of termination
(other than as may have already accrued as of the date of termination or as
expressly provided in plans in which you participated at the date of
termination); provided, however, that the restrictions on your activities
-------- -------
contained in Section 4 hereof shall continue in effect as provided therein.
(d) Termination by the Company Other Than for "Cause". In the event
-------------------------------------------------
that the Company terminates your employment other than for death or disability
in accordance with subparagraph (b) above, or other than for "cause" in
accordance with subparagraph (c) above, the Company shall pay you (or cause to
be paid for you) your employee health insurance and other benefits (not
including salary) for a period of not less than twelve (12) months from the date
of termination. If your employment is terminated under this Section 6(d), all
other compensation and rights to benefits from the Company shall cease (other
than as may have already accrued as of the date of termination or as expressly
provided in plans in which you participated at the date of termination);
provided, however, that the restrictions on your activities contained in Section
- -------- -------
4 hereof shall continue in effect as provided therein.
(e) Termination by you for "Good Reason". In the event that you
------------------------------------
voluntarily terminate your employment for Good Reason, the Company shall pay you
(or cause to be paid for you) your employee health insurance and other benefits
(not including salary) for a period of not less than twelve (12) months from the
date of termination. As used herein, "Good Reason" means (i) the assignment to
you of duties substantially inconsistent with your status as an executive
officer of the Company, or a substantial alteration in the nature or status of
your responsibilities from those as of the date hereof or as the same may be
changed from time to time; (ii) a reduction by the Company in your total
compensation in effect on the date hereof or as the same may be increased from
time to time, or (iii) a Change in Control (as defined in the Company's 1999
Stock Plan, which shall not be deemed to include a public offering of the
Company's securities); provided that, under either (i), (ii) or (iii) such
reason has not been cured by the Company within thirty (30) days after written
notice to the Company by you. If your employment is terminated under this
Section 6(e), all other compensation and rights to benefits from the Company
shall cease (other than as may have already accrued as of the date of
termination or as expressly provided in plans in which you participated at the
date of termination); provided, however, that the restrictions on your
--------- -------
activities contained in Section 4 hereof shall continue in effect as provided
therein. To the extent there is any conflict between the terms of this Agreement
and the terms of the nonqualified stock option agreement between you and the
Company, the terms of the nonqualified stock option agreement shall control.
6. Assignment. This Agreement is a personal contract, and except as
----------
specifically set forth herein, your rights and interests herein may not be sold,
transferred,
5
<PAGE>
assigned, pledged or hypothecated. The Company may freely assign this Agreement
and any of its rights, obligations and interests hereunder. This Agreement shall
be binding upon and inure to the benefit of each party's successors and
permitted assigns.
7. ENTIRE AGREEMENT; GOVERNING LAW; CAPTIONS. This Agreement
-----------------------------------------
contains the entire agreement between the parties with respect to your
employment by the Company, and the validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York. You hereby agree that any agreement or arrangement existing prior to the
date hereof regarding your employment by the Company is hereby terminated and
superseded by this Agreement. This Agreement may not be changed orally, but
only by agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Section and paragraph
headings are for convenience of reference only and shall not be considered a
part of this Agreement.
8. NOTICES. Any notices or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed given (a) on the
same day if given by hand, (b) on the third business day after mailing if given
by registered or certified mail, return receipt requested, postage prepaid, (c)
on the next business day after it was deposited with the courier service if sent
by reputable overnight courier, (d) or when sent if given by facsimile with
confirmation, addressed to you at 2009 Yacht Vigilant, Newport Beach, CA 92660
or to the Company at its offices at 432 Park Avenue South, 12th Floor, New York,
New York 10016, Attention: General Counsel (fax no. 212-592-5833), with a copy
to: Gould & Wilkie LLP, One Chase Manhattan Plaza, 58th floor, New York, New
York 10005, Attention: John E. Gould, Esq. (fax no.: 212-809-6890) or such other
address as shall have been specified in writing by either party to the other.
9. ARBITRATION. Except as provided by Section 4(e) of this
-----------
Agreement, any dispute or controversy under or in connection with this Agreement
shall be settled exclusively by arbitration in New York, New York by one
arbitrator in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered upon the arbitrator's award in any court
having jurisdiction. The costs and expenses (including reasonable attorneys'
fees and disbursements) of the prevailing party in any such dispute or
controversy shall be reimbursed by the other party.
10. RIGHT TO WITHHOLD. The Company shall have the right to make all
-----------------
appropriate withholdings from your salary and other compensation under federal,
state and local tax laws.
6
<PAGE>
If the foregoing accurately reflects the agreement between us, please
confirm your acceptance and agreement by signing the attached copy of this
Agreement and return the same to me.
Sincerely,
PartMiner, Inc.
/s/ Daniel Nissanoff
By: _________________________
Name: Daniel Nissanoff
Title: President
ACCEPTED AND AGREED:
/s/ Earle Zucht
____________________________
Earle Zucht
7
<PAGE>
EXHIBIT 1O.22
June 18, 1999
PERSONAL AND CONFIDENTIAL
Ms. Kim Hibler
28662 Avenida Placida
San Juan Capistrano, CA 92675
Dear Ms.Hibler:
This letter (the "Agreement") will confirm the agreement between PartMiner,
Inc., a New York corporation (the "Company"), and you relating to your
employment by the Company.
1. EMPLOYMENT. The Company hereby employs you, and you hereby agree to serve
as the Vice President of Strategic Alliances of the Company during the Term of
Employment (as hereinafter defined). In such capacity, you shall be responsible
for (i) the recruitment, hiring, training and managing of personnel that expand
the customer base of the Company and ensure active usage of the PartMiner web-
based products; (ii) the recruitment, hiring, training and managing of a team of
marketing directors that set and implement strategies with strategic partners of
the Company; and (iii) developing a marketing strategy for Prima International
("Prima"), including, but not limited to, obtaining new franchise agreements for
Prima and obtaining agreements with a direct marketing group for Prima. You
shall report directly to Earle Zucht, Executive Vice President of Business
Development of the Company. In the event that any changes in your
responsibilities are made by the Company, such changes will be commensurate with
your demonstrated abilities. Any changes made by the Company in the foregoing
reporting arrangements will be discussed with you prior to implementing such
changes. You agree also to perform such senior executive services customary to
such position as shall from time to time be assigned to you and, in the absence
of such assignment, such senior executive services customary to such position as
are necessary to the operations of the Company. You agree to use your best
efforts to promote the interests of the Company and to devote all of your
working time and energies to the business and affairs of the Company during the
Term of Employment (as hereinafter defined). Although you may be associated with
or invest in other companies, you will not allow such activities to interfere
with your services to the Company.
2. TERM OF EMPLOYMENT. The term of employment hereunder shall be for the
period commencing on June 14, 1999 and shall end on June 14, 2001 (the "Term of
Employment"), unless earlier terminated pursuant to the provisions of Section 5
hereof.
3. COMPENSATION; EXPENSES; BENEFITS.
(a) Base Salary. As compensation for the services hereunder during the
Term of Employment, the Company shall pay you a base salary of $140,000 per
annum. Such salary shall be payable in appropriate bi-weekly installments to
conform with the regular payroll dates
<PAGE>
for salaried personnel of the Company and will be considered for adjustment
annually, in accordance with the Company policy, based on the Company's
evaluation of your performance for the preceding fiscal year.
(b) Benefits. You will receive the benefits that the Company provides its
senior executives generally, including employee health insurance benefits. Your
vacation will begin to accrue as of the date hereof, in accordance with the
Company's existing policy, up to a maximum of three (3) weeks per year.
(c) Expenses. During the Term of Employment, you shall be entitled to be
reimbursed for all reasonable expenses incurred by you in performing services
hereunder in accordance with the policies and procedures established by the
Company from time to time.
(d) Incentive Compensation. You will have the opportunity to receive
annually up to $25,000 in incentive compensation; provided that, certain
management by objective ("MBO") targets are met. Such MBOs shall be agreed upon
between you and the Company and shall be payable quarterly.
(e) Stock Options. The Company shall grant or cause to be granted to you
options to purchase approximately 800 shares of common stock of the Company. The
exercise price of these options shall be determined based on a valuation of the
Company of $50,000,000. The options shall be granted pursuant to the 1999 Stock
Plan of the Company and will be subject to the terms and conditions of the Plan
and of a nonqualified stock option agreement to be entered into between you and
the Company. Subject to the foregoing, the total number of shares covered by
these options shall vest as follows: (i) one third of such options shall vest on
the date of the executed nonqualified stock option agreement (the "Grant Date"),
(ii) one third of such options shall vest on the first anniversary of the Grant
Date, and (iii) one third of such options shall vest on the second anniversary
of the Grant Date.
COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY; CONFIDENTIALITY; ENFORCEABILITY;
BREACH.
(a) Covenant Not To Compete. You acknowledge that you are expected to play
a very important role in the on-going development of the Company, that you will
have detailed knowledge of the Company's business and its plans for the future,
that you will have a fiduciary relationship with the Company, and you will be
receiving substantial compensation and other benefits under this Agreement.
During the Term of Employment, you shall not, directly or indirectly, advise,
manage, control, operate, be employed by or participate in the ownership,
management, operation or control of, or be connected in any manner with any
business which competes with any business of the Company. The decision of the
Board of Directors of the Company as to what constitutes a competing business
shall be final and binding upon you. For these purposes, your ownership of one
percent (1%) or less of any class of securities of a public company shall not be
considered to be competition with the Company. Notwithstanding anything
contained herein to the contrary, in the event that following the Term of
Employment, you directly or indirectly advise, manage, control, operate, become
employed by or participate in
<PAGE>
the ownership, management, operation or control of, or become connected in any
manner with any business which competes with any business of the Company, any
and all options granted to you hereunder shall terminate whether or not
exercisable.
(b) Intellectual Property. You agree that all ideas, inventions, trade
secrets, marketing plans and business plans developed by you during the Term of
Employment which relate directly or indirectly to the business of the Company,
including without limitation, any process, operation, product or improvement
which may be patentable or copyrightable, will be the property of the Company
and that you will at the Company's request and cost do whatever is necessary to
secure the rights thereto by patent, copyright or otherwise to the Company.
(c) Confidentiality. You agree that you will not divulge to anyone (other
than the Company or any persons employed or designated by the Company) any
knowledge or information of any type whatsoever of a confidential nature
relating to the business of the Company, including, without limitation, any and
all types of ideas, inventions, trade secrets, marketing plans, business plans,
and processes, operations, products or improvements which may be patentable or
copyrightable ("Confidential Information"). You further agree not to disclose,
publish or make use of any such Confidential Information without the prior
written consent of the Company. The term "Confidential Information" does not
include any information which (i) at the time of disclosure or thereafter is
generally available to and known to the public (other than as a result of
disclosure directly or indirectly by you), (ii) was available to you on a non-
confidential basis from a source other than the Company or its representatives
and advisors, provided that such source is not in breach of any obligations of
confidentiality to the Company, or (iii) has been independently acquired or
developed by you without violating any of your obligations pursuant to this
Agreement. The provisions set forth in this section shall survive the
termination or cancellation of this Agreement.
(d) Enforceability. You recognize and agree that the limitations placed on
you by this Section 4 are reasonable and are required for the protection of the
Company. You agree that if any such limitation is determined in arbitration or
by a court of competent jurisdiction to be unenforceable, you agree and submit
to the reduction of such limitation as the court or arbitrator(s) deem
reasonable. The limitations placed on you by this Section 4 are of the essence
of this Agreement and they shall be construed and enforced independently. The
existence of any claim or cause of action against the Company by you shall not
constitute a defense against the enforcement of these limitations on you.
(e) Breach. You acknowledge and agree that money damages would not
adequately compensate the Company in the event of breach by you of any provision
of this Section 4. Consequently, you agree that the Company shall be entitled,
without the necessity of proving actual damages, to obtain damages for any
breach of this Section 4, to enforce specific performance by you of any
provision of this Section 4, or to obtain temporary and permanent injunctive
relief from any court of competent jurisdiction for enforcement of the
provisions of this Section 4.
<PAGE>
5. TERMINATION.
(a) General. Your employment hereunder shall terminate as provided in Section 2
hereof and may be earlier terminated in accordance with the provisions of this
Section 5. Unless earlier terminated in accordance with the provisions of this
Section 5, the Company shall provide you with at least thirty (30) days notice
prior to the termination of your employment as provided in Section 2 if the
Company does not intend to renew this Agreement.
(b) Death and Disability. Your employment under this Agreement shall terminate
upon (i) your death; or (ii) in the event you become disabled, at the option of
the Company, thirty (30) days after the date on which the Company shall have
given you written notice of the termination of your employment because of your
physical or mental incapacity on a permanent basis. You shall be deemed to be
physically or mentally incapacitated on a permanent basis if you are unable, by
reason of any physical or mental incapacity, for a period of ninety (90)
substantially consecutive days or for shorter periods aggregating one hundred
twenty (120) days or more during any twelve (12) month period, to perform your
duties as Vice President of Strategic Alliances of the Company in a reasonably
satisfactory manner. In the event of any disagreement between you and the
Company as to whether you are physically or mentally incapacitated on a
permanent basis so as to permit the Company to terminate your employment
pursuant to this subparagraph (b), the question of such permanent incapacity
shall be submitted for decision to an impartial and reputable physician in New
York County, New York (the "Deciding Doctor") chosen by mutual agreement of the
Company and you or, failing such agreement, the Deciding Doctor shall be chosen
by two physicians from New York County, New York (one of whom shall be selected
by the Company and the other by you). The decision of the Deciding Doctor
regarding your capacity or incapacity shall be final and binding on the Company
and you. You shall submit to any medical examinations reasonably necessary to
enable the Deciding Doctor to make a decision regarding your capacity or
incapacity. If your employment is terminated under this Section 5(b), all
compensation and rights to benefits from the Company shall cease on the date of
your death or the date specified in the notice of termination for disability
(other than as may have already accrued as of the date of termination or as
expressly provided in plans in which you participated at the date of
termination).
