<PAGE>
As filed with the Securities and Exchange Commission on March 7, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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CLEARCOMMERCE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 7372 74-2760053
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
(512) 832-0132
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Michael S. Grajeda
Vice President and Chief Financial Officer
ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
(512) 832-0132
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Paul R. Tobias Paul E. Hurdlow, P.C.
Dana Fallon P. Steven Hacker
Alan D. Bickerstaff John J. Gilluly III
John B. Sartain, Jr. Ariane A. Chan
Wilson Sonsini Goodrich & Rosati Gray Cary Ware & Freidenrich LLP
Professional Corporation 100 Congress Avenue, Suite 1440
8911 Capital of Texas Highway North, Austin, Texas 78701
Suite 3350 (512) 457-7000
Austin, Texas 78759
(512) 338-5400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
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, please 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, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Price Amount of
Securities to be Registered (1)(2) Registration Fee
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<S> <C> <C>
Common Stock $0.001 par value .. $57,500,000 $15,180
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</TABLE>
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(1) Includes dollar amount that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) promulgated 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 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 7, 2000.
Shares
[ClearCommerce Corporation Logo]
Common Stock
--------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price 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 "CLCM."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotment shares.
Investing in the common stock involves risks. See "Risk Factors" on page 7.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions ClearCommerce
-------- ------------- -------------
<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
Chase H&Q
SG Cowen
This date of this prospectus is , 2000.
<PAGE>
[Artwork]
Top of Gatefold
A rectangular box with depiction of credit cards, a chain, two hands, a room
with computers and a globe with an oblong depiction of a portion of a computer
screen with the words "Forward" and "To: http://www."
At the top of the box, appear the words "ClearCommerce. Internet Transaction
Management." Beneath the box, appears the following paragraph:
"We provide e-commerce transaction management solutions that enable
businesses to automate transaction and payment processing. Our e-
commerce software allows businesses to conduct real-time transaction
processing, fraud analysis and protection, automated shipping and tax
calculation, digital content downloading and business reporting and
analysis. Our solution integrates with a business' online storefront
and customer relationship management, or CRM, applications and with its
existing business systems and processes."
At the bottom right corner of the page appear the ClearCommerce trademark
and the phrase "The Engine that drives eBusiness."
Back of Gatefold
The back of the gatefold will include a diagram with pictures of computers
on the left side with arrows pointing between a black box in the center of the
page. On the top of the left side of the page, a single picture of computers
appears under the caption "Single storefront." To the right of the picture is
the following sentence:
"The ClearCommerce Merchant Engine(TM) is designed for single
storefronts and a single credit card processor."
On bottom left side of the page, five overlapping pictures of computers appear
over the caption "Multiple Storefronts." To the right of the pictures is the
following sentence:
"The ClearCommerce Hosting Engine(R) supports multiple storefronts and
multiple credit card processors."
The following pictures appear beside the black box in the center of the
page: credit cards, a chain, a person with business reports, a computer
screen, computer diskettes, a highway and a router with cables. Within the
box, the following headings are included next to the pictures: Payment, Fraud
Protection, Reporting, Storefront APIs, Legacy API, Shipping/Tax and Digital
Content Download. The heading "ClearCommerce Engine" appears under the black
box.
An arrow from the black box points to a picture of a computer terminal with
data on the screen. The heading "Credit card processor" appears under the
picture.
On the far left side of the page is a box with a globe in the background. In
the center of the page, behind the box is a picture of a globe surrounded by a
box and pictures of a light bulb, a person and a cog. On the far right hand
side of the page is a rectangular box with a picture of a computer terminal in
the background.
At the bottom right hand corner of the page are the ClearCommerce trademark
and the caption "THE ENGINE THAT DRIVES eBUSINESS."
2
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 7
Special Note Regarding Forward-
Looking Statements................. 21
Use of Proceeds..................... 22
Dividend Policy..................... 22
Capitalization...................... 23
Dilution............................ 24
Selected Consolidated Financial
Data............................... 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 27
Business............................ 35
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management............................................................ 46
Related Party Transactions............................................ 56
Principal Stockholders................................................ 59
Description of Capital Stock.......................................... 62
Shares Eligible for Future Sale....................................... 66
Underwriting.......................................................... 68
Notice to Canadian Residents.......................................... 70
Legal Matters......................................................... 71
Experts............................................................... 71
Where You Can Find More Information................................... 71
Index to Consolidated Financial Statements............................ F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
different information. 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 date of this prospectus), all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as an underwriter
and with respect to unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully, including our financial statements and the risks
of investing in our common stock discussed under "Risk Factors," before making
an investment decision.
ClearCommerce Corporation
We are a leading provider of e-commerce transaction management solutions
that enable businesses to automate transaction and payment processing. Our e-
commerce software allows businesses to conduct real-time transaction
processing, fraud analysis and protection, automated shipping and tax
calculation, digital content downloading and business reporting and analysis.
Using an open architecture and industry standards, our solution integrates with
a business' online storefront and customer relationship management, or CRM,
applications and with its existing business systems and processes.
International Data Corporation estimates that the worldwide e-commerce
application market will increase from $1.7 billion in 1999 to $13.1 billion by
2003. Although many e-businesses have implemented a variety of solutions to
improve the online customer shopping experience, these solutions generally fail
to provide transaction management--the automation of payment processing and the
integration of related transaction information with existing business systems
and processes. Automated transaction management that delivers a comprehensive
solution 24 hours a day, seven days a week, without costly and lengthy
implementation, is critical to increasing efficiency and scalability.
We have designed the architecture of our transaction management solution to
meet the stringent performance, reliability and scalability requirements of e-
businesses. Our two principal e-commerce software products, Merchant Engine and
Hosting Engine, include similar functionality, but each is designed to meet the
needs of different customers. Merchant Engine supports single businesses.
Hosting Engine enables commerce service providers, or CSPs, a group of
application service providers, or ASPs, focused on e-commerce, to
simultaneously support multiple businesses and enables large businesses to
simultaneously support multiple divisions. We also offer customization and
implementation services, customer service and support and maintenance and
hosting services for our products.
As of December 31, 1999, thousands of businesses engaged in e-commerce used
our solution either directly or through CSPs. Some of the customers that have
licensed our products directly from us include the following: Apple Computer,
BuyitNow.com, Cabela's, Cooking.com, Corbis, Electronic Arts, E-Stamp,
Flooz.com, HP Shopping Village, Harrods, Mary Kay Cosmetics, Onvia, Pets.com,
Pitney Bowes, Sun Microsystems and TheStreet.com. In addition, our products
have been adopted by a number of leading CSPs, including Cardservice
International, Chase Merchant Services, CSP Source, EDS, Intel/iCat, Orbit
Commerce, Planet Online, PNC Bank and ShopNow.com. In order to expand the
adoption of our solution, we also have established relationships with other e-
business infrastructure companies, including Art Technology Group, BroadVision,
Hewlett-Packard, Mercantec, Microsoft and Vignette.
We were incorporated in Delaware and began operations in September 1995 as
Outreach Communications Corporation. References in this prospectus to
"ClearCommerce," "we," "our," "our company" and "us" refer to ClearCommerce
Corporation, a Delaware corporation.
Our principal executive offices are located at 11500 Metric Boulevard, Suite
300, Austin, Texas 78758, and our telephone number is (512) 832-0132.
We maintain a web site at www.clearcommerce.com. Information contained on
our web site does not constitute part of this prospectus.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by us......................... shares
Common stock to be outstanding after the offering.. shares
Use of proceeds.................................... For working capital and
general corporate
purposes.
Proposed Nasdaq National Market symbol............. CLCM
</TABLE>
Unless otherwise indicated, the number of shares of common stock outstanding
after this offering is based on 16,095,968 shares outstanding as of December
31, 1999, including the issuance of 1,299,943 shares of Series C preferred
stock in January and February 2000, assuming conversion of all outstanding
preferred stock and payment in shares of common stock of accrued and unpaid
dividends on the preferred stock as of December 31, 1999 and excluding:
.1,271,931 shares of common stock issuable upon exercise of stock options
outstanding as of March 7, 2000 with a weighted average exercise price
of $6.35 per share;
. 80,179 shares of common stock issued upon exercise of stock options
between December 31, 1999 and March 7, 2000;
.700,483 shares of common stock and 285,675 shares of preferred stock
issuable upon exercise of outstanding warrants as of March 7, 2000 with
a weighted average exercise price of $6.06 per share;
.1,342,047 shares reserved for future issuance under our 1997 Stock
Option/Issuance Plan, 300,000 shares reserved for issuance under our
2000 Director Plan and 600,000 shares reserved for sale under our 2000
Employee Stock Purchase Plan as of March 7, 2000;
. 41,329 shares of common stock issuable as payment of accrued and unpaid
dividends on outstanding preferred stock after December 31, 1999 and on
outstanding preferred stock warrants as of March 7, 2000; and
. shares that we have agreed to issue to Cardservice International at
a per share purchase price equal to the price to the public in this
offering; the number of shares that we have agreed to issue Cardservice
International will equal the lower of 10% of the shares sold in this
offering (excluding the underwriter's over-allotment option) or the
number of shares purchasable for an aggregate of $6 million at such
offering price.
"ClearCommerce" and "Hosting Engine" are registered trademarks of our
company. We also use the trademarks "FraudShield" and "Merchant Engine."
Each trademark, trade name or service mark of any other company appearing in
this prospectus belongs to its holder.
5
<PAGE>
Summary Consolidated Financial Data
The summary consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes thereto included elsewhere in this prospectus. The consolidated statement
of operations data set forth below for the years ended December 31, 1997, 1998
and 1999 and the consolidated balance sheet data as of December 31, 1999 have
been derived from our audited consolidated financial statements included
elsewhere in this prospectus. The historical results are not necessarily
indicative of results for any future period. The "Pro Forma" column in the
table below reflects our capitalization as of December 31, 1999 with
adjustments for the issuance of 1,299,943 shares of Series C preferred stock
after December 31, 1999, the automatic conversion of all shares of outstanding
Series A, Series B and Series C preferred stock into 12,176,313 shares of
common stock upon the closing of this offering, which includes the payment in
shares of common stock of accrued and unpaid dividends on the preferred stock
as of December 31, 1999. The "Pro Forma As Adjusted" column in the table below
reflects the application of the net proceeds from the sale by us of the
shares of common stock in this offering at an assumed initial public offering
price of $ per share and the deduction of the underwriting discount and
estimated offering expenses.
<TABLE>
<CAPTION>
For the Year Ended December
31,
--------------------------------
1997 1998 1999
Consolidated Statement of Operations Data: -------- --------- -----------
(in thousands, except per
share data)
<S> <C> <C> <C>
Revenues:
Software licenses........................... $ 147 $ 582 $ 3,294
Services.................................... 249 481 1,988
-------- -------- --------
Total revenues............................ 396 1,063 5,282
Gross margin.................................. 227 636 3,283
Loss from operations.......................... (1,190) (7,122) (14,138)
Net loss...................................... (1,147) (7,215) (14,627)
Net loss attributable to common stock......... (1,147) (7,485) (44,928)
Basic and diluted net loss per share.......... (0.89) (6.51) (23.78)
Shares used in computing basic and diluted net
loss per share............................... 1,283 1,149 1,889
Pro forma basic and diluted net loss per share
(unaudited).................................. $ (1.04)
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)....... 14,065
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and equivalents.......................... $ 16,915 $ 26,106
Working capital............................... 12,732 21,923
Total assets.................................. 23,678 32,869
Mandatorily redeemable convertible preferred
stock........................................ 66,066 --
Total common stockholders' (deficit) equity... (52,319) 22,938
</TABLE>
6
<PAGE>
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and all of the information
contained in this prospectus before deciding whether to purchase our common
stock. The risks and uncertainties described below are not the only risks and
uncertainties we face. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition and results of operations would suffer. In such case, the
trading price of our common stock could decline, and you may lose all or part
of your investment in our common stock.
Risks Related to Our Business
We have a limited operating history and are subject to the risks encountered by
early-stage companies.
We began operations in September 1995. We first offered transaction
processing hosting services for e-businesses in January 1996 and began selling
our software in November 1996. Accordingly, we have a very limited operating
history, and our business and prospects should be considered in light of the
heightened risks and uncertainties to which early-stage companies in rapidly
evolving markets, such as the e-commerce market, are particularly exposed.
These include:
. Risks that the intense competition and rapid technological change in our
industry could adversely affect demand for our products and services;
. Risks that we may not be able to expand our direct sales and marketing
channels or establish and fully utilize relationships with strategic
partners and indirect sales channel partners;
. Risks that our products or services may not perform to or adequately
support our customers' technical specifications or scale to handle
increased transaction volumes;
. Risks that our global expansion may not be successful; and
. Risks that any fluctuations in our quarterly operating results will be
significant relative to our revenues for the corresponding period.
Because we have a limited operating history, it may be difficult for you to
evaluate our business and its future prospects. Our business strategy may not
be successful, and we may not successfully address the risks that are discussed
in more detail below.
We have a history of losses, expect future losses and cannot assure you that we
will achieve profitability.
We have incurred significant net losses since our inception. We incurred net
losses of $1.1 million in 1997, $7.2 million in 1998 and $14.6 million in 1999.
As of December 31, 1999, we had an accumulated deficit of approximately $50.2
million. We increased our sales and marketing, research and development and
general and administrative expenses in 1999 and plan to continue to do so in
future periods. As a result, our net losses will likely increase, and we will
need to generate significantly higher revenues in order to achieve
profitability. If we do achieve profitability, we may not be able to sustain
it. Our inability to achieve or maintain profitability may have an adverse
effect on the price of our common stock and, therefore, your investment in our
company.
Our limited operating history makes it difficult to forecast our revenues and
expenses.
Our limited operating history makes it difficult to forecast our future
revenues and expenses. Although our revenues increased on a quarterly basis in
1999, you should not consider quarterly revenue growth as indicative of future
performance. Our revenues and operating results may be adversely affected by a
number of risks and uncertainties, including those listed elsewhere in these
risk factors. As a result, our revenues may not grow at similar levels in
future periods and may remain flat or decline over any given period.
7
<PAGE>
We base our forecast for expenses in part on future revenue projections. We
incur expenses in advance of revenues, and we may not be able to quickly reduce
spending if our revenues are lower than expected. In particular, we expect to
incur additional costs and expenses related to the following:
. The development of relationships with marketing partners, system
integrators, value-added resellers, or VARs, commerce service providers,
or CSPs, and original equipment manufacturers, or OEMs;
. The development and expansion of our sales force and marketing
operations;
. The development and enhancement of existing and new products and
services; and
. The expansion of our management team.
We expect that our business, stock price, operating results and financial
condition could be materially adversely affected if our revenues do not meet
our projections or our net losses are greater than expected.
The expected fluctuations of our quarterly results could cause our stock price
to fluctuate or decline.
We expect that our quarterly operating results will fluctuate significantly
in the future based upon a number of factors, many of which are not within our
control. We plan to further increase our operating expenses in order to expand
our sales and marketing activities and broaden our product offerings. We base
our operating expenses on anticipated market growth, and our operating expenses
are relatively fixed in the short term. As a result, if our revenues are lower
than we expect, our quarterly operating results may not meet the expectations
of public market analysts or investors, which could cause the market price of
our common stock to decline. Our quarterly results may fluctuate in the future
as a result of many other factors, including the following:
. Our ability to retain our existing customers and to attract new e-
businesses, VARs, CSPs and OEMs;
. Customer acceptance of our pricing model;
. Changes in the level of demand for our products or services;
. Our success in expanding our sales and marketing programs;
. The number, timing and significance of product enhancements and new
product announcements by us or our competitors;
. The length of our sales cycle;
. The level of e-commerce transactions;
. The evolution of related technology and the emergence of standards and
competing technology; and
. Changes in the level of our operating expenses.
These risks and uncertainties are particularly significant for companies
such as ours that are in the evolving market for Internet products and
services. In addition, other factors that may affect our quarterly results are
set forth elsewhere in these risk factors. As a result of these and other
factors, our revenues and expenses may not be predictable.
Due to the uncertainty surrounding our revenues and expenses, we believe
that quarter to quarter comparisons of our historical operating results may not
be meaningful and our historical operating results should not be relied upon as
an indicator of our future performance.
The market for our products and services is in its early stages of development
and may fail to mature into a sustainable market.
Our products and services facilitate e-commerce. The market for these
products and services is in its early stages of development and is rapidly
evolving, and a viable market may fail to emerge or be sustainable. We
8
<PAGE>
cannot predict the level of demand and market acceptance for our products and
services, especially because acquisition of our products and services requires
large capital and other significant resource commitments. If the market for our
products and services does not mature or if significant competitive pressures
develop, our business will be harmed.
Adoption of e-commerce, particularly by those individuals and companies that
have historically relied upon traditional means of commerce, will require a
broad acceptance of new and different methods of conducting business and
exchanging information. Critical issues concerning the Internet, including
security, reliability, cost, ease of use and quality of service, remain
unresolved and may limit the growth of e-commerce. Delays in the deployment of
improvements to the infrastructure for Internet access, including higher speed
modems and other access devices, adequate capacity and a reliable network
backbone, could also hinder the development of the Internet as a viable
commercial marketplace. Our future revenues and profits will depend
substantially on the Internet being accepted and widely used for commerce. If
e-commerce does not continue to grow or grows more slowly than expected, our
business will be harmed.
In the emerging marketplace of e-commerce, our products and services involve
a new approach to the conduct of e-commerce. As a result, intensive marketing
and sales efforts may be necessary to educate prospective customers regarding
the uses and benefits of our products and services. Companies that have already
invested substantial resources in other methods of conducting business may be
reluctant to adopt a new approach that may replace, limit or compete with their
existing systems. Similarly, purchasers with established patterns of commerce
may be reluctant to alter those patterns. In addition, the security and privacy
concerns of existing and potential online purchasers may inhibit the growth of
online business generally and the market's acceptance of our products and
services in particular. Accordingly, a viable market for our products and
services may not emerge or be sustainable.
The intense competition in our industry could reduce or eliminate the demand
for our products and services.
The market for our products and services is intensely competitive and
subject to rapid technological change. An increasing number of market entrants
have introduced or are developing competing products and services. We expect
competition to intensify in the future. We face competition from developers of
other systems for e-commerce, such as CyberSource, CyberCash, HNC Software,
Open Market, PaylinX, and Verisign/Signio. In addition, our CSP customers,
other CSPs and other companies, including financial services, supply chain
management providers and credit card companies, may enter the market for our
products and services. In the future, we may also compete with large Internet-
focused companies that derive a significant portion of their revenues from e-
commerce and that may offer, or provide a means for others to offer, e-commerce
transaction management products and services.
Many of our current and potential competitors have longer operating
histories, substantially greater financial, technical, marketing or other
resources, or greater name recognition than we do. These competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in customer requirements. Competition could seriously impede our
ability to sell additional products and services on terms favorable to us, if
at all. Our current and potential competitors may develop and market new
technologies that render our existing or future services obsolete, unmarketable
or less competitive. Our current and potential competitors may make
acquisitions or establish relationships among themselves or with other solution
providers, thereby increasing the ability of their products and services to
address the needs of our current and prospective customers. Our current and
potential competitors may establish or strengthen cooperative relationships
with our current or future indirect sales channel partners that would limit our
ability to sell services through these channels. We expect that competitive
pressures will require the reduction of the prices of our services and reduce
our market share, either of which could materially and adversely affect our
business, financial condition and operating results.
9
<PAGE>
Our future financial performance is largely dependent on the successful
development and sale of new products and new and enhanced versions of our core
products.
Our future financial performance will depend, in significant part, on our
successful development and sale of new products and new and enhanced versions
of our core products, Merchant Engine and Hosting Engine. We may not be able to
successfully develop product enhancements or new products and, to the extent
that we do, these enhancements and new products may not achieve market
acceptance. To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our products and services. In
addition, we must continue to operate all services we offer in an efficient
manner. The e-commerce industry is characterized by rapid technological change,
changes in user requirements and preferences, frequent new product and service
introductions embodying new technologies and the emergence of new industry
standards and practices that could render our technology and systems obsolete.
Our success will depend, in part, on our ability to both internally develop and
license leading technologies to enhance our existing products and develop new
products. We must continue to address the increasingly sophisticated and varied
needs of our customers and respond to technological advances and emerging
industry standards and practices on a cost-effective and timely basis. The
development of technology involves significant technical and business risks. We
may fail to develop new technologies effectively or in a cost-effective manner
or to adapt our technology and systems to merchant requirements or emerging
industry standards. As a result of such failure, our business could be harmed
materially.
To increase market awareness of our products and generate increased revenue, we
need to expand our sales and distribution capabilities.
We must expand our direct and indirect sales operations to increase market
awareness of our products and services and generate increased revenue. We
cannot be certain that we will be successful in these efforts. We have recently
begun to expand our direct sales force and plan to hire additional sales
personnel. Our products and services require a sophisticated sales effort
targeted at the senior management of our prospective customers. Consequently,
recent and new hires will require extensive training and take time to achieve
full productivity. We cannot be certain that our recent or new hires will
become as productive as necessary or that we will be able to hire enough
qualified individuals in the future. As a result, we may be unable to expand
our direct sales operations to the extent necessary for us to maintain or grow
our business. We also expect to continue to expand our relationships with VARs,
CSPs, OEMs and other third-party resellers to expand our indirect sales
channel. In addition, we will need to manage potential conflicts between our
direct sales and third-party reselling efforts. To avoid channel conflict, we
pay commissions to both our direct sales representatives and members of our
business development organization. This results in a higher cost of sales and
could increase our losses or make us less profitable.
Our failure to establish and maintain strategic relationships may limit our
ability to penetrate our target markets and grow our business.
We derive a significant portion of our sales through formal and informal
relationships with co-marketing partners, system integrators, VARs, CSPs, OEMs
and other third parties that help develop and deploy applications for our
customers. In particular, most of our revenues are derived through our
relationships with e-commerce software providers and CSPs that license our
products to e-businesses in conjunction with other products and services. The
maintenance and development of these relationships is a critical part of our
business strategy, and we believe that our future revenues increasingly will be
derived from such partners and channels. In the future, we may be unable to
establish these relationships, or adequately service them once established. As
a result, any of these third parties may choose to partner with one of our
competitors. If we lose a CSP to a competitor, then we would likely lose the
entire merchant base associated with such CSP and the related revenues. In
addition, we do not have written agreements with some of the system
integrators, e-commerce providers and CSPs that offer or recommend our products
to their customers, and, therefore, they are under no obligation to recommend
or support our products and may recommend or give higher priority to the
products of other companies or to their own products. The occurrence of any of
these circumstances would limit our ability to sell our products and services
and could result in decreased revenues.
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Our relationships with our significant customers are important to us and any
deterioration or termination of these relationships could adversely affect our
revenues.
A deterioration or termination of our relationships with our significant
customers could materially adversely affect our revenues and our ability to
market and sell our products. In 1999, sales to our two largest customers,
Cardservice International and Hewlett-Packard, represented 18% and 19% of our
revenues, respectively.
Our reputation and revenues would be harmed if we experience any problems with
our Merchant Engine and Hosting Engine products or related services.
To date, substantially all of our revenues have been attributable to
licenses of our Merchant Engine and Hosting Engine products and to related
services. We currently expect these products and services to account for most
of our future revenues. Factors negatively affecting the pricing of or demand
for Merchant Engine and Hosting Engine products and related services, such as
increased competition or rapid technological change, could cause our revenues
to decline.
Our software products may contain undetected defects that may prove costly and
time-consuming for us to correct.
Our software products may contain undetected errors or defects that become
apparent when we introduce the products or when we provide an increased volume
of services. Our products integrate with a variety of third-party products and
systems and operate on multiple platforms. In addition, we often customize our
products for individual customers. As a result, the complexity of our products
makes the likelihood of an undetected error or defect more prevalent. We cannot
assure you that defects in our products will be detected by us or others prior
to licensing, sale or implementation. Product defects could result in all or
any of the following consequences to our business:
.Loss of revenues;
.Delay in market acceptance;
.Damage to our reputation;
.Increased service and warranty costs;
.Diversion of development resources; and
.Liability for damages to our customers.
Our lengthy sales and product implementation cycles could cause delays in
revenue recognition and make it difficult to predict our quarterly results.
Our sales and product implementation cycles are subject to delays over which
we have little or no control. These delays can affect the timing of revenue
recognition and make it difficult to predict our quarterly results. Licensing
our Merchant Engine and Hosting Engine products is often an enterprise-wide
decision by prospective customers. The importance of this decision requires us
to engage in a lengthy sales cycle with prospective customers. Our products and
services require a sophisticated sales effort targeted at the senior management
of our prospective customers. During the sales process, we provide a
significant level of education regarding the uses and benefits of our products.
In addition, if a customer requires that we integrate our products with other
systems that we do not already support, then our professional services
department may be required to commit significant resources to this integration
over an extended period of time. Delays in acquiring new customers could cause
our revenues to stop growing or even to decline, and delays due to lengthy
sales cycles or prolonged deployment or implementation schedules could reduce
our revenue in any given period and cause operating results to vary
significantly from quarter to quarter.
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Delays in our planned product release schedule may result in decreased revenues
and a loss of market share.
Delays in the planned releases of our new products or upgrades may adversely
affect future revenues and create operational inefficiencies resulting from
increases in expenses in anticipation of such releases. Our failure to
introduce new products, services or product enhancements on a timely basis may
delay or hinder market acceptance and allow competitors to gain market share.
In particular, we expect to release new versions of our Merchant Engine and
Hosting Engine in the third quarter of this year. Our release of these versions
could be delayed for a number of factors including:
. Inadequate planning and estimation of required resources;
. Prolonged testing due to higher than expected defect rates;
. Design changes due to changing customer needs or technological
specifications or evolving standards;
. Unavailability of adequate resources; or
. Diversion of management's attention.
If a release of a new version of our products is delayed for any reason,
then our revenues may not grow as expected. We could lose market share, and the
price of our common stock could decline.
We may not be able to secure funding in the future necessary to operate our
business as planned.
We require substantial working capital to fund our business. We have had
significant operating losses and negative cash flow from operations since
inception and expect this to continue for the foreseeable future. In addition,
we may incur significant capital expenditures in connection with our planned
expansion of our hosting services. We expect to use the net proceeds of this
offering primarily for working capital purposes and to continue investments in
product development, to expand sales and marketing activities, to fund capital
expenditures and potentially to make future acquisitions. We believe that these
proceeds, together with our existing capital resources, will be sufficient to
meet our capital requirements for at least the next twelve months. However, our
capital requirements depend on several factors, including the rate of market
acceptance of our products and services, our ability to expand our customer
base, increased sales and marketing expenses, the growth of the number of our
employees and related expenses and other factors. If capital requirements vary
materially from those currently planned, we may require additional financing
sooner than anticipated. If additional funds are raised through our issuance of
equity securities, the percentage ownership of our stockholders will be
reduced, and these equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock. Additional financing may
not be available when needed on terms favorable to us or at all. If adequate
funds are not available or are not available on acceptable terms, we may be
unable to develop or enhance our products and services, adequately support and
maintain relationships with key partners and customers, take advantage of
future opportunities or respond to competitive pressures.
Our strategic relationships may require our entry into international markets
sooner or more rapidly than we may have anticipated.
We derive a significant portion of our sales through our strategic
relationships, including our relationships with CSPs, e-commerce software
providers and system integrators. Many of these partners are expanding their
service offerings internationally. If one of our partners requests us to
localize our products and services for international markets, then we may need
to accelerate our product expansion to avoid harming our relationship. Any
acceleration of our international product and service expansion could require
us to divert attention and resources from other initiatives which could limit
our growth and adversely affect our business.
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We may be unable to adequately develop a profitable professional services
organization, which could affect both our operating results and our ability to
assist our clients with the implementation of our products.
We cannot be certain that we can attract, retain or successfully manage a
sufficient number of qualified professional services personnel. Clients that
license our software often engage our professional services department to
assist with support and implementation of, and training and consulting, related
to our products. We believe that growth in our product sales depends on our
ability to provide our clients with these services and to attract and educate
third-party consultants and service providers to provide similar services. As a
result, we expect to significantly increase the number of our services
personnel to meet these needs. New services personnel will require extensive
training and education and take time to reach full productivity. Competition
for qualified services personnel with the appropriate Internet specific
knowledge is intense. We are in a new emerging market, and a limited number of
people have the skills needed to provide the services that our customers
demand. To meet our needs for services personnel, we may also need to use more
costly third-party service providers and consultants to supplement our own
professional services organization. To date, costs related to professional
services have exceeded professional services-related revenue. We cannot be
certain that our professional services revenue will exceed professional
services costs in future periods. We generally bill our customers for our
services on a "time and materials" basis. However, from time to time we enter
into fixed-price contracts for services. On occasion, the costs of providing
the services have exceeded our fees from these contracts and, from time to
time, we may misprice future contracts to our detriment.
Difficulties we may encounter managing our growth could adversely affect our
results of operations.
We have experienced a period of rapid and substantial growth since 1997 that
has placed a strain on our administrative infrastructure. We have increased the
number of our employees from 24 employees at December 31, 1997 to 129 employees
at December 31, 1999. We expect to continue to experience periods of rapid
growth and substantial change that will place significant demands on our
administrative, operational, financial and other resources. We also expect
operating expenses and staffing levels to continue to increase substantially in
the future. In particular, we intend to continue hiring a significant number of
additional personnel this year and in later years. If we are unable to grow to
meet demand for our products and services or to manage and support this growth
effectively, we will be required to divert additional resources away from
expanding our business and toward internal administration, causing our
financial condition and operating results to be materially adversely affected.
A breach of our security could expose us to liability, harm our reputation or
otherwise harm our business.
If any breach of our security were to occur, our reputation and business
could be harmed, and we could be exposed to liability. Customer transaction
data, such as credit card information, that our products process is highly
sensitive and personally identifying. A significant barrier to market
acceptance of e-commerce and communication is the concern regarding the secure
exchange of valuable and confidential information over the Internet. The risk
has been particularly relevant in recent months during which time several of
the most popular and most frequently visited Internet sites were attacked by
hackers and other third parties with malicious intent. We rely on third-party
encryption and authentication technology to provide the security and
authentication necessary to effect the secure exchange of valuable and
confidential information. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments (such as break-ins and similar disruptive problems caused by
Internet users) will not result in a compromise or breach of security measures
incorporated in our products to protect customer transaction data. In addition,
as we continue to develop localized products for international markets,
regulatory and export restrictions may prohibit us from using the strongest and
most secure cryptographic protection available and thereby expose us to a risk
of data interception. A party who is able to circumvent our security measures
also could misappropriate proprietary information and customer's information,
interrupt our operations or both. Any
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compromise or breach of our security could reduce demand for our product and
services. If any such compromise or breach were to occur, it could have a
material adverse effect on our business, financial condition or operating
results.
We may be required to expend significant capital and other resources to
protect against security breaches or to address any problems they may cause.
Concerns over the security of the Internet and other online transactions and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Web in particular, especially as a means of
conducting commercial transactions. Because our activities involve the storage
and transmission of highly sensitive, confidential and personal information,
such as credit card numbers, security breaches could damage our reputation and
expose us to a risk of loss or litigation and possible liability. Our security
measures may not prevent security breaches, and failure to prevent security
breaches may disrupt our operations.
Potential system failures and lack of capacity could negatively affect demand
for our products and services.
Our ability to deliver products and services to our merchants depends on the
uninterrupted operation of our e-commerce transaction processing and hosting
systems. The availability of our hosting services, including our QuickStart
program, is critical to our growth and operating results. Our systems and
operations are vulnerable to damage or interruption from many factors
including:
. Power loss;
. Telecommunications or data network failure;
. Operator negligence;
. Improper operation by employees;
. Physical and electronic break-ins, overloads and similar events; and
. Computer viruses.
Despite the fact that we are implementing redundant servers in third-party
hosting centers, we may still experience service interruptions for the reasons
listed above and a variety of other reasons. If our redundant servers are
overloaded or otherwise unavailable, our insurance may not cover all or some
portion of the resulting losses. We have experienced periodic interruptions,
affecting all or a portion of our systems, which we believe will continue to
occur from time to time. In addition, any interruption in our systems that
impairs our ability to provide services could damage our reputation and reduce
demand for our services.
Our success also depends on our ability to grow, or scale, our e-commerce
transaction systems to accommodate increases in the volume of traffic on our
systems, especially during peak periods of demand. We may not be able to
anticipate increases in the use of our systems and successfully expand the
capacity of our network infrastructure. Our inability to expand our systems to
handle increased traffic could result in system disruptions, slower response
times and other difficulties in providing services to our customers, which
could materially harm our business.