(c) Termination by the Company for "Cause". The Company may terminate your
employment for "cause"; provided, however, the Company shall have given you
written notice specifying in reasonable detail the reason therefor, and ten (10)
days after receipt of such notice in which to cure such "cause", if capable of
cure. For the purposes of this Agreement, an event or occurrence constituting
"cause" shall mean knowingly or recklessly causing material injury to the
Company; willful misconduct in the performance of, or a willful failure to
perform, your duties; commission of dishonest or fraudulent conduct whether or
not in connection with your employment, or unlawful behavior involving moral
turpitude whether or not in connection with your employment; or breach or
violation of this Agreement. If your employment is terminated under this Section
5(c), all compensation and rights to benefits from the Company shall cease on
the date of termination (other than as may have already accrued as of the date
of termination or as expressly provided in plans in which you participated at
the date of termination); provided,
<PAGE>
however, that the restrictions on your activities contained in Section 4 hereof
shall continue in effect as provided therein.
6. ASSIGNMENT. This Agreement is a personal contract, and except as
specifically set forth herein, your rights, obligations and interests herein may
not be sold, transferred or assigned. The Company may freely assign this
Agreement and any of its rights, obligations and interests hereunder. This
Agreement shall be binding upon and inure to the benefit of each party's
successors and permitted assigns.
7. ENTIRE AGREEMENT; GOVERNING LAW; CAPTIONS. This Agreement contains the
entire agreement between the parties with respect to your employment by the
Company, and the validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York. You hereby
agree that any agreement or arrangement existing prior to the date hereof
regarding your employment by the Company is hereby terminated and superseded by
this Agreement. This Agreement may not be changed orally, but only by agreement
in writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought. Section and paragraph headings are for
convenience of reference only and shall not be considered a part of this
Agreement.
8. NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given (a) on the same day if
given by hand, (b) on the third business day after mailing if given by
registered or certified mail, return receipt requested, postage prepaid, (c) on
the next business day after it was deposited with the courier service if sent by
reputable overnight courier, or (d) when sent if given by facsimile with
confirmation, addressed to you at 28662 Avenida Placida, San Juan Capistrano, CA
92675, or to the Company at its offices at 432 Park Avenue South, New York, New
York 10016, Attention: General Counsel (fax no. 212-592-5833), with a copy to:
Gould & Wilkie LLP, One Chase Manhattan Plaza, 58th floor, New York, New York
10005, Attention: John E. Gould, Esq. (fax no.: 212-809-6890) or such other
address as shall have been specified in writing by either party to the other.
9. ARBITRATION. Except as provided by Section 4(e) of this Agreement, any
dispute or controversy under or in connection with this Agreement shall be
settled exclusively by arbitration in New York, New York by one arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered upon the arbitrator's award in any court having
jurisdiction. The costs and expenses (including reasonable attorneys' fees and
disbursements) of the prevailing party in any such dispute or controversy shall
be reimbursed by the other party.
10. RIGHT TO WITHHOLD. The Company shall have the right to make all appropriate
withholdings from your salary and other compensation under federal, state and
local tax laws.
If the foregoing accurately reflects the agreement between us, please confirm
your acceptance and agreement by signing the attached copy of this Agreement and
return the same to me.
5
<PAGE>
Sincerely,
PartMiner, Inc.
/s/ Daniel Nissanoff
By:_________________________ Name: Daniel Nissanoff
Title: President
ACCEPTED AND AGREED:
/s/ Kim Hibler
____________________________
Kim Hibler
<PAGE>
EXHIBIT 10.23
May 18, 1999
Mr. Mark Schenecker
Dear Mr. Schenecker:
This letter (the "Agreement") will confirm the agreement between Dast
Corporation d/b/a Microcom Technologies, a New York corporation (the "Company"),
and you relating to your employment by the Company.
1. EMPLOYMENT. The Company hereby employs you, and you hereby agree
----------
to serve as the Chief Technology Officer of the Company during the Term of
Employment (as hereinafter defined). In such capacity, you shall be responsible
for supervising, managing and coordinating the information technology function
of the Company, including the design, operation and function of the PartMiner
web site. In addition, your responsibilities may include operational and
strategic responsibilities associated with the core business of the Company as
it exists today. You shall report directly to Daniel Nissanoff, President of the
Company. In the event that any changes in your responsibilities are made by the
Company, such changes will be commensurate with your demonstrated abilities. Any
changes made by the Company in the foregoing reporting arrangements will be
discussed with you prior to implementing such changes. You agree also to perform
such senior executive services customary to such position as shall from time to
time be assigned to you and, in the absence of such assignment, such senior
executive services customary to such position as are necessary to the operations
of the Company. You agree to use your best efforts to promote the interests of
the Company and to devote all of your working time and energies to the business
and affairs of the Company during the Term of Employment (as hereinafter
defined). Although you may be associated with or invest in other companies, you
will not allow such activities to interfere with your services to the Company.
2. TERM OF EMPLOYMENT. The term of employment hereunder shall be for
------------------
the period commencing on May 24, 1999 and shall end on May 24, 2001 (the "Term
of Employment"), unless earlier terminated pursuant to the provisions of Section
5 hereof.
3. COMPENSATION; EXPENSES; BENEFITS.
--------------------------------
(a) Base Salary. As compensation for the services hereunder during
-----------
the Term of Employment, the Company shall pay you a base salary of $200,000 per
annum. Such salary shall be payable in appropriate bi-weekly installments to
conform with the regular payroll dates for salaried personnel of the Company and
will be considered for adjustment annually, in accordance with the Company
policy, based on the Company's evaluation of your performance
<PAGE>
for the preceding fiscal year.
(b) Benefits. You will receive the benefits that the Company provides
--------
its senior executives generally, including employee health insurance benefits.
Your vacation will begin to accrue as of the date hereof, in accordance with the
Company's existing policy, up to a maximum of three (3) weeks per year.
(c) Expenses. During the Term of Employment, you shall be entitled to
--------
be reimbursed for all reasonable expenses incurred by you in performing services
hereunder in accordance with the policies and procedures established by the
Company from time to time. In addition, during the first year of the Term of
Employment, the Company will reimburse you for reasonable lodging in New York
City and travel expenses incurred for travel between New York City, New York and
Colorado.
(d) Stock Options. Subject to approval by the shareholders and
-------------
directors of the Company of a proposed 1999 Stock Plan of the Company (the
"Plan"), the Company shall grant or cause to be granted to you options to
purchase shares of common stock of the Company. The exercise price of these
options shall be determined based on a valuation of the Company of $50,000,000.
The options shall be granted pursuant to the Plan and will be subject to the
terms and conditions of the Plan and of a nonqualified stock option agreement to
be entered into between you and the Company. Subject to the foregoing, the total
number of shares covered by these options shall vest as follows: (i) one third
of such options shall vest on May 24, 1999, (ii) one third of such options shall
vest on May 24, 2000, and (iii) one third of such options shall vest upon the
public offering by the Company of its securities pursuant to a registration
statement under the Securities Act of 1933, as amended.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY;
-----------------------------------------------
CONFIDENTIALITY; ENFORCEABILITY; BREACH.
----------------------------------------
(a) Covenant Not To Compete. You acknowledge that you are expected to play
-----------------------
a very important role in the on-going development of the Company, that you will
have detailed knowledge of the Company's business and its plans for the future,
that you will have a fiduciary relationship with the Company, and you will be
receiving substantial compensation and other benefits under this Agreement.
During the Term of Employment, you shall not, directly or indirectly, advise,
manage, control, operate, be employed by or participate in the ownership,
management, operation or control of, or be connected in any manner with any
business which competes with any business of the Company. The decision of the
Board of Directors of the Company as to what constitutes a competing business
shall be final and binding upon you. For these purposes, your ownership of one
percent (1%) or less of any class of securities of a public company shall not be
considered to be competition with the Company. Notwithstanding anything
contained herein to the contrary, in the event that following the Term of
Employment, you directly or indirectly advise, manage, control, operate, become
employed by or participate in the ownership, management, operation or control
of, or become connected in any manner with any business which competes with any
business of the Company, any and all options granted to you hereunder shall
terminate whether
<PAGE>
or not exercisable. Notwithstanding the foregoing, you shall be permitted to
publish a book on your own time which does not interfere with your duties and
responsibilities hereunder, any revenue from which shall be yours; provided the
Company shall have the right to review and approve such book prior to
publication.
(b) Intellectual Property. You agree that all ideas, inventions,
---------------------
trade secrets, marketing plans and business plans developed by you during the
Term of Employment which relate directly or indirectly to the business of the
Company, including without limitation, any process, operation, product or
improvement which may be patentable or copyrightable, will be the property of
the Company and that you will at the Company's request and cost do whatever is
necessary to secure the rights thereto by patent, copyright or otherwise to the
Company.
(c) Confidentiality. You agree that you will not divulge to anyone
---------------
(other than the Company or any persons employed or designated by the Company)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of the Company, including, without limitation, any and
all types of ideas, inventions, trade secrets, marketing plans, business plans,
and processes, operations, products or improvements which may be patentable or
copyrightable ("Confidential Information"). You further agree not to disclose,
publish or make use of any such Confidential Information without the prior
written consent of the Company. The term "Confidential Information" does not
include any information which (i) at the time of disclosure or thereafter is
generally available to and known to the public (other than as a result of
disclosure directly or indirectly by you), (ii) was available to you on a
non-confidential basis from a source other than the Company or its
representatives and advisors, provided that such source is not in breach of any
obligations of confidentiality to the Company, or (iii) has been independently
acquired or developed by you without violating any of your obligations pursuant
to this Agreement. The provisions set forth in this section shall survive the
termination or cancellation of this Agreement.
(d) Enforceability. You recognize and agree that the limitations
--------------
placed on you by this Section 4 are reasonable and are required for the
protection of the Company. You agree that if any such limitation is determined
in arbitration or by a court of competent jurisdiction to be unenforceable, you
agree and submit to the reduction of such limitation as the court or
arbitrator(s) deem reasonable. The limitations placed on you by this Section 4
are of the essence of this Agreement and they shall be construed and enforced
independently. The existence of any claim or cause of action against the Company
by you shall not constitute a defense against the enforcement of these
limitations on you.
(e) Breach. You acknowledge and agree that money damages would not
------
adequately compensate the Company in the event of breach by you
of any provision of this Section 4. Consequently, you agree that
the Company shall be entitled, without the necessity of proving
actual damages, to obtain damages for any breach of this Section
4, to enforce specific performance by you of any provision of
this Section 4, or to obtain temporary and
3
<PAGE>
permanent injunctive relief from any court of competent
jurisdiction for enforcement of the provisions of this Section
4.
5. TERMINATION.
-----------
(a) General. Your employment hereunder shall terminate as provided in
-------
Section 2 hereof and may be earlier terminated in accordance with the provisions
of this Section 5. Unless earlier terminated in accordance with the provisions
of this Section 5, the Company shall provide you with at least (30) days notice
prior to the termination of your employment as provided in Section 2 if the
Company does not intend to renew this Agreement.
(b) Death and Disability. Your employment under this Agreement shall
--------------------
terminate upon (i) your death; or (ii) in the event you become disabled, at the
option of the Company, thirty (30) days after the date on which the Company
shall have given you written notice of the termination of your employment
because of your physical or mental incapacity on a permanent basis. You shall be
deemed to be physically or mentally incapacitated on a permanent basis if you
are unable, by reason of any physical or mental incapacity, for a period of
ninety (90) substantially consecutive days or for shorter periods aggregating
one hundred twenty (120) days or more during any twelve (12) month period, to
perform your duties as Chief Technology Officer of the Company in a reasonably
satisfactory manner. In the event of any disagreement between you and the
Company as to whether you are physically or mentally incapacitated on a
permanent basis so as to permit the Company to terminate your employment
pursuant to this subparagraph (b), the question of such permanent incapacity
shall be submitted for decision to an impartial and reputable physician in New
York County, New York (the "Deciding Doctor") chosen by mutual agreement of the
Company and you or, failing such agreement, the Deciding Doctor shall be chosen
by two physicians from New York County, New York (one of whom shall be selected
by the Company and the other by you). The decision of the Deciding Doctor
regarding your capacity or incapacity shall be final and binding on the Company
and you. You shall submit to any medical examinations reasonably necessary to
enable the Deciding Doctor to make a decision regarding your capacity or
incapacity. If your employment is terminated under this Section 6(b), all
compensation and rights to benefits from the Company shall cease on the date of
your death or the date specified in the notice of termination for disability
(other than as may have already accrued as of the date of termination or as
expressly provided in plans in which you participated at the date of
termination).
(c) Termination by the Company for "Cause". The Company may terminate
-------------------------------------
your employment for "cause"; provided, however, the Company shall have given you
-------- -------
written notice specifying in reasonable detail the reason therefor, and ten (10)
days after receipt of such notice in which to cure such "cause", if capable of
cure. For the purposes of this Agreement, and event or occurrence constituting
"cause" shall mean knowingly or recklessly causing material injury to the
Company; willful misconduct in the performance of, or a willful failure to
perform, your duties; commission of dishonest or fraudulent conduct whether or
not in connection with your employment, or unlawful behavior involving moral
turpitude whether or not in connection with your employment; or breach or
violation of this Agreement. If your employment is terminated
4
<PAGE>
under this Section 5(c), all compensation and rights to benefits from the
Company shall cease on the date of termination (other than as may have already
accrued as of the date of termination or as expressly provided in plans in which
you participated at the date of termination); provided, however, that the
-------- -------
restrictions on your activities contained in Section 4 hereof shall continue in
effect as provided therein.
(d) Termination by Voluntary Resignation. You may terminate your
------------------------------------
employment upon thirty (30) days written notice to the Company at any time after
May 24, 2000 in your sole discretion for any reason or for no reason at all. If
your employment is terminated under this Section 5(d), all compensation and
rights to benefits from the Company shall cease (other than as may have already
accrued as of the date of termination or as expressly provided in plans in which
you participated at the date of termination). Nothwithstanding the foregoing, if
your employment is terminated under this Section 5(d), any options granted to
you in accordance with this Agreement shall immediately terminate on the date of
such notice of termination to the extent not then exercisable.
6. ASSIGNMENT. This Agreement is a personal contract, and except as
----------
specifically set forth herein, your rights, obligations and interests herein may
not be sold, transferred or assigned. The Company may freely assign this
Agreement and any of its rights, obligations and interests hereunder. This
Agreement shall be binding upon and inure to the benefit of each party's
successors and permitted assigns.
7. ENTIRE AGREEMENT; GOVERNING LAW; CAPTIONS. This Agreement
-----------------------------------------
contains the entire agreement between the parties with respect to your
employment by the Company, and the validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York. You hereby agree that any agreement or arrangement existing prior to the
date hereof regarding your employment by the Company is hereby terminated and
superseded by this Agreement. This Agreement may not be changed orally, but only
by agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Section and paragraph
headings are for convenience of reference only and shall not be considered a
part of this Agreement.
8. NOTICES. Any notices or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed given (a) on the
same day if given by hand, (b) on the third business day after mailing if given
by registered or certified mail, return receipt requested, postage prepaid, (c)
on the next business day after it was deposited with the courier service if sent
by reputable overnight courier, or (d) when sent if given by facsimile with
confirmation, addressed to you at [address] or to the Company at its offices at
16 East 52/nd/ Street, New York, New York 10022, Attention: President (fax no.
212-758-2559), with a copy to: Gould & Wilkie LLP, One Chase Manhattan Plaza,
58th floor, New York, New York 10005, Attention: Michael R. Manley, Esq. (fax
no.: 212-809-6890) or such other address as shall have been specified in writing
by either party to the other.
9. ARBITRATION. Except as provided by Section 4(e) of this
-----------
Agreement, any dispute or controversy under or in connection with this Agreement
shall be settled exclusively
5
<PAGE>
by arbitration in New York, New York by one arbitrator in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered upon the arbitrator's award in any court having jurisdiction. The costs
and expenses (including reasonable attorneys' fees and disbursements) of the
prevailing party in any such dispute or controversy shall be reimbursed by the
other party.
10. RIGHT TO WITHHOLD. The Company shall have the right to make all
-----------------
appropriate withholdings from your salary and other compensation under federal,
state and local tax laws.
6
<PAGE>
If the foregoing accurately reflects the agreement between us, please
confirm your acceptance and agreement by signing the attached copy of this
Agreement and return the same to me.
Sincerely,
DAST CORPORATION D/B/A
MICROCOM TECHNOLOGIES
/s/ Daniel Nissanoff
------------------------------------------
Name: Daniel Nissanoff
Title: President
ACCEPTED AND AGREED:
/s/ Mark Schenecker
- ----------------------------
Mark Schenecker
7
<PAGE>
EXHIBIT 10.24
December 8, 1999
Mr. Michael R. Manley
73 Kingsbury Road
New Rochelle, New York 10804
Re: Severance
Dear Michael:
This letter will confirm our agreement (the "Agreement") as follows:
1. In the event that there is a change in control of the PartMiner, Inc.
(the "Company") and your employment with the Company is terminated by the
Company within one (1) year following a change in control for reasons other than
cause or your death or disability, the Company shall make salary continuation
payments to you equal to six (6) months of your salary at the annual rate of
$200,000, and the Company shall reimburse you for business expenses that had
been accrued but had not been paid prior to the date of termination. The Company
shall have no further obligation to make any payments to you or provide any
benefits to you after the date of such termination.
2. For purposes of this Agreement:
(a) a "change in control" shall mean a change in the management of the
Company so that Daniel Nissanoff is no longer the President and Chief Executive
Officer of the Company, a merger or consolidation in which the Company is not
the surviving entity, or a sale of fifty percent (50%) or more of the assets or
capital stock of the Company; and
(b) "cause" shall mean knowingly or recklessly causing material injury
to the Company; willful misconduct in the performance of, or a willful failure
to perform, your duties; commission of dishonest or fraudulent conduct whether
or not in connection with your employment, or unlawful behavior involving moral
turpitude whether or not in connection with your employment.
3. This Agreement is not an employment agreement. Nothing in this
Agreement shall be interpreted or construed to confer upon you any right with
respect to employment with the Company now or in the future, nor shall this
Agreement interfere in any way with the right of the Company to terminate your
employment at any time.
<PAGE>
Michael R. Manley 2 December 7, 1999
4. This Agreement is a personal contract, and except as specifically
set forth herein, your rights, obligations and interests herein may not be sold,
transferred or assigned. The Company may freely assign this Agreement and any of
its rights, obligations and interests hereunder. This Agreement shall be binding
upon and inure to the benefit of each party's legal beneficiaries, successors
and permitted assigns.
5. This Agreement contains the entire agreement between the parties with
respect to your employment by the Company, and the validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York. This Agreement may not be changed orally, but only by
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought. Section and paragraph headings are
for convenience of reference only and shall not be considered a part of this
Agreement.
6. Any notices or other communications required or permitted hereunder
shall be in writing and shall be deemed given (a) on the same day if given by
hand, (b) on the third business day after mailing if given by registered or
certified mail, return receipt requested, postage prepaid, (c) on the next
business day after it was deposited with a courier service if sent by reputable
overnight courier, or (d) when sent if given by facsimile with confirmation,
addressed to you at the address first set forth above or to the Company at its
offices at 432 Park Avenue South, New York, New York 10016, Attention: General
Counsel (fax no. 212-592-5833), with a copy to: Gould & Wilkie LLP, One Chase
Manhattan Plaza, 58th floor, New York, New York 10005, Attention: John E. Gould,
Esq. (fax no.: 212-809-6890) or such other address as shall have been specified
in writing by either party to the other.
7. The Company shall have the right to make all appropriate withholdings
from any payments made to you pursuant to paragraph 1 above under federal, state
and local tax laws.
If the foregoing accurately reflects the agreement between us, please
confirm your acceptance and agreement by signing the attached copy of this
Agreement and returning the same to me.
Very truly yours,
PARTMINER, INC.
/s/ Daniel Nissanoff
By:______________________
Daniel Nissanoff
President and Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Michael R. Manley
________________________
Michael R. Manley
<PAGE>
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of March 16, 1999, by and
between Dast Corporation, d.b.a. Microcom Technologies, a New York corporation
(the "Company") and Daniel Nissanoff (the "Executive").
------- ---------
Introduction
------------
The Company desires to retain the services of the Executive and the
Executive wishes to continue to be employed by the Company. The Executive is a
key employee of the Company, and has had full access to information concerning
the Company and its business. The disclosure of such information or the engaging
in competitive activities would cause substantial harm to the Company. In
addition, the Company, the Executive and certain investors in the Company have
entered into a Stock Purchase Agreement dated March 16, 1999 (the "Purchase
--------
Agreement"), and it is a condition of the closing under the Purchase Agreement
- ---------
that the parties hereto enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Term. The Company shall employ the Executive for a term
--------- ----
commencing on the date of this Agreement and continuing for five (5) years,
unless earlier terminated pursuant to Section 8. The Executive's employment
under this Agreement may also be extended beyond such term with the prior
written agreement of the Executive and the Company.
Section 2. Duties. The Executive shall serve as President and Chief
--------- ------
Executive Officer of the Company for the term of this Agreement. The Executive
shall be responsible for the management of the operations of the Company,
subject to the supervision and direction of the Board of Directors of the
Company (the "Board"). The Executive shall report directly to the Board.
-----
Section 3. Time Commitment; Efforts. During the term of this Agreement,
--------- ------------------------
the Executive shall use all reasonable efforts to promote the interests of the
Company and shall devote the Executive's full business time to its business and
affairs. The Executive may serve from time to time as an advisor, director or
trustee of outside organizations (e.g., for-profit organizations, not-for-profit
organizations, professional organizations), provided that such service does not
conflict with (i) the business or reputation of the Company, (ii) the
Executive's performance of his duties as President and Chief Executive
<PAGE>
Officer of the Company, or (iii) Sections 5 and 6 hereof. The Executive shall
consult with, and obtain the consent of, the Board with respect to his service
as an advisor, director or trustee of any outside organization. The Board shall
have sole discretion, to be exercised reasonably, in determining whether or not
the Executive's service as an advisor, director or trustee of an outside
organization conflicts with (i) the business or reputation of the Company, (ii)
the Executive's performance of his duties as President and Chief Executive
Officer of the Company, or (iii) Sections 5 and 6 hereof.
Section 4. Compensation. The Executive shall be entitled to compensation as
--------- ------------
follows:
(a) Base Salary. During the term of the Executive's employment with
-----------
the Company, the Executive will receive a salary at the annual rate of $300,000
(the "Base Salary"), such salary shall be payable in appropriate installments to
-----------
conform with the regular payroll duties for salaried personnel of the Company.
(b) Withholding. The Company may withhold from compensation and
-----------
benefits payable to the Executive all applicable federal, state and local
withholding taxes.
(c) Other Entitlements. The Executive shall be entitled during the
------------------
term of employment to:
(i) participate in such benefit plans as are afforded from time to
time to other executive employees of the Company, including without limitation
all health and other insurance plans;
(ii) four weeks vacation during each calendar year commencing with
1999. The Executive shall be compensated for any vacation not so used;
(iii) reimbursement of all reasonable expenses incurred by the
Executive in the performance of his duties as President and Chief Executive
Officer of the Company, and which are documented in accordance with procedures
approved by the Company for all executive officers of the Company;
(iv) $2,000 per month to be used to pay for, in his sole discretion,
a leased or purchased automobile, including automobile insurance and parking
related thereto, health club expenses, life insurance, club dues and expenses,
or other similar fringe benefits; and
(v) life insurance benefits no less favorable to him than those
provided by the Company on the date of this Agreement.
2
<PAGE>
Section 5. Confidentiality. In consideration of the mutual promises
--------- ---------------
contained herein, and to preserve the goodwill of the Company (which term, for
purposes of this Section, shall include subsidiaries and affiliates of the
Company) in connection with the transactions contemplated by the Purchase
Agreement, which were of substantial benefit to the Executive, the Executive
agrees as follows:
(a) The Executive will not during or after the term of employment,
directly or indirectly, disclose or divulge any trade secrets or other
information of a business, financial, marketing, technical or other nature
pertaining to the Company, including information of others that the Company has
agreed to keep confidential (collectively, "Confidential Information"), except
------------------------
(i) to the extent necessary for the performance of the Executive's duties for
the Company, (ii) to the extent that such Confidential Information has become
public knowledge other than by breach of this Agreement by the Executive, or
(iii) as necessary to file tax returns or other required reports with
governmental agencies or as otherwise required by law.
(b) The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as required in connection
with the performance of the Executive's duties for the Company.
(c) Upon the termination of his employment with the Company for any
reason, the Executive shall immediately deliver to the Company all materials
(including all copies) in the Executive's possession which contain or relate to
Confidential Information.
(d) All inventions, ideas, sketches, designs, prototypes,
developments or improvements made by the Executive, either alone or in
conjunction with others, at any time or at any place during the term of the
Executive's employment by the Company, whether or not reduced to writing or
practice during such term, which relate to the business in which the Company is
engaged, shall be the exclusive property of the Company. The Executive shall
promptly disclose any such invention, development or improvement to the Company,
and, at the request and expense of the Company, shall assign all of the
Executive's rights to the same to the Company. The Executive shall sign all
instruments necessary for the filing and prosecution of any applications for or
extension or renewals of letters patent of the United States or any foreign
country which the Company desires to file.
(e) All copyrightable work by the Executive relating to the Company's
business during the term of the Executive's employment by the Company is
intended to be "work made for hire" as defined in Section 101 of the Copyright
Act of 1976, and shall be the property of the Company. If the copyright to any
such
3
<PAGE>
copyrightable work is not the property of the Company by operation of law, the
Executive will, without further consideration, assign to the Company all right,
title and interest in such copyrightable work and will assist the Company and
its nominees in every way, at the Company's expense, to secure, maintain and
defend for the Company's benefit copyrights and any extensions and renewals
thereof on any and all countries, such work to be and to remain the property of
the Company whether copyrighted or not.
Section 6. Noncompetition. In consideration of the mutual promises
--------- --------------
contained herein, and to preserve the goodwill of the Company (which term, for
purposes of this Section, shall include subsidiaries and affiliates of the
Company) in connection with the transactions contemplated by the Purchase
Agreement, which were of substantial benefit to the Executive, the Executive
agrees that prior to the termination of the Executive's employment with the
Company, and thereafter for a period of three (3) years:
(i) the Executive will not, directly or indirectly, or as a stockholder,
partner, employee, consultant or other owner or participant in any business
entity other than the Company or as a holder of not more than one (1%) percent
of the total outstanding stock of a publicly held company, engage in or assist
any other person or entity to engage in any business in which the Company is
engaging or in which the Company is actively planning to engage in at the time
of the Executive's termination;
(ii) the Executive will not, directly or indirectly, solicit or endeavor
to entice away from the Company, or otherwise interfere with the business
relationship of the Company with, any person who is, or was during the
Executive's term of employment, a customer or employee of, consultant or
supplier to, or other person or entity having material business relations with,
the Company; and
(iii) Notwithstanding the foregoing, nothing contained herein shall
prohibit the Executive from continuing his relationship with Market Maker
Systems Corporation, so long as such relationship does not otherwise violate the
terms of this Section 6.