If we lose key personnel or are unable to attract and retain additional
qualified personnel, we may not be able to successfully manage our business and
achieve our objectives.
We believe our future success will depend upon our ability to retain our key
management personnel because of their experience and knowledge regarding the
development, opportunities and challenges of our business. All of our key
employees are at-will employees and may terminate their relationship with us at
any time. We may not be successful in attracting and retaining key employees in
the future.
Our future success and our ability to expand our operations will also depend
in large part on our ability to attract and retain additional qualified
marketing, sales and technical personnel. Competition for these types of
employees is intense due to the limited number of qualified professionals. We
have in the past experienced difficulty in recruiting and retaining qualified
marketing, sales, engineering and support personnel. Failure to attract and
retain personnel, particularly marketing, sales and technical personnel, could
make it difficult for us to manage our business and meet our objectives.
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We may be unable to protect our intellectual property.
Our success depends to a significant degree upon the protection of our
software and other intellectual property rights. We rely on trade secret,
copyright and trademark laws and confidentiality agreements with employees and
third-parties, all of which offer only limited protection. Moreover, the laws
of other countries in which we market our products may afford little or no
effective protection of our technology. The reverse engineering, unauthorized
copying or other misappropriation of our technology could enable third parties
to benefit from our technology without paying us for it. This could have a
material adverse effect on our business, operating results and financial
condition. If we resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive and could
involve a high degree of risk.
Claims by other companies that our products infringe their copyrights or
patents could adversely affect our financial condition.
If any of our products violate third party proprietary rights, we may be
required to reengineer our products or seek to obtain licenses from third
parties to continue offering our products without substantial reengineering.
Any efforts to reengineer our products or obtain licenses from third parties
may not be successful and, in any case, would substantially increase our costs
and have a material adverse effect on our business, operating results and
financial condition. Although we perform limited patent searches to determine
whether the technology used in our products infringes patents held by third
parties, we cannot be certain that our products do not infringe the
intellectual property rights of others. Product development is inherently
uncertain in a rapidly evolving technological environment in which there may be
numerous patent applications pending, many of which are confidential when
filed, with regard to similar technologies.
Seasonal trends in sales of our software products may affect our quarterly
operating results.
We may experience seasonality in sales of our products. These seasonal
trends may materially affect our quarter to quarter operating results. Revenues
and operating results in our quarter ending December 31 may be lower relative
to our other quarters, because many customers defer purchase decisions until
the following calendar year or to avoid changes close to the holiday season. In
addition, credit card processors may halt implementation of new lease line
connections during the holiday season delaying implementation of our software.
We are also currently attempting to expand our presence in international
markets, particularly in Europe. We expect our quarter ending September 30 to
reflect the effects of the slowing of international business activity and
spending activity generally associated with that time of year, particularly in
Europe. To the extent that our revenues in Europe or other parts of the world
increase in future periods, we expect our period to period revenues to reflect
any seasonal buying patterns in these markets.
If we experienced a product liability claim, we could incur substantial
litigation costs and liability to third parties.
Since our customers use our products for mission critical applications such
as e-commerce, errors, defects or other performance problems could result in
financial or other damages to our clients. They could seek damages for losses
from us, which, if successful, could have a material adverse effect on our
business, financial condition or operating results. Although our license
agreements typically contain provisions designed to limit our exposure to
product liability claims, existing or future laws or unfavorable judicial
decisions could negate such limitation of liability provisions. We have not
experienced any product liability claims to date. However, a product liability
claim brought against us, even if not successful, would likely be time
consuming and costly and direct management's attention from the management of
the business.
We may become subject to government regulation and legal uncertainties that
would adversely affect our financial results.
We are not currently subject to direct regulation by any domestic or foreign
governmental agency, other than regulations applicable to businesses generally,
export control laws and laws or regulations directly
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applicable to e-commerce. However, due to the increasing usage of the Internet,
it is possible that a number of laws and regulations may be applicable or may
be adopted in the future with respect to conducting business over the Internet,
covering issues such as:
. Taxes;
. User privacy;
. Pricing;
. Content;
. Right to access and use personal data;
. Copyrights and patents;
. Distribution; and
. Characteristics and quality of services.
For example, we believe that some of our services may require us to comply
with the Fair Credit Reporting Act. As a precaution, we are implementing
changes to our systems and processes so that we will be in compliance with the
act. Compliance with this act will require us to provide information about
personal data stored by us or our customers. Failure to comply with this act
could result in claims being made against us.
Furthermore, the growth and development of the market for e-commerce may
prompt more stringent consumer protection laws that may impose additional
burdens on those companies conducting e-commerce. The adoption of additional
laws or regulations may decrease the growth of the Internet or other online
services, which could, in turn, decrease the demand for our services and
increase our cost of doing business.
The applicability of existing laws governing issues, such as property
ownership, copyrights, encryption and other intellectual property issues,
taxation, libel, export or import matters and personal privacy, related to the
Internet is uncertain. The vast majority of laws were adopted prior to the
broad commercial use of the Internet and related technologies. As a result,
they do not contemplate or address the unique issues of the Internet and
related technologies. Changes to these laws intended to address these issues,
including some recently proposed changes in the United States regarding
taxation and encryption and in the European Union regarding contract formation
and privacy, could create uncertainty in the Internet marketplace and impose
additional costs and other burdens. This uncertainty, additional costs and
other burdens could reduce demand for our products and services or increase the
cost of doing business due to increased costs of litigation or increased
service delivery costs.
Due to the encryption technology contained in our products, such products
are subject to United States export controls. United States export controls,
either in their current form or as may be subsequently enacted, may delay the
introduction of new products or limit our ability to distribute products
outside of the United States. In addition, federal or state legislation or
regulation may further limit the levels of encryption or authentication
technology we can use in our products. Further, various countries regulate the
import of certain encryption technology and have adopted laws relating to
personal privacy issues that could limit our ability to distribute products in
those countries. Any such export or import restrictions, new legislation or
regulation or government enforcement of existing regulations could have a
material adverse effect on our business, financial condition and operating
results.
The scope of the information that we collect and use in the future may be
considered personally identifying, which would limit our ability to collect and
report this data.
We may collect information about users of systems that implement our
products and use such information for our benefit and the benefit of our
customers. There are both existing and proposed laws regulating and restricting
the collection of information over the Internet that is considered "personally
identifying" and the use of this information. These laws are dynamic and vary
among domestic and foreign jurisdictions. In the event that the information
that we collect and use is considered to be personally identifying, our ability
to collect and use this information may be restricted.
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Our international business exposes us to additional foreign risks.
Sales of our products and services to customers outside the United States
accounted for approximately 5% of our revenues in 1999. We expect that
international revenues will account for a significant percentage of our
revenues in the future. The growth of our international operations will require
us to recruit and hire a number of new sales and marketing and support
personnel in foreign countries. These countries may not have a sufficient pool
of qualified personnel from which we may hire, or we may not be successful at
hiring, training or retaining such personnel. In addition, we have only limited
experience in developing localized versions of our products and in marketing
and distributing our products in international markets. Introductions of our
products into international markets will require significant investment by us
in advance of anticipated future revenues. We may not be able to successfully
localize, market, sell and deliver our products in international markets which
would materially adversely affect our business, operating results and financial
condition. Conducting business outside of the United States is subject to
additional risks that may affect our ability to sell our products and result in
reduced revenues, including:
. Changes in regulatory requirements;
. Currency conversion risks and currency fluctuations;
. Potentially adverse tax consequences, including taxes on the repatriation
of earnings;
. Political instability, civil unrest and economic instability;
. Greater difficulty enforcing intellectual property rights and weaker laws
protecting such rights;
. Greater difficulty and expense in conducting business abroad;
. Complications in complying with foreign laws and changes in governmental
policies;
. Longer accounts receivable payment cycles in certain countries;
. Potentially less developed communications and Internet infrastructure;
and
. Tariffs, licensing and other trade restrictions.
Any one or more of these factors could significantly limit our ability to
grow our business abroad and limit the growth of our revenue. To the extent our
international operations expand, we expect that an increasing portion of our
international revenue will be denominated in foreign currencies, subjecting us
to fluctuations in foreign currency exchange rates. We do not currently engage
in foreign currency hedging transactions. However, as we expand our
international operations, we may choose to limit such exposure by entering into
forward foreign exchange contracts or engaging in similar hedging strategies.
Any currency exchange strategy we implement may be unsuccessful in avoiding and
potentially could increase exchange-related losses.
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Risks Related to Our Industry
The demand for our services could be negatively affected by the reduced growth
of e-commerce or by delays in the development of Internet infrastructure.
Sales of goods and services over the Internet do not currently represent a
significant portion of overall sales of goods and services. We depend on the
growing use and acceptance of e-commerce as an effective medium of commerce by
merchants and customers in the United States and internationally. Rapid growth
in the use of and interest in the Internet is important and is a relatively
recent development. Sales of goods and services over the Internet have
developed more slowly outside of the United States. We cannot be certain that
acceptance and use of the Internet will continue to develop or that a
sufficiently broad base of businesses and consumers will adopt, or continue to
use, the Internet as a medium of commerce.
The emergence of the Internet as a commercial marketplace may occur more
slowly than anticipated for a number of reasons, including potentially
inadequate development of the necessary network infrastructure or delayed
development of enabling technologies and performance improvements. If the
number of Internet users or their use of Internet resources continues to grow,
it may overwhelm the existing Internet infrastructure. Delays in the
development or adoption of new standards and protocols required to handle
increased levels of Internet activity could also have a detrimental effect.
These factors could result in slower response times or adversely affect usage
of the Internet, resulting in lower numbers of e-commerce transactions and
lower demand for our services. Any delays or reductions in the growth of the
Internet as a medium of commerce would adversely affect the growth of or even
reduce our revenues.
The imposition of new sales or other taxes could limit the growth of e-commerce
generally and, as a result, the demand for our products.
Recent federal legislation limits the imposition of state and local taxes on
Internet-related sales. In 1998, Congress passed the Internet Tax Freedom Act,
which places a three-year moratorium on state and local taxes on Internet
access, unless the tax was already imposed prior to October 1, 1998, and
discriminatory taxes on e-commerce. There is a possibility that Congress may
not renew this legislation in 2001. If Congress chooses not to renew this
legislation, state and local governments would be free to impose taxes on
electronically purchased goods. We believe that, in accordance with current
industry practice, most companies that sell products over the Internet do not
currently collect sales or other taxes on shipments of their products into
states or foreign countries where they are not physically present. However, one
or more states or foreign countries may seek to impose sales or other tax
collection obligation on out-of-jurisdiction companies that engage in e-
commerce. A successful assertion by one or more states or foreign countries
that companies engaged in e-commerce should collect sales or other taxes on the
sale of their products over the Internet, even though not physically present in
the state or foreign country, could indirectly reduce demand for our products.
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Risks Related to this Offering
Our stock price may fluctuate substantially, and you may not be able to resell
your shares above the offering price.
The market price for our common stock will be affected by a number of
factors, including the following:
. The announcement or delay of new services or service enhancements by us
or our competitors;
. Quarterly variations in our or our competitors' results of operations;
. Changes in earnings estimates or recommendations by securities analysts;
. Developments in our industry and e-commerce generally; and
. General market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
In addition, stock prices for many companies in the technology and emerging
growth sectors have been especially volatile and have experienced wide
fluctuations that have often been unrelated to operating performance. These
factors and fluctuations, as well as general economic, political and market
conditions may materially and adversely affect the market price of our common
stock and, therefore, your investment in our common stock.
Because we are currently unable to identify the specific uses to which the net
proceeds from this offering will be applied, you will be relying on the
judgment of our management regarding the application of the proceeds.
We have not designated any specific use for the net proceeds from our sale
of common stock described in this prospectus. Rather, we expect to use the net
proceeds for general corporate purposes, including working capital.
Consequently, our management will have significant flexibility in applying the
net proceeds of this offering. You will be relying on the judgment of our
management regarding the application of the proceeds. Our management will have
the ability to change the application of the proceeds of this offering without
stockholder approval.
Our business may be adversely affected by class action litigation due to stock
price volatility.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and divert
management's attention and resources, which could have a material adverse
effect on our business, operating results and financial condition.
Because our executive officers and directors own a significant percentage of
our common stock, they will be able to exercise significant influence over us.
Upon completion of this offering, our present directors and executive
officers and their affiliates will beneficially own approximately % of
the outstanding common stock. As a result, if these stockholders act together,
they will be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions like mergers and other business
combinations. This concentration of ownership may also have the effect of
delaying or preventing a change in control over us unless it is supported by
our directors and executive officers.
There may be sales of a substantial number of shares of our common stock after
this offering by our stockholders, including our executive officers and
directors, and these sales could cause our stock price to decline.
Our executive officers, directors and current stockholders hold a
substantial number of shares, which they can sell in the public market in the
near future. Our executive officers, directors and substantially all of our
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stockholders have executed lock-up agreements that prevent them from selling or
otherwise disposing of our common stock for a period of 180 days from the date
of this prospectus, without the prior written approval of Credit Suisse First
Boston. These lock-up agreements will expire on , 2000, and an
aggregate of shares, or % of our total outstanding shares will
be eligible for resale from time to time beginning upon the expiration of these
lock-up agreements, in some cases subject only to the volume, manner of sale
and notice requirements of Rule 144 under the Securities Act. Sales of a
substantial number of shares of our common stock after this offering could
cause our stock price to fall or create the perception to the public of
difficulties or problems with our products and services which could cause our
stock price to fall. The sale of these shares or the negative perception
created by the sale of these shares could impair our ability to raise capital
through the sale of additional stock. You should read "Shares Available for
Future Sale" for a full discussion of shares that may be sold in the public
market in the future.
The anti-takeover provisions of Delaware law, our certificate of incorporation
and our bylaws could adversely affect the rights of the holders of our common
stock.
Anti-takeover provisions of Delaware law, our certificate of incorporation
and our bylaws may make a change in control of our company more difficult, even
if a change in control would be beneficial to the stockholders. These
provisions may allow the board of directors to prevent changes in the
management and control of our company. Under Delaware law, our board of
directors may adopt additional anti-takeover measures in the future.
One anti-takeover provision that we have is the ability of our board of
directors to determine the terms of preferred stock and issue preferred stock
without the approval of the holders of the common stock. Upon the closing of
this offering, our certificate of incorporation will allow the issuance of up
to 5,000,000 shares of preferred stock. However, because the rights and
preferences of any series of preferred stock may be set by the board of
directors in its sole discretion without approval of the holders of the common
stock, and the rights and preferences of this preferred stock may be superior
to those of the common stock. Accordingly, the rights of the holders of common
stock may be adversely affected. You should read "Description of Capital
Stock--Delaware Anti-takeover Law and Certain Charter and Bylaw Provisions" for
a discussion of additional anti-takeover measures.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," contains forward-looking
statements. 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 or our industry's actual results, levels of
activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. Such risks and other factors
include, among other things, 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," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue" or the negative of
such 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 various factors, including
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. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform such statements to
actual results.
21
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares
of common stock that we are selling in this offering will be approximately
$ ($ if the underwriters exercise their over-allotment
option in full) based on an assumed public offering price of $ per share
and after deducting the estimated underwriting discount and estimated offering
expenses payable by us.
The principal purpose of this offering is to create a public market for our
common stock. We expect to use the net proceeds from this offering for working
capital and general corporate purposes. A portion of the net proceeds may also
be used to acquire or invest in complementary businesses, technologies, product
lines or products. We have no current plan or agreement with respect to any
such acquisition, and we are not currently engaged in any negotiations with
respect to any such transaction. Our management will have broad discretion
concerning the allocation and use of the net proceeds. Pending such uses, we
intend to invest the net proceeds in interest-bearing, investment-grade
securities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
DIVIDEND POLICY
Upon completion of this offering we will pay accumulated dividends in common
stock on our outstanding Series A, Series B and Series C preferred stock
pursuant to the terms of our certificate of incorporation. We have never
declared or paid any dividends on our common stock. We currently expect to
retain future earnings, if any, for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future. A covenant made by us under our existing line of credit prohibits the
payment of cash dividends.
22
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999
on:
. An actual basis;
. A pro forma basis giving effect to the automatic conversion of all shares
of outstanding Series A, Series B and Series C preferred stock into
12,176,313 shares of common stock upon the closing of this offering,
which includes the payment in shares of common stock of accrued and
unpaid dividends on the preferred stock as of December 31, 1999 and the
issuance of 1,299,943 shares of Series C preferred stock after December
31, 1999; and
. A pro forma as adjusted basis to reflect our capitalization as of
December 31, 1999, with the preceding pro forma adjustments plus the
receipt of the estimated net proceeds from our sale of shares
of common stock at the initial public offering price of $ per share.
The table below should be read in conjunction with our balance sheet as of
December 31, 1999 and the related notes, which are included elsewhere in this
prospectus. You should review Note 10 to the notes to our financial statements
for descriptions of our Series A, Series B and Series C preferred stock. The
table below also reflects a beneficial conversion feature that resulted from
the issuance of Series C preferred stock in 1999. The beneficial conversion
feature was calculated in accordance with Emerging Issues Task Force Issue No.
98-5 and resulted in an increase in stockholders' deficit of approximately
$29.2 million at December 31, 1999.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Mandatorily redeemable convertible
preferred stock, $.001 par value,
12,647,830 shares authorized and
designated actual; 10,797,350 shares
issued and outstanding actual; no shares
authorized, issued or outstanding, pro
forma and pro forma as adjusted........... $ 66,066 $ -- $ --
Preferred stock, $.001 par value, 5,000,000
shares authorized pro forma as adjusted;
no shares issued and outstanding pro forma
as adjusted............................... -- -- --
Common stock, $.001 par value, 20,000,000
shares authorized actual and pro forma;
3,919,655 shares issued and outstanding
actual; 16,095,968 issued and outstanding
pro forma; 100,000,000 authorized pro
forma as adjusted; shares issued and
outstanding pro forma as adjusted......... 4 16
Additional paid-in-capital................. -- 88,153
Deferred compensation...................... (2,097) (2,097)
Accumulated other comprehensive loss....... (13) (13)
Accumulated deficit........................ (50,213) (63,121)
-------- -------- --------
Total stockholders' (deficit) equity....... (52,319) 22,938
-------- -------- --------
Total capitalization....................... $ 13,747 $ 22,938 $
======== ======== ========
</TABLE>
The table above excludes the following :
. 1,271,931 shares of common stock issuable upon exercise of stock options
outstanding as of March 7, 2000 with a weighted average exercise price
of $6.35 per share;
. 80,179 shares of common stock issued upon exercise of stock options
between December 31, 1999 and March 7, 2000;
. 700,483 shares of common stock and 285,675 shares of preferred stock
issuable upon exercise of outstanding warrants as of March 7, 2000 with
a weighted average exercise price of $6.06 per share;
. 1,342,047 shares reserved for future issuance under our 1997 Stock
Option/Issuance Plan, 300,000 shares reserved for issuance under our
2000 Director Plan and 600,000 shares reserved for sale under our 2000
Employee Stock Purchase Plan as of March 7, 2000;
. 41,329 shares of common stock issuable as payment of accrued and unpaid
dividends on outstanding preferred stock after December 31, 1999 and on
outstanding preferred stock warrants as of March 7, 2000; and
. shares that we have agreed to issue to Cardservice International at
a purchase price per share equal to the price to the public in this
offering; the number of shares that we have agreed to issue to
Cardservice International will equal the lower of 10% of the shares sold
in this offering (excluding the underwriter's over-allotment option) or
the number of shares purchasable for an aggregate of $6 million at such
offering price.
23
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $ million, or $ per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets at December
31, 1999, increased by the net proceeds of the sales of Series C preferred
stock after December 31, 1999, reduced by the amount of our total liabilities,
and divided by the total number of shares of common stock outstanding after
giving effect to the automatic conversion of the Series A, Series B and
Series C preferred stock and payment in shares of common stock of accrued
unpaid dividends on the preferred stock as of December 31, 1999. 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 the completion of this offering. After giving effect to the
sale of shares of common stock offered by us at an assumed initial
public offering price of $ per share, and after deducting the
underwriting discount and estimated offering expenses payable by us, our pro
forma net tangible book value at December 31, 1999 would have been
approximately $ million, or $ per share of common stock. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution of $ per share
to new investors of common stock. The following table illustrates this dilution
on a per share basis:
<TABLE>
<S> <C> <C>
Assumed public offering price per share.............................. $
Pro forma net tangible book value per share as of December 31,
1999.............................................................. $
Increase in pro forma net tangible book value per share
attributable to new investors.....................................
----
Pro forma net tangible book value per share after the offering (as
adjusted)...........................................................
----
Dilution per share to new investors.................................. $
====
</TABLE>
The following table summarizes on a pro forma as adjusted basis after giving
effect to the offering, as of December 31, 1999, the differences between the
existing stockholders and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid by investors and
the average price per share paid:
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
-------------- -------------- Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... % $ % $
New investors...........................
--- --- ---- ---
Totals................................ % $ % $
=== === ==== ===
</TABLE>
The table above excludes the following :
. 1,271,931 shares of common stock issuable upon exercise of stock options
outstanding as of March 7, 2000 with a weighted average exercise price
of $6.35 per share;
. 80,179 shares of common stock issued upon exercise of stock options
between December 31, 1999 and March 7, 2000;
. 700,483 shares of common stock and 285,675 shares of preferred stock
issuable upon exercise of outstanding warrants with a weighted average
exercise price of $6.06 per share;
. 1,342,047 shares reserved for future issuance under our 1997 Stock
Option/Issuance Plan, 300,000 shares reserved for issuance under our
2000 Director Plan and 600,000 shares reserved for sale under our 2000
Employee Stock Purchase Plan as of March 7, 2000;
. 41,329 shares of common stock issuable as payment of accrued and unpaid
dividends on outstanding preferred stock after December 31, 1999 and on
outstanding preferred stock warrants as of March 7, 2000; and
. shares that we have agreed to issue to Cardservice International at
a purchase price per share equal to the price to the public in this
offering; the number of shares that we have agreed to issue to
Cardservice International will equal the lower of 10% of the shares sold
in this offering (excluding the underwriter's over-allotment option) or
the number of shares purchasable for an aggregate of $6 million at such
offering price.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes thereto included elsewhere in this prospectus. The consolidated statement
of operations data set forth below for the period from inception (September 21,
1995) through December 31, 1995 and for the year ended December 31, 1996 and
the balance sheet data as of 1995, 1996 and 1997 have been derived from our
audited consolidated financial statements. The consolidated statement of
operations data set forth below 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 consolidated financial statements included elsewhere
in this prospectus, which have been audited by PricewaterhouseCoopers LLP. The
historical results are not necessarily indicative of results to be expected for
any future period.
<TABLE>
<CAPTION>
Period from
Sept. 21, 1995 For the Year Ended December 31,
(Inception) to --------------------------------------
Dec. 31, 1995 1996 1997 1998 1999
-------------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
Software licenses...... $ 1 $ 11 $ 147 $ 582 $ 3,294
Services............... 1 175 249 481 1,988
-------- -------- -------- -------- --------
Total revenues....... 2 186 396 1,063 5,282
-------- -------- -------- -------- --------
Cost of revenues:
Software licenses...... 4 60 89 135 130
Services............... -- 17 80 292 1,869
-------- -------- -------- -------- --------
Total cost of
revenues............ 4 77 169 427 1,999
-------- -------- -------- -------- --------
Gross margin........... (2) 109 227 636 3,283
Operating expenses:
Sales and marketing.... 1 57 484 3,336 7,593
Research and
development........... -- 51 463 2,661 6,514
General and
administrative........ 25 78 470 1,761 3,314
-------- -------- -------- -------- --------
Total operating
expenses............ 26 186 1,417 7,758 17,421
-------- -------- -------- -------- --------
Loss from
operations.......... (28) (77) (1,190) (7,122) (14,138)
-------- -------- -------- -------- --------
Interest income
(expense):
Interest expense....... -- -- (1) (132) (531)
Interest income ....... -- -- 44 39 42
-------- -------- -------- -------- --------
Net loss............. (28) (77) (1,147) (7,215) (14,627)
Dividends on
mandatorily redeemable
convertible preferred
stock................. -- -- -- (270) (1,074)
Beneficial conversion
feature related to
Series C preferred
stock................. -- -- -- -- (29,227)
-------- -------- -------- -------- --------
Net loss attributable
to common stock..... $ (28) $ (77) $ (1,147) $ (7,485) $(44,928)
======== ======== ======== ======== ========
Net loss per share:
Basic and diluted...... $ (0.08) $ (0.06) $ (0.89) $ (6.51) $ (23.78)
======== ======== ======== ======== ========
Basic and diluted
weighted average
shares................ 352 1,300 1,283 1,149 1,889
======== ======== ======== ======== ========
Pro forma net loss per
share (unaudited):
Basic and diluted...... $ (1.04)
========
Weighted average
shares................ 14,065
========
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Cash and equivalents........ $ 2 $ 20 $ 2,230 $ 71 $ 16,915
Working (deficit) capital... 2 20 1,975 (4,791) 12,732
Total assets................ 2 54 2,548 2,150 23,678
Mandatorily redeemable
convertible preferred
stock...................... -- -- 3,345 3,615 66,066
Long-term debt, net of
current portion............ 30 122 -- 387 435
Capital lease obligations,
net of current portion..... -- -- 12 12 78
Total stockholders'
deficit.................... $ (28) $ (104) $ (1,248) $ (8,649) $(52,319)
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
our consolidated financial statements and related notes included elsewhere in
this prospectus.
Overview
We provide e-commerce transaction management solutions that enable
businesses to automate transaction and payment processing. Our e-commerce
software allows businesses to conduct real-time transaction processing, fraud
analysis and protection, automated shipping and tax calculation, digital
content downloading and business reporting and analysis.
We were incorporated in September 1995 and initially focused on providing
Internet hosting services. In January 1996, we first offered transaction
processing hosting services for e-businesses. In November 1996, we commercially
released Merchant Engine, our first transaction management software product for
single businesses, and first recognized software license revenues. In November
1996, we also commercially released Hosting Engine, designed to enable commerce
service providers, or CSPs, to simultaneously support multiple businesses or
large enterprises to support multiple divisions.
We derive revenues from licensing software products and providing related
services. Revenues derived from software licenses include fees from licenses of
Merchant Engine and Hosting Engine and annual merchant fees received from CSPs
that utilize Hosting Engine to provide transaction and payment processing
services on an outsourced basis. Revenues derived from services include fees
for hosting services and customization and implementation services, customer
service and support and maintenance for our products.
Software license revenues derived from Hosting Engine and Merchant Engine
are generally recognized when the product is shipped. Revenues derived from
annual merchant fees are generally recognized ratably over the term of the
agreement. Revenues for services are recognized as the services are provided.
Revenues for maintenance are recognized ratably over the term of the
maintenance agreements.
Through 1997, our revenues were primarily services revenues derived from
hosting fees. Since the beginning of 1998, most of our revenues have been
derived from software licenses.
We sell our products and services through a direct sales force and strategic
relationships with systems integrators, VARs, storefront and CRM vendors and
CSPs that introduce us to their customers or resell our products. Although
international revenues generated to date have been approximately 5% of
revenues, we have an office in the United Kingdom and plan to establish
operations in other parts of Europe, Asia Pacific and South America.
A relatively small number of customers accounted for a significant portion
of our total revenues in 1999. If this trend continues, the loss or delay of
revenues from any of these individual customers could have a significant impact
on our revenues. In 1998, sales to our largest customer, Cardservices
International, accounted for 16% of our total revenues. In 1999, sales to our
two largest customers, Cardservices International and Hewlett-Packard,
accounted for 18% and 19% of our revenues, respectively.
We have incurred substantial net losses since inception, and as of December
31, 1999, we had an accumulated deficit of $50.2 million. This accumulated
deficit resulted from a beneficial conversion feature related to our issuance
of Series C preferred stock, our lack of substantial revenues, the significant
costs incurred in the development of our products and the establishment of our
sales and marketing organization.
27
<PAGE>
Results of Operations
The following table sets forth items from our consolidated statements of
operations expressed as a percentage of total revenues for the periods
indicated:
<TABLE>
<CAPTION>
Period from For the Year Ended
Sept. 21, 1995 December 31,
(Inception) to --------------------------------
Dec. 31, 1995 1996 1997 1998 1999
-------------- ----- ------ ------ ------
Consolidated Statement of
Operations Data:
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses............ 50% 6% 37% 55% 62%
Services..................... 50 94 63 45 38
------- ----- ------ ------ ------
Total revenues............. 100 100 100 100 100
------- ----- ------ ------ ------
Cost of revenues:
Software licenses............ 200 32 23 13 3
Services..................... -- 9 20 27 35
------- ----- ------ ------ ------
Total cost of revenues..... 200 41 43 40 38
------- ----- ------ ------ ------
Gross margin................. (100) 59 57 60 62
Operating expenses:
Sales and marketing.......... 50 31 122 314 144
Research and development..... -- 27 117 250 123
General and administrative... 1,250 42 119 166 63
------- ----- ------ ------ ------
Total operating expenses... 1,300 100 358 730 330
------- ----- ------ ------ ------
Loss from operations....... (1,400) (41) (301) (670) (268)
------- ----- ------ ------ ------
Interest income (expense):
Interest expense............. -- -- -- (13) (10)
Interest income ............. -- -- 11 4 1
------- ----- ------ ------ ------
Net loss................... (1,400)% (41)% (290)% (679)% (277)%
The following table sets forth, for each component of revenues, the cost of
these revenues as a percentage of the related revenues for the periods
indicated:
<CAPTION>
Period from For the Year Ended
Sept. 21, 1995 December 31,
(Inception) to --------------------------------
Dec. 31, 1995 1996 1997 1998 1999
-------------- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cost of software license reve-
nues......................... 400% 545% 61% 23% 4%
Cost of services revenues..... -- 10 32 61 94
</TABLE>
28
<PAGE>
Comparison of Years Ended December 31, 1999 and 1998
Revenues
Total revenues increased to $5.3 million for 1999 from $1.1 million for
1998.
Software License Revenues. Software license revenues increased to $3.3
million for 1999 from $582,000 for 1998. The increase was due to an increase in
the number of Hosting Engine and Merchant Engine licenses as well as increased
revenues derived from annual merchant fees. As a percentage of total revenues,
software license revenues increased to 62% for 1999 from 55% for 1998. We
anticipate that software license revenues will increase as a percentage of
total revenues in 2000.
Services Revenues. Services revenues increased to $2.0 million for 1999 from
$481,000 for 1998. This increase was primarily due to professional services
sold to new and existing customers, increased revenues from our hosting
services and revenues from maintenance contracts sold to our new customers. As
a percentage of total revenues, services revenues decreased to 38% for 1999
from 45% for 1998.
Cost of Revenues
Cost of Software License Revenues. Cost of software license revenues
consists primarily of royalties paid to third parties under technology
licensing arrangements. Cost of software license revenues decreased to
$130,000, or 4% of software license revenues, for 1999 from $135,000, or 23% of
software license revenues, for 1998. The decrease was primarily due to an
increase in the number of licenses of our Hosting Engine and an increase in
annual merchant fees. We historically have realized higher gross margins on
licenses of Hosting Engine than on licenses of Merchant Engine due to a higher
selling price for Hosting Engine. We anticipate that the cost of license
revenues will increase in absolute dollars but will vary as a percentage of
software license revenues, depending on the percentage mix of licenses of
Hosting Engine and Merchant Engine sold and the amount of annual merchant fees.
Cost of Services Revenues. Cost of services revenues consists primarily of
personnel costs for our hosting and professional services for our products.
Cost of services revenues increased to $1.9 million, or 94% of services
revenues, for 1999 from $292,000, or 61% of services revenues, for 1998. The
increase resulted primarily from the hiring of additional personnel in
anticipation of the growth of our business and the use of contractors to
support increased demand for consulting services. We anticipate the number of
service personnel will continue to increase in 2000.