Section 7. Remedies. Without limiting the remedies available to the
--------- --------
Company, the Executive acknowledges that a breach of any of the covenants
contained in Sections 5 and 6 herein could result in irreparable injury to the
Company for which there might be no adequate remedy at law, and that, in the
event of such a breach or threat thereof, the Company shall be entitled to
obtain a temporary restraining order and/or a preliminary injunction and a
permanent injunction restraining the
4
<PAGE>
Executive from engaging in any activities prohibited by Sections 5 and 6 herein
or such other equitable relief as may be required to enforce specifically any of
the covenants of Sections 5 and 6 herein.
Section 8. Termination. The Executive's employment with the Company (which
--------- -----------
term, for purposes of this Section, shall include subsidiaries and affiliates of
the Company) may be terminated at any time (i) by the Company with Cause or
without Cause or in the event of the death or Disability of the Executive or
(ii) by the Executive for Good Reason.
As used herein, "Cause" means the good faith determination of the
-----
Board, after notice to the Executive and after the Executive has had an
opportunity to present the Executive's view of the relevant facts and
circumstances to the Board, that the Executive has (a) engaged in malfeasance,
willful misconduct, active fraud or gross negligence with respect to the Company
which has not been cured by the Executive within 30 days after notice to the
Executive by the Company, or (b) been convicted of or pleaded nolo contendere to
(i) any misdemeanor relating to the affairs of the Company, which is injurious
to the Company, or (ii) any felony.
As used herein, "Disability" means the Executive is unable to render
----------
the services to be rendered by him pursuant to this Agreement for a continuous
period of ninety (90) successive days or for shorter periods aggregating one
hundred twenty (120) days or more during any twelve (12) successive months. In
the event of any disagreement between the Executive and the Company as to
whether the Executive is physically or mentally incapacitated so as to permit
the Company to terminate the Executive's employment pursuant to this Section 8,
the question of such incapacity shall be submitted for decision to an impartial
and reputable physician in New York County, New York (the "Deciding Doctor")
chosen by mutual agreement of the Company and you, or, failing such agreement,
the Deciding Doctor shall be chosen by two physicians from New York County, New
York (one of whom shall be selected by the Company and the other by you). The
decision of the Deciding Doctor regarding your capacity or incapacity shall be
final and binding on the Company and you.
As used herein, "Good Reason" means (i) the assignment to the
Executive of duties substantially inconsistent with his status as the Chief
Executive Officer of the Company, or a substantial alteration in the nature or
status of his responsibilities from those in effect as of the date hereof or as
the same may be enhanced from time to time; or (ii) a reduction by the Company
in the Executive's total compensation as in effect on the date hereof or as the
same may be increased from time to time; provided, that under either (i) or (ii)
such reason has not
5
<PAGE>
been cured by the Company within 30 days after written notice to the Company by
the Executive.
If the Executive's employment is terminated hereunder, the Company
shall have no further obligation to make any payments or provide any benefits to
the Executive hereunder after the date of termination except for (a) payments of
Base Salary and expense reimbursement that had accrued but had not been paid
prior to the date of termination, (b) if Executive's employment with the Company
is terminated by the Company without Cause (other than upon death or
Disability), continuation of Base Salary at the rate in effect at the date of
termination and continuation of benefits (to the extent permitted by the
applicable plans) until two years after the date of termination (but in no event
after the scheduled termination date of this Agreement) and (c) payments in
accordance with the next paragraph of this Section 8.
In the event the Executive's employment by the Company is terminated
(a) by the Company without Cause (other than upon death or Disability), (b) as a
result of the Company refusing to renew or extend this Employment Agreement at
the end of any applicable term or (c) by the Executive for Good Reason, the
Executive shall have the right, by giving written notice to the Company within
ten (10) days after the date of termination of his employment by the Company, to
require the Company to repurchase at fair market value (as determined in
accordance with Schedule A to this Agreement) one hundred percent (100%) of the
----------
shares of capital stock of the Company held by the Executive in accordance with
the terms set forth in Schedule A.
----------
The provisions of Sections 5, 6, 7 and 8 shall survive the termination
of the Executive's employment in accordance with their terms except that the
provisions of the previous paragraph contained in this Section 8 shall become
null and void upon the Company's completion of a "Qualified Public Offering" as
-------------------------
such term is defined in Section 7.01 of the Stockholders Agreement dated as of
March 16, 1999 by and among the Company, the Executive and certain other
stockholders of the Company.
Section 9. Enforceability, etc. This Agreement shall be interpreted in such
--------- -------------------
a manner as to be effective and valid under applicable law, but if any provision
hereof shall be prohibited or invalid under any such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provisions shall be
construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by applicable law.
6
<PAGE>
Section 10. Notices. Any notice or other communication given pursuant to
---------- -------
this Agreement shall be in writing and shall be deemed to be properly given when
personally delivered, on the day after if sent by nationally recognized
overnight courier or express mail, or on the third business day after mailing by
first class certified or registered mail, postage prepaid, return receipt
requested as follows:
(a) If to the Executive:
203 East 72nd Street
Apt. 2B
New York, N.Y. 10021
(b) If to the Company:
Dast Corporation
d.b.a. Microcom Technologies
16 East 52nd Street
New York, N.Y. 10022
Attention: Board of Directors
with a copy to:
Boston Ventures Management, Inc.
One Federal Street
23rd Floor
Boston, MA 02110-2003
Attention: James M. Wilson
or to such other address as the parties shall have designated by notice to the
other parties.
Section 11. Governing Law. This Agreement shall be governed by and
---------- -------------
construed in accordance with the internal laws of the State of New York, without
regard to their choice of law provisions. Any suits brought hereunder shall be
brought in the state or federal courts located in the County of New York, State
of New York.
Section 12. Amendments and Waivers. No amendment or waiver of this
---------- ----------------------
Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a breach
of any provision of this Agreement by the other party shall not operate and be
construed as a waiver or a continuing waiver by that party of the same or any
subsequent breach of any provision of this Agreement by the other party.
7
<PAGE>
Section 13. Binding Effect. This Agreement shall be binding on and inure
---------- --------------
to the benefit of the parties hereto and their respective heirs, executors and
administrators, successors and assigns, except that it may not be assigned by
either party without the other party's consent, except that the Company may
assign this agreement to an entity that acquires substantially all of the
Company's assets.
Section 14. Entire Agreement. This Agreement constitutes the final and
---------- ----------------
entire agreement of the parties with respect to the matters covered hereby and
replaces and supersedes all other employment or similar agreements between the
Company and the Executive and all other agreements and understandings relating
hereto.
Section 15. Counterparts. This Agreement may be executed in any number of
---------- ------------
counterparts, including counterpart signature pages or counterpart facsimile
signature pages, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
DAST CORPORATION
d.b.a Microcom Technologies
By: /s/ Daniel Nissanoff
----------------------------------
(Title)
/s/ Daniel Nissanoff
--------------------------------------
Daniel Nissanoff
<PAGE>
Exhibit 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of March 16, 1999, by and
between Dast Corporation, d.b.a. Microcom Technologies, a New York corporation
(the "Company") and Bruce Friedman (the "Executive").
Introduction
The Company desires to retain the services of the Executive and the
Executive wishes to continue to be employed by the Company. The Executive is a
key employee of the Company, and has had full access to information concerning
the Company and its business. The disclosure of such information or the engaging
in competitive activities would cause substantial harm to the Company. In
addition, the Company and certain investors in the Company have entered into a
Stock Purchase Agreement dated March 16, 1999 (the "Purchase Agreement"), and it
is a condition of the closing under the Purchase Agreement that the parties
hereto enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, parties agree as follows:
Section 1. Term. The Company shall employ the Executive for a term
commencing on the date of this Agreement and continuing for five (5) years,
unless earlier terminated pursuant to Section 8. The Executive's employment
under this Agreement may also be extended beyond such term with the prior
written agreement of the Executive and the Company.
Section 2. Title. The Executive shall serve as an executive officer of
the Company for the term of this Agreement.
Section 3. Time Commitment; Efforts. During the term of this Agreement,
the Executive shall use all reasonable efforts to promote the interests of the
Company and shall devote the Executive's full business time to its business and
affairs. The Executive may serve from time to time as an advisor, director or
trustee of outside organizations (e.g., for-profit organizations, not-for-profit
organizations, professional organizations), provided that such service does not
conflict with (i) the business or reputation of the Company (ii) the Executive's
performance of his duties as an executive officer of the Company, or (iii)
Sections 5 and 6 hereof. The Executive shall consult with, and obtain the
consent of, the Chief Executive Officer of the Company ("CEO") with respect to
his service as an advisor, director or trustee of any outside organization. The
CEO shall have sole discretion, to be exercised reasonably, in determining
whether or not the Executive's service as an advisor, director or
<PAGE>
trustee of an outside organization conflicts with (i) the business or reputation
of the Company, (ii) the Executive's performance of his duties as an executive
officer of the Company, or (iii) Sections 5 and 6 hereof.
Section 4. Compensation. The Executive shall be entitled to
compensation as follows:
(a) Base Salary. During the term of the Executive's employment
with the Company, the Executive will receive a salary at the annual rate of
$225,000 (the "Base Salary"), such salary shall be payable in appropriate
installments to conform with the regular payroll duties for salaried personnel
of the Company.
(b) Withholding. The Company may withhold from compensation
and benefits payable to the Executive all applicable federal, state and local
withholding taxes.
(c) Other Entitlements. The Executive shall be entitled during
the term of employment to:
(i) participate in such benefit plans as are afforded from
time to time to other executive employees of the Company, including without
limitation all health and other insurance plans;
(ii) four weeks vacation during each calendar year
commencing with 1999. The Executive shall be compensated for any vacation not
so used;
(iii) reimbursement of all reasonable expenses incurred by the
Executive in the performance of his duties as an officer of the Company, and
which are documented in accordance with procedures approved by the Company for
all executive officers of the Company; and
(iv) life insurance benefits no less favorable to him than
those provided by the Company on the date of this Agreement.
(d) Additional Compensation. The Company will pay to Executive
an amount, ("Gross Tax Payment") sufficient to cause the net after federal
income tax proceeds on such Gross Tax Payment to be equal to the excess of (a)
the actual federal income tax incurred on the exercise of the Executive's option
to acquire 25% of the shares of common stock of the Company from Daniel J.
Nissanoff in accordance with the terms of the Letter of Agreement between the
Executive, Lynne Friedman, Daniel J. Nissanoff and Stacy Jargowsky Nissanoff,
dated as of July 30, 1997, as amended (the "Option") and the amount of federal
income tax liability that would have been incurred by Executive if the income
recognized on the exercise of the Option had been taxable at long-term capital
gain rates, provided, however, that the
2
<PAGE>
Gross Tax Payment will be made only as, when and to the extent of any Tax
Benefits (defined below). This provision shall apply each time a portion of the
Option is exercised.
All payments under this Section shall be made promptly after the filing
of tax returns by the Company demonstrating that Tax Benefits giving rise to
such payments were realized in the year for which such returns were filed;
provided, however, that in the event that such Tax Benefits are initially
- -----------------
determined not to be allowable by a taxing authority, the Executive shall pay
over to the Company the amount by which the payments under this Section 4(d)
exceed the amount that would have been paid pursuant to Section 4(d) if only the
amount of the deduction finally allowed had been claimed in the relevant tax
return.
As used herein, "Tax Benefits" means the net cash tax savings to the
--------------
Company as realized by the Company attributable to (i) the deduction allowable
under Section 83(h) of the Internal Revenue Code of 1986, as amended, as a
result of Executive's exercise of the Option and (ii) the deduction allowable to
the Company as a result of making the Gross Tax Payment to the Executive
provided for in this Subsection. In determining Tax Benefits, all other tax
deductions and credits available to the Company shall be deemed to have been
utilized before the items specified in the preceding sentence. The amount of
"Tax Benefits" shall include (i) the Tax Benefits realized in the taxable year
of exercise, a prior taxable year as a result of applying a net operating loss
carryback attributable to such deductions to such prior taxable year or a
subsequent taxable year(s) as a result of applying a net operating loss
carryforward attributing such deductions to a subsequent taxable year(s) and
(ii) the excess of (a) the Tax Benefits realized on a prior exercise of part of
the 0ption ("Prior Exercise") over (b) the Gross Tax Payment made in connection
------------------
with such Prior Exercise.
Notwithstanding the foregoing, the payments contemplated by
this Section may not be paid to the extent prohibited by any credit arrangement
to which the Company is a party.
Section 5. Confidentiality. In consideration of the mutual promises
---------- ----------------
contained herein and to preserve the goodwill of the Company (which term, for
purposes of this, Section, shall include subsidiaries and affiliates of the
Company) in connection with the transactions contemplated by the Purchase
Agreement, which were of substantial benefit to the Executive, the Executive
agrees as follows:
(a) The Executive will not during or after the term of
employment, directly or indirectly, disclose or divulge any trade secrets or
other information of a business, financial, marketing, technical or other
nature pertaining to the Company including
3
<PAGE>
information of others that the Company has agreed to keep confidential
(collectively, "Confidential Information"), except (i) to the extent necessary
------------------------
for the performance of the Executive's duties for the company, (ii) to the
extent that such Confidential Information has become public knowledge other than
by breach of this Agreement by the Executive, or (iii) as necessary to file tax
returns or other required reports with governmental agencies or as otherwise
required by law.
(b) The Executive shall make no use whatsoever directly or
indirectly, of any confidential information, except as required in connection
with the performance of the Executive's duties for the Company.
(c) Upon the termination of his employment with the Company
for any reason, the Executive shall immediately deliver to the Company all
materials (including all copies) in the Executive's possession which contain of
relate to Confidential Information.
(d) All inventions, ideas, sketches, designs, prototypes,
developments or improvements made by the Executive, either alone or in
conjunction with others, at any time or at any place during the term of the
Executive's employment by the Company, whether or not reduced to writing or
practice during such term, which relate to the business in which the Company is
engaged, shall be the exclusive property of the Company. The Executive shall
promptly disclose any such invention development or improvement to the Company,
and, at the request and expense of the Company, shall assign all of the
Executive's rights to the same to the Company. The Executive shall sign all
instruments necessary for the filing and prosecution of any applications for or
extension or renewals of letters patent of the United States or any foreign
country which the Company desires to file.
(e) All copyrightable work by the Executive relating to the
Company's business during the term of the Executive's employment by the Company
is intended to be "work made for hire" as defined in Section 101 of the
Copyright Act of 1976, and shall be the property of the Company. If the
copyright to any such copyrightable work is not the property of the Company by
operation of law, the Executive will, without further consideration, assign to
the Company all right, title and interest in such copyrightable work and will
assist the Company and its nominees in every way, at the Company's expense, to
secure, maintain and defend for the Company's benefit copyrights and any
extensions and renewals thereof on any and all such work including translations
thereof in any and all countries, such work to be and to remain the property of
the Company whether copyrighted or not.
Section 6. Noncompetition. In consideration of the mutual
--------- --------------
4
<PAGE>
promises contained herein, and to preserve the goodwill of the Company (which
term, for purposes of this Section, shall include subsidiaries and affiliates of
the Company) in connection with the transactions contemplated by the Purchase
Agreement, which were of substantial benefit to the Executive, the Executive
agrees that prior to the termination of the Executive's employment with the
Company, and thereafter for a period of three (3) years:
(i) the Executive will not, directly or indirectly, or as a
stockholder, partner, employee, consultant or other owner or participant in any
business entity other than the Company or as a holder of not more than one (1%)
percent of the total outstanding stock of a publicly held Company, engage in or
assist any other person or entity to engage in any business in which the Company
is engaging or in which the Company is actively planning to engage in at the
time of the Executive's termination; and
(ii) the Executive will not, directly or indirectly solicit or
endeavor to entice away from the Company, or otherwise interfere with the
business relationship of the Company with, any person who is, or was during the
Executive's term of employment, a customer or employee of, consultant or
supplier to, or other person or entity having material business relations with,
the Company.
Section 7. Remedies. Without limiting the remedies available to the
Company, the Executive acknowledges that a breach of any of the covenants
contained in Sections 5 and 6 herein could result in irreparable injury to the
Company for which there might be no adequate remedy at law, and that, in the
event of such a breach or threat thereof, the Company shall be entitled to
obtain a temporary restraining, order and/or a preliminary injunction and a
permanent injunction restraining the Executive from engaging in any activities
prohibited by Sections 5 and 6 herein or such other equitable relief as may be
required to enforce specifically any of the covenants of Sections 5 and 6
herein.
Section 8. Termination. The Executive's employment with the Company
(which term, for purposes of this section, shall include subsidiaries and
affiliates of the Company) may be terminated at any time (i) by the Company with
Cause or without Cause or in the event of the death or Disability of the
Executive or (ii) by the Executive for Good Reason.
As used herein, "Cause" means the good faith determination of the
Board, after notice to the Executive and after the Executive has had an
opportunity to present the Executive's view of the relevant facts and
circumstances to the Board, that the Executive has (a) engaged in malfeasance,
willful misconduct, active fraud or gross negligence with respect to the
5
<PAGE>
Company which has not been cured by the Executive within 30 days after notice to
the Executive by the Company, (b) failed to substantially perform his duties
with the Company after a written demand for substantial performance is delivered
to the Executive by or on behalf of the Board, which demand (i) shall have been
approved by Daniel Nissanoff, and (ii) shall specifically identify the manner in
which the Board believes that the Executive has not substantially performed his
duties, or (c) been convicted of or pleaded nolo contendere to (i) any
misdemeanor relating to the affairs of the Company, which is injurious to the
Company, or (ii) any felony.
As used herein, "Disability" means the Executive is unable to render
the services to be rendered by him pursuant to this Agreement for a continuous
period of ninety (90) successive days or for shorter periods aggregating one
hundred twenty (120) days or more during any twelve (12) successive months. In
the event of any disagreement between the Executive and the Company as to
whether the Executive is physically or mentally incapacitated so as to permit
the Company to terminate the Executive's employment pursuant to this Section 8,
the question of such incapacity shall be submitted for decision to an impartial
and reputable physician in New York County, New York (the "Deciding Doctor")
chosen by mutual agreement of the Company and you, or, failing such agreement,
the Deciding Doctor shall be chosen by two physicians from New York County, New
York (one of whom shall be selected by the Company and the other by you). The
decision of the Deciding Doctor regarding your capacity or incapacity shall be
final and binding on the Company and you.
As used herein, "Good Reason" means (i) the assignment to the
Executive of duties substantially inconsistent with his status as an executive
officer of the Company, or a substantial alteration in the nature or status of
his responsibilities from those as of the date hereof or as the same may be
enhanced from time to time; or, (ii) a reduction by the Company in the
Executive's total compensation as in effect on the date hereof or as the same
may be increased from time to time; provided, that under either (i) or (ii) such
reason has not been cured by the Company within 30 days after written notice to
the Company by the Executive.
It the Executive's employment is terminated hereunder, the Company
shall have no further obligation to make any payments or provide any benefits to
the Executive hereunder after the date of termination except for (a) payments of
Base Salary and expense reimbursement that had accrued but had not been paid
prior to the date of termination, (b) if Executive's employment with the Company
is terminated by the Company without Cause (other than upon death or
Disability), continuation of Base Salary at the rate in effect at the date of
termination and continuation of benefits (to the extent permitted by the
applicable plans) until
6
<PAGE>
two years after the date of termination (but in no event after the scheduled
termination date of this Agreement) and (c) payments in accordance with the next
paragraph of this Section 8.
In the event the Executive's employment by the Company is terminated
(a) by the Company without Cause (other than upon death or Disability), (b) as a
result of the Company refusing to renew or extend this Employment Agreement at
the end of any applicable term or (c) by the Executive for Good Reason, the
Executive shall have the right, by giving written notice to the Company within
ten (10) days after the date of termination of his employment by the Company, to
require the Company to repurchase at fair market value (as determined in
accordance with Schedule A to this Agreement) one hundred percent (100%) of the
shares of any capital stock of the Company held by the Executive in accordance
with the terms set forth in Schedule A. Additionally, if at the time the
----------
repurchase right contained in this paragraph is effective, the Executive has an
unexercised option to acquire shares of capital stock of the Company from Daniel
Nissanoff, the Executive shall have the right, within the ten (10) day period
referred to in the preceding sentence, to require the Company to pay to the
Executive the difference between the fair market value (as determined in
accordance with Schedule A of this Agreement) of the shares of capital stock
----------
underlying the option and the exercise price of such option, in accordance with
the terms of Schedule A.
----------
The provisions of Sections 5, 6, 7 and 8 shall survive the termination
of the Executive's employment in accordance with their terms except that the
provisions of the previous paragraph contained in this Section 8 shall become
null and void upon the Company's completion of a "Qualified Public Offering" as
such term is defined in Section 7.01 of the Stockholders Agreement dated as of
March 16, 1999 by and among the Company and certain stockholders of the Company.
Section 9. Enforceability etc. This Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision hereof shall be prohibited or invalid under any such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provisions shall be
construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by applicable law.
Section 10. Notices. Any notice or other communication given pursuant
to this Agreement shall be in writing and shall be deemed to be properly given
when personally delivered, on the day
7
<PAGE>
after if sent by nationally recognized overnight courier or express mail, or on
the third business day after mailing by first class certified or registered
mail, postage prepaid, return receipt requested as follows:
(a) If to the Executive:
c/o of Morton Rosenfeld
2049 Century Park East
Suite 3090
Los Angeles, CA 90067
(b) If to the Company:
Dast Corporation
d.b.a. Microcom Technologies
16 East 52nd Street
New York, N.Y. 10022
Attention: Board of Directors
with a copy to:
Boston Ventures Management, Inc.
One Federal Street
23rd Floor
Boston, MA 02110-2003
Attention: James M. Wilson
or to such other address as the parties shall have designated by notice to the
other parties.
Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to their choice of law provisions. Any suits brought hereunder shall be
brought in the state or federal courts located in the County of New York, State
of New York. In the event of any litigation between the Executive and the
Company related to the termination of Executive for Cause as provided for in
Section 8 above, the unsuccessful party to the litigation will pay to the
prevailing party such party's reasonable attorneys' fees actually incurred by
the prevailing party.
Section 12. Amendments and waivers. No amendment or waiver of this
Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either Party of a breach
of any provision of this Agreement by the other party shall not operate and be
construed as a waiver or a continuing waiver by that party of the same or any
subsequent breach of any provision of this
<PAGE>
Agreement by the other party.
Section 13. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective heirs, executors
and administrators, successors and assigns, except that it may not be assigned
by either party without the other party's consent, except that the Company may
assign this agreement to an entity that acquires substantially all of the
Company's assets.
Section 14. Entire Agreement. This Agreement constitutes the final and
entire agreement of the parties with respect to the matters covered hereby and
replaces and supersedes all other employment or similar agreements between the
Company and the Executive and all other agreements and understandings relating
hereto.
Setion 15. Counterparts. This Agreement may be executed in any number
of counterparts, including counterpart signature pages or counterpart facsimile
signature pages, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument as of the date first above written.
DAST CORPORATION
d.b.a. Microcom Technologies
By: /s/ Daniel Nissanoff
------------------------
President (Title)
/s/ Bruce Friedman
------------------------
Bruce Friedman
10
<PAGE>
EXHIBIT 10.27
January 26, 1999
PRIVILEGED AND CONFIDENTIAL
- ---------------------------
Mr. William Barron
203 Bay Avenue
Huntington Bay, New York 11793
Dear Mr. Barron:
This letter (the "Agreement") will confirm the agreement between Dast
Corporation d/b/a Microcom Technologies, a New York corporation (the "Company"),
and you relating to your employment by the Company.
1. EMPLOYMENT. The Company hereby employs you, and you hereby agree
----------
to serve as the Chief Marketing Officer of the Company from the earlier of
February 15, 1999 or the date you actually begin your employment at the Company
through and including February 15, 2001. In such capacity, you shall be
responsible for preparing, implementing and managing the marketing plan of the
Company, assigning in the financing efforts of the Company, hiring and managing
a marketing staff, developing and managing manufacturer and distributor
relationships, and managing sales of advertising, on-line services, and the
public relations of the Company. You shall report to Daniel Nissanoff, President
of the Company. Any changes in the foregoing reporting responsibilities will be
discussed with you prior to implementing such changes. In the event that any
changes in responsibilities are made, such changes will be commensurate with
your demonstrated abilities. You agree also to perform such senior executive
services customary to such position as shall from time to time be assigned to
you and, in the absence of such assignment, such senior executive services
customary to such position as are necessary to the operations of the Company.
You agree to use your best efforts to promote the interests of the Company and
to devote all of your working time and energies to the business and affairs of
the Company during the Term of Employment (as hereinafter defined). Although you
may be associated with or invest in other companies, you will not allow such
activities to interfere with your services to the Company.
2. TERM OF EMPLOYMENT. The term of employment hereunder shall be
------------------
for the period which shall commence the earlier of February 15, 1999 or the date
you actually begin employment at the Company and shall end on February 15, 2001,
unless earlier terminated pursuant to the provisions of Section 5 hereof (the
"Term of Employment").
1
<PAGE>
3. COMPENSATION; EXPENSES; BENEFITS.
--------------------------------
(a) Base Salary. As compensation for the services hereunder during
-----------
the Term of Employment, the Company shall pay you a base salary of $200,000 per
annum. As you know, the Company is currently seeking to raise $10,000,000 in
additional financing. If the Company is successful in raising $10,000,000 in
additional financing, then your base salary for the remainder of the Term of
Employment shall be increased to $250,000 beginning with the first full month
immediately following the closing of such financing. Such salary shall be
payable in appropriate bi-weekly installments to conform with the regular
payroll dates for salaried personnel of the Company and will be considered for
adjustment annually, in accordance with the Company policy, based on your
evaluated performance for the preceding fiscal year.
(b) Benefits. You will receive the benefits that the Company provides
--------
its senior executives generally, including employee health insurance benefits.
Your vacation will begin to accrue as of the date hereof, in accordance with
the Company's existing policy, up to a maximum of three (3) weeks per year.
(c) Expenses. During the Term of Employment, you shall be entitled to
--------
be reimbursed for all reasonable expenses incurred by you in performing services
hereunder in accordance with the policies and procedures established by the
Company from time to time.
(d) Stock Options. Subject to approval by the shareholders and
-------------
directors of the Company of a proposed 1999 Stock Plan of the Company (the
"Plan"), and subject to the amendment of the Company's certificate of
incorporation, the Company shall grant or cause to be granted to you options to
purchase an amount equal to three percent (3%) of the total issued and
outstanding shares of common stock of the Company, as of the date of the grant,
subject to dilution on the same basis as other executives of the Company. The
exercise price of these options shall be determined based on a valuation of the
Company of $10,000,000 prior to the financing described in Section 3(a) above.