Gross margin is affected by the costs associated with producing revenues and
the mix of software license revenues and services revenues. Gross margin
increased to 62% in 1999 from 60% in 1998. We historically have realized higher
gross margin on license revenues than on services revenues. If services
revenues increase as a percentage of total revenues, our overall gross margin
may decrease.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, costs associated with stocks-based compensation, commissions and
costs associated with marketing and strategic relationship programs, such as
trade shows, seminars, public relations and marketing materials. Sales and
marketing expenses increased to $7.6 million, or 144% of total revenues, for
1999 from $3.3 million, or 314% of total revenues, for 1998. The increase was
attributable to an increase in the number of sales and marketing personnel and
related expenses. To a lesser extent, the increase was related to an increase
in marketing and strategic relationship programs, including trade shows, public
relations and marketing materials. We expect sales and marketing expenses to
continue to increase in absolute dollars as we continue to expand our marketing
programs and our sales force to support strategic relationships and domestic
and international expansion.
Research and Development. Research and development expenses consist
primarily of salaries, fees for outside consultants and related costs
associated with the development of new products, the enhancement of
29
<PAGE>
existing products, quality assurance, testing and documentation. Research and
development expenses increased to $6.5 million, or 123% of total revenues, for
1999 from $2.7 million, or 250% of total revenues, for 1998. The increase
primarily resulted from salaries and other costs associated with new personnel.
We anticipate that research and development expenses will continue to increase
in absolute dollars in 2000.
General and Administrative. General and administrative expenses consist
primarily of salaries and other personnel-related costs for executive and
financial personnel, as well as legal, accounting and insurance costs. General
and administrative expenses increased to $3.3 million, or 63% of total
revenues, for 1999 from $1.8 million, or 166% of total revenues, for 1998. The
increase resulted primarily from salaries associated with an increase in the
number of general and administrative personnel and the costs required to manage
our growth.
Interest Income (Expense)
Interest expense increased to $489,000 for 1999, or 9% of total revenues,
from $93,000, or 9% of total revenues, for 1998. This increase was primarily
due to increased borrowings under our line of credit as well as loans to us
from certain stockholders as well as non-cash interest expense related to
warrants issued in conjunction with debt.
Provision for Income Taxes
At December 31, 1999, we had approximately $16.8 million of domestic net
operating loss carryforwards that expire on various dates and may be used to
reduce future federal and state income taxes, if any. We have recorded a
valuation allowance for the full amount of the net deferred tax assets as the
future realization of the tax benefit is not sufficiently assured.
Comparison of Years Ended December 31, 1998 and 1997
Revenues
Total revenues increased to $1.1 million for 1998 from $396,000 for 1997.
Software License Revenues. Software license revenues increased to $582,000
for 1998 from $147,000 for 1997. The increase was primarily due to an increase
in the number of licenses sold as well as revenues from annual merchant fees.
As a percentage of total revenues, software license revenues increased to 55%
for 1998 from 37% for 1997.
Services Revenues. Services revenues increased to $481,000 for 1998 from
$249,000 for 1997. The increase was primarily due to our provision of
additional hosting services, professional services sold to new and existing
customers and revenues from maintenance contracts sold to our new customers. As
a percentage of total revenues, services revenues decreased to 45% for 1998
from 63% for 1997.
Cost of Revenues
Cost of Software License Revenues. Cost of software license revenues
increased to $135,000, or 23% of software license revenues, for 1998 from
$89,000, or 61% of software license revenues, for 1997. The percentage decrease
was due to an increase in the proportion of higher margin Hosting Engine
licenses and annual merchant fees in the overall software license revenues mix.
Cost of Services Revenues. Cost of services revenues increased to $292,000,
or 61% of services revenues, for 1998 from $80,000, or 32% of services
revenues, for 1997. The dollar and percentage increases resulted primarily from
the hiring of additional personnel in anticipation of the growth of our
business and the use of contractors to support increased demand for maintenance
and consulting services. The decline in services gross margin to 39% for 1998
from 68% for 1997 was primarily due to the increase in the number of personnel
and related costs.
30
<PAGE>
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased to $3.3 million,
or 314% of total revenues, for 1998 from $484,000, or 122% of total revenues,
for 1997. The increase was primarily attributable to an increase in the number
of sales and marketing personnel. To a lesser extent, the increase was
attributable to an increase in marketing and strategic relationship programs,
including trade shows, public relations and marketing materials.
Research and Development. Research and development expenses increased to
$2.7 million, or 250% of total revenues, for 1998 from $463,000, or 117% of
total revenues, for 1997. The increase primarily resulted from salaries and
other costs associated with new personnel.
General and Administrative. General and administrative expenses increased to
$1.8 million, or 166% of total revenues, for 1998 from $470,000, or 119% of
total revenues, for 1997. Substantially all of the increase was due to salaries
associated with an increase in the number of general and administrative
personnel.
Interest Income (Expense)
Interest expense increased to $93,000, or 9% of total revenue, for 1998,
from interest income of $43,000, or 11% of total revenues, for 1997. This
increase was primarily due to increased borrowings under our line of credit as
well as to loans to us from certain stockholders.
Consolidated Quarterly Results of Operations
The following tables set forth a summary of our unaudited consolidated
quarterly operating results for each of the eight most recent quarters during
the years ended December 31, 1998 and 1999. This information has been derived
from unaudited consolidated financial statements that, in management's opinion,
have been prepared on a basis consistent with the audited consolidated
financial statements contained elsewhere in the prospectus and include all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of such information when read in conjunction with our audited
consolidated financial statements and related notes. We believe that period to
period comparisons of our financial results are not necessarily meaningful and
should not be relied upon as indicative of future performance.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- -------- ---
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses...... $ 173 $ 212 $ 47 $ 150 $ 161 $ 788 $ 987 $ 1,358
Services............... 85 159 167 70 174 311 701 802
------ ------- ------- ------- ------- ------- ------- -------
Total revenues........ 258 371 214 220 335 1,099 1,688 2,160
------ ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Software licenses...... 21 33 45 36 38 29 46 17
Services............... 29 44 60 159 291 457 514 607
------ ------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............. 50 77 105 195 329 486 560 624
------ ------- ------- ------- ------- ------- ------- -------
Gross margin........... 208 294 109 25 6 613 1,128 1,536
Operating expenses:
Sales and marketing.... 542 669 960 1,165 1,445 1,483 2,357 2,308
Research and
development........... 302 520 846 993 1,367 1,668 1,679 1,800
General and
administrative........ 234 296 487 744 716 862 944 792
------ ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 1,078 1,485 2,293 2,902 3,528 4,013 4,980 4,900
------ ------- ------- ------- ------- ------- ------- -------
Loss from operations.. (870) (1,191) (2,184) (2,877) (3,522) (3,400) (3,852) (3,364)
------ ------- ------- ------- ------- ------- ------- -------
Interest income
(expense):
Interest expense....... (17) (20) (30) (65) (65) (22) (36) (408)
Interest income........ 23 13 2 1 13 9 20 --
------ ------- ------- ------- ------- ------- ------- -------
Net loss.............. $ (864) $(1,198) $(2,212) $(2,941) $(3,574) $(3,413) $(3,868) $(3,772)
====== ======= ======= ======= ======= ======= ======= =======
</TABLE>
31
<PAGE>
The following table sets forth items from our consolidated results of
operations expressed as a percentage of total revenues for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses.......... 67% 57% 22% 68% 48% 72% 58% 63%
Services................... 33 43 78 32 52 28 42 37
---- ---- ------ ------ ------ ---- ---- ----
Total revenues............ 100 100 100 100 100 100 100 100
---- ---- ------ ------ ------ ---- ---- ----
Cost of revenues:
Software licenses.......... 8 9 21 17 11 3 3 1
Services................... 11 12 28 72 87 42 30 28
---- ---- ------ ------ ------ ---- ---- ----
Total cost of revenues.... 19 21 49 89 98 45 33 29
---- ---- ------ ------ ------ ---- ---- ----
Gross margin............... 81 79 51 11 2 55 67 71
Operating expenses:
Sales and marketing........ 210 180 449 530 431 135 140 107
Research and development... 117 140 395 451 408 152 99 83
General and
administrative............ 91 80 228 338 214 77 56 37
---- ---- ------ ------ ------ ---- ---- ----
Total operating expenses.. 418 400 1,072 1,319 1,053 364 295 227
Loss from operations...... (337) (321) (1,021) (1,308) (1,051) (309) (228) (156)
---- ---- ------ ------ ------ ---- ---- ----
Interest income (expense):
Interest expense........... (7) (5) (14) (29) (20) (2) (2) (19)
Interest income............ 9 3 1 -- 4 1 1 --
---- ---- ------ ------ ------ ---- ---- ----
Net loss.................. (335)% (323)% (1,034)% (1,337)% (1,067)% (311)% (229)% (175)%
==== ==== ====== ====== ====== ==== ==== ====
The following table sets forth, for each component of revenues, the cost of
those revenues as a percentage of the related revenues for the periods
indicated:
<CAPTION>
Three Months Ended
----------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost of software license
revenues.................. 12% 16% 96% 24% 24% 4% 5% 1%
Cost of services........... 34 28 36 227 167 147 73 76
</TABLE>
Trends discussed in the period to period comparisons above generally apply
to the results of operations for our eight most recent quarters, except for
certain differences discussed below.
We have experienced significant fluctuations in revenues, expenses and
results of operations from quarter to quarter, and such fluctuations are likely
to continue. A significant portion of our revenues has been generated from a
limited number of customers, and it is difficult to predict the timing of
future orders and shipments to customers. We anticipate that in the near term
our results of operations in any given period will continue to depend to a
significant extent upon sales to a small number of customers. We have also
experienced significant variations in our quarterly gross margin for software
license revenues due to the volume and product mix. Our gross margin for
services revenues has varied due to the volume of services revenues, our
investment in the infrastructure of our hosting services and the timing and
number of additional services personnel hired and related costs.
Our sales and marketing expenses have generally increased in absolute
dollars on a quarterly basis, due in significant part to the timing and number
of additional personnel hired and compensation and related costs
32
<PAGE>
and the timing, number and significance of specific sales and marketing
activities, such as trade shows, partner programs and other promotional
activities. Our expenditures for research and development have increased in
absolute dollars on a quarterly basis, primarily as a result of the timing and
number of additional personnel hired and related compensation costs. Our
general and administrative expenses have generally increased in absolute
dollars on a quarterly basis primarily as a result of the timing and number of
additional personnel hired and related costs and the costs required to manage
our growth.
Stock-Based Compensation
During the three-year period ended December 31, 1999, we granted options to
purchase approximately 2,532,915 shares of common stock under our stock option
plans at a weighted average exercise price of $0.68 per share. We have recorded
deferred stock-based compensation expenses related to these options of
approximately $2.8 million. This deferred stock-based compensation will be
amortized over the vesting period of the underlying options. Of this $2.8
million, an aggregate of $745,000 was amortized during 1999 and was allocated
as follows:
. $69,000 to cost of services;
. $457,000 to sales and marketing;
. $166,000 to research and development; and
. $53,000 to general and administrative.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private
placements of preferred stock totaling $35.8 million through December 31, 1999
and borrowings from our stockholders and our bank. As of December 31, 1999, we
had cash and equivalents totaling $16.9 million. In addition, in January 2000
and February 2000 we issued an additional 1,299,943 shares of Series C
preferred stock at a price of $7.07 per share resulting in gross proceeds of
approximately $9.2 million.
Cash used for operating activities for 1999 was $12.3 million, primarily due
to a net loss of $14.6 million and an increase in accounts receivable and
contracts receivable, partially offset by increases in accounts payable,
accrued expenses and deferred revenues. Cash used for operating activities for
1998 was $5.3 million, primarily due to a net loss of $7.2 million and an
increase in accounts receivable and contracts receivable, partially offset by
increases in accounts payable, accrued expenses and deferred revenues.
Cash used for investing activities was $1.7 million for 1999 and $556,000
for 1998. Investing activities for the periods were primarily purchases of
equipment, consisting largely of computer servers, workstations and networking
equipment.
Cash provided by financing activities was $30.9 million for 1999 primarily
from the issuance of preferred stock for net proceeds totaling $26.9 million.
Cash provided by financing activities totaling $3.7 million for 1998 was
primarily from borrowings under our credit facilities and loans from certain
stockholders.
As of December 31, 1999 and 1998, our primary financial commitments
consisted of obligations outstanding under capital leases and notes payable
under our credit facilities and to certain stockholders of $2.3 million and
$3.7 million, respectively. Future obligations under operating leases totaled
$692,000 at December 31, 1999.
In 1999, we entered into a new bank line of credit which allows us to borrow
up to $3.3 million for working capital purposes and up to $1.0 million for
equipment purchases. The working capital revolving line of credit expires in
July 2000 and the equipment line of credit expires in May 2002. Amounts
available under the working capital revolving line of credit are a function of
eligible accounts receivable and both lines of credit
33
<PAGE>
bear interest at the bank's prime rate plus .25%. As of December 31, 1999, $2.1
million was available for borrowing and the bank's prime rate was 8.5%.
As of December 31, 1999, we had approximately $16.8 million of domestic net
operating loss carryforwards that expire on various dates and may be used to
reduce future federal and state income taxes, if any. Under the provisions of
the Internal Revenue Code, certain substantial changes in our ownership may
limit the amount of net operating loss carryforwards which could be utilized
annually to offset future taxable income.
Since our inception, we have significantly increased our operating expenses.
We anticipate that we will continue to experience significant growth in our
operating expenses for the foreseeable future and that our operating expenses
and capital expenditures will constitute a material use of our cash resources.
In addition, we may utilize cash resources to fund acquisitions or investments
in businesses, technologies, products or services that are complementary to our
business. We believe that the net proceeds of this offering together with our
current cash balances will be sufficient to meet our anticipated cash
requirements for working capital and capital expenditures for at least 12
months immediately following the offering. To the extent that cash generated
from operations is insufficient to satisfy our liquidity requirements, we may
seek to sell additional equity or debt securities, or obtain additional credit
facilities. The issuance of additional equity or convertible debt securities
could result in additional dilution to our stockholders.
Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. We do not expect SFAS No. 133 to have a material effect on
our financial position or results of operations.
Year 2000
We have not incurred any material expense nor have we experienced any
material disruptions in our systems or those of our vendors and service
providers as a result of Year 2000 system processing.
Qualitative and Quantitative Disclosure of Market Risk
We do not currently have any derivative financial instruments and do not
intend to invest in derivatives. We invest our cash in short-term, highly
liquid cash equivalents. Indebtedness under our bank line of credit bears
interest at the bank's prime rate plus .25% and therefore, we have some
interest rate risk to the extent that the bank increases its prime rate.
However, because of the short-term nature of the line of credit and small
amounts outstanding thereunder, we believe that our exposure to interest rate
risk is not material to our results of operations.
Beneficial Conversion Feature
The issuance of our Series C preferred stock resulted in a beneficial
conversion feature of approximately $29.2 million at December 31, 1999,
calculated in accordance with Emerging Issues Task Force Issue No. 98-5, which
resulted in an increase to stockholders' deficit for the year ended December
31, 1999.
34
<PAGE>
BUSINESS
Overview
We are a leading provider of e-commerce transaction management solutions
that enable businesses to automate transaction and payment processing. Our e-
commerce software allows businesses to conduct real-time transaction
processing, fraud analysis and protection, automated shipping and tax
calculation, digital content downloading and business reporting and analysis.
Using an open architecture and industry standards, our solution integrates with
a business' online storefront and customer relationship management, or CRM,
applications and its existing business systems and processes. We have designed
the architecture of our transaction management solution to meet the stringent
performance, reliability and scalability requirements of e-businesses. Each of
our two principal e-commerce software products is designed to meet the needs of
different customers. Merchant Engine supports single businesses. Hosting Engine
enables commerce service providers, or CSPs, a group of application service
providers, or ASPs, focused on e-commerce, to simultaneously support multiple
businesses and allows large businesses to simultaneously support multiple
divisions. We also offer customization and implementation services, customer
service and support, maintenance and application hosting services for our
products.
Industry Background
The Internet has emerged as a global communications medium to deliver and
share information and conduct business. The convenience and widespread
accessibility of the Internet has allowed businesses greater access to new and
existing customers, as well as the ability to interact with their customers 24
hours a day, seven days a week. International Data Corporation, or IDC,
estimates that the volume of goods and services exchanged over the Internet
will increase from $268 billion in 2000 to $1.6 trillion in 2003. In an effort
to gain greater access to new and existing customers and improve market share,
Internet-related businesses have focused on improving their marketing efforts
and enhancing the online user experience through storefront and CRM
applications, also known as "front-end" Internet infrastructure. IDC estimates
that the worldwide e-commerce application market will increase from $1.7
billion in 1999 to $13.1 billion by 2003. Although many e-businesses have
implemented a variety of front-end solutions to improve the online customer
shopping experience, these solutions generally fail to provide transaction
management--the automation of payment processing and the integration of related
transaction information with existing business systems and processes.
Traditional Transaction Processing and Fulfillment
E-commerce transactions typically follow a standard process. Once an online
customer clicks the "buy" button, an online business generally takes the
following steps to process an order:
. Receives the order;
. Calculates shipping costs and sales or value added taxes;
. Screens for fraud;
. Obtains payment authorization from a credit card processor;
. Processes the payment;
. Coordinates the fulfillment and shipping of the order or downloading of
digital content; and
. Relays the information regarding the transaction to existing business
systems and processes.
We believe that the majority of e-businesses today lack the systems
necessary to automate transaction processing functions, performing most of
these functions manually. Without automation, personnel generally receive
transaction information by printed copy or e-mail. This information must be
entered manually into the credit card processing system and, once authorization
is received, entered manually into existing business systems and processes,
such as fulfillment and enterprise resource planning, or ERP, systems that
coordinate the manufacturing, inventory management, shipping, accounting or
related functions for the transaction. Further, if a merchant screens for
fraud, it is often limited to human review of lists of stolen credit card
numbers.
35
<PAGE>
Problems Created by Manual Processing
Manual transaction processing impairs operational efficiency and customer
service. Specific problems include:
. Limited scalability. In order to process increasing volumes of
transactions, e-businesses must hire additional staff, resulting in
increased personnel costs and limited growth potential.
. Customer dissatisfaction. Human errors can result in shipment errors and
delays, resulting in customer dissatisfaction. According to an Andersen
Consulting study, nine out of ten online shoppers experienced problems
during the 1999 holiday season. Further, without automated systems,
customers typically are unable to track the status of their orders.
. Increased costs from fraudulent transactions. In e-commerce transactions,
because the credit card is not present, the business is liable to its
credit card processor for the full value of the transaction in the event
of credit card fraud, even if the processor pre-authorized the
transaction. In a manual process, it is difficult for personnel
processing transactions to detect fraudulent credit card transactions on
a real-time basis, leaving the e-business more susceptible to fraud
related losses.
. Expensive and time-consuming. Businesses must hire and train additional
personnel to coordinate and perform transaction processes that could be
automated. The lack of automation results in increased transaction
processing time and costs.
. Increased errors. Manual data entry can lead to transaction processing
errors and impair the efficiency of existing information systems.
The Need for Transaction Management
We believe that e-businesses have principally focused on marketing and
enhancing the customer shopping experience, but their emphasis is now expanding
to include efficient e-commerce. The movement to efficient e-commerce can
require sophisticated integration of storefronts and CRM applications with
transaction processing and management of information into existing business
systems and processes such as fulfillment and ERP systems that coordinate
manufacturing, inventory management, accounting or related functions. Until
recently, limited infrastructure has existed to help support and scale e-
businesses. Automated transaction management that delivers a comprehensive
solution 24 hours a day, seven days a week, without costly and lengthy
implementation, is critical to enhance efficiency and scalability. A
transaction management solution must be able to simultaneously process
increasing transaction volumes and a variety of payment methods and currencies.
E-businesses also need a solution that can provide enhanced fraud protection.
Some businesses will find it more efficient and secure to handle transaction
management functions internally and others will prefer to outsource these
functions to CSPs. An ideal solution should address both enterprise and CSP
business models.
Our Solution
We are a leading provider of e-commerce transaction management solutions
that enable businesses to automate transaction and payment processing. Using an
open architecture and industry standards, our e-commerce software integrates
with leading online storefront and CRM applications and many existing business
systems and processes, such as fulfillment and ERP systems that coordinate
manufacturing, inventory management, accounting or related functions. In
addition, our software interfaces with credit card processors. Our solution has
been specifically designed to meet the stringent performance and scalability
requirements of e-businesses. Our two principal e-commerce software products,
Merchant Engine and Hosting Engine, include similar functionality, but each is
designed to meet the needs of different customers. Merchant Engine supports
single businesses. Hosting Engine enables CSPs to simultaneously support
multiple businesses and allows large businesses to simultaneously support
multiple divisions.
36
<PAGE>
We Offer a Comprehensive Transaction Management Solution
Our software provides customers with a comprehensive transaction management
solution, which includes:
. Real-time transaction and payment processing;
. Enhanced fraud analysis and protection;
. Automated shipping and tax calculation;
. Digital content downloading; and
. Business reports and analysis.
We also offer customization and implementation services, customer service
and support, maintenance and application hosting services for our products.
Our Solution Integrates with a Wide Range of Applications
Our solution integrates with a wide range of leading e-commerce storefront
and CRM applications and existing business systems and processes. Our software
is designed to integrate with a variety of front-end software systems,
including sophisticated software that enhances the online customer shopping
experience, such as BroadVision and Vignette applications, and ready-to-use
storefronts, including those offered by Mercantec and Microsoft. Our systems
interface with credit card processors, such as Barclays, Chase Merchant
Services, First Data Merchant Services, Global Payment Systems, NatWest, Nova,
Paymentech and Vital, to automate credit card approval. Our software also
integrates with existing business systems and processes such as fulfillment or
ERP systems that coordinate manufacturing, inventory management, accounting or
related functions. This integration minimizes human involvement, substantially
increasing operational efficiency.
We Provide a Scalable Solution for Growing Customers
Our solution is scalable to meet the growing transaction management needs
of our customers. Our solution enables a business to reliably process multiple
transactions simultaneously for maximum performance and scalability. Our
Hosting Engine allows our CSPs to host thousands of merchants and also
supports several administrative functions, such as merchant reports for
billing and the ability to readily activate and deactivate merchants. This
scalability results in lower upgrade and maintenance costs for our customers
and promotes operating efficiency by allowing customers of CSPs to continue
using substantially the same systems if they decide to migrate our solution
in-house as their business grows.
We Can Implement Our Solution Quickly, Bringing Our Customers to Market
Sooner
Our solution is designed to quickly and cost-effectively integrate with
many applications and business processes. Our ClearLink and Legacy APIs, or
application programming interfaces, make it easier for e-businesses to
interface with a variety of commercial and custom storefront packages and
existing business systems with reduced implementation time. In addition, our
"QuickStart" program allows customers to set up and run our software out of
our facilities and begin processing e-commerce transactions within days while
their internal infrastructure is put in place. Once their internal
infrastructure is installed, customers can quickly and easily migrate our
transaction management solution to their facilities.
Our Solution is Cost-Effective and Flexible
Our solution is cost-effective and provides flexibility for our customers.
For customers that license our software directly from us, we charge an initial
software licensing fee, fees for integration, if required and annual
maintenance fees. We also charge CSPs a fixed annual fee per merchant
resulting in recurring revenue. Our fixed pricing allows these high volume
customers to capture economies of scale as they process an increasing number
of transactions and provide services to an increasing number of businesses. We
also provide hosting services for our products to e-businesses that prefer not
to operate and maintain their own infrastructure. In addition, these
businesses can easily and cost-effectively move our solution in-house should
they later choose to perform these functions internally.
37
<PAGE>
Our Strategy
Our objective is to become the leading provider of e-commerce transaction
management software and services. Key elements of our strategy include:
Increase Direct Sales and Indirect Distribution Channels and Expand
Internationally
We plan to simultaneously expand our direct sales force and develop and
solidify relationships with business partners that sell and implement our
product. We plan to substantially increase the number of direct sales
representatives by the end of 2000 and expand our international direct sales
force by expanding our office in the United Kingdom and establishing operations
in other parts of Europe, Asia Pacific and South America. We believe that
front-end solution providers, systems integrators, consulting firms, platform
vendors and our CSP partners have a strong influence on their customers'
software purchasing decisions. We believe a majority of our revenues were
influenced by our channel partners in 1999. We believe that many of our
partners are seeking transaction management solutions that complement their
existing product offerings. In order to expand the adoption of our solution, we
have established relationships with Art Technology Group, Breakaway Solutions,
Breakthrough Software, BroadVision, Chase Merchant Services, Hewlett-Packard,
Intel/iCat, Intershop, Mercantec, Microsoft, Sun Microsystems and Vignette. We
plan to expand these relationships and create new relationships with selected
partners to increase our access to additional geographic markets and customers.
Leverage and Enhance CSP Relationships
We currently provide our solution to leading CSPs and we intend to continue
to leverage these relationships to increase the adoption of our solution.
Through our CSP customers, we believe we will be able to efficiently access
their large merchant bases. We believe that this is the most cost-effective
method to reach many e-businesses and increase our recurring annual fees.
Further, the effects of this distribution channel are multiplied because some
of our CSP customers host other CSPs that also provide us with annual fees. For
example, Cardservice International hosts msn.com's b-central and its merchants,
each of which pays an annual fee. We also encourage our CSPs to resell our
solution to their customers when a customer decides to move our solution in-
house.
Enhance Business-to-Business Solutions
We intend to expand our core technology into emerging business-to-business
e-commerce markets. As businesses move their purchasing functions online,
suppliers will need transaction management infrastructure targeted at the needs
of a corporate purchaser. We believe new business-to-business transaction
processing methods will emerge. For example, corporate purchase cards, a new
product offered by American Express, Visa and MasterCard, are a business-to-
business variant of ordinary credit cards. Corporate purchase cards help
businesses reduce the costs associated with their purchasing expenditures by
reducing the need for expensive purchase orders. Information that can be useful
in bookkeeping and cost-control activities such as line item details and SIC
codes of items purchased and tax amounts are supplied on the monthly purchase
card statements. Processing corporate purchase card transactions involves many
of the same technologies and systems as ordinary credit card transactions in
which we have extensive expertise. The next release of our software is expected
to include corporate purchase card capabilities. In addition, we have provided
a customer with e-check capabilities that allow for direct payment between
businesses.
Continue Our Technology Leadership
We intend to continue to devote substantial resources to develop new and
innovative products and features to increase the functionality, reliability,
scalability and performance of our solution. We are adding several new features
to the current versions of our Merchant Engine and Hosting Engine that will
provide increased support for business-to-business e-commerce, enhanced fraud
protection and improved performance. We anticipate that future releases will
contain these features. In addition, we are developing new localized products
and credit card processor interfaces for major global markets.
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<PAGE>
Expand Service Offerings
We intend to continue to expand our service offerings to complement our
existing and future products. By continuing to invest in our hosting
infrastructure, we expect to improve and expand our hosting capabilities for
our products. We believe that by improving our hosting infrastructure, we can
expand our QuickStart services and host additional CSPs that prefer to
outsource our applications. We also intend to offer enhanced fraud protection
services.
Products and Services
Products
We have two principal software products, Merchant Engine and Hosting
Engine. Merchant Engine is designed to automate transaction management for
individual businesses. Hosting Engine performs the same function for multiple
businesses or multiple divisions of a large business. In addition, Hosting
Engine provides CSPs with administrative functions, such as the ability to
readily activate and deactivate merchants and prepare consolidated merchant
reports for billing and other purposes.
Merchant Engine and Hosting Engine generally include the same modules and
related functions, including:
Payment Module. The payment module communicates with major credit card
processors to authorize payment transactions enabling real-time payment
authorization and processing. Online customers can receive rapid purchase
confirmation reducing the risk that they will cancel a transaction. The
payment module allows transaction information to be sent over the Internet,
via a lease line or dial-up connection to the card processor. It also allows
multiple transactions to be processed simultaneously on a single server,
reducing the time that the customer has to "wait in line" for a transaction to
be processed.
Although the vast majority of all domestic Internet purchases use credit
cards, other payment methods are evolving, particularly in international
locations. We currently interface with three credit card processors that can
process payments in multiple currencies, and we are developing features to
localize our software for major global markets. In addition, to support
business-to-business transactions, we anticipate releasing corporate purchase
card support modules in a future product release.
FraudShield. FraudShield performs automatic checks that help reduce fraud.
FraudShield enables our customers to automatically reject attempted fraudulent
purchases based on their historical data. In addition, this module can perform
address verification services, valid card number checks, duplicate order
checks and guards against programs that generate numerically valid, yet
fraudulent credit card numbers. We allow merchants to customize their fraud
protection and fraud detection rules, based on their specific business
conditions. In particular, our customers are able to block out specific
Internet Protocol addresses and credit card numbers through a simple, Web-
based interface.
ClearLink APIs. Our ClearLink APIs, or application programming interfaces,
allow our customers to integrate our solution with storefronts and CRM
applications. Our ClearLink APIs interface with many of the popular commercial
storefronts and CRM solutions, including those offered by Art Technology
Group, Breakthrough Software, Broadvision, Intel/iCat, Intershop, Mercantec,
Microsoft and Vignette. Our ClearLink APIs are written in C and Java, and run
on Linux, Unix and Windows NT.
Legacy API. Our Legacy API helps e-businesses integrate our solution with a
variety of existing business systems and processes with minimal disruption to
business flow. Our Legacy API acts as an interface between our products and
the existing business systems and processes, such as fulfillment and ERP
systems that coordinate manufacturing, inventory management, accounting or
related functions. Our Legacy API allows customers without specialized
knowledge of database and encryption technology to quickly link our solution
to existing business systems.
39
<PAGE>
Security. Our solution uses secure sockets layer technology, or SSL, in
conjunction with encryption technology to protect all transaction data. The
connection between the storefront and CRM applications and our solution is made
via an encrypted SSL connection, using digital certificates to ensure
authentication. This enables businesses to take full advantage of our
solution's secure payment environment by encrypting all credit card
information, reducing the risk of fraud.
Reporting Tools Module. The reporting tools module confirms shipment of
goods, initiates the process to obtain payments and credits once goods have
been shipped, adds and deletes entries in the customer's fraud database, tracks
sales through customer storefronts and provides graphical reports that display
transaction information. Because of the integrated components of our software,
these reports can automatically reconcile orders passed through the storefront
with those settled through the credit card processor.
Shipping and Tax Calculator Modules. The shipping calculator module allows
e-businesses to establish precise rules for how their customers will be charged
to ship the products they have ordered and can calculate shipping charges based
upon a flat amount per order or by levying a different charge for every state
and freight carrier. These rules can be tailored to the requirements of
multiple departments within an e-business. The tax calculator module allows
real-time calculation of sales tax at both state and municipal levels.
Digital Content Download Module. The digital content download module allows
automatic electronic transmission and retrieval of digital goods, such as
music, software, graphics, artwork and other content, immediately after
purchase, making purchased digital goods available to customers as downloads
from a unique internet address. This module can track the progress of the
download to verify successful completion and, once complete, prevents
additional downloads. This module also eliminates the need for proprietary
software to download digital content because it works with ordinary Web
browsers and standard Internet protocols.
New Product Development. We intend to continue to devote substantial
resources to the development of new and innovative products and features to
increase the reliability, scalability and performance of our solution. We are
currently adding several new features to the current versions of Merchant
Engine and Hosting Engine to enable our customers to provide increased support
for business-to-business e-commerce transactions, enhanced fraud protection
capabilities and improved overall performance and efficiency of our products.
We anticipate that future releases will include the following features and
enhancements:
. Highly extensible architecture allowing for more rapid integration of
third party applications, more rapid feature deployment and faster new
payment-type implementations;
. Support for corporate purchase cards;
. Enhanced fraud protection to extend the current FraudShield functionality
to allow merchants greater control over fraud detection;
. Enhanced user interface designed to allow greater ease of configuring and
administering our solution;
. New open APIs designed to allow better integration of reports and
existing business applications; and
. Enhanced CSP administration functions.
Services
We offer hosting services for our solution and professional services for our
customers.
Hosting Services. We have provided hosting services since our inception.
Currently, we leverage this experience to provide hosting services to e-
businesses and CSPs through the following programs:
. ""QuickStart'' Program. We provide a "QuickStart" program that enables
businesses and CSPs to rapidly implement our products by allowing us to
initially host their Merchant Engine or Hosting Engine while their
transaction management infrastructure is put into place. This rapid
implementation enables customers to begin selling their products and
services over the Internet quickly, often within
40
<PAGE>
days. These customers can quickly and easily migrate our products from
our servers to their internal systems when their infrastructure is
installed.
. Service Bureau for CSPs. Many businesses' e-commerce needs are serviced
by CSPs that have added transaction processing to complete their service
offerings. Many CSP customers have requested that we provide hosting
services for our applications for them while they focus on expanding
their service offerings and attracting new customers. Our hosting service
is operated under the CSPs' brands. These CSPs can quickly and easily
move our solution in-house should they so decide.