The Company will adopt or cause to be adopted the Plan and grant the options
within ninety (90) days of execution of this Agreement. Daniel Nissanoff, in his
capacity as a shareholder of the Company, hereby represents and warrants that he
will vote in favor of adoption of the Plan. The options shall be granted
pursuant to the Plan and will be subject to the terms and conditions of the Plan
and of a mutually agreeable nonqualified stock option agreement to be entered
into between you and the Company. Subject to the foregoing, one third of the
total number of shares covered by these options shall vest upon adoption of the
Plan and grant of the options to you thereunder (the "Grant Date"), and
thereafter in accordance with the following schedule:
2
<PAGE>
<TABLE>
<CAPTION>
Vesting Date Expiration Date
------------ ---------------
<S> <C>
The Grant Date February 15, 2009
February 15, 2000 February 15, 2009
February 15, 2001 February 15, 2009
</TABLE>
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY; CONFIDENTIALITY;
---------------------------------------------------------------
ENFORCEABILITY; BREACH.
----------------------
(a) Covenant Not To Compete. You acknowledge that you are expected to
-----------------------
play a very important role in the on-going development of the Company, that you
will have detailed knowledge of the Company's business and its plans for the
future, that you will have a fiduciary relationship with the Company, and you
will be receiving substantial compensation and other benefits under this
Agreement. During the Term of Employment, you shall not, directly or indirectly,
advise, manage, control, operate, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with any business which competes with any business of the Company. The decision
of the Board of Directors of the Company as to what constitutes a competing
business shall be final and binding upon you. For these purposes, your ownership
of one percent (1%) or less of any class of securities of a public company shall
not be considered to be competition with the Company. Notwithstanding anything
contained herein to the contrary, in the event that following the Term of
Employment and for a period of five (5) years thereafter, you directly or
indirectly advise, manage, control, operate, become employed by or participate
in the ownership, management, operation or control of, or become connected in
any manner with any business which competes with any business of the Company,
any and all options granted to you hereunder shall terminate whether or not
exercisable.
(b) Intellectual Property. You agree that all ideas, inventions,
----------------------
trade secrets, marketing plans and business plans developed by you during the
Term of Employment which relate directly or indirectly to the business of the
Company, including without limitation, any process, operation, product or
improvement which may be patentable or copyrightable, will be the property of
the Company and that you will at the Company's request and cost do whatever is
necessary to secure the rights thereto by patent, copyright or otherwise to the
Company.
(c) Confidentiality. You agree that you will not divulge to anyone
---------------
(other than the Company or any persons employed or designated by the Company)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of the Company, including, without limitation, all
types of ideas, inventions, trade secrets, marketing plans, business plans, and
processes, operations, products or improvements which may be patentable or
copyrightable ("Confidential Information"). You further agree not to disclose,
3
<PAGE>
publish or make use of any such Confidential Information without the prior
written consent of the Company. The term "Confidential Information" does not
include any information which (i) at the time of disclosure or thereafter is
generally available to and known to the public (other than as a result of
disclosure directly or indirectly by you), (ii) was available to you on a
non-confidential basis from a source other than the Company or its
representatives and advisors, provided that such source is not in breach of any
obligations of confidentiality to the Company, or (iii) has been independently
acquired or developed by you without violating any of your obligations pursuant
to this Agreement. The provisions set forth in this section shall survive the
termination or cancellation of this Agreement.
(d) Enforceability. You recognize and agree that the limitations
--------------
placed on you by this Section 4 are reasonable and are required for the
protection of the Company. You agree that if any such limitation is determined
in arbitration or by a court of competent jurisdiction to be unenforceable, you
agree and submit to the reduction of such limitation as the court or
arbitrator(s) deem reasonable. The limitations placed on you by this Section 4
are of the essence of this Agreement and they shall be construed and enforced
independently. The existence of any claim or cause of action against the Company
by you shall not constitute a defense against the enforcement of these
limitations on you.
(e) Breach. You acknowledge and agree that money damages would not
------
adequately compensate the Company in the event of breach by you of any provision
of this Section 4. Consequently, you agree that the Company shall be entitled,
without the necessity of proving actual damages, to obtain damages for any
breach of this Section 4, to enforce specific performance by you of any
provision of this Section 4, or to obtain temporary and permanent injunctive
relief from any court of competent jurisdiction for enforcement of the
provisions of this Section 4.
5. TERMINATION.
-----------
(a) General. Your employment hereunder shall terminate as provided in
-------
Section 2 hereof and may be earlier terminated in accordance with the provisions
of this Section 5. Unless earlier terminated in accordance with the provisions
of this Section 5, the Company shall provide you with at least sixty (60) days
notice prior to the termination of your employment as provided in Section 2 if
the Company does not intend to renew this Agreement.
(b) Death and Disability. Your employment under this Agreement shall
--------------------
terminate upon (i) your death; and/or (ii) in the event you become disabled, at
the option of the Company, thirty (30) days after the date on which the
Company shall have given you written notice of the termination of your
employment because of your physical or mental incapacity on a permanent basis.
You shall be deemed to be physically or mentally incapacitated on a permanent
basis if you are unable, by reason of any physical or mental incapacity, for a
period of ninety (90) substantially consecutive days or for shorter periods
aggregating one hundred twenty (120) days or more during any 12 month period,
to perform your duties as Chief
4
<PAGE>
Marketing Officer of the Company in a reasonably satisfactory manner. In the
event of any disagreement between you and the Company as to whether you are
physically or mentally incapacitated on a permanent basis so as to permit the
Company to terminate your employment pursuant to this subparagraph (b), the
question of such permanent incapacity shall be submitted for decision to an
impartial and reputable physician in New York County, New York (the "Deciding
Doctor") chosen by mutual agreement of the Company and you or, failing such
agreement, the Deciding Doctor shall be chosen by two physicians from New York
County, New York (one of whom shall be selected by the Company and the other by
you). The decision of the Deciding Doctor regarding your capacity or incapacity
shall be final and binding on the Company and you. You shall submit to any
medical examinations reasonably necessary to enable the Deciding Doctor to make
a decision regarding your capacity or incapacity.
(c) Termination by the Company for "Cause". The Company may terminate
--------------------------------------
your employment for "cause"; provided, however, the Company shall have given you
--------- -------
written notice specifying in reasonable detail the reason therefor, and ten (10)
days after receipt of such notice in which to cure such "cause", if capable of
cure. For the purposes of this Agreement, an event or occurrence constituting
"cause" shall mean knowingly or recklessly causing material injury to the
Company; willful misconduct in the performance of, or a willful failure to
perform, your duties; commission of dishonest, fraudulent or unlawful behavior
involving moral turpitude whether or not in connection with your employment; or
breach or violation of this Agreement. If your employment is terminated under
this Section 5(c), all compensation and rights to benefits from the Company
shall cease on the date of termination (other than as may have already accrued
as of the date of termination or as expressly provided in plans in which you
participated at the date of termination); provided, however, that the
-------- -------
restrictions on your activities contained in Section 4 hereof shall continue in
effect as provided therein.
(d) Termination by the Company Other Than for "Cause". In the event
-------------------------------------------------
the Company terminates your employment other than for death or disability in
accordance with subparagraph (b) above, or other than for "cause" in accordance
with subparagraph (c) above, the Company shall pay you your salary and benefits
until February 15, 2001, all of your options shall immediately vest, and the
Company shall have no further obligation to you hereunder. In the event the
Company terminates your employment for death or disability in accordance with
subparagraph (b) above, all of your options shall immediately vest.
6. ASSIGNMENT. This Agreement is a personal contract, and except as
----------
specifically set forth herein, the rights and interests of you and the Company
herein may not be sold, transferred or assigned, except that the Company may
assign its rights and interests in this Agreement to a successor, affiliate or
subsidiary of the Company. This Agreement shall be binding upon and inure to
the benefit of each party's successors and permitted assigns.
5
<PAGE>
7. ENTIRE AGREEMENT; GOVERNING LAW; CAPTIONS. This Agreement
-----------------------------------------
contains the entire agreement between the parties with respect to your
employment by the Company, and the validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York. You hereby agree that any agreement or arrangement existing prior to the
date hereof regarding your employment by the Company is hereby terminated and
superseded by this Agreement. This Agreement may not be changed orally, but only
by agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Section and paragraph
headings are for convenience of reference only and shall not be considered a
part of this Agreement.
8. NOTICES. Any notices or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed given on the same
day if given by hand, on the third business day after mailing if given by
registered or certified mail, return receipt requested, postage prepaid, on the
next business day after it was deposited with the courier service if sent by
reputable overnight courier, or when sent if given by facsimile with
confirmation, addressed to you at 203 Bay Avenue, Huntington Bay, New York 11743
or to the Company at its offices at 16 East 52/nd/ Street, New York, New York
10022, Attention: President (fax no. 212-758-2559), with a copy to: Gould &
Wilkie, One Chase Manhattan Plaza, 58th floor, New York, New York 10005,
Attention: Michael R. Manley, Esq. (fax no.: 212-809-6890) or such other address
as shall have been specified in writing by either party to the other.
9. ARBITRATION. Except as provided by Section 4(e) of this
-----------
Agreement; any dispute or controversy under or in connection with this Agreement
shall be settled exclusively by arbitration in New York, New York by one
arbitrator in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered upon the arbitrator's award in any court
having jurisdiction. The costs and expenses (including reasonable attorneys'
fees and disbursements) of the prevailing party in any such dispute or
controversy shall be reimbursed by the other party.
10. RIGHT TO WITHHOLD. The Company shall have the right to make all
-----------------
appropriate withholdings from your salary and other compensation under federal,
state and local tax laws.
6
<PAGE>
If the foregoing accurately reflects the agreement between us, please
confirm your acceptance and agreement by signing the attached copy of this
Agreement and return the same to me.
Sincerely,
DAST CORPORATION D/B/A
MICROCOM TECHNOLOGIES
By: /s/ Daniel Nissanoff
--------------------------
Name: Daniel Nissanoff
Title: President
Accepted and Agreed
as of January 06 1999
/s/ William Barron /s/ Daniel Nissanoff
- ----------------------------- -------------------------------
William Barron Daniel Nissanoff, a shareholder
of the Company
7
<PAGE>
EXHIBIT 10.28
September 27, 1999
PRIVATE AND CONFIDENTIAL
- ------------------------
Mr. Walid Mougayar
President and Chief Executive Officer
Cyber Management, Inc.
6985 Coolihans
Caledon East, Ontario
L0N 1E) Canada
Dear Mr. Mougayar:
This letter (the "Agreement") will confirm the agreement between Cyber
Management, Inc., a Canadian corporation, with a business address of 6985
Coolihans, Caledon East, Ontario, L0N 1E0, Canada ("CMI") and PartMiner, Inc., a
New York corporation, with a business address of 432 Park Avenue South, 12/th/
Floor, New York, New York 10016 ("PartMiner") for consulting services to be
provided by CMI to PartMiner. For purposes of this Agreement, CMI shall include
Walid Mougayar. The parties hereto agree as follows:
1. Services.
--------
1.1 Scope of Services. CMI shall perform consulting services for
-----------------
PartMiner, including without limitation, the following:
(i) advising PartMiner with respect to its marketing plans and
business development activities; its external marketing campaigns and
advertising programs; and the preparation and presentation of material to
investors, the media, industry, and customers;
(ii) drafting and finalizing a comprehensive "white paper" describing
PartMiner's business and its associated business opportunities in relation to
the marketplace, including without limitation, a detailed discussion of market
positioning; and preparing presentation material to accompany the white paper;
and
(iii) identifying for PartMiner key business metrics that depict,
demonstrate or otherwise describe PartMiner's business advantage, and possible
market segments or verticals for entry by PartMiner; potential media and
industry relationships, including without limitation, assisting PartMiner in
developing such relationships, and selecting and introducing PartMiner to
suitable media and industry contacts. Such contact must be an officer,
principal or decision maker of such media and industry entities. CMI will be
present during at least one introductory meeting; provided, however, that
-------- -------
PartMiner has the right to meet or not meet with any potential contact selected
by CMI within PartMiner's sole discretion.
<PAGE>
1.2 Nature of Services. CMI shall devote such time, attention and
------------------
energies to the performance of this Agreement as may be reasonably requested by
PartMiner in order that CMI fulfills its obligations under this Agreement. CMI
agrees that the services to be provided to PartMiner shall be carried out in a
diligent, prompt and professional manner, consistent with the highest
professional standards in the industry. The services performed by CMI for
PartMiner are non-exclusive and PartMiner remains free to engage others to
perform similar services for PartMiner.
2. Term and Termination. The term of this Agreement shall commence as of
--------------------
August 31, 1999 and shall terminate six (6) months thereafter (the "Term"),
unless terminated earlier as set forth below. This Agreement may be terminated
by either party for any reason upon thirty (30) days written notice. In the
event of termination by PartMiner, PartMiner's only obligation to CMI shall be a
pro-rata grant of options to CMI for services rendered pursuant to this
Agreement prior to the effective date of termination. Either party may
terminate this Agreement upon a material breach of this Agreement by the other
party, which breach is not remedied within ten (10) days after written notice of
such breach by the non-breaching party. Upon termination, CMI shall deliver to
PartMiner all written and other materials, including records, notes, data,
memoranda, models, flow charts, etc., which PartMiner has provided to CMI or
which CMI has prepared in connection with this Agreement in whatever form, which
materials shall be owned exclusively by PartMiner.
3. Compensation. PartMiner shall compensate CMI for the consulting
------------
services as follows:
3.1 Options. Provided that neither party has terminated this
-------
Agreement prior to the end of the Term pursuant to paragraph 2 above, PartMiner
will grant to Walid Mougayar options to acquire common stock of PartMiner
pursuant to a nonqualified stock option agreement, such grant to be effective on
the date you execute such nonqualified stock option agreement. The options
shall vest, if at all, commencing on the effective date of PartMiner's initial
public offering of its common stock. The options shall be exercisable at a
price equal to such public offering price per share (the "Option Price"). The
number of shares subject to the options shall be an amount equal to $75,000
divided by the Option Price. In the event PartMiner's initial public offering
consists of units, the Option Price shall be based upon the portion of the unit
price allocable to PartMiner's common stock, as determined by the underwriters
of the initial public offering at that time.
3.2 Expenses. CMI may be expected to travel on behalf of PartMiner,
--------
or to work on the premises of one or more of PartMiner's clients. CMI shall use
reasonable efforts to provide CMI as much notice as possible in advance of any
travel requirement. PartMiner shall be responsible for reimbursement of all
authorized business-related expenses associated with such travel.
4. Independent Contractor. The relationship established by this Agreement
----------------------
is that of independent contractor and nothing in this Agreement shall be
construed as creating a relationship of joint venture, partnership, employer-
employee, or agent. CMI does not have
<PAGE>
authority to create any obligations for PartMiner, nor may CMI create or enter
into any obligations for PartMiner. CMI remains free to provide consulting
services for entities other than PartMiner; provided that, CMI's work for such
other entities does not impair CMI's ability to fulfill its commitments to
PartMiner under this Agreement and does not violate any term or condition of
this Agreement. Because CMI is an independent contractor, CMI is not eligible to
participate in any employee fringe benefit of PartMiner, including health
insurance, dental insurance, paid vacation or any other benefit plan of
PartMiner.
5. Restrictive Covenants.
---------------------
5.1 Confidentiality. In the course of our business relationship, CMI
---------------
may have access to information that PartMiner considers proprietary and
confidential. This information includes, without limitation, copyrightable
works of original authorship, inventions (whether patentable, patented or not),
trademarks and other intellectual property, technical know-how, technical
specifications, software object code and source code, protocols, strategic
business plans, results of testing, financial information, product information,
methods of operation, concepts, compilations of data, and customer, vendor and
third party information ("Confidential Information"). CMI agrees that
Confidential Information will be used by CMI only to perform the services
pursuant to this Agreement, will not be disclosed to any other company or person
without the prior written permission from an officer of PartMiner, and will not
be used for any other purpose other than that for which it was disclosed.
Confidential Information does not include any information which (i) at the time
of disclosure or thereafter is generally available to and known to the public
(other than as a result of disclosure directly or indirectly by CMI), (ii) was
available to CMI on a non-confidential basis from a source other than PartMiner
or our representatives and advisors; provided that such source is not in breach
of any obligations of confidentiality to PartMiner, or (iii) has been
independently acquired or developed by CMI without violating any of its
obligations pursuant to this Agreement.
5.2 No Solicitation. PartMiner has made and continues to make a
---------------
substantial investment in the development of its business. During the term of
this Agreement, and for a period of one year thereafter, CMI agrees not to
solicit any employee or business associate of PartMiner to terminate or
materially alter their relationship with PartMiner, or to solicit any business
associate of PartMiner for services which compete with those provided by
PartMiner.
5.3 Other Agreement. CMI will sign a Technical Information and
---------------
Invention Agreement, a copy of which is attached hereto as Exhibit A.
---------
6. Notices. All notices to be given hereunder shall be in writing to the
-------
parties at the addresses first above written, in the case of CMI directed to the
attention of Walid Mougayar, and in the case of PartMiner directed to the
attention of its General Counsel, by personal delivery or sent by certified or
registered United States mail, postage prepaid, return receipt requested, or by
reputable overnight courier. Either party may change its notice address by a
notice given to the other in a manner provided for in this Paragraph 6. Notices
shall be deemed to have been given (and received) (a) when personally delivered,
(b) five (5) business days after posting when sent by certified or registered
United States mail, or (c) on the business day after the date on which deposited
with a reputable overnight courier.
<PAGE>
7. Miscellaneous. This Agreement shall be construed in accordance with
-------------
the laws of the State of New York, without regard to its conflicts of laws
rules. Any dispute between the parties shall be litigated in the federal and
state courts located in New York County, State of New York. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all previous oral or written agreements between the
parties with respect to the subject matter hereof, and may not be modified
except by a writing signed by an authorized signatory of each party. If any
provision of this Agreement is held to be unenforceable, invalid or illegal by
any court of competent jurisdiction, such unenforceable, invalid or illegal
provision shall not affect the remainder of this Agreement. CMI may not assign
this Agreement or any of its rights hereunder without the prior written consent
of PartMiner. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their successors and permitted assigns. No waiver by a
party of any breach or default hereunder shall be deemed to be a waiver of any
preceding or subsequent breach or default. The paragraph headings used herein
are for convenience only. This Agreement shall be deemed to have been jointly
and equally drafted by the parties and the provisions of this Agreement
therefore should not be construed against a party on the grounds that such party
drafted or was more responsible for drafting the provisions. This Agreement may
be executed in any number of counterparts, each of which shall be deemed an
original, and all of which together shall constitute a single instrument.
Please indicate your agreement to and acceptance of the foregoing by
signing in the appropriate space below.
We look forward to a productive relationship with you.
Very truly yours,
PARTMINER, INC.
/s/ Daniel Nissanoff
By:______________________
Daniel Nissanoff
President and Chief Executive Officer
AGREED AND ACCEPTED:
CYBER MANAGEMENT, INC.
/s/ Walid Mougayar
By:________________________
Walid Mougayar
President and Chief Executive Officer
/s/ Walid Mougayar
___________________________
Walid Mougayar, individually
<PAGE>
EXHIBIT 10.29
January 31, 2000
PRIVATE AND CONFIDENTIAL
- ------------------------
Mr. William R. Engles, Jr.
5 Riverside Drive, #13-C
New York, New York 10023
Dear Mr. Engles:
This letter (the "Agreement") will confirm the agreement between PartMiner,
Inc., a New York corporation (the "Company"), and you relating to your
employment by the Company.
1. EMPLOYMENT. The Company hereby employs you, and you hereby agree to serve,
as the Chief Financial Officer of the Company during the Term of Employment (as
defined in Section 2 hereof). In such capacity, you shall be responsible for
performing those duties consistent and commensurate with your position and as
may from time to time be reasonably directed by the Chief Executive Officer of
the Company, to whom you shall directly report, and the Company's Board of
Directors. Any changes to be made by the Company in the foregoing reporting
arrangements will be discussed with you prior to implementation. You agree to
use your best efforts to promote the interests of the Company and to devote all
of your working time, efforts and energies to the business and affairs of the
Company during the Term of Employment. Subject to Section 4 hereof, you may be
associated with or invest in other companies; provided, however, you will not
-------- -------
allow such activities to interfere with your duties or services to the Company.
2. TERM OF EMPLOYMENT. The Term of Employment hereunder shall be for the
period commencing on January 31, 2000 and shall end on January 30, 2002 (the
"Term of Employment"), unless earlier terminated pursuant to the provisions of
Section 5 hereof.
3. COMPENSATION; EXPENSES; BENEFITS.
(a) Base Salary. As full compensation for the services rendered hereunder
-----------
during the Term of Employment, the Company shall pay you a base salary of
$200,000 per annum ("Base Salary"). The Base Salary shall be payable in semi-
monthly installments to conform with the regular payroll dates for salaried
personnel of the Company and will be considered for increases annually, in
accordance with the then existing Company policy, based, among other things, on
the Company's evaluation of your performance for the preceding fiscal year.
(b) Benefits. During the Term of Employment, you will receive the benefits
--------
that the Company shall provide its senior executives generally, including
employee health insurance benefits, disability and participation in bonus, stock
option and other incentive compensation
<PAGE>
William R. Engles, Jr. 2 January 31, 2000
programs, if any. Your vacation will begin to accrue as of the date hereof, in
accordance with existing Company policy, up to a maximum of four (4) weeks per
year. All vacation must be used by December 31 of each year of the Term of
Employment at which time any unused vacation will expire and you will no longer
be entitled to such unused vacation time. No compensation shall be payable in
respect of any unused vacation days.
(c) Expenses. During the Term of Employment, you shall be entitled to be
--------
reimbursed for all reasonable expenses incurred by you in performing services
hereunder in accordance with, and subject to, the policies and procedures
established by the Company from time to time.
(d) Stock Options. The Company shall grant or cause to be granted to you
-------------
options (the "Options") to purchase an aggregate of 570,000 shares of the common
stock of the Company pursuant to the PartMiner, Inc. 1999 Stock Plan (the
"Plan"), subject to the terms and conditions of the Plan and a nonqualified
stock option agreement to be entered into between you and the Company (the
"Stock Option Agreement") concurrently herewith.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY; CONFIDENTIALITY;
ENFORCEABILITY; BREACH.
(a) Covenant Not to Compete and Not To Solicit. You hereby acknowledge
------------------------------------------
that you are expected to play a very important role in the on-going development
of the Company, that you will have detailed knowledge of the Company's business
and its plans for the future, that you will have fiduciary duties owing to the
Company and its shareholders, and that you will receive substantial compensation
and other benefits under this Agreement. Accordingly, you agree that for the
period of two (2) years from the date that your employment with the Company
terminates (or the term thereof expires), except in the event that the Company
terminates your employment without Cause (as defined in Section 5(c) below) or
you terminate your employment for Good Reason (as defined in Section 5(d)
below), in which case, you agree that for a period of one (1) year from the date
of termination, you shall not, directly or indirectly,
(i) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be employed or retained by,
render services to, provide financing or advice to, or otherwise be connected
with a Competing Business (a "Relationship"). For purposes of this Agreement,
the term "Competing Business" shall mean (A) any business that develops or sells
products or services that are directly competitive with the Company's CAPSXpert
database, (B) any business that develops or sells software for component and
supplier management so long as the Company remains in such business; (C) any
business whose primary business involves the sale or distribution of electronic
components; or (D) any business that provides an e-commerce web site which
aggregates pricing and availability data for electronic components.
Notwithstanding the foregoing, following the termination of your employment, (X)
nothing shall prevent you from having a Relationship with an investment banking
firm or rendering services as an investment banker, and/or (Y) nothing shall
prevent you from having a Relationship with a Competing Business; provided that,
--------
the work you perform for such Competing Business does not directly involve the
businesses defined in Sections 4(a)(i)(A), (B), (C) and (D) above; and/or (Z) a
Competing Business shall not include electronic
<PAGE>
William R. Engles, Jr. 3 January 31, 2000
components manufacturers ("ECMs"); provided, that, such ECMs do not engage in
--------
the distribution of electronic components.
(ii) hire, offer to hire, divert, entice away, solicit or in any
other manner persuade or attempt to persuade (a "Solicitation") any person who
is, or was, at any time within the twelve (12) months prior to such
Solicitation, an officer, director, or employee of the Company or any of its
affiliates to discontinue, cease or alter his, her or its relationship
therewith; or
(iii) divert, entice away, solicit or in any other manner interfere
with, disrupt or attempt to disrupt, any present or prospective relationship,
contractual or otherwise, between the Company or any of its affiliates, on the
one hand, and any of its agents, customers, suppliers, licensors, licensees or
employees, on the other hand.
Nothing in this Section 4(a) shall prohibit you from acquiring up to
three (3%) percent of any class of outstanding equity securities of any
corporation whose equity securities are regularly traded on a national
securities exchange or in the "over-the-counter market."
(b) Intellectual Property. You hereby acknowledge and agree that during
---------------------
the Term of Employment, any and all United States and/or foreign patents, patent
applications, service marks, inventions, discoveries, innovations, improvements,
trade secrets and secret processes, whether or not patentable, which you may
have conceived, developed or made, or may conceive, develop or make, either
alone or in conjunction with others and which are related or in any way
connected with the business of the Company (collectively, "Intellectual
Property"), have been and shall be fully disclosed to the Company, and are and
shall be the sole and exclusive property of the Company whether or not disclosed
as against you and you hereby unconditionally and irrevocably assign to the
Company any and all right, title and interest in and to such Intellectual
Property and hereby and irrevocably and unconditionally waive any right to the
foregoing.
(c) Confidentiality. You agree that you will not divulge to anyone (other
---------------
than the Company or any persons employed or designated by the Company) any
knowledge or information of any type whatsoever of a confidential nature
relating to the business of the Company, including, without limitation, any and
all types of ideas, inventions, trade secrets, proprietary information,
marketing plans, business plans, software, software codes, customer and supplier
lists, data processing reports, customer sales analyses, invoices, price lists
or information, and processes, operations, products or improvements that may be
patentable or copyrightable ("Confidential Information"). You further agree not
to disclose, publish or make use of any Confidential Information without the
prior written consent of the Company. The term "Confidential Information" does
not include any information that (i) at the time of disclosure or thereafter is
generally available to and known in the public domain (such information not
being deemed to be in the public domain merely because it is embraced by more
general information that is in the public domain), other than as a result of
disclosure directly or indirectly by you, (ii) was available to you on a non-
confidential basis from a source other than the Company or its representatives
and advisors, provided that such source is not in breach of any obligations of
confidentiality to the Company, or (iii) has been independently acquired or
developed by you without violating any of your obligations pursuant to this
Agreement.
<PAGE>
William R. Engles, Jr. 4 January 31, 2000
(d) No conflicts. You hereby represent and warrant to the Company that you
------------
are not subject to any restrictions, contractual or otherwise, which
prohibit or otherwise restrict you from entering into this Agreement.