Professional Services and Customer Support. Our professional services
organization provides our customers with custom development services, standard
product extensions and implementation and training related to our products. A
typical engagement lasts 90 to 120 days and involves planning, configuration,
testing and implementation. We often integrate these custom software solutions
into new product releases based on customer demand. Also, our professional
services organization often works closely with third-party systems integrators
to train their consultants on the implementation of our solution.
We believe that providing a high level of customer service and technical
support is necessary to achieve rapid product implementation and customer
satisfaction. Our customer support organization provides a broad range of
customer service and technical support. We provide support for our products
and services primarily from our corporate headquarters in Austin, Texas but
plan to establish additional support and service sites in other markets as
required.
Customers
Our products are targeted to two distinct categories of businesses, CSPs
and e-businesses. Some of our customers include:
E-businesses
CSPs
Adornis
AllCharities.com Apple Computer Corporation
AT&T Campuswide BuyitNow.com
Booksense (ABA) Cabela's
Brandwise Cooking.com
Cardservices International Corbis
Chase Merchant Services Electronic Arts
Cobalt E-Stamp
CSP Source Flooz.com
EDS Harrods
E-quire hpshopping.com
Inacom Jordan Formula One Racing
Intel/iCat Mary Kay Cosmetics
Interpath Onvia
Kinzan Pets.com
Orbit Commerce Pitney Bowes
Planet Online TheStreet.com
PNC Bank Sun Microsystems
Pointserve Wizards of the Coast
PSIGate
ShopNow.com
In addition, thousands of e-businesses use our software through our CSP
customers, including other CSPs such as Bigstep.com, Cincinnati Bell,
EarthLink, e-Charge, Knight-Ridder, msn.com's b-central and Prodigy.
A relatively small number of customers accounted for a significant portion
of our total revenues in 1999. If this trend continues, the loss or delay of
revenues from any of these individual customers could have a
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<PAGE>
significant impact on our revenues. In 1998, sales to our largest customer,
Cardservice International, accounted for 16% of our total revenues. In 1999,
sales to our two largest customers, Cardservice International and Hewlett-
Packard, accounted for 18% and 19% of our revenues, respectively.
Sales and Marketing
Sales
We sell our products primarily through a direct sales force and through
relationships with storefronts and CRM application vendors, CSPs, platform
vendors and system integrators.
Direct Sales. We maintain a direct sales force that is primarily responsible
for selling to CSPs and working with non-OEM partners. On December 31, 1999,
members of our direct sales organization were located in five offices in North
America and one office in the United Kingdom. The direct sales organization in
North America is divided into three regions, east, central and west, and each
region is staffed with a regional sales manager, a sales engineer and at least
one sales representative.
Strategic Relationships. A key element of our market penetration strategy is
the formation and development of relationships with leading providers in
various complementary areas. We believe that these relationships increase our
market exposure and presence, generate qualified sales opportunities for our
solution and assist us in implementing our solution. We have currently
established relationships with storefront and CRM vendors, systems integrators,
platform vendors and CSPs to help us sell and implement our solution. We
believe these relationships are important because these providers often have
the first point of contact with e-businesses and have a strong influence on
their customers' software buying decisions. We are also establishing and
expanding relationships with CSPs that provide our software and services.
Marketing
Our marketing organization provides product and market direction, and
supports sales efforts through awareness and lead generation programs. Key
marketing programs include:
. Market analysis and product definition;
. Product strategy updates with industry analysts;
. Public relations activities and speaking engagements;
. Direct mail and relationship marketing programs;
. Brochures, data sheets and web site marketing;
. Industry focused programs, such as CSP initiatives; and
. Management of our domestic and international advisory boards.
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[REVENUE CHART]
[Graphical depiction of the ClearCommerce revenue model. The diagram is a flow
chart with arrows connecting oblong buttons labeled "CSP," "Merchant" and "M"
and the ClearCommerce trademark. Also, at the bottom of the page are two
buttons for license revenues and recurring merchant fees.]
Because we believe that most businesses will outsource their e-business
infrastructure, we have focused on penetrating leading CSPs. Through our CSP
customers, we are able to efficiently access their large merchant bases.
Further, the effects of this distribution channel are multiplied because some
of our CSP customers host other CSPs that also provide us with annual fees. For
example, Cardservice International hosts msn.com's b-central and its merchants,
each of which pays an annual fee.
Development and Technology
We devote a substantial portion of our resources to developing new products
and product features, extending and improving our products and technology and
researching new technological initiatives in the market for e-commerce
transaction management solutions. Our development organization works closely
with our marketing and services organizations to incorporate customer feedback
and market requirements into our products and services.
Our high performance server-based architecture is designed to be secure,
scaleable and reliable. Our software currently operates on Sun and Hewlett-
Packard versions of Unix and on Windows NT.
Our solutions employ remote client-side APIs, called ClearLink APIs, which
are used as the primary integration point into any application that requires
access to our solution. Our solution transmits data via an encrypted SSL
connection between third-party storefront and CRM applications. Digital
certificates are used to enforce authentication and enhance fraud protection.
All transaction types are done through our ClearLink APIs.
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Our Hosting Engine enables users to add, configure, change and delete
merchant configurations. This is done through a secure browser-based
application or through various utilities that are typically integrated with the
customer's existing business systems and processes. In addition, our
architecture enables CSPs providing hosting services to run one secure server
while many, less-expensive ordinary Web servers carry the load of Web site
traffic.
As of December 31, 1999, we had 48 employees engaged in research and
development activities. Our research and development expenditures for the years
ended December 31, 1997, 1998 and 1999 were approximately $463,000, $2.7
million and $6.5 million, respectively. We expect that we will continue to
commit significant resources to development of new products and enhancements in
the future.
Competition
We compete in markets that are new, intensely competitive, highly fragmented
and rapidly changing. We have experienced and expect to continue to experience
increased competition from current and potential competitors, many of which
have significantly greater financial, technical, marketing and other resources.
Companies offering competitive products vary in scope and breadth of the
products and services offered and include:
. Transaction processing service providers, such as CyberSource, CyberCash,
Verisign/Signio and WorldPay;
. E-commerce software suppliers, such as Open Market and PaylinX;
. Point solutions that address certain technology components of transaction
processing, such as HNC Software; and
. Vendors of supply chain management software.
In the future, we may also compete with large Internet-focused companies
that derive a significant portion of their revenues from e-commerce and that
may offer, or provide a means for others to offer, e-commerce transaction
management products and services.
Many of our current and potential competitors have longer operating
histories, substantially greater financial, technical, marketing and other
resources, or greater name recognition than we do. These competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in customer requirements. Competition could seriously impede our
ability to sell additional products and services on terms favorable to us. Our
current and potential competitors may develop and market new technologies that
render our existing or future products and services obsolete, unmarketable or
less competitive. Our current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
other e-commerce transaction service providers, thereby increasing the ability
of their products and services to address the needs of our prospective
customers. In addition, our current and potential competitors may establish or
strengthen cooperative relationships with our current or future indirect sales
channel partners, that would limit our ability to sell products and services
through these channels. Competitive pressures could reduce our market share or
require the reduction of the prices of our products and services, either of
which could materially and adversely affect our business, results of operations
or financial condition.
We compete on the basis of several factors, including:
. System reliability;
. Product performance and scalability;
. Breadth of service and product offering;
. Ease of implementation;
. Time to market;
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<PAGE>
. Customer support; and
. Price.
We believe that we presently compete favorably with respect to each of these
factors. However, the market for our products and services is still evolving,
and we may not be able to compete successfully against current and potential
competitors.
Intellectual Property
We rely primarily on a combination of copyright, trademark and trade secret
laws, confidentiality procedures and contractual provisions to protect our
proprietary rights. As part of our confidentiality procedures, we enter into
confidentiality and assignment agreements with our employees and other third
parties. However, we believe that these measures afford only limited
protection. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and we are unable to determine the extent to which
piracy of our software products exists. In addition, the laws of some foreign
countries do not protect our proprietary rights as fully as do the laws of the
United States.
We are not aware that we are infringing any proprietary rights of third
parties. We expect that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in our
industry segment grows and the functionality of products in different industry
segments overlaps. In addition, litigation may be necessary in the future to
enforce our intellectual property rights, to protect our patents, copyrights,
trademarks or trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Any litigation, with or without merit, could be costly and time
consuming, divert management's attention and resources, cause product shipment
delays or require us to enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to us, if at all. Consequently, any intellectual property disputes
could have a material adverse effect on our business, financial condition and
operating results.
Employees
As of December 31, 1999, we had 129 full-time employees, 48 of whom were
engaged in research and development, 38 in sales and marketing, 10 in
professional services, 13 in customer services, and 20 in finance,
administration and operations. Our future performance depends in significant
part upon the continued service of our key technical, sales and senior
management personnel. The loss of the services of one or more of our key
employees could have a material adverse effect on our business. Our future
success also depends on our ability to attract, train and retain highly
qualified technical, sales and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that we can retain our key
personnel in the future. None of our employees is represented by a labor union.
We have not experienced any work stoppages and consider our relations with our
employees to be good.
Facilities
We lease approximately 29,000 square feet for our headquarters in a single
office complex located in Austin, Texas pursuant to a lease that expires in
January 2002. We also lease space for sales offices in Atlanta, Georgia;
Oconomowoc, Wisconsin; San Francisco, California and London, England. We
believe our facilities are adequate for our current needs. We may need to
locate additional space to meet our needs in the future.
Legal Proceedings
As of the date hereof, there is no material litigation pending against us.
From time to time, we are a party to litigation and claims incident to the
ordinary course of business. Although the results of litigation and claims
cannot be predicted with certainty, we believe the final outcome of such
matters will not have a material adverse effect on our business.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to the
executive officers and directors of our company and their ages as of December
31, 1999.
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
James G. Treybig (2).... 59 Chairman of the Board of Directors
Robert J. Lynch......... 46 Chief Executive Officer, President and Director
Julie Fergerson......... 31 Chief Technology Officer
Michael S. Grajeda...... 40 Chief Financial Officer, Secretary and Vice President
Joseph C. Aragona (2)... 43 Director
R.C. Estes.............. 34 Director, Treasurer and Vice President, Strategy
Wendy L. Harrington
(1).................... 34 Director
William H. McAleer (1).. 49 Director
Scott D. Sandell (1).... 35 Director
Stuart H. Fullerton..... 54 Vice President, Sales
Alan Scutt.............. 46 Vice President, Europe
Michael R. Turner....... 46 Vice President, Marketing
</TABLE>
- ---------------------
(1) Member of audit committee
(2) Member of compensation committee
James G. Treybig has been Chairman of our board of directors since September
1997. Since 1996, Mr. Treybig has been a Venture Partner with Austin Ventures,
a venture capital firm, and has served as a director or chairman of the board
of several privately held companies. From 1974 through 1996, Mr. Treybig was
the Chief Executive Officer of Tandem Computers. Mr. Treybig received a B.A.
and B.S. in electrical engineering from Rice University in 1963 and 1964,
respectively, and an M.B.A. from Stanford University in 1968.
Robert J. Lynch has been one of our directors since November 1996 and has
been our Chief Executive Officer and President since September 1997. From 1994
through 1996, Mr. Lynch was the Vice President of Sales of Netsolve
Incorporated. From 1989 to 1994 he was an executive with Affiliated Computer
Services, including President of ACS/Transfirst. Mr. Lynch received his B.S. in
economics from St. Johns University in 1975 and a P.D. in administration from
Fordham University in 1980.
Julie Fergerson, one of our co-founders, was a director from June 1995 until
August 1997. She has served as our Chief Technology Officer since September
1997. Ms. Fergerson was formerly a Project Manager and programmer with IBM from
1994 to 1995.
Michael S. Grajeda has been our Chief Financial Officer, Secretary and Vice
President since July 1998. From 1989 to 1998, Mr. Grajeda held several
positions, including Accounting Manager, Chief Financial Officer, Chief
Operating Manager and General Manager of Electronic Arts, or its subsidiary,
Origin Systems. Mr. Grajeda received a B.S. in accounting from California State
University, Hayward in 1982.
Joseph C. Aragona has been one of our directors since September 1997. Mr.
Aragona is a founder and General Partner of Austin Ventures, a venture capital
firm, and has been associated with Austin Ventures since 1982. Mr. Aragona also
serves on the board of directors of Pervasive Software and several privately
held companies. Mr. Aragona received an A.B. in economics from Harvard College
in 1978 and an M.B.A. from the Harvard Business School in 1982.
R.C. Estes, one of our co-founders, has been one of our directors since
inception, and is our Vice President, Strategy and our Treasurer. Mr. Estes was
our Chief Executive Officer from September 1995 until September 1997. Mr. Estes
received a B.A. in psychology with a minor in business administration from
Southern Methodist University in 1990 and an M.B.A. from the University of
Texas at Austin in 1995.
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<PAGE>
Wendy Harrington has been one of our directors since February 2000. Ms.
Harrington has been Vice President of Operations at Internet Capital Group, an
Internet holding company engaged in business-to-business e-commerce, since June
1999. From 1995 to 1999, Ms. Harrington was a Senior Engagement Manager at
McKinsey & Company, a consulting firm. Ms. Harrington is also a director of a
private company. Ms. Harrington received a B.S. in business administration and
management information systems from the University of Illinois at Urbana-
Champaign in 1987 and an M.B.A. from Stanford Graduate School of Business in
1995.
William H. McAleer has been one of our directors since January 1999. Mr.
McAleer has been a Managing Director of Voyager Capital, a venture capital
firm, since October 1996. From 1994 to 1996, Mr. McAleer was the President of
e.liance Partners, a firm advising early stage technology companies.
Mr. McAleer is also a director of Apex and several private companies. Mr.
McAleer received a B.S. degree from Cornell University in 1973 and an M.B.A.
from Cornell University in 1975.
Scott D. Sandell has been one of our directors since January 1999. Mr.
Sandell is a partner of New Enterprise Associates, a venture capital firm, and
has served in other capacities at such firm since January 1996. Prior to
joining New Enterprise Associates, Mr. Sandell was the President of Yankee
Pacific Company, a marketing and business strategy consulting firm from March
1994 to December 1995. He is also a member of the board of directors of Mission
Critical Software, Inc. and several privately held companies. Mr. Sandell holds
a B.S. degree in engineering sciences from Dartmouth College and an M.B.A.
degree from the Stanford Graduate School of Business.
Stuart H. Fullerton has been our Vice President, Sales since September 1997.
From 1983 to 1997, Mr. Fullerton held a number of positions with Tandem
Computers, Inc., including Director of Sales--U.S. Finance and Securities, from
1994 to 1997. Mr. Fullerton received a B.S. in mechanical engineering from
Cornell University in 1973.
Alan Scutt has been our Vice President, Europe since November 1998. From
1997 to 1998, Mr. Scutt was with FTP Software Ltd., where he served as Vice
President for Northern Europe and Regional Manager of Central Europe. From 1996
to 1997, Mr. Scutt was a director of Tricom Communications, Ltd. From 1993 to
1996, Mr. Scutt was the United Kingdom Country Manager for Banyan Systems (UK)
Ltd. Mr. Scutt received a business studies diploma from Worthing College in
England.
Michael R. Turner has been our Vice President, Marketing since June 1999.
From 1995 to 1999, Mr. Turner was the Vice President of Marketing in charge of
product strategy, promotion and pricing for NetSolve Incorporated. Mr. Turner
received a B.S. in engineering from Case Western Reserve University in 1975,
and an M.S. in business from Purdue University in 1978.
Board Composition
Prior to the closing of this offering, our board of directors will be
divided into three classes, as nearly equal in number as possible, with each
director serving a three-year term and one class being elected at each year's
annual meeting of stockholders. Mr. Aragona, Mr. Lynch and Mr. Treybig will be
in the class of directors whose term expires at the 2000 annual meeting of
stockholders. Mr. Estes and Ms. Harrington will be in the class of directors
whose term expires at the 2001 annual meeting of the stockholders. Mr. McAleer
and Mr. Sandell will be in the class of directors whose term expires at the
2002 annual meeting of stockholders.
Our board of directors currently consists of seven members. At each annual
meeting of stockholders, the successors to each class of directors will be
elected to serve for three year terms from the time of election and
qualification until the next annual meeting at which such director's class
stands for election. Our bylaws provide that the authorized number of directors
may be changed only by resolution of the board of directors.
Executive officers are elected by the board of directors on an annual basis
and serve until their successors have been duly elected and qualified.
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<PAGE>
Board Committees
We established a compensation committee in January 1999 and an audit
committee in February 2000.
Compensation Committee. The current members of our compensation committee
are James G. Treybig and Joseph C. Aragona. The compensation committee of the
board of directors determines the salaries and benefits for our employees,
consultants, directors and other individuals compensated by our company. The
compensation committee also administers our stock plans.
Audit Committee. The current members of our audit committee are Wendy L.
Harrington, William H. McAleer and Scott D. Sandell. Our audit committee
reviews and monitors our financial statements and accounting practices, makes
recommendations to our board regarding the selection of independent auditors
and reviews the results and scope of the audit and other services provided by
our independent auditors.
Compensation Committee Interlocks and Insider Participation
The board of directors established its compensation committee in January
1999. Prior to establishing the compensation committee, the board of directors
as a whole performed the functions delegated to the compensation committee.
During 1999, our compensation committee consisted of Mr. Lynch, Mr. Treybig and
Mr. Aragona, but Mr. Lynch is no longer a member of our compensation committee.
The entire board of directors approved all option grants during the time that
Mr. Lynch was a member of the compensation committee. Mr. Treybig and
Mr. Aragona are both "non-employee directors" under federal securities laws and
"outside directors" under federal tax laws. No interlocking relationship exists
between our board of directors or compensation committee and the board of
directors or compensation committee of any other company, nor has an
interlocking relationship existed. Each of Messrs. Aragona, Lynch and Treybig
have engaged in certain transactions with our company. See "Related Party
Transactions."
Director Compensation
James G. Treybig received cash compensation of $60,000 in 1999 for his
services as a director. Otherwise, we do not currently pay any cash
compensation to directors for their service as members of the board of
directors, although we reimburse them for certain expenses in connection with
attendance at board and committee meetings. Under our 1997 Option/Stock
Issuance Plan and 2000 Stock Plan, nonemployee directors are eligible to
receive stock option grants at the discretion of the board of directors, and,
after this offering is completed, all nonemployee directors will receive stock
options pursuant to the automatic option grant program in effect under the 2000
Director Option Plan.
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<PAGE>
Executive Compensation
The following table sets forth the compensation earned for services rendered
in all capacities by our President and Chief Executive Officer and our four
next most highly compensated executive officers who earned more than $100,000
for the year ended December 31, 1999. These executives are referred to as the
named executive officers in this prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation Awards
----------------- ---------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Position Salary Bonus Award(1) Options Compensation(2)
------------------ -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Robert J. Lynch......... $169,375 $ -- -- -- $ --
Chief Executive Officer
R.C. Estes.............. 117,383 -- -- -- --
Vice President,
Strategy
Stuart H. Fullerton..... 134,583 115,323 -- -- --
Vice President, Sales
Michael S. Grajeda...... 144,458 -- 30,000 -- --
Chief Financial Officer
Alan Scutt.............. 138,352 11,413 -- -- 16,476
Vice President, Europe
</TABLE>
- ---------------------
(1) Restricted stock award represents 1999 option grants exercised prior to
vesting. These shares are subject to repurchase by our company at the
original exercise price if the individual leaves our company prior to
vesting.
(2) Represents a car allowance of $1,373 per month.
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<PAGE>
Stock Options
The following table presents the stock option grants during the year ended
December 31, 1999 under our 1997 Stock Option/Stock Issuance Plan to each of
the persons listed in the Summary Compensation Table.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential
Realizable
Value at
Assumed
Percent of Annual Rates
Total of Stock
Number of Options Appreciation
Securities Granted to Exercise for Option
Underlying Employees or Base Term(3)
Options During Price Expiration -------------
Name Granted(1) Period(2) ($/share) Date 5% 10%
- ---- ---------- ---------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Lynch......... -- --% $ -- -- $ -- $ --
Chief Executive Officer
R.C. Estes.............. -- -- -- -- -- --
Vice President,
Strategy
Stuart H. Fullerton..... -- -- -- -- -- --
Vice President, Sales
Michael S. Grajeda...... 30,000 2.5 0.492 3/25/09 24,042 38,284
Chief Financial Officer
Alan Scutt.............. -- -- -- -- -- --
Vice President, Europe
</TABLE>
- ---------------------
(1) 25% of the shares subject to the option vest one year after the date of
grant and the remaining 75% of the shares subject to the option vest
monthly over the next three years. All options to employees are immediately
exercisable.
(2) We granted options to purchase an aggregate of 1,194,154 shares during the
fiscal year ended December 31, 1999 to employees and consultants.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices and
are based on the exercise price of $0.492 per share.
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Aggregate Option Exercises in 1999 and Option Values at December 31, 1999
The following table presents the number of shares acquired and the value
realized upon exercise of stock options during 1999 and the number of shares of
common stock subject to "exercisable" and "unexercisable" stock options held as
of December 31, 1999 by each of the persons listed in the Summary Compensation
Table. Also presented are values of unexercised "in-the-money" options. Upon a
change of control, the expiration of our repurchase right automatically
accelerates by 12 months and accelerates fully if the surviving corporation
does not assume all options under the 1997 Stock Plan or following an
involuntary termination of an employee without cause within 18 months of such
change of control.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired on Value ------------------------- -------------------------
Name Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Lynch......... -- $ -- -- -- $ -- $ --
Chief Executive Officer
R. C. Estes............. -- -- -- -- -- --
Vice President,
Strategy
Stuart H. Fullerton..... 259,000 1,803,417 -- -- -- --
Vice President, Sales
Michael S. Grajeda...... 70,000 487,410 -- -- -- --
Chief Financial Officer 30,000 197,340 -- -- -- --
Alan Scutt.............. 56,000 389,928 -- -- -- --
Vice President, Europe
</TABLE>
- ---------------------
(1) Shares acquired on exercise represents option grants exercised prior to
vesting. These shares are subject to repurchase by our company at the
original exercise price if the individual leaves our company prior to
vesting. The repurchase right generally expires as to 25% of the shares on
the first anniversary of the date of grant and the remainder expires
ratably over a 36-month period thereafter.
(2) "Value realized" is calculated on the basis of the fair market value of the
common stock on December 31, 1999 minus the exercise price. It does not
necessarily indicate that the optionee sold such stock for such amount.
Stock Plans
1997 Stock Option/Stock Issuance Plan
Our 1997 Stock Option/Stock Issuance Plan, referred to as the 1997 Stock
Plan, was adopted by our board of directors in December 1997, and our
stockholders initially approved the plan in December 1997. Our 1997 Stock Plan
provides for the grant of incentive stock options, which may provide for
preferential tax treatment, to our employees, and for the grant of nonstatutory
stock options and stock purchase rights to our employees and directors. As of
March 7, 2000, we had reserved for future issuance 1,342,047 shares of our
common stock under this plan and options to purchase 1,271,931 shares of common
stock were outstanding. Following the closing of this offering, we will not
grant any additional stock options under our 1997 Stock Plan although options
granted under the 1997 Stock Plan will remain outstanding in accordance with
their terms. Instead, we will grant options under our 2000 Stock Plan. Our 1997
Stock Plan, as amended, and our stock option agreements provide that the
vesting of shares subject to options granted to employees shall accelerate by
12 months following a change in control and shall accelerate fully if the
surviving corporation does not assume all options under the 1997 Stock Plan or
following an involuntary termination of an employee without cause within 18
months of such change of control.
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2000 Stock Plan
Our 2000 Stock Plan was adopted by our board of directors in February 2000,
and we intend to submit the plan to our stockholders for approval. This plan
provides for the grant of incentive stock options to our employees and
nonstatutory stock options and stock purchase rights to our employees,
directors and consultants. As of March 1, 2000, the lower of 1,000,000 shares
or the number of shares of our common stock reserved under the 1997 Plan but
not subject to grants immediately prior to the closing of our public offering
were reserved for issuance pursuant to our 2000 Stock Plan. No options have yet
been issued pursuant to the 2000 Stock Plan. The number of shares reserved for
issuance under our 2000 Stock Plan will increase annually on January 1st of
each calendar year, starting January 2001, equal to the lesser of 5% of the
outstanding shares of our common stock on the first day of the year, 2,500,000
shares or such lesser amount as our board of directors may determine.
The compensation committee of our board administers our 2000 Stock Plan. The
administrator has the power to determine the terms of the options or stock
purchase rights granted, including the exercise price, the number of shares
subject to each option or stock purchase right, the exercisability of the
options and the form of consideration payable upon exercise. The administrator
determines the exercise price of options granted under our 2000 Stock Plan, but
with respect to incentive stock options, the exercise price must at least be
equal to the fair market value of our common stock on the date of grant.
Additionally, the term of an incentive stock option may not exceed ten years.
The administrator determines the term of all other options.
No optionee may be granted an option to purchase more than 1,000,000 shares
in any fiscal year. In connection with his or her initial service, an optionee
may be granted an additional option to purchase up to 1,000,000 shares of our
common stock. After termination of one of our employees, directors or
consultants, he or she may exercise his or her option for the period of time
stated in the option agreement. If termination is due to death or disability,
the option will generally remain exercisable for 12 months following such
termination. In all other cases, the option will generally remain exercisable
for three months. However, an option may never be exercised later than the
expiration of its term.
The administrator determines the exercise price of stock purchase rights
granted under our 2000 Stock Plan. Unless the administrator determines
otherwise, the restricted stock purchase agreement will grant us a repurchase
option that we may exercise upon the voluntary or involuntary termination of
the purchaser's service with us for any reason (including death or disability).
The purchase price for shares we repurchase will generally be the original
price paid by the purchaser. The administrator determines the rate at which our
repurchase option will lapse. Our 2000 Stock Plan generally does not allow for
the transfer of options or stock purchase rights, and only the optionee may
exercise an option and stock purchase right during his or her lifetime.
Our 2000 Stock Plan provides that in the event of our merger with or into
another corporation or a sale of substantially all of our assets, the successor
corporation will assume or substitute for each option or stock purchase right.
If the outstanding options or stock purchase rights are not assumed or
substituted for, all outstanding options and stock purchase rights will
terminate as of the closing of such merger or sale of assets. Our 2000 Stock
Plan will automatically terminate in 2010, unless we terminate it sooner. In
addition, our board of directors has the authority to amend, suspend or
terminate the stock option plans provided such action does not adversely affect
any option previously granted under our stock option plans.
2000 Director Option Plan
Our board of directors adopted our 2000 Director Option Plan, referred to as
the Director Plan, in February 2000, and we plan to submit this plan to our
stockholders for approval. Our Director Plan provides for the periodic grant of
nonstatutory stock options to our non-employee directors. As of March 1, 2000,
a total of 300,000 shares were reserved for issuance under our Director Plan,
none of which was issued and outstanding as of March 1, 2000. All grants of
options to our non-employee directors under our Director Plan are automatic. We
will grant each non-employee director an option to purchase 20,000 shares upon
the later of (i) the effective date of our Director Plan, or (ii) when such
person first becomes a non-employee director
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<PAGE>
(except for those directors who became non-employee directors by ceasing to be
employee directors). All non-employee directors who have been directors for at
least six months will receive an option to purchase 20,000 shares on the date
the Director Plan is approved by our stockholders of each year. All options
granted under our Director Plan have a term of ten years and an exercise price
equal to fair market value on the date of grant. Each option becomes
exercisable as to 25% of the shares subject to the option on each anniversary
of the date of grant, provided the non-employee director remains a director on
such dates. After termination as a non-employee director with us, an optionee
must exercise an option at the time set forth in his or her option agreement.
If termination is due to death or disability, the option will remain
exercisable for 12 months. In all other cases, the option will remain
exercisable for a period of three months. However, an option may never be
exercised later than the expiration of its term.
A non-employee director may not transfer options granted under our Director
Plan other than by will or the laws of descent and distribution. Only the non-
employee director may exercise the option during his or her lifetime. In the
event of our merger with or into another corporation or a sale of substantially
all of our assets, the successor corporation will assume or substitute each
option. If such assumption or substitution occurs, the options will continue to
be exercisable according to the same terms as before the merger or sale of
assets. Following such assumption or substitution, if a non-employee director
is terminated other than by voluntary resignation, the option will become fully
exercisable and generally will remain exercisable for a period of three months.
If the outstanding options are not assumed or substituted for, our board of
directors will notify each non-employee director that he or she has the right
to exercise the option as to all shares subject to the option for a period of
30 days following the date of the notice. The option will terminate upon the
expiration of the 30-day period.
Unless terminated sooner, our Director Plan will automatically terminate in
2010. Our board of directors has the authority to amend, alter, suspend, or
discontinue our Director Plan, but no such action may adversely affect any
grant made under our Director Plan.
2000 Employee Stock Purchase Plan
Concurrently with this offering, we intend to establish a 2000 Employee
Stock Purchase Plan, referred to as our Purchase Plan. A total of 600,000
shares of our common stock will be made available for sale. In addition, our
Purchase Plan provides for annual increases in the number of shares available
for issuance under the Purchase Plan on January 1st of each year, beginning in
2001, equal to the lesser of 5% of the outstanding shares of our common stock
on the first day of the calendar year, 2,500,000 shares, or such other lesser
amount as may be determined by our board of directors. Our compensation
committee of our board administers our Purchase Plan. Our board of directors or
its committee has full and exclusive authority to interpret the terms of our
Purchase Plan and determine eligibility. All of our employees are eligible to
participate if they are customarily employed by us or any participating
subsidiary for at least 20 hours per week and more than five months in any
calendar year. However, an employee may not be granted an option to purchase
stock under our Purchase Plan if such employee:
. Immediately after the grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock, or
. Whose rights to purchase stock under all of our employee stock purchase
plans accrues at a rate that exceeds $25,000 worth of stock for each
calendar year.
Our Purchase Plan is intended to qualify for preferential tax treatment and
contains consecutive, overlapping 24-month offering periods. Each offering
period includes four 6-month purchase periods. The offering periods generally
start on the first trading day on or after February 15 and August 15 of each
year, except for the first such offering period which will commence on the
first trading day on or after the effective date of this offering and will end
on the last trading day on or before August 14, 2002.
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<PAGE>
Our Purchase Plan permits participants to purchase common stock through
payroll deductions of up to 15% of their eligible compensation which includes a
participant's base straight time gross earnings and commissions but excludes
all other compensation paid to our employees. A participant may purchase no
more than 50,000 shares during any 6-month purchase period.
Amounts deducted and accumulated by the participant are used to purchase
shares of our common stock at the end of each 6-month purchase period. The
price is 85% of the lower of the fair market value of our common stock at the
beginning of an offering period or after a purchase period ends. If the fair
market value at the end of a purchase period is less than the fair market value
at the beginning of the offering period, participants will be withdrawn from
the current offering period following their purchase of shares on the purchase
date and will be automatically re-enrolled in a new offering period.
Participants may end their participation at any time during an offering period
and will be paid their payroll deductions to date. Participation ends
automatically upon termination of his or her employment with us.
A participant may not transfer rights granted under our Purchase Plan other
than by will, the laws of descent and distribution or as otherwise provided
under the our Purchase Plan.
In the event of our merger with or into another corporation or a sale of all
or substantially all of our assets, a successor corporation may assume or
substitute each outstanding option. If the successor corporation refuses to
assume or substitute for the outstanding options, the offering period then in
progress will be shortened, and a new exercise date will be set.
Our Purchase Plan will terminate in 2010. However, our board of directors
has the authority to amend or terminate our Purchase Plan, except that, subject
to certain exceptions described in the plan, no such action may adversely
affect any outstanding rights to purchase stock under our Purchase Plan.
401(k) Plan
In January 1999, we adopted a Retirement Savings and Investment Plan, our
401(k) Plan, covering our full-time employees located in the United States. Our
401(k) Plan is intended to qualify under Section 401(k) of the Internal Revenue
Code, so that contributions to our 401(k) Plan by employees or by us, and the
investment earnings thereon, are not taxable to employees until withdrawn from
our 401(k) Plan. If our 401(k) Plan qualifies under Section 401(k) of the
Internal Revenue Code, contributions by us, if any, will be deductible by us
when made.
Pursuant to our 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit of $10,500 in
2000 and to have the amount of such reduction contributed to our 401(k) Plan.
Our 401(k) Plan permits, but does not require, additional matching
contributions to our 401(k) Plan by us on behalf of all participants in our
401(k) Plan. To date, we have not made any contributions to our 401(k) Plan.
Employment Agreements and Change in Control Arrangements
With the exception of Alan Scutt, we do not have any employment agreements
with any of our executive officers. Our employment agreement with Mr. Scutt
sets his current salary at (Pounds)90,000 ($145,350 assuming a conversion rate
of $1.615 per pound) annually and permits Mr. Scutt's to participate in our
bonus plan. His employment agreement also provides for other compensation of
(Pounds)850 ($1,373) per month, reimbursement of expenses, 4 weeks of paid
vacation, and an option to purchase 56,000 shares of our common stock. One
month's written notice is required to make any significant changes to Mr.
Scutt's employment agreement.
Employment with our executives is generally at will. Our executives are
eligible to participate in our bonus plan. Bonuses under our bonus plan are
determined by a combination of our financial performance, the individual
employee's negotiated target bonus and the employee's performance rating. Our
executives receive
54
<PAGE>
stock options, subject to the approval of our board of directors or
compensation committee, in connection with their employment.
Our 1997 Stock Plan, as amended, and our stock option agreements provide
that the vesting of shares subject to options granted to employees shall
accelerate by 12 months following a change in control and shall accelerate
fully if the surviving company does not assume all options outstanding under
the 1997 Stock Plan or following an involuntary termination of an employee
without cause within 18 months of such change of control.
Our repurchase agreements with Julie Fergerson and R.C. Estes, and our stock
subscription agreement with Robert J. Lynch, provide that the schedule
releasing our right to repurchase their shares upon termination of employment
shall accelerate by one year upon a change of control, and our repurchase right
shall expire completely if such employee is involuntarily terminated without
cause within 12 months of a change of control.
Limitations On Directors' Liability And Indemnification
Our certificate of incorporation limits the liability of our directors and
executive officers to the maximum extent permitted by Delaware law. Delaware
law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for (i) any breach of their duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments
of dividends or unlawful stock repurchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit. Such
limitation of liability does not apply to liabilities arising under the federal
securities laws and does not affect the availability of equitable remedies such
as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in such capacity,
regardless of whether the bylaws would permit indemnification.
We have entered into agreements prior to the effective time of this offering
to indemnify our directors and executive officers, in addition to
indemnification provided for in our bylaws. These agreements, among other
things, provide for indemnification of our directors and executive officers for
certain expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by any such persons in any action or proceeding, including any
action by or in the right of our company, arising out of such persons' services
as our directors or executive officers, any subsidiary of our company or any
other company or enterprise to which such persons provide services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as our directors and executive officers.
55
<PAGE>
RELATED PARTY TRANSACTIONS
Other than the employment agreements described in "Management," and the
transactions described below, since we were formed there has not been nor is
there currently proposed, any transaction or series of similar transactions to
which we were or will be a party:
. In which the amount involved exceeded or will exceed $60,000; and
. In which any director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will have a
direct or indirect material interest.
Sales of Common Stock and Preferred Stock
Common Stock. On October 20, 1999, we sold 125,000 shares of common stock to
Michael R. Turner at a price of $0.4920 per share upon exercise of an option to
purchase these shares through our 1997 Stock Plan. Mr. Turner exercised this
option pursuant to an early exercise provision in his Stock Option Agreement.
Preferred Stock. In January and April 1999, we sold an aggregate of
4,706,196 shares of Series B Preferred Stock at a purchase price of $2.46 per
share. In December 1999 and in January and February 2000, we sold an aggregate
of 4,243,267 shares of Series C Preferred Stock at a purchase price of $7.07
per share. Of these shares, 8,355,851 shares were purchased by the executive
officers, directors and holders of more than 5% of our outstanding stock listed
in the following table. All of the share numbers in the following table reflect
the conversion of each outstanding share of preferred stock into one share of
common stock.
<TABLE>
<CAPTION>
Shares of Preferred
Stock
-------------------
Stockholder Series B Series C
- ----------- --------- ---------
<S> <C> <C>
Entities affiliated with Austin Ventures.................... 1,199,241 1,610,600
Internet Capital Group...................................... 572,889 265,698
R.C. Estes.................................................. 52,226 54,076
Julie Fergerson............................................. 6,071 543
Entities affiliated with Voyager Capital Fund............... 962,191 320,879
Entities affiliated with New Enterprise Associates.......... 962,192 819,843
Robert J. Lynch............................................. 6,098 70,892
Michael S. Grajeda.......................................... 20,325 1,667
James G. Treybig............................................ 40,650 21,335
Entities affiliated with Intel.............................. 813,008 271,128
Alan Scutt.................................................. -- 1,414
Hewlett-Packard............................................. -- 282,885
</TABLE>
Joseph Aragona, one of our directors, is a general partner of Austin
Ventures, and may be deemed to own beneficially the shares held by the entities
associated with Austin Ventures. Wendy L. Harrington, one of our directors, is
a vice president of Internet Capital Group and may be deemed to own
beneficially the shares held by the entities associated with Internet Capital
Group. William H. McAleer, one of our directors, is a managing director of
Voyager Capital Fund and may be deemed to own beneficially the shares held by
the entities associated with Voyager Capital Fund. Scott D. Sandell, one of our
directors, is a partner of New Enterprise Associates and may be deemed to own
beneficially the shares held by the entities associated with New Enterprise
Associates. R.C. Estes is one of our founders and is currently our Vice
President, Strategy. Julie Fergerson is one of our founders and is currently
our Chief Technology Officer. Robert J. Lynch is our President, Chief Executive
Officer and is a member of our board of directors. Michael S. Grajeda is our
Chief Financial Officer and Secretary. James G. Treybig is our chairman of the
board of directors. Alan Scutt is our Vice President, Europe.
56
<PAGE>
In connection with the issuances of the preferred stock described above, we
entered into an investors' rights agreement with the holders of preferred
stock, including those stockholders listed above, and with R.C. Estes, Julie
Fergerson and Bill Fergerson. The terms of this investors' rights agreement
grant certain registration rights that obligate us, under certain
circumstances, to affect a registration under the Securities Act of shares of
common stock. See "Description of Capital Stock--Registration Rights."
Warrants
In November 1999, in connection with a bridge financing, we issued warrants
to purchase shares of our Series C Preferred Stock to the following executive
officers, directors and holders of more than 5% of our outstanding stock:
<TABLE>
<CAPTION>
Number of
shares
subject to
Warrantholder warrant
------------- ----------
<S> <C>
Entities affiliated with Austin Ventures...................... 59,723
R.C. Estes.................................................... 2,749
Julie Fergerson............................................... 183
Entities affiliated with Internet Capital Group............... 28,513
Robert J. Lynch............................................... 54
Entities affiliated with New Enterprise Associates............ 17,217
Entities affiliated with Voyager Capital Fund................. 17,216
Entities affiliated with Intel................................ 14,548
The exercise price per share under these warrants is $7.07. These warrants
have not been exercised. These warrants terminate on the earlier of the closing
of this offering or November 29, 2004.
In February 2000, we issued a warrant to Hewlett-Packard to purchase 555,183
shares of our common stock with an exercise price per share of $7.07.
In March 2000, we issued a warrant to Hewlett-Packard to purchase 125,000
shares of our common stock with an exercise price per share of $5.00.
Loans from Directors, Officers and 5% Stockholders
On September 27, 1999, we entered into a loan and warrant agreement which
was amended on November 29, 1999, providing for the issuance of revolving
short-term notes to the following executive officers, directors and holders of
more than 5% of our outstanding stock:
<CAPTION>
Amount of
Noteholder loans
---------- ----------
<S> <C>
Entities affiliated with Austin Ventures...................... $1,688,992
R.C. Estes.................................................... 77,767
Entities affiliated with Internet Capital Group............... 806,366
Entities affiliated with New Enterprise Associates............ 486,916
Entities affiliated with Voyager Capital Fund................. 486,916
Entities affiliated with Intel................................ 411,422
</TABLE>
The outstanding principal of and all accrued and unpaid interest on all of
these short-term notes were converted into shares of our Series C Preferred
Stock on December 31, 1999.
Customer Contracts
We have several agreements with Hewlett-Packard, including a strategic
relationship agreement, software licenses and hardware purchase and lease
agreements. As of March 7, 2000, we issued Hewlett-Packard warrants to purchase
a total of 680,183 shares of our common stock.
57
<PAGE>
One of our stockholders, Intel, is also one of our customers. In September
1998, we entered into a contract with iCat to become one of our CSPs. Intel
subsequently acquired iCat, and has become one of our CSPs. We have also
executed a professional services agreement with Intel Online Services, Inc. to
provide product enhancements.
On March 6, 2000, we entered into a stock purchase agreement with
Cardservice International, one of our CSP customers, to purchase that number of
shares of our common stock equal to the lower of 10% of the number of shares
sold in this offering (excluding the underwriters' over-allotment option) or
the number of shares purchasable for an aggregate of $6 million at the per
share price at which common stock is sold to the public in this offering.
Pursuant to this agreement, Cardservice International will purchase these
shares on the date of the closing of this offering.
All future transactions, including any loans from our company to our
officers, directors, principal stockholders or affiliates, will be approved by
a majority of the board of directors, including a majority of the independent
and disinterested members of the board of directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to our company than could be obtained from unaffiliated third parties.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of March 7, 2000 and as adjusted to
reflect the sale of common stock offered hereby by:
. Each stockholder known by us to own beneficially more than 5% of the
common stock;
. Each of the named executive officers;
. Each director of our company; and
. All directors and executive officers as a group.
The percentage of ownership in the following table is based on 16,176,147
shares of common stock outstanding on March 7, 2000, assuming conversion of all
outstanding preferred stock and payment in common stock of all accrued and
unpaid dividends thereon and shares of common stock outstanding
after completion of the offering. This table assumes no exercise of the
underwriters' over-allotment option and assumes conversion of all outstanding
shares of preferred stock. If the over-allotment option is exercised in full,
we will sell an aggregate of shares of common stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after
March 7, 2000 are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated in the footnotes below, to our knowledge, the
persons and entities named in the table have sole voting and investment power
with respect to all shares beneficially owned, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
Percentage of
Common Stock
Outstanding
-----------------
Number of Shares Before After
Beneficial Owner(1) Beneficially Owned Offering Offering
- ------------------- ------------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Austin Ventures
(2)..................................... 5,089,276 31.2% %
114 W. 7th St., Suite 300
Austin, Texas 78701
Entities affiliated with Internet Capital
Group (3)............................... 1,908,470 11.8
44 Montgomery Street, Suite 3705
San Francisco, CA 94104
R.C. Estes (4)........................... 1,362,423 8.4
Julie Fergerson (5)...................... 871,187 5.4
Entities affiliated with Voyager Capital
Fund (6)................................ 1,315,285 8.1
800 Fifth Avenue, Suite 4100
Seattle, WA 98104
Robert J. Lynch (7)...................... 666,958 4.1
Michael S. Grajeda (8)................... 149,275 * *
James G. Treybig (9)..................... 259,151 1.6
10915 Bee Caves Road
Austin, Texas 78733
Entities affiliated with Intel (10)...... 1,111,360 6.9
2200 Mission College Blvd.
Santa Clara, CA 95052
Entities affiliated with New Enterprise
Associates (11)......................... 1,817,290 11.2
2490 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Shares Common Stock
Beneficially Owned Outstanding
------------------ -----------------
Before After
Beneficial Owner(1) Number Offering Offering
- ------------------- ------ -------- --------
<S> <C> <C> <C>
Alan Scutt (12).......................... 101,423 * *
Hewlett-Packard (13)..................... 964,971 5.7
3000 Hanover Street
Palo Alto, CA 94304
Joseph C. Aragona (14)................... 5,089,276 31.3
Wendy L. Harrington (15)................. 1,908,470 11.8
William H. McAleer (16).................. 1,315,285 8.2
Scott D. Sandell (17).................... 1,817,290 11.3
Stuart H. Fullerton (18)................. 301,000 1.9
All executive officers and directors as a
group................................... 13,841,738 83.7
</TABLE>
- ---------------------
* Less than 1% of the outstanding shares of common stock.
(1) Except as otherwise noted below, the address of each person listed on
the table is 11500 Metric Blvd., Suite 300, Austin, Texas 78758.
(2) Includes 168,591 shares held by Austin Ventures V Affiliates Fund, L.P.,
3,368,615 shares held by Austin Ventures V, L.P. and 1,406,510 shares
held by Austin Ventures VII, L.P. Also includes warrants to purchase
6,902 shares of preferred stock and dividends thereon held by Austin
Ventures V Affiliates Fund and warrants to purchase 137,250 shares of
preferred stock and dividends thereon held by Austin Ventures V, L.P.,
which warrants are exercisable within 60 days.
(3) Includes 1,839,699 shares and includes warrants to purchase 68,801
shares of preferred stock and dividends thereon exercisable within 60
days.
(4) Includes warrants to purchase, which warrants are 5,159 shares and
dividends thereon, which warrants are exercisable within 60 days. Also
includes shares that are subject to our right of repurchase at the
original purchase price upon termination of Mr. Estes' employment. Our
repurchase right generally expires ratably on a monthly basis over a 42-
month period which began in September 1997.
(5) Includes warrants to purchase 523 shares of preferred stock and
dividends thereon, which warrants are exercisable within 60 days,
130,000 shares held by The Fergerson Trust of 2000, 4,000 shares held by
the Kenneth D. Simone Trust of 2000, 4,000 shares held by the Debra D.
Fergerson Trust of 2000 and 200,123 shares held by Ms. Fergerson's
husband, William Fergerson. Also includes shares that are subject to our
right of repurchase at the original purchase price upon termination of
Ms. or Mr. Fergerson's employment. Our repurchase rights generally
expire ratably on a monthly basis over a 42-month period that began in
September 1997.
(6) Includes 1,231,113 shares held by Voyager Capital Fund I, L.P., 66,845
shares held by Voyager Capital Founders Fund, L.P. and warrants to
purchase 16,429 shares of preferred stock and dividends thereon held by
Voyager Capital Fund I, L.P. and warrants to purchase 891 shares of
preferred stock and dividends thereon held by Voyager Capital Founders
Fund, L.P., which warrants are exercisable within 60 days.
(7) Includes 127,000 shares held by the Cynthia M. Lynch 1999 Exempt Trust,
127,000 shares held by the Robert J. Lynch 1999 Exempt Trust, an option
to purchase 105,600 shares of common stock and a warrant to purchase 54
shares of preferred stock and dividends thereon, which warrant and
option are exercisable within 60 days. Also includes shares that are
subject to our right of repurchase at the original purchase price in the
event of the termination of Mr. Lynch's employment. Our repurchase
rights generally expire ratably over a 42-month period that began in
September 1997.
(8) Includes an option to purchase 27,000 shares of common stock that is
exercisable within 60 days. Mr. Grajeda's shares are subject to our
right of repurchase upon the termination of his employment. Our
repurchase right generally expires over a four-year period, with our
repurchase right expiring with respect to 25% of the shares one year
after the vesting commencement date and the remainder expiring ratably
on a monthly basis over the remaining 36-month period, which vesting
periods began in July 1998 and March 1999.
60
<PAGE>
(9) Includes 237,140 shares individually owned by Mr. Treybig, and 21,335
shares held by the Treybig CC Family Trust Limited. Also includes shares
that are subject to our right of repurchase at the original purchase
price upon termination of Mr. Treybig's service as a director. Our
repurchase right generally expires over a four-year period, with our
repurchase right expiring with respect to 50% of the shares 18 months
after the vesting commencement date and the remainder, expiring ratably
over the 30 months thereafter. The vesting period began in September
1997.
(10) Includes 59,161 shares held by Middlefield Ventures, Inc., an affiliate
of Intel, and a warrant to purchase 14,637 shares of preferred stock and
dividends thereon held by Middlefield Ventures, Inc., which warrant is
exercisable within 60 days.
(11) Includes 1,781,424 shares held by New Enterprise Associates VIII, L.P.,
16,479 shares held by NEA Presidents Fund, L.P., 2,059 shares held by
NEA Ventures 1999, L.P. and a warrant to purchase 17,322 shares of
preferred stock and dividends thereon held by New Enterprise Associates
VIII, L.P., which warrant is exercisable within 60 days.
(12) Includes an option to purchase 44,000 shares of common stock. Also
includes shares that are subject to our right to repurchase the shares
upon the termination of Mr. Scutt's employment. Our repurchase right
generally expires over a four-year period, with our repurchase right
expiring with respect to 25% of the shares are year after the vesting
commencement date and the remainder expiring ratably on a monthly basis
over the remaining 36-month period, which vesting period began in
November 1998 and February 2000.
(13) Includes warrants to purchase 680,183 shares, which warrants are
exercisable within 60 days.
(14) Includes 168,591 shares held by Austin Ventures V Affiliates Fund, L.P.,
3,368,615 shares held by Austin Ventures V, L.P., 1,406,510 shares held
by Austin Ventures VII, L.P., warrants to purchase 6,902 shares of
preferred stock and dividends thereon held by Austin Ventures V
Affiliates Fund and warrants to purchase 137,250 shares of preferred
stock and dividends thereon held by Austin Ventures V, L.P., which
warrants are exercisable within 60 days. Mr. Aragona is a general
partner of AV Partners V, L.P, the general partner of Austin Ventures V
Affiliates Fund, L.P. and Austin Ventures V, L.P. and a general partner
of AV Partners VII, L.P., the general partner of Austin Ventures VII,
L.P. Mr. Aragona disclaims beneficial ownership of these shares, except
to the extent of his pecuniary interest in those shares.
(15) Includes 1,839,669 shares and warrants to purchase 68,801 shares of
preferred stock and dividends thereon, which warrants are exercisable
within 60 days, by entities associated with Internet Capital Group of
which Ms. Harrington may be deemed to be the beneficial owner. Ms.
Harrington disclaims beneficial ownership of these shares except to the
extent of her pecuniary interest.
(16) Includes 1,231,113 shares held by Voyager Capital Fund I, L.P., 66,845
shares held by Voyager Capital Founders Fund, L.P., warrants to purchase
16,429 shares of preferred stock and dividends thereon held by Voyager
Capital Fund I, L.P. and warrants to purchase 891 shares of preferred
stock and dividends thereon held by Voyager Capital Founders Fund, L.P.,
which warrants are exercisable within 60 days, of which Mr. McAleer
maybe deemed to be the beneficial owner. Mr. McAleer is a managing
partner of Voyager Capital Management, LLC, the general partner of
Voyager Capital Fund I, L.P. and Voyager Capital Founders Fund, L.P. Mr.
McAleer disclaims beneficial ownership of these shares, except to the
extent of his pecuniary interest.
(17) Includes 1,781,424 shares held by New Enterprise Associates VIII, L.P.,
16,479 shares held by New Enterprise Associates President's Fund, L.P.,
2,059 shares held by New Enterprise Ventures 1999, L.P. and a warrant to
purchase 17,322 shares of preferred stock and dividends thereon held by
New Enterprise Associates VIII, L.P., which warrant is exercisable
within 60 days, of which Mr. Sandell may be deemed to be the beneficial
owner. Mr. Sandell is a general partner of each of New Enterprise
Associates VIII, L.P., New Enterprise Associates President's Fund, L.P.
and New Enterprise Associates Ventures 1999, L.P. Mr. Sandell disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest.
(18) Includes an option to purchase 42,000 shares of common stock that is
exercisable within 60 days. Mr. Fullerton's shares are subject to our
right of repurchase at the original purchase price upon termination of
his employment. Our repurchase right generally expires over a four-year
period, with our repurchase right expiring with respect to 25% of the
shares one year after the vesting commencement date and the remainder
expiring ratably on a monthly basis over the remaining 36-month period,
which periods began in September 1997 and February 2000.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Upon the closing of this offering, we will be authorized to issue
100,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value. The following description of
our capital stock does not purport to be complete and is subject to and
qualified in its entirety by our certificate of incorporation and bylaws, which
are included as exhibits to the registration statement of which this prospectus
forms a part, and by the provisions of applicable Delaware law.
Common Stock
As of March 7, 2000, there were 16,176,147 shares of common stock
outstanding that were held of record by approximately 113 stockholders,
assuming the conversion of all outstanding shares of preferred stock and
payment in common stock of all accrued and unpaid dividends the preferred stock
as of December 31, 1999. In addition, as of March 7, 2000, there were 1,271,931
shares of common stock subject to outstanding options. When this offering is
completed, there will be shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option or additional
exercise of outstanding options.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available for that
purpose. In the event of our liquidation, dissolution or winding up, the
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior distribution rights of preferred
stock, if any, then outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable, and the shares of common
stock to be issued upon the closing of this offering will be fully paid and
nonassessable.
Preferred Stock
As of March 7, 2000, we had three series of preferred stock: Series A,
Series B and Series C preferred stock. Each series of preferred stock has the
rights, preferences and privileges described in our current certificate of
incorporation, which is included as an exhibit to the registration statement of
which this prospectus forms a part. As of March 7, 2000, the number of
outstanding shares for each series of our preferred stock was:
. 3,147,830 shares of Series A preferred stock;
. 4,706,196 shares of Series B preferred stock; and
. 4,243,267 shares of Series C preferred stock.
Upon the closing of this offering, all outstanding shares of our preferred
stock and accrued dividends thereon as of December 31, 1999 will be converted
into 12,176,313 shares of common stock. Dividends accrued prior to the
completion of this offering will be converted into shares of common stock.
Thereafter, our board of directors will have the authority, without action by
our stockholders, to designate and issue preferred stock in one or more series
and to designate the rights, preferences and privileges of each series, any or
all of which may be greater than the rights of the common stock. It is not
possible to state the actual effect of the issuance of any shares of preferred
stock upon the rights of holders of the common stock until the board of
directors determines the specific rights of the holders of such preferred
stock. However, the effects might include, among other things, restricting
dividends on the common stock, diluting the voting power of the common stock,
impairing the liquidation rights of the common stock and delaying or preventing
a change in control of our company without further action by the stockholders.
We have no present plans to issue any shares of preferred stock.
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<PAGE>
Warrants
As of March 7, 2000, we had outstanding warrants to purchase (i) 700,483
shares of common stock, (ii) 130,228 shares of Series B preferred stock and
(iii) 155,447 shares of Series C preferred stock. One warrant to purchase
555,183 shares of common stock will expire five trading days after the
completion of this offering, unless earlier exercised. A warrant to purchase
125,000 shares of common stock will expire on March 1, 2004, unless earlier
exercised. The warrants to purchase 130,228 shares of Series B preferred stock
expire upon the completion of this offering, unless earlier exercised. Of the
warrants to purchase shares of Series C preferred stock, warrants to purchase
141,303 shares of Series C preferred stock will expire upon completion of this
offering, unless earlier exercised. The remaining warrant to purchase 14,144
shares of Series C preferred stock will remain outstanding after the completion
of this offering and will become exerciseable to purchase an aggrgegrate of
14,144 shares of common stock. This warrant will expire on February 28, 2004,
unless earlier exercised.
Registration Rights
The holders of the 12,220,999 shares of common stock assuming conversion of
all outstanding preferred stock and payment in common stock of accrued and
unpaid dividends on preferred stock, or the registrable securities, or their
permitted transferees are entitled to have their shares registered by us under
the Securities Act of 1933, as amended, under the terms of an agreement between
us and the holders of these registrable securities. These registration rights
include the following:
. The holders of at least a majority of the then outstanding registrable
securities may require, on two occasions beginning 180 days after the
date of this prospectus, that we register their shares for public resale.
We are obligated to register these shares if the holders of a majority of
such shares request registration and only if such registration covers at
least a majority of the registrable securities.
. The holders of at least 25% of the then outstanding registrable
securities, the holder of a warrant to purchase 555,183 shares of common
stock and one of our customers who has the right to purchase shares of
common stock may require not more than two times in every twelve-month
period that we register their shares for public resale on Form S-3 or
similar short-form registration, provided we are eligible to use Form S-3
or similar short-form registration and provided further that the value of
the securities to be registered is at least $500,000.
. If we register any of our shares of common stock for purposes of
effecting any public offering, the holders of registrable securities, the
holder of a warrant to purchase 555,183 shares of common stock and one of
our customers who has the right to purchase shares of common stock
are entitled to include their shares of common stock in the registration,
subject however to our right to reduce the number of shares proposed to
be registered in view of market conditions.
We will bear all registration expenses in connection with any registration
(other than underwriting discounts and commissions). All registration rights
terminate on the date that is five years following the closing of this
offering, or, with respect to any holder of registrable securities with less
than 1% of the then outstanding shares of capital stock, at the time that such
holder is entitled to sell all of its shares and any three-month period under
rule 144 of the Securities Act.
Private Placement
On March 6, 2000, we entered into a stock purchase agreement with
Cardservice International, one of our CSP customers, to purchase that number of
shares of our common stock equal to the lower of 10% of the number of shares
sold in this offering (excluding the underwriters' over-allotment option) or
the number of shares purchasable for an aggregate of $6 million at the per
share price at which common stock is sold to the public in this offering.
Pursuant to this agreement, Cardservice International will purchase these
shares on the date of the closing of this offering.
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<PAGE>
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Provisions of Delaware law and our certificate of incorporation and bylaws
could make more difficult our acquisition by means of a tender offer, a proxy
contest or otherwise and the removal of incumbent officers and directors. These
provisions, summarized below, are expected to discourage coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of our company to first negotiate with our board of directors.
We believe that the benefits of increased protection of our ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure our company outweigh the disadvantages of discouraging
such proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
Delaware Anti-Takeover Law
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became
an interested stockholder, unless (with certain exceptions):
. The board of directors approves the transaction in which the stockholder
became an interested stockholder prior to the date the interested
stockholder attained to that status;
. When the stockholder became an interested stockholder, he or she owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding shares owned by persons who are
directors and also officers; or
. On or subsequent to the date the business combination is approved by the
board of directors, the business combination is authorized at an annual
or special meeting of stockholders.
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision would be expected
to have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.
Certain Provisions of Our Certificate of Incorporation and Bylaws
Upon the closing of this offering, our certificate of incorporation will
provide for the board of directors to be divided into three classes, as nearly
equal in number as possible, serving staggered terms. Approximately one-third
of the board will be elected each year. See "Management." Our having a
classified board could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of the board of directors
until the second annual stockholders meeting following the date the acquiror
obtains the controlling stock interest. A classified board could also have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of our company and could increase the
likelihood that incumbent directors will retain their positions.
Our certificate of incorporation will provide that directors may be removed
(i) with cause by the affirmative vote of the holders of at least a majority of
the voting power of all of the outstanding shares of voting stock or (ii)
without cause by the affirmative vote of the holders of at least 66 2/3% of the
voting power of all of the then-outstanding shares of the voting stock.
Our bylaws establish an advance notice procedure for stockholder proposals
to be brought before our annual meeting of stockholders, including proposed
nominations of persons for election to the board of directors. Stockholders at
an annual meeting may only consider proposals or nominations specified in the
notice
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<PAGE>
of meeting or brought before the meeting by or at the direction of the board of
directors or by a stockholder who was a stockholder of record on the record
date for the meeting, who is entitled to vote at the meeting and who has given
to our Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. Although the bylaws do not
give the board of directors the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be conducted
at a special or annual meeting of the stockholders, the bylaws may have the
effect of precluding the conduct of certain business at a meeting if the proper
procedures are not followed or may discourage or defer a potential acquiror
from conducting a solicitation of proxies to elect its own slate of directors
or otherwise attempting to obtain control of our company.
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. Our bylaws authorize a majority of
the board of directors, the chairman of the board or the chief executive
officer to call a special meeting of stockholders. The elimination of the right
of stockholders to call a special meeting means that a stockholder could not
force stockholder consideration of a proposal over the opposition of the board
of directors by calling a special meeting of stockholders prior to such time as
a majority of the board of directors believed such consideration to be
appropriate or until the next annual meeting provided that the requestor met
the notice requirements. The restriction on the ability of stockholders to call
a special meeting means that a proposal to replace the board could be delayed
until the next annual meeting.
Our certificate of incorporation will provide for the elimination of actions
by written consent of stockholders upon the closing of this offering. Under
Delaware law, stockholders may execute an action by written consent in lieu of
a stockholder meeting. Delaware law permits a corporation to eliminate such
actions by written consent. Elimination of written consents of stockholders may
lengthen the amount of time required to take stockholder actions since certain
actions by written consent are not subject to the minimum notice requirement of
a stockholder's meeting. The elimination of stockholders' written consents,
however, deters hostile takeover attempts. Without the availability of
stockholder's actions by written consent, a holder or group of holders
controlling a majority in interest of our capital stock would not be able to
amend our bylaws or remove directors pursuant to a stockholder's written
consent. Any such holder or group of holders would have to obtain the consent
of a majority of the board of directors, the chairman of the board or the chief
executive officer to call a stockholders' meeting and wait until the notice
periods, as determined by the board of directors pursuant to our bylaws, expire
prior to taking any such action.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Equiserve LP,
Boston Equiserve Division. Equiserve LP is located at 150 Royall Street,
Canton, Massachusetts 02021, and its telephone number is (781) 575-2000.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock in the public market
following this offering or the possibility of such sales occurring could
adversely affect prevailing market prices for our common stock or could impair
our ability to raise capital through an offering of equity securities.
Upon completion of this offering, we will have outstanding
shares of common stock, based upon shares outstanding as of December 31, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants after December 31, 1999. Of these shares,
sold in this offering will be freely tradable without restriction
under the Securities Act except for any shares purchased by "affiliates" of our
company as that term is defined in Rule 144 under the Securities Act.
Upon completion of this offering, shares of common stock held by
existing stockholders are "Restricted Securities" as that term is defined in
Rule 144 under the Securities Act. We issued and sold the Restricted Securities
in private transactions in reliance upon exemptions from registration under the
Securities Act. Restricted Securities may be sold in the public market only if
they are registered under the Securities Act or if they qualify for an
exemption from registration, such as Rule 144 or 701 under the Securities Act,
which are summarized below.
Our officers, directors, employees and certain stockholders, who
collectively held as of March 7, 2000 an aggregate of Restricted
Securities, and the underwriters entered into lock-up agreements in connection
with this offering. These lock-up agreements provide that, with certain limited
exceptions, our officers, directors, employees, selling stockholders and such
other stockholders have agreed not to offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of any shares of our company for a
period of 180 days after the effective date of this offering. Credit Suisse
First Boston Corporation may, in its sole discretion and at any time without
prior notice, release all or any portion of the shares subject to these lock-up
agreements. We have also entered into an agreement with Credit Suisse First
Boston Corporation that we will not offer, sell or otherwise dispose of our
common stock until 180 days after the effective date of this offering.
Taking into account the lock-up agreements, the number of shares that will
be available for sale in the public market under the provisions of Rules 144,
144(k) and 701 will be as follows:
<TABLE>
<CAPTION>
Number
of
Date of Availability for Sale Shares
----------------------------- ------
<S> <C>
At various times between December 31, 1999 and the date 180 days
after the effective date of this offering.......................
At various times thereafter upon the expiration of applicable
holding periods.................................................
</TABLE>
Following the expiration of the lock-up period, certain shares issued upon
exercise of options granted by us prior to the completion of this offering will
also be available for sale in the public market pursuant to Rule 701 under the
Securities Act.
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirement,
of Rule 144. In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year (including the holding period of any prior owner
except an affiliate) would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding
(approximately shares immediately after this offering) or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.
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Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about our company. Under Rule 144(k), a person who is not deemed to have been
an affiliate of our company at any time during the three months preceding a
sale, and who has beneficially owned the shares proposed to be sold for at
least two years (including the holding period of any prior owner except an
affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144.
We intend to file a registration statement on Form S-8 under the Securities
Act covering shares of common stock reserved for issuance under the stock plans
and subject to outstanding options under the 1997 Stock Plan. See "Management--
Stock Plans." Such registration statement is expected to be filed and become
effective as soon as practicable after the effective date of this offering.
Shares of common stock issued upon exercise of options under the Form S-8 will
be available for sale in the public market, subject to Rule 144 volume
limitations applicable to affiliates and subject to the contractual
restrictions described above. At March 7, 2000, options to purchase 1,271,931
shares of common stock were outstanding, all of which options were then
exercisable. Beginning 180 days after the effective date of this offering,
approximately shares issuable upon the exercise of vested stock
options will become eligible for sale in the public market, if such options are
exercised.