(e) Enforceability. You acknowledge and agree that the limitations placed
--------------
on you by this Section 4 are reasonable and are required for the protection of
the Company. You agree that if any such limitation is determined in arbitration
or by a court of competent jurisdiction to be unenforceable, you agree and
submit to the reduction of such limitation as the court or arbitrator(s) deem
reasonable. The limitations placed on you by this Section 4 are of the essence
of this Agreement and they may be construed and enforced independently. You
acknowledge and agree that the provisions set forth in this Section 4 shall
survive the termination or cancellation of this Agreement.
(f) Breach. You acknowledge and agree that: (i) the Company will be
------
irreparably injured in the event of a breach by you of any of your obligations
under this Section 4; (ii) monetary damages will not be an adequate remedy for
any such breach; (iii) the Company will be entitled to injunctive relief, in
addition to any other remedy which it may have, in the event of any such breach;
and (iv) the Company shall be entitled to obtain damages for any breach of this
Section 4, in addition to any injunctive or equitable relief otherwise available
to the Company.
5. TERMINATION.
(a) General. The Term of Employment shall be for the period provided in
-------
Section 2 hereof, unless it is earlier terminated in accordance with the
provisions of this Section 5.
(b) Death and Disability. Your employment under this Agreement shall
--------------------
terminate upon (i) your death, or (ii) in the event you become disabled, at the
option of the Company, thirty (30) calendar days after the date on which the
Company shall have provided you with written notice of termination because of
your physical or mental incapacity on a permanent basis ("Incapacitated"). You
shall be deemed to be Incapacitated if you are unable, by reason of any physical
or mental incapacity, for a period of ninety (90) substantially consecutive
calendar days or the shorter periods aggregating one hundred twenty (120)
calendar days or more during any twelve (12) month period, to perform your
duties pursuant to this Agreement in a reasonably satisfactory manner. In the
event of any disagreement between you and the Company as to whether you are
Incapacitated, the question of such permanent incapacity shall be submitted for
decision to an impartial and reputable physician in New York County, New York
(the "Deciding Doctor") chosen by mutual agreement of the Company and you or,
failing such agreement, the Deciding Doctor shall be jointly chosen by two
physicians from New York County, New York (one of whom shall be selected by the
Company and the other by you). The decision of the Deciding Doctor regarding
whether you are Incapacitated shall be final and binding on the Company and you.
You shall submit to any medical examinations reasonably necessary to enable the
Deciding Doctor to make a decision regarding whether you are Incapacitated. In
the event that your employment is terminated pursuant to this Section 5(b), all
compensation and rights to benefits from the Company pursuant to this Agreement
shall cease on the date of such termination; provided, that, you shall be
--------
entitled to all compensation and benefits (including
<PAGE>
William R. Engles, Jr. 5 January 31, 2000
reimbursement of expenses) as may have already accrued as of such date or as
expressly provided herein or in plans in which you were participating at such
date or by law.
(c) Termination by the Company for "Cause". The Company may terminate your
--------------------------------------
employment at any time during the Term of Employment hereunder for "Cause";
provided, however, that the Company shall provide you with written notice
- -------- -------
specifying in reasonable detail the basis therefor, and up to ten (10) days
after receipt of such notice in which to cure such "Cause," if it is reasonably
capable of being cured. For the purposes of this Agreement, "Cause" shall mean:
(i) knowingly or recklessly causing material injury to the Company's business,
condition or reputation; (ii) willful misconduct in the performance of, or a
willful failure to perform, your duties; (iii) commission of dishonest or
fraudulent conduct whether or not in connection with your employment; (iv)
unlawful behavior involving moral turpitude whether or not in connection with
your employment; and/or (v) a material breach or violation of the provisions of
Section 4 hereof.
(d) Termination By You For Good Reason. You may terminate your employment
----------------------------------
hereunder at any time during the Term of Employment for "Good Reason" by
providing the Company with prior written notice specifying the reasons therefor
and following the Company's failure to cure the same within ten calendar (10)
days of its receiving such notice. Your employment shall terminate at the end
of such ten calendar (10) day period. For purposes of this Agreement, "Good
Reason" shall mean the occurrence of any of the following: (i) the Company
requiring you to engage in any illegal act; (ii) a material breach by the
Company of this Agreement (including, without limitation, a change in your
status, title, position, or responsibilities (including reporting
responsibilities) which represents a demotion from your status, title, position
or responsibilities as in effect immediately prior thereto); (iii) the Company
requiring you to work permanently at a location outside the metropolitan area
(including without limitation, Connecticut; Long Island, New York; New Jersey;
New York, New York; or Westchester, New York), without your prior consent, and
(iv) a change in control of the Company, which for purposes of this Agreement
shall mean an event or series of events after the date hereof by which (i) any
"person" or "group" (as such terms, are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Act")) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of more
than fifty percent (50%) of the aggregate voting power of all the capital stock
of the Company normally entitled to vote in the election of directors, (ii)
during any period of two consecutive calendar years individuals who at the
beginning of each period constituted the Board (together with any new directors
whose election by the Board or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination was previously so approved) cease for any reason to
constitute a majority of the directors then in office, or (iii) the consummation
of a plan or transaction to merge or consolidate the Company with or into
another corporation, or to sell, or otherwise dispose of, all or substantially
all of the Company's property and assets, or to liquidate the Company ("Change
in Control").
(e) Termination of Employment by the Company Other Than For "Cause" or By
---------------------------------------------------------------------
You For "Good Reason". In the event that your employment is terminated by the
- ---------------------
Company other than for Cause, or by you for Good Reason (pursuant to Section
5(d) hereof), the Company shall pay
<PAGE>
William R. Engles, Jr. 6 January 31, 2000
to you in a lump sum payment within thirty (30) days of such termination
("Payment Period"), an amount equal to the net present value of your Base Salary
for the unexpired term of this Agreement calculated using a discount rate of
LIBOR plus one percent (1%) (the "Payment"); provided that, the Company has the
--------
cash reasonably available to make such payment within the Payment Period;
provided further that, in the event that the Company does not have the cash
- -------- -------
reasonably available to make such Payment, the Company shall pay you continuing
payments of Base Salary and continuing benefits pursuant to Sections 3(a) and
3(b), respectively, in accordance with the Company's regular payroll practice
until the Company is reasonably capable of making the balance of the Payment;
provided, further, however, that you have complied and will continue to comply
with Section 4 hereof.
(f) Termination of Employment By The Company For "Cause" or By You Other
--------------------------------------------------------------------
Than For "Good Reason". In the event that your employment is terminated by the
- ----------------------
Company for Cause (pursuant to Section 5(c) above), or by you voluntarily other
than for Good Reason (pursuant to Section 5(d) above), all compensation and
rights to benefits from the Company (including stock plans) pursuant to this
Agreement shall cease on the date of such termination; provided, that, you shall
--------
be entitled to all compensation and benefits (including reimbursement of
expenses) as may have already accrued as of such date or as expressly provided
in plans in which you were participating at such date or by law.
(g) Duties Upon Termination. Upon termination of your employment with the
-----------------------
Company for any reason, or upon expiration of the Term of Employment, those
duties and obligations set forth in Section 4 hereof shall continue and bind you
in accordance with the terms thereof.
6. ASSIGNMENT. This Agreement is a personal contract, and except as
specifically set forth herein, your rights, obligations and interests herein may
not be sold, delegated, transferred or assigned. The Company may freely assign
this Agreement and any of its rights, obligations and interests hereunder,
subject to the provisions herein with respect to a Change in Control. This
Agreement shall be binding upon and inure to the benefit of each party's
successors, legal beneficiaries and permitted assigns.
7. ENTIRE AGREEMENT; GOVERNING LAW; HEADINGS. This Agreement contains the
entire agreement between the parties with respect to your employment by the
Company, and the validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed wholly within said State. Subject to
Section 9 below, you hereby consent to the jurisdiction of the Federal and State
courts located in New York County and waive any objections to such courts based
on venue, including but not limited to, forum non conveniens, in connection with
any claim or dispute arising under this Agreement. Each of the parties hereto
irrevocably waives any and all right to a jury trial in any legal proceedings
arising out of or relating to this Agreement. You hereby agree that any
agreement or arrangement existing prior to the date hereof regarding your
employment by the Company is hereby terminated and superseded by this Agreement.
This Agreement may not be changed orally, but only by agreement in writing
signed by the party against whom enforcement of any waiver, change, modification
or discharge is
<PAGE>
William R. Engles, Jr. 7 January 31, 2000
sought. Section and paragraph headings contained herein are for convenience of
reference only and shall not be considered a part of this Agreement.
8. NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given (a) on the same day if
given by hand, (b) on the third business day after mailing if given by
registered or certified mail, return receipt requested, postage prepaid, (c) on
the next business day after it was deposited with the courier service if sent by
reputable overnight courier, or (d) when sent if given by facsimile with
confirmation, addressed to you at 5 Riverside Drive, #13-C, New York, New York
10023 with a copy to: Winston & Strawn, 200 Park Avenue, New York, New York
10066, Attention: Peter E. Calamari, Esq. (fax no. 212-294-4700), or to the
Company at its offices at 432 Park Avenue South, 12/th/ Floor, New York,
New York 10016, Attention: General Counsel (fax no. 212-592-5833), with a copy
to: Kirkpatrick & Lockhart LLP, 1251 Avenue of the Americas, 45/th/ Floor, New
York, New York 10020, Attention: Stephen R. Connoni, Esq. (fax no. 212-536-3901)
or such other address as shall have been specified in writing by either party to
the other.
9. ARBITRATION. Except as provided by Section 4(f) of this Agreement, any
dispute or controversy under or in connection with this Agreement shall be
settled exclusively by arbitration in New York, New York by one arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered upon the arbitrator's award in any court having
competent jurisdiction. The costs and expenses (including reasonable attorneys'
fees and disbursements) of the prevailing party in any such dispute or
controversy shall be reimbursed by the other party.
10. RIGHT TO WITHHOLD. The Company shall have the right to make all
appropriate withholdings from your salary and other compensation under federal,
state and local tax laws.
11. SEVERABILITY. If any term or provision hereof is determined to be invalid
or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired, (b) any such invalidity or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction, and (c) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement (and all signatures need not appear on any
one counterpart), and this Agreement shall become effective when one or more
counterparts has been signed by each of the parties hereto and delivered to each
of the other parties hereto.
13. WAIVER, ETC. The failure of either of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Agreement or any provision hereof or the right of either of the parties
hereto to thereafter enforce each and every provision of this Agreement.
<PAGE>
William R. Engles, Jr. 8 January 31, 2000
14. LEGAL FEES. The Company agrees to reimburse you for up to $5,000 in legal
fees incurred by you in connection with the negotiations of this Agreement and
any other agreements referred to herein.
If the foregoing accurately reflects the agreement between us, please
confirm your acceptance and agreement by signing the attached copy of this
Agreement and return the same to me.
Sincerely,
PARTMINER, INC.
/s/ Daniel Nissanoff
By:__________________________
Name: Daniel Nissanoff
Title: President and Chief
Executive Officer
ACCEPTED AND AGREED:
/s/ William R. Engles, Jr.
_________________________
William R. Engles, Jr.
<PAGE>
EXHIBIT 11.1
PARTMINER, INC.
Computation of Shares Used in Computing Basic and Diluted Net Loss
Per Common Share
(in thousands, except share data)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Numerator:
Loss before extraordinary item $ (117) $ (1,850) $ (16,901)
Extraordinary item-loss on early
extinguishment of debt - - (1,030)
Accretion of mandatorily redeemable
convertible preferred stock - - (12,075)
----------- ----------- ------------
Net loss applicable to common
shareholders $ (117) $ (1,850) $ (30,006)
=========== =========== ============
Denominator:
Common stock, beginning of year 20,000,000 30,000,000 30,000,000
Weighted average common shares
repurchased during the year - - (11,917,808)
Weighted average common shares
issued during the year 4,219,178 - 995,312
Weighted average mandatorily
redeemable common shares issued
during the year - - 17,598,630
Common stock options and warrants
using the treasury stock method - - -
----------- ----------- ------------
Weighted average shares used in
computing basic and diluted net
loss per common share 24,219,178 30,000,000 36,676,134
=========== =========== ============
Basic and diluted loss per common share:
Loss before extraordinary item $ - $ (0.06) $ (0.79)
Extraordinary item - - (0.03)
----------- ----------- ------------
Basic and diluted net loss per
common share $ - $ (0.06) $ (0.82)
=========== =========== ============
</TABLE>
<PAGE>
EXHIBIT 16.1
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]
February 17, 2000
Securities and Exchange Commission
450 Fifth Avenue, N.W.
Washington, DC 20549
Gentlemen:
We have read the section titled "Change in Independent Accountants" included in
Partminer, Inc.'s Registration Statement on Form S-1 and are in agreement with
the statements contained in paragraph one of such section. We have no basis to
agree or disagree with other statements of the registrant contained therein.
Very truly yours,
/s/ Ernst & Young LLP
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
------------
Accurate Components Inc.
Market Trading Concepts Inc.
IQXpert Holdings Inc.
IQXpert, Inc.
ExtraTime Technologies, Inc.
PartMiner Ap S
PartMiner Ltd.
PartMiner Limited
PartMiner Pte Ltd.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated February 16, 2000 relating to the consolidated financial statements
and financial statement schedules of PartMiner, Inc., which appear in such
Registration Statement. We also consent to the references to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 18, 2000
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated January 14, 2000 relating to the combined financial statements of
IQXpert Holdings Inc. and Affiliate, which appear in such Registration
Statement. We also consent to the references to us under the heading "Experts"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 18, 2000
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated November 12, 1999 relating to the combined financial statements of
Accurate Components Inc. and Affiliate, which appear in such Registration
Statement. We also consent to the references to us under the heading "Experts"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 18, 2000
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