Following this offering, the holders of an aggregate of approximately
shares of outstanding common stock and common stock issuable upon conversion of
outstanding warrants will have the right to require us to register their shares
for sale upon meeting certain requirements. See "Description of Capital Stock--
Registration Rights."
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<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, Chase Securities Inc.
and SG Cowen Securities Corporation are acting as representatives, the
following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
Credit Suisse First Boston Corporation................................
Chase Securities Inc..................................................
SG Cowen Securities Corporation.......................................
----
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 from us 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 brokers/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>
In addition, Credit Suisse First Boston Corporation will receive an
aggregate fee from us equal to 3% of gross proceeds from the common stock sold
to Cardservice International in a private placement which is scheduled to close
on the date of the closing of this offering.
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, announce an
intention to sell, pledge or directly or indirectly dispose of, or file with
the Commission a registration statement under the Securities Act relating to,
any additional shares of common stock or securities convertible into or
exchangeable or exercisable for any shares of 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. These restrictions do
not prohibit us from issuing employee stock options and common stock issuable
upon exercise of employee stock options outstanding on the date of this
prospectus, or filing a registration statement on Form S-8 covering all shares
of common stock reserved for issuance under our compensation plans.
Our officers, directors and substantially all of our stockholders have
agreed that they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any shares of our common stock or
68
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securities convertible into or exchangeable or exercisable for any shares of
our common stock, 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 common stock,
whether any such aforementioned transaction is to be settled by 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 our customers, business
partners and other parties, including friends and family of key employees of
our company. The number of shares available for sale to the general public in
the offering will be reduced to the extent these persons purchase directed
shares. Any directed 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 have our common stock approved for listing on The Nasdaq
National Market under the symbol "CLCM."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include:
. The information included in this prospectus and otherwise available to
the underwriters;
. The history and the prospects for the industry in which we will compete;
. The ability of our management;
. The prospects for our future earnings;
. The present state of our development and our current financial condition;
. The general condition of the securities markets at the time of this
offering; and
. The recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids under 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 number.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed 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 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 be in
the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or otherwise, and, if commenced, may be discontinued at
any time.
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NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that: (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws; (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent; and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (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
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such 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 such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for our
company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Austin,
Texas. Certain legal matters will be passed upon for the underwriters by Gray
Cary Ware & Freidenrich LLP, Austin, Texas. Upon the completion of this
offering, WS Investments, an investment partnership composed of some current
and former members of and persons associated with Wilson Sonsini Goodrich &
Rosati, Professional Corporation, as well as certain individual attorneys of
this firm, will beneficially own 3,536 shares of our common stock.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, some
items of which are contained in exhibits to the Registration Statement, as
permitted by the rules and regulations of the Commission. For further
information with respect to our company and the common stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each document
filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved. The Registration Statement, including exhibits thereto and the
financial statements and notes filed as a part thereof, as well as reports and
other information filed with the Commission, may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon payment of fees prescribed by the Commission. These reports
and other information may also be inspected without charge at a Web site
maintained by the Commission. The address of the site is http://www.sec.gov.
Prior to this offering, we have not been required to file reports under the
Securities Exchange Act of 1934. Following consummation of the offering, we
will be required to file reports and other information with the Commission
under the exchange act. You are invited to read and copy any reports,
statements or other information that we file with the Commission.
We intend to provide to our stockholders proxy statements and annual reports
prepared in accordance with applicable law. Our annual reports will contain
audited consolidated financial statements following the end of each fiscal
year, and we will make available quarterly reports containing unaudited summary
consolidated financial information for each of the first three fiscal quarters
of each fiscal year.
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CLEARCOMMERCE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Changes in Common Stockholders' Deficit.......... F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of ClearCommerce Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in common stockholders' deficit
and cash flows present fairly, in all material respects, the financial position
of ClearCommerce Corporation and its subsidiary (the "Company") at December 31,
1998 and 1999 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
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.
PRICEWATERHOUSECOOPERS LLP
Austin, Texas
February 25, 2000, except as to Note 15 which is as of March 6, 2000
F-2
<PAGE>
CLEARCOMMERCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Pro Forma
Balance
December 31, Sheet at
--------------- December
1998 1999 31, 1999
------ ------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Cash and equivalents............................. $ 71 $16,915 $26,106
Accounts receivable, net of allowance of $21 and
$212, respectively.............................. 539 2,152 2,152
Contracts receivable............................. 764 2,358 2,358
Prepaid expenses and other current assets........ 179 255 255
------ ------- -------
Total current assets............................ 1,553 21,680 30,871
Property and equipment, net...................... 597 1,998 1,998
------ ------- -------
Total assets.................................... $2,150 $23,678 $32,869
====== ======= =======
Liabilities, mandatorily redeemable convertible
preferred stock and common stockholders' (deficit)
equity
Accounts payable................................. $ 691 $ 1,001 $ 1,001
Accrued expenses................................. 372 601 601
Accrued compensation............................. 490 1,319 1,319
Deferred revenues................................ 1,443 4,191 4,191
Related party loan............................... 1,216 -- --
Current portion of debt.......................... 2,113 1,789 1,789
Current portion of capital lease obligations..... 19 47 47
------ ------- -------
Total current liabilities....................... 6,344 8,948 8,948
Long-term deferred revenue, net of current
portion......................................... 441 470 470
Long-term debt, net of current portion........... 387 435 435
Capital lease obligations, net of current
portion......................................... 12 78 78
------ ------- -------
Total liabilities............................... 7,184 9,931 9,931
------ ------- -------
Mandatorily redeemable convertible preferred
stock (Note 10)................................. 3,615 66,066 --
------ ------- -------
Commitments and contingencies
Common stock, $.001 par value; 8,000,000 and
20,000,000 shares authorized, respectively;
100,000,000 shares authorized pro forma;
2,787,120 and 3,919,655 shares issued and
outstanding, respectively; 16,095,968 issued and
outstanding pro forma........................... 3 4 16
Additional paid-in capital....................... -- -- 88,153
Deferred compensation............................ -- (2,097) (2,097)
Accumulated other comprehensive loss............. -- (13) (13)
Accumulated deficit.............................. (8,652) (50,213) (63,121)
------ ------- -------
Total common stockholders' (deficit) equity..... (8,649) (52,319) 22,938
------ ------- -------
Total liabilities, mandatorily redeemable
convertible preferred stock and common
stockholders' (deficit) equity................. $2,150 $23,678 $32,869
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CLEARCOMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
--------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
Revenues:
Software licenses........................... $ 147 $ 582 $ 3,294
Services.................................... 249 481 1,988
--------- --------- ----------
Total revenues............................. 396 1,063 5,282
--------- --------- ----------
Cost of revenues:
Software licenses .......................... 89 135 130
Services.................................... 80 292 1,869
--------- --------- ----------
Total cost of revenues..................... 169 427 1,999
--------- --------- ----------
Gross margin................................ 227 636 3,283
Operating expenses:
Sales and marketing......................... 484 3,336 7,593
Research and development.................... 463 2,661 6,514
General and administrative.................. 470 1,761 3,314
--------- --------- ----------
Total operating expenses................... 1,417 7,758 17,421
--------- --------- ----------
Loss from operations....................... (1,190) (7,122) (14,138)
--------- --------- ----------
Interest income (expense):
Interest expense ........................... (1) (132) (531)
Interest income............................. 44 39 42
--------- --------- ----------
Net loss................................... (1,147) (7,215) (14,627)
Dividends on mandatorily redeemable
convertible preferred stock................ -- (270) (1,074)
Beneficial conversion feature related to
Series C preferred stock (Note 10)......... -- -- (29,227)
--------- --------- ----------
Net loss attributable to common stock...... $ (1,147) $ (7,485) $ (44,928)
========= ========= ==========
Net loss per share:
Basic and diluted........................... $ (0.89) $ (6.51) $ (23.78)
========= ========= ==========
Basic and diluted weighted average shares... 1,283,347 1,149,145 1,889,101
========= ========= ==========
Pro forma net loss per share (unaudited):
Basic and diluted........................... $ (1.04)
==========
Weighted average shares..................... 14,065,414
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CLEARCOMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' DEFICIT
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total Common
Common Stock Paid-in Deferred Comprehensive Accumulated Stockholders'
Shares Dollars Capital Compensation Loss Deficit Deficit
--------- ------- ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 1,299,500 $-- $ -- $ -- $ -- $ (104) $ (104)
Issuance of common
stock.................. 1,291,130 3 -- -- -- -- 3
Net loss................ -- -- -- -- -- (1,147) (1,147)
--------- --- ------ ------- ---- -------- --------
Balance at December 31,
1997................... 2,590,630 3 -- -- -- (1,251) (1,248)
Issuance of common stock
under employee plans... 196,490 -- 21 -- -- -- 21
Issuance of warrants in
conjunction with bridge
loan................... -- -- 63 -- -- -- 63
Accrued dividends on
preferred stock........ -- -- (84) -- -- (186) (270)
Net loss................ -- -- -- -- -- (7,215) (7,215)
--------- --- ------ ------- ---- -------- --------
Balance at December 31,
1998................... 2,787,120 3 -- -- -- (8,652) (8,649)
Issuance of common stock
under employee plans... 1,132,535 1 283 -- -- -- 284
Deferred compensation... -- -- 2,842 (2,842) -- -- --
Amortization of deferred
compensation........... -- -- -- 745 -- -- 745
Issuance of warrants in
conjunction with bridge
loan................... -- -- 242 -- -- -- 242
Accrued dividends on
preferred stock........ -- -- (1,074) -- -- -- (1,074)
Beneficial conversion
feature related to
Series C
preferred stock (Note
10).................... -- -- (2,293) -- -- (26,934) (29,227)
Unrealized translation
gain/(loss)............ -- -- -- -- (13) -- (13)
Net loss................ -- -- -- -- -- (14,627) (14,627)
--------- --- ------ ------- ---- -------- --------
Balance at December 31,
1999................... 3,919,655 $ 4 $ -- $(2,097) $(13) $(50,213) $(52,319)
========= === ====== ======= ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CLEARCOMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... (1,147) (7,215) (14,627)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 19 118 1,193
Non-cash interest expense........................ -- 63 242
Net changes in assets and liabilities:
Change in deferred revenue...................... 114 1,759 2,777
Change in accounts receivable, net.............. (42) (473) (1,613)
Change in contracts receivable.................. (75) (689) (1,594)
Change in prepaid expenses and other assets..... (33) (136) (76)
Change in accounts payable and accrued
expenses....................................... 287 1,246 1,368
------- ------- --------
Net cash used in operating activities........... (877) (5,327) (12,330)
------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment............... (129) (556) (1,682)
------- ------- --------
Cash flows from financing activities:
Payments on capital lease obligations............. (4) (14) (73)
Proceeds from issuance of common stock, net....... 3 21 284
Proceeds from issuance of preferred stock, net.... 2,976 -- 26,938
Payments on debt.................................. (80) -- (1,655)
Proceeds from debt................................ 321 3,717 5,375
------- ------- --------
Net cash provided by financing activities....... 3,216 3,724 30,869
------- ------- --------
Effect of exchange rate changes on cash........... -- -- (13)
------- ------- --------
Increase (decrease) in cash and equivalents....... 2,210 (2,159) 16,844
Cash and equivalents at beginning of year......... 20 2,230 71
------- ------- --------
Cash and equivalents at end of year............... $ 2,230 $ 71 $ 16,915
======= ======= ========
Supplemental information:
Interest paid..................................... $ -- $ -- $ --
======= ======= ========
Taxes paid........................................ -- 11 20
======= ======= ========
Assets acquired under capital lease............... 24 25 167
======= ======= ========
Accrued dividends................................. -- 270 1,074
======= ======= ========
Beneficial conversion feature..................... -- -- 29,227
======= ======= ========
Conversion of founders' loans into Series A
preferred stock.................................. 119 -- --
======= ======= ========
Conversion of notes payable into Series A
preferred stock.................................. 250 -- --
======= ======= ========
Conversion of notes payable into Series B
preferred stock.................................. -- -- 1,206
======= ======= ========
Conversion of notes payable into Series C
preferred stock.................................. -- -- 4,006
======= ======= ========
Deferred compensation............................. -- -- 2,842
======= ======= ========
Warrants issued in conjunction with bridge loan... $ -- $ 63 $ 242
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Organization and Business Operations
ClearCommerce Corporation (formerly Outreach Communications)
("ClearCommerce" or the "Company") was incorporated on September 21, 1995. The
Company provides solutions in e-Commerce transaction processing, fraud tracking
and reporting. The Company's products provide online customer credit card
authorizations, online order and payment processing, automated tax and shipping
calculations, online order tracking and integration into legacy systems. The
Company's principal offices are located in Austin, Texas and the United
Kingdom. The Company is organized and operates as one business segment.
Effective September 15, 1997, the Board of Directors authorized a 1,299.5
for 1 stock split of the Company's common stock. The effect of the stock split
has been reflected in these consolidated financial statements for all periods
presented. In accordance with the Company's amended and restated articles of
incorporation as of September 15, 1997, the Company changed the par value of
its common stock from no par to $.001.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of the
Company's wholly owned subsidiary. All significant intercompany transactions
and balances have been eliminated in consolidation.
Revenues
The Company derives revenues from licenses of its software and related
services, which include assistance in implementation, customization and
integration, customer support, training and consulting.
License fees are recognized when there is persuasive evidence of an
arrangement for a fixed and determinable fee that is probable of collection and
when delivery has occurred. For arrangements with multiple elements, the
Company recognizes revenue for the delivered elements based upon the residual
method as prescribed by Statement of Position No. 98-9, "Modification of SoP
No. 97-2 with Respect to Certain Transactions."
Revenues from reseller arrangements are recognized when reported by the
reseller upon licensing the Company's software to end users if there are no
specified undelivered elements. For contracts with specified undelivered
elements for which there is no vendor specific objective evidence for the
specified undelivered element, revenue is deferred until the earlier of when
the specified undelivered element is delivered or vendor specific objective
evidence becomes available.
F-7
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Annual merchant fees are generated from annual software licenses that enable
merchants to connect to commerce service providers. Annual merchant fees from
end users are recognized on a subscription basis over the service period.
Prepaid annual merchant fees from resellers are recognized over the contract
period.
Other services revenues from consulting and training services are recognized
as such services are performed. Services revenues from post-contract customer
support are recognized ratably over the support period, generally one year.
The Company derives revenue from contracts that provide for consulting
services at a fixed hourly rate. In connection with such arrangements, the
Company recognizes the fair value of the implementation services as such
services are performed.
Unaudited Pro Forma Information
In February 2000, the board of directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the initial public offering is closed under the terms presently
anticipated, all of the mandatorily redeemable convertible preferred stock
outstanding and accrued dividends will automatically convert into 12,176,313
shares of common stock which includes 1,299,943 shares of Series C mandatorily
redeemable convertible preferred stock issued by the Company subsequent to
December 31, 1999 (Note 15). Accrued dividends are payable in common stock
based on fair market value. The unaudited pro forma balance sheet is adjusted
for the assumed issuance of 1,299,943 shares of Series C preferred stock,
payment of dividends in the form of common stock and the conversion of the
mandatorily redeemable convertible preferred stock, as if such transactions had
occured as of December 31, 1999.
Deferred Revenues
To the extent the Company has billed customers or resellers for the
obligation to deliver licenses or perform future services, such obligations are
recorded as deferred revenue until delivery of the license or such services
have been performed. Additionally, as discussed above, post-contract customer
support revenue is deferred and recognized over the term of the agreement.
Cost of Software Licenses and Services
Cost of software licenses includes royalties as well as the costs of product
packaging, documentation and production. Cost of services consist primarily of
costs incurred in providing software support, maintenance and professional
consulting services.
Research and Development
Research and development costs are incurred for the development of new
products or bringing about significant improvements to existing products.
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed", requires the
capitalization of certain software development costs once technological
feasibility is established. The capitalized cost is then amortized on a
straight-line basis over the estimated product life, or based on the ratio of
current revenues to total projected product revenues, whichever is greater.
Technological feasibility does not occur for the Company's products until all
testing has been performed and the products are substantially ready for release
to the customer; therefore, to date, the Company has not capitalized any
software development costs.
F-8
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Cash and Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, generally three to seven years, or the shorter of the
useful lives or lease term for assets acquired under capital leases. Leasehold
improvements are amortized over the shorter of the remaining term of the lease
or the life of the asset.
Mandatorily Redeemable Convertible Preferred Stock
Mandatorily redeemable convertible preferred stock is presented net of
issuance costs (Note 10).
Income Taxes
The Company uses the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Prior to September 15, 1997, the Company was an S-Corporation for federal
income tax purposes. Effective September 15, 1997, the Company converted from
an S-Corporation to a C-Corporation for income tax purposes.
Advertising
The Company expenses advertising costs as incurred. During the years ended
December 31, 1997, 1998 and 1999, the Company expended $62, $53 and $490
respectively, related to advertising costs.
Concentration of Credit Risk
The Company sells its products to various companies across several
industries and geographies. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses.
Foreign Currency
The Company has determined that the functional currency of its foreign
subsidiary is the local currency. The financial statements of the foreign
subsidiary are translated into dollars in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation."
Translation gains and losses are accumulated and reported as accumulated other
comprehensive income or loss in the consolidated statement of changes in common
stockholders' deficit.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash
and equivalents, short-term trade receivables, contracts receivable, trade
payables and long-term obligations, approximate fair value.
F-9
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Stock-based Compensation Plans
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). As allowed by SFAS No. 123, the Company
continues to apply the provisions of Accounting Principles Board Opinion No. 25
"Accounting for Stock issued to Employees" ("APB No. 25") and related
interpretations in accounting for its plan. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the determined fair value
of the Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000, with earlier application encouraged. The Company does not currently use
derivative instruments and, therefore, does not expect that the adoption of
SFAS No. 133 will have an impact on its financial position or results of
operations.
3. Net Loss Per Share
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128") effective January 1,
1998. SFAS No. 128 requires the presentation of basic and diluted earnings per
share. Basic earnings per share is computed by dividing income or loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share is computed by
giving effect to all dilutive potential common shares that were outstanding
during the period. The Company has excluded all mandatorily redeemable
convertible preferred stock and outstanding stock options and warrants from the
calculation of diluted net loss per share because all such securities are
antidilutive for all periods presented. The total number of common stock
equivalents excluded from the calculations of diluted net loss per common share
were 5,584,147, 5,750,228 and 13,483,763 for the years ended December 31, 1997,
1998 and 1999, respectively.
Pro forma net loss per share, as presented in the statements of operations,
has been computed as described above and also gives effect, under Securities
and Exchange Commission guidance, to the conversion of the mandatorily
redeemable convertible preferred stock and payment of dividends in the form of
common stock (using the as-if-converted method).
The numerator in the pro forma net loss per share calculation is equivalent
to the net loss for each period presented. The denominator in the pro forma net
loss per share calculation is comprised of the following:
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
-----------------
<S> <C>
Weighted average number of common shares outstanding..... 1,889,101
Effect of convertible securities:
Mandatorily redeemable convertible preferred stock and
accrued dividends....................................... 12,176,313
----------
Shares used in pro forma calculation..................... 14,065,414
==========
</TABLE>
F-10
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
4. Property and Equipment
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
----- ------
<S> <C> <C>
Computer equipment............................................ $ 619 $1,555
Software...................................................... -- 332
Leasehold improvements........................................ -- 186
Furniture and fixtures........................................ 115 510
----- ------
734 2,583
Less--accumulated depreciation................................ (137) (585)
----- ------
$ 597 $1,998
===== ======
</TABLE>
For the years ended December 31, 1997, 1998 and 1999, depreciation expense
was $19, $118 and $448 respectively. At December 31, 1998 and 1999, property
and equipment includes $49 and $216, respectively, of assets acquired under
capital lease. Accumulated depreciation for assets under capital lease was $11
and $27 at December 31, 1998 and 1999, respectively, and related depreciation
expense was $2, $9 and $16 for the years ended December 31, 1997, 1998 and
1999, respectively.
5. Debt
In 1998, a bank granted the Company a line of credit for general purposes
and equipment purchases. The aggregate amounts borrowed under the facility were
not to exceed $1,000. Under this agreement, the Company borrowed in aggregate
$1,000 and $232 as of December 31, 1998 and 1999, respectively, at the bank's
prime rate (7.75% and 8.5% at December 31, 1998 and 1999, respectively).
Of the $1,000 outstanding at December 31, 1998, $613 was related to general
purposes and $387 was borrowed for equipment purchases. As discussed below, the
portion related to general purposes was subsequently transferred to a new line
of credit facility. The amounts borrowed for equipment were $387 and $232 as of
December 31, 1998 and 1999, respectively, and will mature on June 23, 2001.
In 1999 the Company was given an additional line of credit facility with a
bank which consists of two elements: (1) a working capital revolving line of
credit not to exceed $3,323; and (2) an equipment line not to exceed $1,000.
Under the $3,323 working capital revolving line of credit, the Company
borrowed $1,789 at December 31, 1999 at the bank's prime rate plus 0.25% (8.75%
at December 31, 1999). This revolving line of credit loan under the facility
will mature on July 18, 2000. During 1999, the Company transferred $613 from
the equipment and general purposes line mentioned above to this revolving line.
Amounts available under the working capital line of credit are a function of
eligible accounts receivable. As of December 31, 1999, $2,100 was available for
borrowing.
Under the $1,000 equipment line, the Company borrowed $203 at December 31,
1999 at the bank's prime plus 0.25% (8.75% at December 31, 1999). This
equipment loan under the facility will mature on May 31, 2002. In conjunction
with this loan, the Company issued the bank a warrant to purchase 5,000 shares
of the Company's Series B preferred stock at a price of $3.69 per share that
expires on July 19, 2004 (Note 9).
Additionally, the Company borrowed $1,500 as of December 31, 1998 at the
bank's prime rate plus 1% (8.75% at December 31, 1998) which matured on
December 11, 1998. The bank agreed to extend the loan until the Company
obtained its funding of the Company's Series B preferred stock, which occurred
in January 1999 (Note 10). The Company repaid the $1,500 in January 1999.
F-11
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
All loans are collateralized by a blanket security interest in all assets of
the Company and the Company must meet certain liquidity requirements on a
monthly basis. The loan agreement includes a restriction on the payment of
dividends. Additionally, the Company's agreement with the bank includes a
provision to pay $100 upon a change of control.
6. Related Party Transactions
In December 1998, the Company established a $1,250 bridge loan facility with
the Series A preferred stockholders. In conjunction with the bridge loan, the
Company issued warrants to purchase 125,228 shares of Series B preferred stock
at $2.46 per share (Note 9). These warrants expire in December 2003 and include
warrants issued to employees to purchase a total of 2,696 shares of Series B
preferred stock. Related party interest totaled less than $1 for the year ended
December 31, 1998. The bridge loan was converted into Series B preferred stock
at $2.46 per share in January 1999.
In September 1999, the Company's preferred stockholders established a
revolving loan facility in a maximum amount of $4,000 bearing interest at 15%
annually. In November 1999, this loan was renegotiated. The facility was
increased to $7,000 and the interest rate was changed to 9.5% per annum. In
addition, warrants to purchase 141,303 shares of Series C preferred stock were
issued (Note 9). These warrants expire November 2004 and include warrants
issued to employees to purchase a total of 3,153 shares of Series C preferred
stock. Related party interest totaled less than $1 for the year ended December
31, 1999. Consistent with the terms of the loan, the loan automatically
converted into shares of the Company's Series C preferred stock at the closing
of the Company's Series C financing on December 31, 1999 at a rate of $7.07 per
share.
7. Income Taxes
The income tax benefit is composed of the following:
<TABLE>
<CAPTION>
Pro-forma For the
For the Year Year Ended
Ended December 31,
December 31, ----------------
1997 1998 1999
------------ ------- -------
<S> <C> <C> <C>
Current....................................... $ -- $ -- $ --
Deferred
Federal...................................... (385) (2,393) (4,395)
State........................................ (48) (323) (574)
Foreign...................................... -- -- (299)
Change in valuation allowance................. 433 2,716 5,268
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</TABLE>
The difference between the tax benefit derived by applying the Federal
statutory income tax rate to net losses and the benefit recognized in the
financial statements is as follows:
<TABLE>
<CAPTION>
Pro-forma For the
For the Year Year Ended
Ended December 31,
December 31, ----------------
1997 1998 1999
------------ ------- -------
<S> <C> <C> <C>
Benefit derived by applying the federal
statutory income rate to net losses before
income taxes............................... $(390) $(2,453) $(5,022)
State tax provision......................... (34) (213) (379)
Foreign tax rate differentials.............. -- -- 41
Permanent differences and other............. 5 12 343
Research and development credit............. (14) (62) (251)
Change in valuation allowance............... 433 2,716 5,268
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</TABLE>
F-12
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The components of deferred taxes are as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Current deferred tax assets (liabilities):
Deferred revenue.......................................... $ 269 $ 593
Allowance for doubtful accounts........................... 2 82
Accrued compensation...................................... 51 674
Other assets.............................................. 1 1
------- -------
Gross deferred tax assets................................ 323 1,350
------- -------
Long-term deferred tax assets (liabilities):
Net operating losses...................................... 2,771 6,492
Foreign net operation loss................................ -- 299
Research and development and other credits................ 76 328
Basis of property and equipment........................... (21) (52)
------- -------
Gross deferred tax assets................................ 2,826 7,067
------- -------
Valuation allowance....................................... (3,149) (8,417)
------- -------
Net deferred tax asset................................... $ -- $ --
======= =======
</TABLE>
Due to the uncertainty surrounding the realization of the benefits of its
deferred tax assets in future tax returns, the Company has recorded a full
valuation allowance against its otherwise recognizable net deferred tax asset.
In 1999, the Company experienced a substantial change in ownership as
defined by the Internal Revenue Code. This change resulted in an annual
limitation for the usage of the net operating loss carryforwards generated
prior to the change in ownership of $2,237. At December 31, 1999, the Company
had total domestic net operating loss carryforwards of $16,751 and research and
development credit carryforwards of $328.
8. Commitments and Contingencies
The Company is obligated under operating lease agreements covering the
corporate facilities and certain equipment. Rental expense under these leases
was $37, $242 and $278 for the years ended December 31, 1997, 1998 and 1999,
respectively. Future minimum lease payments have been included in the table
below:
<TABLE>
<CAPTION>
Capital Operating
For the Year Ending December 31: Leases Leases
-------------------------------- ---------- ---------
<S> <C> <C>
2000.................................................... $ 57 $355
2001.................................................... 57 286
2002.................................................... 27 51
---- ----
Total payments.......................................... $141 $692
====
Less amounts representing interest...................... 16
----
Capital lease obligations............................... $125
====
</TABLE>
The Company has a fair market value purchase option available at the
termination of three of its capital leases. In addition, two of the Company's
capital leases have automatic renewal terms, which are cancelable by the
Company within sixty days.
F-13
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The Company has entered into employment agreements with certain officers of
the Company. Some employment agreements provide for severance in the event the
individual is terminated without cause.
From time to time, the Company may be involved in litigation relating to
claims arising out of its ordinary course of business. Management believes that
there are no claims or actions pending or threatened against the Company, the
ultimate disposition of which would have a material impact on the Company's
financial position, results of operations or cash flows.
9. Warrants
On February 1, 1997, the Company issued a warrant to purchase 20,300 shares
of common stock at an exercise price of $.01 per share to an advisor of the
Company. The warrants may be exercised at any time on or before February 1,
2007. These warrants were valued using the Black-Scholes valuation model at
less than $1.
In conjunction with a bridge loan, the Company issued warrants to purchase
125,228 shares of Series B preferred stock at $2.46 per share to certain of its
Series A stockholders. These warrants expire in December 2003. These warrants
were valued using the Black-Scholes valuation model. Incremental interest
expense of $63 was recorded during the year ended December 31, 1998 related to
these warrants.
In conjunction with a bank loan, the Company issued a warrant to purchase
5,000 shares of the Company's Series B preferred stock at a price of $3.69 per
share. This warrant expires July 19, 2004. These warrants were valued using the
Black-Scholes valuation model at less than $1.
In conjunction with a bridge loan, the Company issued warrants to purchase
141,303 shares of Series C preferred stock at $7.07 per share to certain of its
Series A and B stockholders. These warrants expire in November 2004. These
warrants were valued using the Black-Scholes valuation model. Incremental
interest expense of $242 was recorded during the year ended December 31, 1999
related to these warrants.
10. Mandatorily Redeemable Convertible Preferred Stock
Following is a summary of mandatorily redeemable convertible preferred stock
("preferred stock") issued by the Company at December 31, 1999:
<TABLE>
<CAPTION>
Number of Shares
Shares Issued and Carrying
Series Date Issued Designated Outstanding Amount
------ -------------------------------------- ---------- ----------- --------
<C> <S> <C> <C> <C>
A September and December 1997........... 3,147,830 3,147,830 $ 3,884
B January and April 1999................ 4,900,000 4,706,196 12,306
C December 1999......................... 4,600,000 2,943,324 49,876
---------- -------
10,797,350 $66,066
---------- -------
</TABLE>
The issuance of the Series C resulted in a beneficial conversion feature of
approximately $29,227 at December 31, 1999, calculated in accordance with
Emerging Issues Task Force Issue No. 98-5, which resulted in an immediate
increase to stockholders' deficit.
The carrying value of the preferred stock represents the proceeds from the
sale of the stock net of issuance costs of $259 plus the effect of the
beneficial conversion feature related to the Series C. An additional 1,299,943
shares of Series C were issued for total proceeds of $9,191 in January and
February 2000 (Note 15).
F-14
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The rights with respect to the Series A, B and C preferred stock are as
follows:
Conversion
Each share of Series A, B and C preferred stock is convertible into common
stock on a one-for-one basis, subject to certain antidilution provisions.
Conversion is at the option of the stockholder or automatic upon the closing of
an initial public offering of the Company's common stock at a price equal to or
exceeding $17.67 per share and aggregate proceeds of at least $10 million or by
written consent or agreement of the holders of at least two-thirds of the
outstanding shares of Series A, B and C preferred stock voting together.
Dividends
The holders of the Series A, B and C preferred stock are entitled to receive
cumulative dividends at the rate of 8% per share based on $1.07 for Series A,
$2.46 for Series B and $7.07 for Series C per annum, payable upon conversion of
the preferred stock in either cash or common stock, at the option of the Board
of Directors at the fair value of the common stock as determined in good faith
by a majority of the Board of Directors. Such dividends shall be cumulative
beginning January 1, 1998 with respect to the Series A preferred stock and the
date the first Series B and C preferred stock is issued with respect to the
Series B and C preferred stock. The holders of the outstanding preferred stock
can waive any dividend preference that such holders shall be entitled to
receive upon the affirmative vote or written consent of the holders of at least
two-thirds of the preferred stock then outstanding voting together as a single
class. Accrued dividends were $270 and $1,344 at December 31, 1998 and 1999,
respectively.
Voting Rights
The holder of each share of Series A, Series B, and Series C preferred stock
has the right to one vote for each share of common stock into which such Series
A, Series B and Series C, preferred stock can be converted, and with respect to
such vote, such stockholder has full voting rights and powers equal to the
voting rights and powers of the holders of common stock, and is entitled to
notice of any stockholders' meeting in accordance with the bylaws of the
corporation, and is entitled to vote, together with holders of common stock,
with respect to any question upon which holders of common stock have the right
to vote.
Liquidation and Redemption
Upon the occurrence of a liquidation event, such as a dissolution of the
Company or by merger or sale of assets, the available assets of the Company
would be distributed first to the holders of Series A, B and C preferred stock
until they receive the amount per share for which each such series was
originally purchased plus any accrued and unpaid dividends. If assets of the
Company remain available for distribution after such preferences have been
satisfied, such remaining assets would be distributed among the holders of
Series A, B and C preferred stock and common stock pro rata based on the "as if
converted" number of common stock shares. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A, B and
C preferred stock shall be insufficient to permit the payment to such holders
of the full aforesaid preferential amounts, then the entire assets and funds of
the Company legally available for distribution shall be distributed ratably
among the holders of Series A, B and C preferred stock in proportion to the
preferential amount each such holder would be entitled to receive.
Commencing on December 31, 2004, the Company may be required to redeem, upon
the affirmative vote of two-thirds of the preferred stockholders voting as a
group, 50% of the outstanding shares of preferred stock, an additional 50% on
December 31, 2005 and the remainder on December 31, 2006 at a redemption price
equal to $1.07, $2.46 and $7.07 for Series A, B and C respectively, plus
accrued dividends. As dividends are cumulative, all series of preferred stock
are presented at redemption value.
F-15
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
11. Stock Option Plan
The Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") provides
for granting incentive stock options as defined by the Internal Revenue Code.
The Plan allows for grants of options to purchase 2,001,940 shares of the
Company's common stock (Note 15). Expired and canceled options are available to
be regranted under the Plan. Options are granted with exercise prices and
vesting schedules as approved by the Board of Directors or a Compensation
Committee appointed by the Board of Directors. Optionees may exercise all
options prior to vesting in which case the Company has the right to repurchase
the unvested shares from the optionee at the original purchase price upon the
employee's termination from the Company.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations in accounting for the Plan. Had
compensation cost for the Plan been determined based on the fair market value
at the grant dates for awards under the Plan consistent with the method
provided by SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company's net loss would have been increased to the following pro forma
amounts:
<TABLE>
<CAPTION>
For the Year Ended
December 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C> <C>
Net loss.......................... As reported $ (1,147) $ (7,215) $(14,627)
Pro forma $ (1,149) $ (7,229) $(14,699)
Basic net loss per share.......... As reported $ (0.89) $ (6.28) $ (7.74)
Pro forma $ (0.90) $ (6.29) $ (7.78)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value pricing model with the following weighted-average assumptions
used for grants during the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Dividend yield.................................... -- -- --
Expected volatility............................... -- -- --
Risk-free rate of return.......................... 6.2% 5.2% 5.6%
Expected life..................................... 5 years 5 years 5 years
</TABLE>
The following table summarizes activity under all Plans for the years ended
December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------
1997 1998 1999
------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price Shares Price Shares Price Shares
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the
beginning of the year.. $ -- -- $0.107 587,761 $0.107 1,115,771
Granted................ 0.107 587,761 0.107 751,000 1.329 1,194,154
Exercised.............. -- -- 0.107 (196,490) 0.252 (1,132,535)
Canceled............... -- -- 0.107 (26,500) 0.258 (377,129)
------ ---------- ------ ---------- ------ ----------
Outstanding at the end
of the year............ $0.107 587,761 $0.107 1,115,771 $1.655 800,261
====== ========== ====== ========== ====== ==========
Options exercisable at
year end............... $0.107 587,761 $0.107 1,115,771 $1.655 800,261
====== ========== ====== ========== ====== ==========
Weighted average fair
value of options
granted during the
year................... $0.035 $0.035 $0.217
====== ====== ======
</TABLE>
F-16
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- --------------------------------------------------- ---------------------------
Weighted-
Outstanding average Weighted- Exercisable Weighted-
at remaining average at average
Exercise December 31, contractual exercise December 31, exercise
price 1999 life price 1999 price
- -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$0.107 93,482 8.39 $0.107 93,482 $0.107
0.246 48,000 9.10 0.246 48,000 0.246
0.492 255,629 9.33 0.492 255,629 0.492
1.000 197,500 9.69 1.000 197,500 1.000
4.000 49,250 9.88 4.000 49,250 4.000
5.000 156,400 9.15 5.000 156,400 5.000
- -------- ------------- ------------- ------------- ------------- -------------
$0.107--
$5.000 800,261 9.30 $1.655 800,261 $1.655
======== ============= ============= ============= ============= =============
</TABLE>
As of December 31, 1998 and 1999, a total of 1,336,583 and 1,503,545 shares
were issued pursuant to the exercise of options and founders shares prior to
vesting. The Company may repurchase these shares at the original exercise price
upon the employee's termination from the Company. The potential liability for
exercised unvested shares which were subject to repurchase at their aggregate
original exercise price was $28 and $261 at December 31, 1998 and 1999,
respectively. There were no options exercised prior to vesting as of
December 31, 1997.
12. Employee Benefit Plan
During the year ended December 31, 1999, the Company's Board of Directors
approved an employee savings plan. The Company's 401(k) Plan is a defined
contribution retirement plan with a cash or deferred arrangement as described
in Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). The 401(k)
Plan is intended to be qualified under Section 401(a) of the Internal Revenue
Code. All employees of the Company are eligible to participate in the 401(k)
Plan. The 401(k) Plan provides that each participant may make elective
contributions from 1% to 15% of his or her compensation, subject to statutory
limits. The Company may, but is not required to, make matching contributions.
No matching contributions were made in 1999.
13. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist of cash and equivalents, accounts receivable and
contracts receivable. To date, the Company has invested excess funds in money
market accounts, commercial paper, municipal bonds and term notes. The Company
deposits cash and equivalents and short-term investments with financial
institutions that management believes are credit worthy. The Company's accounts
receivable are derived from revenues earned from customers located primarily in
the United States. The Company maintains an allowance for doubtful accounts
receivable based upon the expected collectibility of all accounts receivable.
The following table summarizes the revenues from customers, all of which
were third parties, in excess of 10% of total net revenues:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................... -- 16% 18%
Customer B.................................................... -- 4 19
Customer C.................................................... 21 2 --
Customer D.................................................... 11 8 1
</TABLE>
F-17
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The following table summarizes accounts and contracts receivable from the
above customers:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Customer A......................................................... 45% 8%
Customer B......................................................... 3% 22%
</TABLE>
14. Stock-Based Compensation
In connection with certain stock option grants during the three year period
ended December 31, 1999, the Company recorded stock-based compensation totaling
$2,842, which is being amortized in accordance with FASB Interpretation No. 28,
"Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans" over the vesting periods of the related options, which is
generally four years. Stock-based compensation amortization recognized during
the three year period ended December 31, 1999 totaled $745. Stock-based
compensation for the year ended December 31, 1999 has been allocated across the
relevant functional expense categories within operating expenses as follows:
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1999
------------
<S> <C>
Cost of services................................................ $ 69
Sales and marketing............................................. 457
Product development and engineering............................. 166
General and administrative...................................... 53
----
$745
====
</TABLE>
15. Subsequent Events
In February 2000, the Company's Board of Directors increased the number of
shares that may be issued under the 1997 Stock Option Plan to 3,961,710.
In February 2000, the Company's Board of Directors approved the adoption of
the Company's 2000 Employee Stock Purchase Plan (the "Purchase Plan"). A total
of 600,000 shares of common stock have been reserved for issuance under the
Purchase Plan. The Purchase Plan permits eligible employees to purchase shares
of common stock through payroll deductions at 85% of the fair value of the
common stock, as defined in the Purchase Plan.
In January 2000 and February 2000, the Company issued an additional
1,299,943 shares of Series C preferred stock at a price of $7.07 per share
resulting in gross proceeds of approximately $9,191.
The Company issued two warrants to purchase a total of 680,183 shares of
common stock at prices ranging from $5.00 to $7.07 per share in February and
March 2000.
In February 2000, the Company's Board of Directors adopted the 2000 Stock
Plan ("2000 Plan") and reserved the lesser of 1,000,000 shares or the remaining
available shares under the 1997 Plan for issuance under the 2000 Plan. The
number of shares reserved for issuance under our 2000 Stock Plan will increase
annually on January 1st of each calendar year, effective beginning in 2001,
equal to the lesser of 5% of the outstanding shares of our common stock on the
first day of the year or such lesser amount as the Board of Directors may
determine.
F-18
<PAGE>
CLEARCOMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The 2000 Director Option Plan ("Director Plan") was adopted in February 2000
and provides for the periodic grant of non statutory stock options to our non-
employee directors. The Company has reserved 300,000 shares of common stock for
issuance under the Director Plan.
In February 2000, the Company issued a warrant to purchase 14,144 shares of
Series C Preferred Stock at $7.07 per share to a bank.
In February 2000, the Company's Board of Directors approved an amendment to
our certificate of incorporation to be effective upon the closing of our
offering that would increase the number of common shares authorized to
100,000,000.
On March 6, 2000, the Company agreed to issue to a major customer shares of
common stock in connection with its planned initial public offering at a
purchase price equal to the price to the public in the planned offering. The
number of shares the Company agreed to issue will equal the lower of 10% of the
shares sold in the planned offering (excluding the underwriters' over-allotment
option) or shares valued at $6,000 at such offering price.
F-19
<PAGE>
[LOGO OF CLEARCOMMERCE]
THE ENGINE THAT DRIVES eBUSINESS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by ClearCommerce in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 15,180
NASD filing fee............................................... 6,250
Nasdaq National Market listing fee............................ 95,000
Printing and engraving costs.................................. 175,000
Legal fees and expenses....................................... 350,000
Accounting fees and expenses.................................. 320,000
Blue sky fees and expenses.................................... 5,000
Transfer agent and registrar fees............................. 10,000
Miscellaneous expenses........................................ 23,570
----------
Total....................................................... $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law. Articles Nine and Ten of
the Registrant's Third Amended and Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law. The Registrant has entered into indemnification agreements
with its directors and executive officers, in addition to indemnification
provided for in the Registrant's Third Amended and Restated Certificate of
Incorporation, and intends to enter into indemnification agreements with any
new directors and executive officers in the future.
Item 15. Recent Sales of Unregistered Securities
During the past three years, the Registrant has issued unregistered
securities to a limited number of persons, as described below. None of these
transactions involved any underwriters, underwriting discounts or commissions,
or any public offering, and the Registrant believes that each transaction was
exempt from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof, Regulation D promulgated thereunder or Rule 701 pursuant
to compensatory benefit plans and contracts relating to compensation as
provided under such Rule 701. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with the Registrant, to
information about the Registrant.
(a) On September 21, 1995, we issued 1,299,500 (giving effect to a 1,299.83-
for-1 stock split) shares of common stock at $0.01 per share to initially
capitalize the Registrant for an aggregate purchase price of $10.00.
(b) On May 22, 1997, we issued 501,607 (giving effect to a 1,299.83-for-1
stock split) shares of common stock at $0.01 per share for an aggregate
purchase price of $3.86.
(c) On February 1, 1997, in partial satisfaction of a consulting fee we
issued a warrant to a consultant for 20,300 shares of our common stock
exercisable at $0.01 per share, for an aggregate purchase price of $203.00.
(d) On June 2 and August 25, 1997, we issued convertible promissory notes
totaling $250,000 in connection with bridge financings to one private investor.
These notes were converted into shares of our Series A preferred stock on
September 15, 1997.
II-1
<PAGE>
(e) On September 15, 1997, we issued 789,523 shares of common stock at $0.01
per share to our founders and certain officers, for an aggregate purchase price
of $7,895.23.
(f) Prior to our Series A Preferred Stock financing in September 1997, two
of our officers had loaned us $191,196.50, of which $40,000 was repaid, and the
remainder converted into shares of our Series A preferred stock on September
15, 1997.
(g) On September 15, 1997 and December 1, 1997, we issued 3,147,830 shares
of Series A preferred stock to a group of private investors at $1.07 per share
for an aggregate purchase price of $3,368,178.10 including conversion of debt.
(h) On November 25, 1998, we entered into a Loan and Warrant Purchase
Agreement under which we issued convertible promissory notes in a bridge
financing totaling $2,000,000 to four private investors and two employees.
These notes were converted into shares of our Series B Preferred Stock on
January 8, 1999. In connection with this bridge financing, we also issued
warrants to purchase 125,228 shares of our Series B Preferred Stock at a
purchase price of $2.46 per share, for an aggregate purchase price of
$308,060.88.
(i) In 1998, we issued 196,490 shares of common stock to employees or other
service providers at $0.107 per share upon the exercise of stock options issued
under our 1997 Stock Plan for an aggregate purchase price of $21,024.43.
(j) On January 8, 1999 and April 6, 1999, we issued 4,706,196 shares of
Series B preferred stock to a group of private investors at $2.46 per share for
an aggregate purchase price of $11,577,242.16.
(k) On July 20, 1999, in connection with the execution of a credit agreement
we issued a warrant to Imperial Bank to purchase 5,000 shares of our Series B
preferred stock at a purchase price of $3.69 per share, for an aggregate
purchase price of $18,450.
(l) On September 27, 1999, we entered into a Loan Agreement, which was
subsequently amended and restated as an Amended and Restated Loan and Warrant
Purchase Agreement on November 29, 1999, under which we issued promissory notes
in a bridge financing totaling $3,999,108.95. These notes were converted into
shares of our Series C preferred stock on December 31, 1999. In connection with
this bridge financing, we also issued warrants to purchase 141,303 shares of
our Series C preferred stock at a purchase price of $7.07 per share, for an
aggregate consideration of $999,012.21.
(m) On December 31, 1999, January 21, 2000, and February 4, 2000, we issued
4,243,267 shares of Series C preferred stock at $7.07 per share for an
aggregate purchase price of $29,999,897.69 including conversion of debt.
(n) In 1999, we issued approximately 1,132,535 shares of our common stock to
employees or other service providers at a range of $0.107 to $5.00 per share
upon the exercise of stock options issued under our 1997 Stock Plan, for our
approximate aggregate purchase price of $285,398.82.
(o) On February 4, 2000, we issued a warrant to Hewlett-Packard to purchase
555,183 shares of our common stock at a purchase price of $7.07 per share, for
an aggregate purchase price of $3,925,143.81.
(p) On February 28, 2000, in connection with a release of collateral under
our credit agreement, we issued a warrant to Imperial Bank to purchase 14,144
shares of our Series C preferred stock at a purchase price of $7.07 per share,
for an aggregate purchase price of $99,998.08.
(q) On March 6, 2000, we issued a warrant to Hewlett-Packard to purchase
125,000 shares of our common stock for an exercise price of $5.00 per share,
for an aggregate purchase price of $625,000.
(r) Between December 31, 1999 and March 7, 2000, we issued 80,179 shares of
our common stock to our employees or other service providers at a range of
$.107 to $5.00 per share upon the exercise of stock options issued under our
1997 Stock Plan, for our approximate aggregate purchase price of $138,319.94.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1.1 Third Amended and Restated Certificate of Incorporation of
ClearCommerce Corporation.
3.1.2 Certificate of Correction to Third Amended and Restated Certificate of
Incorporation of the ClearCommerce Corporation.
3.1.3* Form of Fourth Amended and Restated Certificate of Incorporation of
ClearCommerce Corporation to be filed immediately prior to the closing
of the offering made pursuant to this Registration Statement.
3.2.1 Bylaws of ClearCommerce Corporation.
3.2.2* Form of Amended and Restated Bylaws of ClearCommerce Corporation to be
in effect after the closing of the offering made pursuant to this
Registration Statement.
4.1 See Exhibits 3.1.1, 3.1.2, and 3.1.3 for provisions of the Certificate
of Incorporation of ClearCommerce Corporation defining the rights of
the holders of common stock.
4.2 See Exhibits 3.2.1 and 3.2.2 for provisions of the Bylaws of the
Registrant defining the rights of the holder of common stock.
4.3* Specimen common stock certificate.
4.4 Third Amended and Restated Investors Rights Agreement, dated December
31, 1999, by and among the Registrant and certain stockholders of
ClearCommerce Corporation, as amended.
4.5 Warrant to purchase common stock issued to Gerald Youngblood.
4.6 ClearCommerce Corporation Stock Purchase Warrant issued to Imperial
Bank.
4.7 ClearCommerce Corporation Common Stock Purchase Warrant issued to
Hewlett Packard.
4.8 ClearCommerce Corporation Warrant to Purchase Common Stock issued to
Hewlett Packard.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between ClearCommerce Corporation
and each of its directors and officers.
10.2 1997 Stock Option/Stock Issuance Plan, as amended.
10.2.1 Form of Option Agreement under the 1997 Stock Option/Stock Issuance
Plan.
10.2.2 Form of Stock Purchase Agreement under the 1997 Stock Option/Stock
Issuance Plan.
10.2.3 Form of Stock Issuance Agreement under 1997 Stock Option/Stock
Issuance Plan.
10.3 2000 Stock Plan.
10.3.1 Form of Option Agreement under 2000 Stock Plan.
10.3.2 Form of Restricted Stock Purchase Agreement under 2000 Stock Plan.
10.4 2000 Employee Stock Purchase Plan.
10.4.1 Form of Subscription Agreement under the 2000 Employee Stock Purchase
Plan.
10.5 2000 Director Option Plan.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.5.1 Form of Option Agreement under 2000 Director Option Plan.
10.6+* Strategic Relationship and Software License Agreement between
Hewlett-Packard Company and ClearCommerce Corporation.
10.6.1+* Amendment #1 to Strategic Relationship and Software License Agreement
between Hewlett-Packard Company and ClearCommerce Corporation.
10.6.2+* Amendment #2 to Strategic Relationship and Software License Agreement
between Hewlett-Packard Company and ClearCommerce Corporation.
10.7+* License and Service Agreement dated June 30, 1998 between
ClearCommerce Corporation and Cardservice International.
10.7.1+* License Agreement Addendum A, dated December 31, 1998, between
ClearCommerce Corporation and Cardservice International.
10.7.2+* License Agreement Addendum B, dated March 31, 1999, between
ClearCommerce Corporation and Cardservice International.
10.7.3+* License Agreement Addendum C, dated March 6, 2000, between
ClearCommerce Corporation and Cardservice International.
10.7.4+* Value Added Reseller License Agreement dated June 30, 1998, between
ClearCommerce Corporation and Cardservice International.
10.8 Lease Agreement between CFH-FTAX Limited Partnership as Landlord, and
ClearCommerce Corporation, as tenant.
10.8.1 First Amendment to the Lease Agreement, dated April 9, 1999, between
CFH-FTAX Limited Partnership, as Landlord, and ClearCommerce
Corporation, as Tenant.
10.8.2 Second Amendment to the Lease Agreement, dated July 19, 1999, between
CFH-FTAX Limited Partnership, as Landlord, and ClearCommerce
Corporation, as Tenant.
10.9 Credit Agreement, dated July 20, 1999, between ClearCommerce
Corporation and Imperial Bank.
10.9.1 First Amendment to Credit Agreement between ClearCommerce Corporation
and Imperial Bank dated September 14, 1999.
10.9.2 Second Amendment to Credit Agreement between ClearCommerce
Corporation and Imperial Bank dated February 28, 2000.
10.10 Employment Agreement with Alan Scutt dated November 2, 1998.
10.11 Repurchase Agreement dated September 15, 1997 between ClearCommerce
Corporation and R.C. Estes.
10.11.1 First Amendment of Repurchase Agreement between ClearCommerce
Corporation and R.C. Estes dated March 26, 1999.
10.12 Repurchase Agreement dated September 15, 1997 between ClearCommerce
Corporation and Julie Fergerson.
10.12.1 First Amendment of Repurchase Agreement between ClearCommerce
Corporation and Julie Fergerson dated March 26, 1999.
10.13 Stock Subscription Agreement dated September 15, 1997 between
ClearCommerce Corporation and Robert J. Lynch.
10.13.1 First Amendment of Stock Subscription Agreement between ClearCommerce
Corporation and Robert Lynch dated March 26, 1999.
10.14 ClearCommerce Corporation 401(K) Plan.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.15 Common Stock Purchase Agreement dated March 6, 2000 between
ClearCommerce Corporation and Cardservice International, Inc.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see Page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment
+ Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment and the omitted portions have been separately filed
with the Commission.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referenced in
Item 14 of this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by a director, officer or controlling person in connection with the
securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Austin, State of Texas,
on the 7th day of March, 2000.
CLEARCOMMERCE CORPORATION
/s/ Robert J. Lynch
By:__________________________________
Robert J. Lynch
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert J. Lynch and Michael S. Grajeda and each
of them, his attorneys-in-fact, each with the power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that such attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully 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 Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert J. Lynch President, Chief Executive March 7, 2000
______________________________________ Officer and Director
Robert J. Lynch (Principal Executive
Officer)
/s/ Michael S. Grajeda Chief Financial Officer March 7, 2000
______________________________________ and Secretary (Principal
Michael S. Grajeda Financial Officer)
/s/ Victoria R. Richardson Controller (Principal March 7, 2000
______________________________________ Accounting Officer)
Victoria R. Richardson
/s/ James G. Treybig Chairman of the Board, March 7, 2000
______________________________________ Director
James G. Treybig
/s/ Scott D. Sandell Director March 7, 2000
______________________________________
Scott D. Sandell
/s/ Wendy L. Harrington Director March 7, 2000
______________________________________
Wendy L. Harrington
Director March 7, 2000
______________________________________
R. C. Estes
/s/ William H. McAleer Director March 7, 2000
______________________________________
William H. McAleer
/s/ Joseph C. Aragona Director March 7, 2000
______________________________________
Joseph C. Aragona
</TABLE>
II-6
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of ClearCommerce Corporation
In connection with our audits of the consolidated financial statements of
ClearCommerce Corporation and its subsidiary as of December 31, 1998 and 1999,
and for each of the three years in the period ended December 31, 1999, which
financial statements are included in the prospectus, we have also audited the
financial statement schedule listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
PRICEWATERHOUSECOOPERS LLP
Austin, Texas
February 25, 2000
S-1
<PAGE>
ClearCommerce Corporation
Schedule II - Valuation and Qualifying Accounts
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance Additions Balance
At Beginning to At End
Description of Year Allowance Year
----------- ------------ --------- -------
<S> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1997.................... $ 0 $ 2 $ 2
Year ended December 31, 1998.................... 2 19 21
Year ended December 31, 1999.................... 21 191 212
Valuation allowance on net deferred tax asset:
Year ended December 31, 1997.................... $ 0 $ 433 $ 433
Year ended December 31, 1998.................... 433 2,716 3,149
Year ended December 31, 1999.................... 3,149 5,268 8,417
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1.1 Third Amended and Restated Certificate of Incorporation of
ClearCommerce Corporation.
3.1.2 Certificate of Correction to Third Amended and Restated Certificate of
Incorporation of the ClearCommerce Corporation.
3.1.3* Form of Fourth Amended and Restated Certificate of Incorporation of
ClearCommerce Corporation to be filed immediately prior to the closing
of the offering made pursuant to this Registration Statement.
3.2.1 Bylaws of ClearCommerce Corporation.
3.2.2* Form of Amended and Restated Bylaws of ClearCommerce Corporation to be
in effect after the closing of the offering made pursuant to this
Registration Statement.
4.1 See Exhibits 3.1.1, 3.1.2, and 3.1.3 for provisions of the Certificate
of Incorporation of ClearCommerce Corporation defining the rights of
the holders of common stock.
4.2 See Exhibits 3.2.1 and 3.2.2 for provisions of the Bylaws of the
Registrant defining the rights of the holder of common stock.
4.3* Specimen common stock certificate.
4.4 Third Amended and Restated Investors Rights Agreement, dated December
31, 1999, by and among the Registrant and certain stockholders of
ClearCommerce Corporation, as amended.
4.5 Warrant to purchase common stock issued to Gerald Youngblood.
4.6 ClearCommerce Corporation Stock Purchase Warrant issued to Imperial
Bank.
4.7 ClearCommerce Corporation Common Stock Purchase Warrant issued to
Hewlett Packard.
4.8 ClearCommerce Corporation Warrant to Purchase Common Stock issued to
Hewlett Packard.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between ClearCommerce Corporation
and each of its directors and officers.
10.2 1997 Stock Option/Stock Issuance Plan, as amended.
10.2.1 Form of Option Agreement under the 1997 Stock Option/Stock Issuance
Plan.
10.2.2 Form of Stock Purchase Agreement under the 1997 Stock Option/Stock
Issuance Plan.
10.2.3 Form of Stock Issuance Agreement under 1997 Stock Option/Stock
Issuance Plan.
10.3 2000 Stock Plan.
10.3.1 Form of Option Agreement under 2000 Stock Plan.
10.3.2 Form of Restricted Stock Purchase Agreement under 2000 Stock Plan.
10.4 2000 Employee Stock Purchase Plan.
10.4.1 Form of Subscription Agreement under the 2000 Employee Stock Purchase
Plan.
10.5 2000 Director Option Plan.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.5.1 Form of Option Agreement under 2000 Director Option Plan.
10.6+* Strategic Relationship and Software License Agreement between
Hewlett-Packard Company and ClearCommerce Corporation.
10.6.1+* Amendment #1 to Strategic Relationship and Software License Agreement
between Hewlett-Packard Company and ClearCommerce Corporation.
10.6.2+* Amendment #2 to Strategic Relationship and Software License Agreement
between Hewlett-Packard Company and ClearCommerce Corporation.
10.7+* License and Service Agreement dated June 30, 1998 between
ClearCommerce Corporation and Cardservice International.
10.7.1+* License Agreement Addendum A, dated December 31, 1998, between
ClearCommerce Corporation and Cardservice International.
10.7.2+* License Agreement Addendum B, dated March 31, 1999, between
ClearCommerce Corporation and Cardservice International.
10.7.3+* License Agreement Addendum C, dated March 6, 2000, between
ClearCommerce Corporation and Cardservice International.
10.7.4+* Value Added Reseller License Agreement dated June 30, 1998, between
ClearCommerce Corporation and Cardservice International.
10.8 Lease Agreement between CFH-FTAX Limited Partnership as Landlord, and
ClearCommerce Corporation, as tenant.
10.8.1 First Amendment to the Lease Agreement, dated April 9, 1999, between
CFH-FTAX Limited Partnership, as Landlord, and ClearCommerce
Corporation, as Tenant.
10.8.2 Second Amendment to the Lease Agreement, dated July 19, 1999, between
CFH-FTAX Limited Partnership, as Landlord, and ClearCommerce
Corporation, as Tenant.
10.9 Credit Agreement, dated July 20, 1999, between ClearCommerce
Corporation and Imperial Bank.
10.9.1 First Amendment to Credit Agreement between ClearCommerce Corporation
and Imperial Bank dated September 14, 1999.
10.9.2 Second Amendment to Credit Agreement between ClearCommerce
Corporation and Imperial Bank dated February 28, 2000.
10.10 Employment Agreement with Alan Scutt dated November 2, 1998.
10.11 Repurchase Agreement dated September 15, 1997 between ClearCommerce
Corporation and R.C. Estes.
10.11.1 First Amendment of Repurchase Agreement between ClearCommerce
Corporation and R.C. Estes dated March 26, 1999.
10.12 Repurchase Agreement dated September 15, 1997 between ClearCommerce
Corporation and Julie Fergerson.
10.12.1 First Amendment of Repurchase Agreement between ClearCommerce
Corporation and Julie Fergerson dated March 26, 1999.
10.13 Stock Subscription Agreement dated September 15, 1997 between
ClearCommerce Corporation and Robert J. Lynch.
10.13.1 First Amendment of Stock Subscription Agreement between ClearCommerce
Corporation and Robert Lynch dated March 26, 1999.
10.14 ClearCommerce Corporation 401(K) Plan.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.15 Common Stock Purchase Agreement dated March 6, 2000 between
ClearCommerce Corporation and Cardservice International, Inc.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see Page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment
+ Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment and the omitted portions have been separately filed
with the Commission.
<PAGE>
EXHIBIT 3.1.1
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CLEARCOMMERCE CORPORATION,
a Delaware Corporation
The undersigned, Robert J. Lynch and Michael S. Grajeda, hereby
certify that:
ONE: Robert J. Lynch is the duly elected and acting Chief Executive
Officer and President and Michael S. Grajeda is the duly elected and acting
Secretary of said corporation.
TWO: The name of the corporation is ClearCommerce Corporation and
that the corporation was originally incorporated on September 21, 1995, under
the name Outreach Communications Corporation, pursuant to the Delaware General
Corporation Law. The certificate of incorporation of the corporation was
amended and restated on September 15, 1997, and the name of the corporation was
changed to ClearCommerce Corporation on February 25, 1998.
THREE: The Amended and Restated Certificate of Incorporation of said
corporation shall be amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is ClearCommerce Corporation.
ARTICLE II
The address of the registered office of this corporation in the State
of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, DE 19801 County of New Castle. The name of its
registered agent at such address is Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares that this corporation is authorized to issue
is 32,647,830 shares. 20,000,000 shares shall be Common Stock, par value $0.001
per share, and 12,647,830 shares shall be Preferred Stock, par value $0.001 per
share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by this Third Amended and Restated Certificate of
Incorporation may be issued from time to time in
<PAGE>
one or more series. The rights, preferences, privileges, and restrictions
granted to and imposed on the Series A Preferred Stock, which series shall
consist of Three Million One Hundred Forty-Seven Thousand Eight Hundred Thirty
(3,147,830) shares, the Series B Preferred Stock, which series shall consist of
Four Million Nine Hundred Thousand (4,900,000) shares and the Series C Preferred
Stock, which series shall consist of 4,600,000 shares, are as set forth below in
this Article IV(B).
1. Dividend Provisions. The holders of shares of Series A Preferred
-------------------
Stock, Series B Preferred Stock, and Series C Preferred Stock shall be entitled
to receive dividends ratably, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation, at the rate of 8% per share based on the Original Series A Issue
Price (as defined below), the Original Series B Issue Price (as defined below)
and the Original Series C Issue Price (as defined below), respectively, per
annum payable upon conversion of the Preferred Stock pursuant to Section 4 in
either cash or Common Stock, at the option of a majority of the Board of
Directors at the fair market value of the Common Stock as determined in good
faith by a majority of the Board of Directors. Such dividends shall be
cumulative (whether or not earned) beginning January 1, 1998 with respect to the
Series A Preferred Stock, the date the first Series B Preferred Stock was issued
(the "Series B Original Issue Date") with respect to the Series B Preferred
Stock, and the date that the first Series C Preferred Stock is issued (the
"Series C Original Issue Date") with respect to the Series C Preferred Stock.
The holders of the outstanding Preferred Stock can waive any dividend preference
that such holders shall be entitled to receive under this Section 1 upon the
affirmative vote or written consent of the holders of at least two-thirds of the
Preferred Stock then outstanding voting together as a single class.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
entitled to receive ratably in proportion to the preferential amount each such
holder is entitled to receive, prior and in preference to any distribution of
any of the assets of this corporation to the holders of Common Stock by reason
of their ownership thereof, an amount per share equal to the sum of (i) $1.07
for each outstanding share of Series A Preferred Stock (the "Original Series A
Issue Price"), $2.46 for each outstanding share of Series B Preferred Stock (the
"Original Series B Issue Price") and $7.07 for each outstanding share of Series
C Preferred Stock (the "Original Series C Issue Price"), and (ii) an amount
equal to accrued but unpaid dividends on such share. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of this
corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock, Series B Preferred Stock, and
Series C Preferred Stock in proportion to the preferential amount each such
holder would be entitled to receive.
(b) Upon the completion of the distribution required by
subsection (a) of this Section 2, the remaining assets of this corporation
available for distribution to stockholders shall be
-2-
<PAGE>
distributed among the holders of Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming full conversion of all
such Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock) until with respect to the holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, such holders shall have received
an aggregate of $3.21 per share plus unpaid dividends, $7.38 per share plus
unpaid dividends, respectively or $21.21 per share plus unpaid dividends,
respectively (as adjusted for any stock splits, stock dividends,
recapitalizations and the like) (including amounts paid pursuant to subsection
(a) of this Section 2) whereupon such shares shall be cancelled. Thereafter, if
assets remain in this corporation, the holders of the Common Stock of this
corporation shall receive all of the remaining assets of this corporation pro
rata based on the number of shares of Common Stock held by each.
(c) (i) For purposes of this Section 2, each of the following
"Conversion Events" shall be treated as a liquidation, dissolution or winding
up: (x) a merger, consolidation or share exchange of this corporation with or
into any other corporation or corporations, or the merger of any other
corporation or corporations into this corporation, in which consolidation,
merger or share exchange the stockholders of this corporation receive
distributions in cash or securities of another corporation or corporations as a
result of such consolidation, merger or share exchange, unless the stockholders
of this corporation hold at least 50% of the votes entitled to be cast by
holders of equity securities of the surviving corporation or (y) a sale of all
or substantially all of the assets of the corporation. Nothing in this
subsection shall limit the right of a holder of Preferred Stock to convert such
shares into Common Stock prior to the effective date of any such transaction.
(ii) In any of such events, if the consideration received by
this corporation is other than cash, the value of such consideration will be
deemed such considerations' fair market value. Any securities, unless expressly
provided for in a merger agreement, plan of reorganization or similar
acquisition agreement, shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through The
Nasdaq Stock Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty (30) day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by this
corporation and the holders of at least two-thirds (2/3) of the voting power of
all then outstanding shares of Preferred Stock voting together as a single
class.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a
-3-
<PAGE>
stockholder's status as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above in (A) (1), (2)
or (3) to reflect the approximate fair market value thereof, as mutually
determined by this corporation and the holders of at least two-thirds of the
voting power of all then outstanding shares of Preferred Stock voting together
as a single class.
(iii) In the event the requirements of this subsection 2(c)(i) or
(ii) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such time as
the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in subsection 2(c)(iv) hereof.
(iv) This corporation shall give each holder of record of
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and this corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after this corporation has given the first notice
provided for herein or sooner than ten (10) days after this corporation has
given notice of any material changes provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of
Preferred Stock that are entitled to such notice rights or similar notice rights
and that represent at least two-thirds of the voting power of all then
outstanding shares of Preferred Stock voting together as a single class.
3. Redemption.
----------
(a) At any time after the fifth anniversary of the Series C
Original Issue Date (the "First Redemption Date") but within ninety (90) days
after the receipt by this corporation of a written request from the holders of
not less than two-thirds of the then outstanding Preferred Stock that all or, if
less than all, a specified percentage of such holders' shares of Preferred Stock
(Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred
Stock, as the case may be) be redeemed (the aggregate of each such series of
shares requested to be redeemed are referred to herein as the "Requested Series
A," the "Requested Series B" and the "Requested Series C," respectively), and
concurrently with surrender by such holders of the certificates representing
such shares, this corporation shall, to the extent it may lawfully do so, redeem
in three (3) annual installments (the sixth and seventh anniversaries of the
Series C Original Issue Date being referred to herein as the "Second Redemption
Date" and the "Third Redemption Date," respectively and collectively with the
First Redemption Date the "Redemption Dates") the Requested Series A, the
Requested Series B and the Requested Series C by paying in cash therefor a sum
per share equal to $1.07 per share, $2.46 per share, and $7.07 per share, of
Series A Preferred Stock, Series B Preferred
-4-
<PAGE>
Stock and Series C Preferred Stock, respectively, (as adjusted for any stock
splits, stock dividends, recapitalizations or the like) plus all accrued but
unpaid dividends on such share (the "Series A Redemption Price," the "Series B
Redemption Price" and the "Series C Redemption Price," respectively). This
corporation shall redeem ratably (i) 50% of the then outstanding shares of
Requested Series A, Requested Series B and Requested Series C no later than 120
days after the First Redemption Date, (ii) 50% of the then outstanding shares of
Requested Series A, Requested Series B and Requested Series C on the Second
Redemption Date plus all shares of Requested Series A, Requested Series B and
Requested Series C that were not redeemed by the corporation on the First
Redemption Date and (iii) the remainder of the Requested Series A, Requested
Series B and Requested Series C on the Third Redemption Date. Any redemption of
Requested Series A, Requested Series B and Requested Series C effected pursuant
to this subsection 3(a) shall be made on a pro rata basis among the holders of
the Requested Series A, Requested Series B and Requested Series C in proportion
to the number of shares of Requested Series A, Requested Series B and Requested
Series C held by such holders to the total number of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock then outstanding.
(b) At least fifteen (15) but no more than thirty (30) days
prior to each Redemption Date, written notice shall be mailed first class
postage prepaid to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Requested
Series A, Requested Series B and Requested Series C to be redeemed at the
address last shown on the records of this corporation for such holder, notifying
such holder of the redemption to be effected on the applicable Redemption Date,
specifying the number of shares to be redeemed from such holder, the applicable
Redemption Date, the Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his, her or its certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
provided in subsection (3)(c), on or after each Redemption Date, each holder of
Requested Series A, Requested Series B and Requested Series C, as the case may
be, to be redeemed on such Redemption Date shall surrender to this corporation
the certificate or certificates representing such shares, in the manner and at
the place designated in the Redemption Notice, and thereupon the applicable
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(c) From and after each Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Requested Series A, Requested Series B or Requested Series C, as the
case may be, designated for redemption on such Redemption Date in the Redemption
Notice as holders of Requested Series A, Requested Series B or Requested Series
C, as the case may be, (except the right to receive the applicable Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares specified in such Redemption Notice, and
such shares shall not thereafter be transferred on the books of this corporation
or be deemed to be outstanding for any purpose whatsoever. If the funds of this
corporation legally available for redemption of shares of Requested Series A,
Requested Series B, and Requested Series C on a Redemption Date are insufficient
to redeem the total number of shares of Requested Series A, Requested Series B
and Requested Series C to be
-5-
<PAGE>
redeemed on such date, those funds that are legally available will be used to
redeem the maximum possible number of such shares ratably among the holders of
such shares to be redeemed such that each holder of a share of Requested Series
A, Requested Series B or Requested Series C as the case may be, receives the
same percentage of the applicable Series A Redemption Price, Series B Redemption
Price or Series C Redemption Price. The shares of Requested Series A, Requested
Series B or Requested Series C not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein and the dividend as
provided for in Section 1 shall continue to accrue with respect to such shares.
At any time thereafter when additional funds of this corporation are legally
available for the redemption of shares of Requested Series A, Requested Series B
or Requested Series C such funds will immediately be used to redeem the balance
of the shares that this corporation has become obliged to redeem on any
Redemption Date but that it has not redeemed.
4. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of this corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined (i) with respect to the Series A Preferred Stock
by dividing the Original Series A Issue Price by the Series A Conversion Price
applicable to such share, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion, (ii) with respect to the
Series B Preferred Stock by dividing the Original Series B Issue Price by the
Series B Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion;
and (iii) with respect to Series C Preferred Stock by dividing the Original
Series C Issue Price by the Series C Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Series A Conversion Price per share
shall be the Original Series A Issue Price. The initial Series B Conversion
Price per share shall be the Original Series B Issue Price. The initial Series
C Conversion Price shall be the Original Series C Issue Price. However, the
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price shall be subject to adjustment as set forth in subsection 4(d). The
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price shall be referred to herein collectively as the "Conversion Price."
(b) Automatic Conversion.
--------------------
(i) Each share of Preferred Stock shall automatically
be converted into shares of Common Stock at the Conversion Price at the time in
effect for such shares of Preferred Stock immediately upon the earlier of (i)
the closing date of this corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement on
Form S-1 or Form SB-2 under the Securities Act of 1933, as amended, the public
offering price of which was not less than $17.67 per share (adjusted to reflect
subsequent stock dividends, stock splits, recapitalizations and the like) and
$10,000,000 in gross proceeds or (ii) the date specified by written consent or
written agreement of the holders of two-thirds of the then outstanding shares of
Preferred Stock voting together as a single class.
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<PAGE>
(ii) In connection with a Conversion Event involving an automatic
conversion set forth in Section 4(b)(i), no holder of shares of Series C
Preferred Stock shall have any contractual liability for any breach of any
representation, warranty, covenant or other obligation for any loss, claim,
damage, expense, indemnification or other liability in connection with such
Conversion Event that is (A) not structured as a pro-rata obligation by each
such holder and limited to the consideration that such holder receives in such
Conversion Event and (B) allocated jointly and severally among the holders of
Series C Preferred Stock. It is understood that an escrow arrangement
established for indemnification purposes and pursuant to which each of the
corporation's stockholders places into escrow the same percentage of the
securities or other consideration to be received by such stockholder in
connection with a Conversion Event will be deemed to satisfy (A) and (B) above.
Notwithstanding anything to the contrary in these Articles, no term of this
Section 4(b)(ii) may be amended without the written consent of the Company,
Intel Corporation and the holders of a majority in interest of the Series C
Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Preferred Stock
-----------------------
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this corporation or of any transfer agent for the Preferred Stock, and
shall give written notice to this corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering Preferred Stock for conversion, be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock upon conversion
of Preferred Stock shall not be deemed to have converted such Preferred Stock
until immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Splits and
--------------------------------------------------------------
Combinations. The Conversion Price of each series of Preferred Stock shall be
- ------------
subject to adjustment from time to time as follows:
(i) (A) If this corporation shall issue, after the Series
C Original Issue Date, any Additional Stock (as defined below) without
consideration or for a consideration per share less than the applicable
Conversion Price for any series in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for a series in effect immediately
prior to each such issuance shall forthwith (except as otherwise provided in
this clause (i)) be adjusted to a price determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance (including
shares of Common Stock deemed to be issued pursuant to subsection
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<PAGE>
4(d)(i)(E)(1) or (2)) plus the number of shares of Common Stock that the
aggregate consideration received by this corporation for such issuance would
purchase at such Conversion Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(including shares of Common Stock deemed to be issued pursuant to subsection
4(d)(i)(E)(1) or (2)) plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for Preferred Stock
shall be made in an amount less than one cent per share, provided that any
adjustments that are not required to be made by reason of this sentence shall be
carried forward and shall be either taken into account in any subsequent
adjustment made prior to three (3) years from the date of the event giving rise
to the adjustment being carried forward, or shall be made at the end of three
(3) years from the date of the event giving rise to the adjustment being carried
forward. Except to the limited extent provided for in subsections (E)(3) and
(E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(d)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or after the
Series C Original Issue Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) (to the extent then
exercisable) of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by
this corporation upon the issuance of such options or rights plus the minimum
exercise price provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but
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<PAGE>
without taking into account potential antidilution adjustments) (to the extent
then convertible or exchangeable) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by this corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by this corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof (unless such options
or rights or convertible or exchangeable securities were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)),
the applicable Conversion Price of each series of Preferred Stock, to the extent
in any way affected by or computed using such options, rights or securities,
shall be recomputed to reflect such change, but no further adjustment shall be
made for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the conversion
or exchange of such securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
applicable Conversion Price of each series of Preferred Stock, to the extent in
any way affected by or computed using such options, rights or securities or
options or rights related to such securities (unless such options or rights were
merely deemed to be included in the numerator and denominator for purposes of
determining the number of shares of Common Stock outstanding for purposes of
subsection 4(d)(i)(A)), shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable securities
that remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued and
the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1) and
(2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 4(d)(i)(E)(3) or (4).
-9-
<PAGE>
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by this
corporation after the Purchase Date other than
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof; or
(B) shares of Common Stock (excluding shares repurchased
at cost by this corporation in connection with the termination of service)
issuable or issued to employees, consultants, directors or vendors (if in
transactions with primarily nonfinancing purposes) of this corporation directly
or pursuant to a stock option plan or restricted stock plan unanimously approved
by the Board of Directors of this corporation.
(iii) In the event this corporation should at any time or from
time to time after the Series C Original Issue Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in subsection 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any
time after the Series C Original Issue Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for each series of Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(i), then, in
each such case for the purpose of this subsection 4(e), the holders of Preferred
Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of this
corporation into which their shares of Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of this
corporation entitled to receive such distribution.
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<PAGE>
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination, reorganization or merger or sale of assets transaction provided for
elsewhere in this Section 4 or in Section 2) provision shall be made so that the
holders of Preferred Stock shall thereafter be entitled to receive upon
conversion of Preferred Stock the number of shares of stock or other securities
or property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of
Preferred Stock after the recapitalization to the end that the provisions of
this Section 4 (including adjustment of the applicable Conversion Price then in
effect and the number of shares purchasable upon conversion of each series of
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(g) No Impairment. This corporation shall not, by amendment of its
-------------
Third Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by this corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) No Fractional Shares and Certificates as to Adjustments.
-------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of Preferred Stock, and the number of shares
of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of any series of Preferred Stock pursuant to this
Section 4, this corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the applicable Conversion Price for such Preferred Stock
at the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property that at the time would be received upon the
conversion of a share of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other
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<PAGE>
securities or property, or to receive any other right, this corporation shall
mail to each holder of Preferred Stock, at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as shall be available to the holders of such Preferred
Stock, this corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its Third Amended and
Restated Certificate of Incorporation.
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given when received (if given by facsimile, electronic mail or personal
delivery) or if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
-------------
(a) General Voting Rights. The holder of each share of
---------------------
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted, and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of this corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an as-
converted basis (after aggregating all shares into which shares of Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
(b) Voting for the Election of Directors. The number of
------------------------------------
directors of the corporation shall be seven (7). As long as at least a majority
of Series A Preferred Stock originally issued remain outstanding, the holders of
such shares of Series A Preferred Stock shall be entitled to elect two (2)
directors of this corporation. As long as a majority of the Series B Preferred
Stock originally issued remain outstanding, the holders of such shares of Series
B Preferred Stock shall be entitled to elect two (2) directors of this
corporation. The holders of outstanding Common Stock shall be entitled to elect
two (2) directors of this corporation. The holders of Preferred Stock and Common
Stock (voting together as a single class and not as separate series, and on an
as-if-converted basis) shall be entitled to elect the remaining director of this
corporation.
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<PAGE>
In the case of any vacancy (other than a vacancy caused by
removal) in the office of a director occurring among the directors elected by
the holders of a class or series of stock pursuant to this Section 5(b), the
remaining directors so elected by that class or series may by affirmative vote
of a majority thereof (or the remaining director so elected if there be but one,
or if there are no such directors remaining, by the affirmative vote of the
holders of a majority of the shares of that class or series), elect a successor
or successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duty called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to written consent.
6. Protective Provisions. So long as any shares of Preferred Stock are
---------------------
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least two-
thirds of the then outstanding shares of Preferred Stock:
(a) sell, convey, or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) unless the
stockholders of this corporation who own more than fifty percent (50%) of the
voting power of this corporation immediately prior to such transaction will own
more than fifty percent (50%) of the voting power of the surviving corporation
or effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of this corporation is disposed of;
(b) amend, alter or change the Third Amended and Restated
Certificate of Incorporation or bylaws of this corporation;
(c) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock;
(d) authorize or issue, or effect any reclassification, or
obligate itself to issue, any other equity security, including any other
security convertible into or exercisable for any equity security, having a
preference over or on parity with any series of Preferred Stock with respect to
voting rights, dividends rights, redemption rights or liquidation preferences;
(e) declare or pay any dividends on its Common Stock or redeem,
purchase or otherwise acquire (or pay into or set aside for a sinking fund for
such purpose) any share or shares of Preferred Stock or Common Stock (otherwise
than by redemption of Preferred Stock in accordance with Section B.3 of Article
IV hereof or by conversion of Preferred Stock in accordance with Section B.4 of
Article IV hereof), or rights to purchase or acquire Preferred Stock or Common
Stock (whether by exercise, conversion or exchange); provided, however, that
this restriction shall not apply to the repurchase of shares of Common Stock in
an aggregate amount of $300,000 or less in
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<PAGE>
any twelve month period from employees, officers, directors, consultants or
other persons performing services for this corporation or any subsidiary
pursuant to agreements approved by the Board of Directors under which this
corporation has the option to repurchase such shares at cost upon the occurrence
of certain events, such as the termination of employment;
(f) amend the Third Amended and Restated Certificate of Incorporation
or bylaws of the corporation to increase, or otherwise take any action that
would have the effect of increasing or reducing, the authorized number of
directors of the corporation to more or less than seven (7);
(g) authorize or issue, or obligate itself to issue, any equity
security, including any other security convertible into or exercisable for any
equity security, of the corporation to any employee of the corporation, other
than up to 3,807,390 shares of Common Stock (or such other number as is
unanimously approved by this corporation's Board of Directors) that may be
reserved for issuance or otherwise issued under any stock option or other plan
or agreement of the corporation, including, but not limited to, the
corporation's 1997 Stock Option Plan;
(h) permit any subsidiary to issue or sell, or obligate itself to
issue or sell, except to the corporation or any wholly-owned subsidiary of the
corporation, any stock of such subsidiary;
(i) undertake any liquidation or winding up of the corporation;
(j) authorize or permit any material change in the principal business
of the corporation;
(k) authorize or enter into any (i) material license not in the
ordinary course of business that would grant exclusive rights to the
corporation's intellectual property assets to another or limit or inhibit the
corporation's ability to engage in the commercial use of its intellectual
property; or (ii) permit any encumbrance on the corporation's core intellectual
property assets; or
(l) amend any of the provisions set forth in this Subsection 6.
7. Status of Converted or Redeemed Stock. In the event any shares of
-------------------------------------
Preferred Stock shall be redeemed or converted pursuant to Section 3 or Section
4 hereof, the shares so converted or redeemed shall be cancelled and shall not
be issuable by this corporation. The Third Amended and Restated Certificate of
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in this corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
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<PAGE>
2. Liquidation Rights. Upon the liquidation, dissolution or winding up
------------------
of this corporation, the assets of this corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable except upon the
----------
agreement of this Corporation and a holder of Common Stock and subject to the
restrictions set forth in Article IV(B), Section 6.
4. Voting Rights. The holder of each share of Common Stock shall have
-------------
the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
Except as otherwise provided in, and subject to Section B.6 of Article IV
of, this Third Amended and Restated Certificate of Incorporation, in furtherance
and not in limitation of the powers conferred by statute, the Board of Directors
is expressly authorized to make, repeal, alter, amend and rescind any or all of
the bylaws of this corporation.
ARTICLE VI
Subject to Section B.6 of Article IV of this Third Amended and Restated
Certificate of Incorporation, the number of directors of this corporation shall
be fixed from time to time by a bylaw or amendment thereof duly adopted by the
Board of Directors or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the bylaws of
this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of this corporation.
ARTICLE IX
A director of this corporation shall, to the fullest extent permitted by
the Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be personally liable to this corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to this
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived any improper personal benefit. If the Delaware
-15-
<PAGE>
General Corporation Law is amended, after approval by the stockholders of this
Article, to authorize corporation action further eliminating or limiting the
personal liability of directors, then the liability of a director of this
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any amendment, repeal or modification of this Article IX, or the adoption
of any provision of this Second Amended and Restated Certificate of
Incorporation inconsistent with this Article IX, by the stockholders of this
corporation shall not apply to or adversely affect any right or protection of a
director of this corporation existing at the time of such amendment, repeal,
modification or adoption.
ARTICLE X
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) agents
of this corporation (and any other persons to which Delaware General Corporation
Law permits this corporation to provide indemnification) through bylaw
provisions, agreements with such agents or other persons, vote of stockholders
or disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable provisions of the
Delaware General Corporation Law (statutory or non-statutory), with respect to
actions for breach of duty to this corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection of a director,
officer, agent, or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such amendment,
repeal or modification.
ARTICLE XI
Subject to Section B.6 of Article IV of this Third Amended and Restated
Certificate of Incorporation, this corporation reserves the right to amend,
alter, change or repeal any provision contained in this Third Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by statute, and all rights conferred upon stockholders herein are granted
subject to this reservation.
* * *
FOUR: That thereafter said amendment and restatement was duly adopted in
accordance with the provisions of Section 242 and Section 245 of the Delaware
General Corporation Law by obtaining a majority of the outstanding Common Stock,
66.67% of the outstanding Preferred Stock, in favor of said amendment and
restatement in the manner set forth in Section 222 of the General Corporation
Law of Delaware.
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Third Amended and
Restated Certificate of Incorporation on December 30, 1999.
CLEARCOMMERCE CORPORATION
/s/ Robert J. Lynch
-----------------------------
Robert J. Lynch
Chief Executive Officer
Attest:
By: /s/ Michael S. Grajeda
------------------------------
Michael S. Grajeda
Secretary
-17-
<PAGE>
EXHIBIT 3.1.2
CERTIFICATE OF CORRECTION
OF THE THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CLEARCOMMERCE CORPORATION
FILED IN THE OFFICE OF THE SECRETARY
OF STATE OF DELAWARE ON DECEMBER 30, 1999
ClearCommerce Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is ClearCommerce Corporation.
2. That the Third Amended and Restated Certificate of Incorporation of
ClearCommerce Corporation (the "Restated Certificate") was filed by the
Secretary of State of Delaware on December 30, 1999 and that said Restated
Certificate requires correction as permitted by Section 103 of the General
Corporation Law of the State of Delaware (the "General Corporation Law").
3. The inaccuracies to be corrected in said instrument are as follows:
3. (a) At any time after the fifth anniversary of the Series C
Original Issue Date (the "First Redemption Date") but within ninety (90)
days after the receipt by this corporation of a written request from the
holders of not less than two-thirds of the then outstanding Preferred Stock
that all or, if less than all, a specified percentage of such holders'
shares of Preferred Stock (Series A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock, as the case may be) be redeemed (the
aggregate of each such series of shares requested to be redeemed are
referred to herein as the "Requested Series A," the "Requested Series B"
and the "Requested Series C," respectively), and concurrently with
surrender by such holders of the certificates representing such shares,
this corporation shall, to the extent it may lawfully do so, redeem in
three (3) annual installments (the sixth and seventh anniversaries of the
Series C Original Issue Date being referred to herein as the "Second
Redemption Date" and the "Third Redemption Date," respectively and
collectively with the First Redemption Date the "Redemption Dates") the
Requested Series A, the Requested Series B and the Requested Series C by
paying in cash therefor a sum per share equal to $1.07 per share, $2.46 per
share, and $7.07 per share, of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, respectively, (as adjusted for any
stock splits, stock dividends, recapitalizations or the like) plus all
accrued but unpaid dividends on such share (the "Series A Redemption
Price," the "Series B Redemption Price" and the "Series C Redemption
Price," respectively). This corporation shall redeem ratably (i) 50% of the
then outstanding shares of Requested Series A, Requested Series B and
Requested Series C no later than 120 days after the First Redemption Date,
(ii) 50% of the then outstanding shares of Requested Series A, Requested
Series B and Requested Series C on the Second Redemption Date plus all
shares of Requested Series A, Requested Series B and Requested Series C
that were not redeemed by the corporation on the First Redemption Date and
(iii) the remainder of the Requested Series A, Requested Series B and
Requested Series C on the Third Redemption Date. Any redemption of
Requested Series A, Requested Series B and Requested Series C effected
<PAGE>
pursuant to this subsection 3(a) shall be made on a pro rata basis among
the holders of the Requested Series A, Requested Series B and Requested
Series C in proportion to the number of shares of Requested Series A,
Requested Series B and Requested Series C held by such holders to the total
number of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock then outstanding.
4. (k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given when received (if given by facsimile, electronic mail or
personal delivery) or if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on
the books of this corporation.
4. The inaccuracies in the Restated Certificate were changed in the
following manner, in Section 3(a) "Series C Original Issue Date" was changed to
"Series B Original Issue Date" and in Section 4(k) the reference to "electronic
mail" notification was deleted. The portions of the instrument in corrected form
are as follows:
3. (a) At any time after the fifth anniversary of the Series B
Original Issue Date (the "First Redemption Date") but within ninety (90)
days after the receipt by this corporation of a written request from the
holders of not less than two-thirds of the then outstanding Preferred Stock
that all or, if less than all, a specified percentage of such holders'
shares of Preferred Stock (Series, A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock, as the case may be) be redeemed (the
aggregate of each such series of shares requested to be redeemed are
referred to herein as the "Requested Series A," the "Requested Series B"
and the "Requested Series C," respectively), and concurrently with
surrender by such holders of the certificates representing such shares,
this corporation shall, to the extent it may lawfully do so, redeem in
three (3) annual installments (the sixth and seventh anniversaries of the
Series B Original Issue Date being referred to herein as the "Second
Redemption Date" and the "Third Redemption Date," respectively and
collectively with the First Redemption Date the "Redemption Dates") the
Requested Series A, the Requested Series B and the Requested Series C by
paying in cash therefor a sum per share equal to $1.07 per share, $2.46 per
share, and $7.07 per share, of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, respectively, (as adjusted for any
stock splits, stock dividends, recapitalizations or the like) plus all
accrued but unpaid dividends on such share (the "Series A Redemption
Price," the "Series B Redemption Price" and the "Series C Redemption
Price," respectively). This corporation shall redeem ratably (i) 50% of the
then outstanding shares of Requested Series A, Requested Series B and
Requested Series C no later than 120 days after the First Redemption Date,
(ii) 50% of the then outstanding shares of Requested Series A, Requested
Series B and Requested Series C on the Second Redemption Date plus all
shares of Requested Series A, Requested Series B and Requested Series C
that were not redeemed by the corporation on the First Redemption Date and
(iii) the remainder of the Requested Series A, Requested Series B and
Requested Series C on the Third Redemption Date. Any redemption of
Requested Series A, Requested Series B and Requested Series C effected
pursuant to this subsection 3(a) shall be made on a pro rata basis among
the holders of the Requested Series A, Requested Series B and Requested
Series C in proportion to the number of shares of Requested Series A,
Requested Series B and Requested Series C held by such holders to the total
number of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock then outstanding.
<PAGE>
4. (k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given when received (if given by facsimile or personal delivery) or
if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of this
corporation.
<PAGE>
Executed on this 11/th/ day of January, 2000.
ClearCommerce Corporation
By: /s/ Michael S. Grajeda
------------------------------------------
Michael S. Grajeda, Chief Financial Officer
<PAGE>
EXHIBIT 3.2.1
BY-LAWS
OF
OUTREACH COMMUNICATIONS CORPORATION
A Delaware Corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE ONE: OFFICES
<C> <S> <C>
1.1 Registered Office and Agent..................... 1
1.2 Other Offices................................... 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting.................................. 1
2.2 Special Meeting................................. 1
2.3 Place of Meetings............................... 2
2.4 Notice.......................................... 2
2.5 Voting List..................................... 2
2.6 Quorum.......................................... 2
2.7 Required Vote; Withdrawal of Quorum............. 3
2.8 Method of Voting; Proxies....................... 3
2.9 Record Date..................................... 3
2.10 Conduct of Meeting.............................. 4
2.11 Inspectors...................................... 4
ARTICLE THREE: DIRECTORS
3.1 Management...................................... 5
3.2 Number; Qualification; Election; Term........... 5
3.3 Change in Number................................ 5
3.4 Removal......................................... 5
3.5 Vacancies....................................... 6
3.6 Meetings of Directors........................... 6
3.7 First Meeting................................... 6
3.8 Election of Officers............................ 6
3.9 Regular Meetings................................ 6
3.10 Special Meetings................................ 6
3.11 Notice.......................................... 6
3.12 Quorum; Majority Vote........................... 7
3.13 Procedure....................................... 7
3.14 Presumption of Assent........................... 7
3.15 Compensation.................................... 7
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE FOUR: COMMITTEES
<S> <C> <C>
4.1 Designation..................................... 8
4.2 Number; Qualification; Term..................... 8
4.3 Authority....................................... 8
4.4 Committee Changes............................... 8
4.5 Alternate Members of Committees................. 8
4.6 Regular Meetings................................ 8
4.7 Special Meetings................................ 8
4.8 Quorum; Majority Vote........................... 8
4.9 Minutes......................................... 9
4.10 Compensation.................................... 9
4.11 Responsibility.................................. 9
ARTICLE FIVE: NOTICE
5.1 Method.......................................... 9
5.2 Waiver.......................................... 9
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office.................. 10
6.2 Removal......................................... 10
6.3 Vacancies....................................... 10
6.4 Authority....................................... 10
6.5 Compensation.................................... 10
6.6 Chairman of the Board........................... 10
6.7 President....................................... 10
6.8 Vice Presidents................................. 11
6.9 Treasurer....................................... 11
6.10 Assistant Treasurers............................ 11
6.11 Secretary....................................... 11
6.12 Assistant Secretaries........................... 11
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares......................... 12
7.2 Replacement of Lost or Destroyed Certificates... 12
7.3 Transfer of Shares.............................. 12
7.4 Registered Stockholders......................... 12
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7.5 Regulations..................................... 12
7.6 Legends......................................... 13
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends....................................... 13
8.2 Reserves........................................ 13
8.3 Books and Records............................... 13
8.4 Fiscal Year..................................... 13
8.5 Seal............................................ 13
8.6 Resignations.................................... 13
8.7 Securities of Other Corporations................ 13
8.8 Telephone Meetings.............................. 14
8.9 Action Without a Meeting........................ 14
8.10 Invalid Provisions.............................. 15
8.11 Mortgages, etc.................................. 15
8.12 Headings........................................ 15
8.13 References...................................... 15
8.14 Amendments...................................... 15
</TABLE>
(iii)
<PAGE>
BY-LAWS
OF
OUTREACH COMMUNICATIONS CORPORATION
A Delaware Corporation
PREAMBLE
These by-laws are subject to, and governed by, the General Corporation Law
of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of Outreach Communications Corporation, a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these by-laws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and registered
---------------------------
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
-------------
places, both within and without the State of Delaware, as the board of directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
--------------
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be
---------------
called at any time by the Chairman of the Board, the President, the board of
directors, and shall be called by the President or the Secretary at the request
in writing of the stockholders of record of not less than ten percent of all
shares entitled to vote at such meeting or as otherwise provided by the
certificate of incorporation of the Corporation. A special meeting shall be
held on such date and at such time as shall be designated by the person(s)
calling the meeting and stated in the notice of the meeting or in a duly
executed waiver of notice of such meeting. Only such business shall be
transacted at a special
<PAGE>
meeting as may be stated or indicated in the notice of such meeting or in a duly
executed waiver of notice of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be held at
-----------------
any place within or without the State of Delaware designated by the board of
directors. A special meeting of stockholders may be held at any place within or
without the State of Delaware designated in the notice of the meeting or a duly
executed waiver of notice of such meeting. Meetings of stockholders shall be
held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and time
------
of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or the
officer or person(s) calling the meeting, to each stockholder of record entitled
to vote at such meeting. If such notice is to be sent by mail, it shall be
directed to such stockholder at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, in which
case it shall be directed to him at such other address. Notice of any meeting
of stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy and shall not, at the beginning of
such meeting, object to the transaction of any business because the meeting is
not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy.
2.5 Voting List. At least ten days before each meeting of stockholders,
-----------
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by him or through a transfer agent appointed by the board of directors, shall
prepare a complete list of stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each stockholder and number of
shares registered in the name of each stockholder. For a period of ten days
prior to such meeting, such list shall be kept on file at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting or a duly executed waiver of notice of such meeting or, if not
so specified, at the place where the meeting is to be held and shall be open to
examination by any stockholder during ordinary business hours. Such list shall
be produced at such meeting and kept at the meeting at all times during such
meeting and may be inspected by any stockholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares
------
entitled to vote on a matter, present in person or by proxy, shall constitute a
quorum at any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these by-laws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other than
announcement at the meeting (unless the board of directors, after such
2
<PAGE>
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided that, if the adjournment is for more than 30 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at
-----------------------------------
any meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of statute, the certificate of incorporation of the
Corporation, or these by-laws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
-------------------------
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each
such proxy shall be filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after three years from the date of
its execution, unless otherwise provided in the proxy. If no date is stated in
a proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
2.9 Record Date. (a) For the purpose of determining stockholders
-----------
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, for any such determination of
stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
3
<PAGE>
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
(iii) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law or these by-laws, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
in the State of Delaware, principal place of business, or such officer or agent
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by law or these by-laws, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
board of directors adopts the resolution taking such prior action.
2.10 Conduct of Meeting. The Chairman of the Board, if such office has
------------------
been filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, the President shall preside at all meetings of stockholders. The
Secretary shall keep the records of each meeting of stockholders. In the
absence or inability to act of any such officer, such officer's duties shall be
performed by the officer given the authority to act for such absent or non-
acting officer under these by-laws or by some person appointed by the meeting.
2.11 Inspectors. The board of directors may, in advance of any meeting
----------
of stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, and the validity and effect of proxies
and shall receive votes, ballots, or consents, hear and determine all challenges
and questions arising in connection with the
4
<PAGE>
right to vote, count and tabulate all votes, ballots, or consents, determine the
results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge, request, or matter
determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an inspector of an
election of directors. Inspectors need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
----------
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation of the Corporation, or these by-laws, the board
of directors may exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Term. The number of directors
-------------------------------------
which shall constitute the entire board of directors shall be not less than one.
The first board of directors shall consist of the number of directors named in
the certificate of incorporation of the Corporation or, if no directors are so
named, shall consist of the number of directors elected by the incorporator(s)
at an organizational meeting or by unanimous written consent in lieu thereof.
Thereafter, within the limits above specified, the number of directors which
shall constitute the entire board of directors shall be determined by resolution
of the board of directors or by resolution of the stockholders at the annual
meeting thereof or at a special meeting thereof called for that purpose. Except
as otherwise required by law, the certificate of incorporation of the
Corporation, or these by-laws, the directors shall be elected at an annual
meeting of stockholders at which a quorum is present. Directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote on the election of directors. Each
director so chosen shall hold office until the first annual meeting of
stockholders held after his election and until his successor is elected and
qualified or, if earlier, until his death, resignation, or removal from office.
None of the directors need be a stockholder of the Corporation or a resident of
the State of Delaware. Each director must have attained the age of majority.
3.3 Change in Number. No decrease in the number of directors
----------------
constituting the entire board of directors shall have the effect of shortening
the term of any incumbent director.
3.4 Removal. Except as otherwise provided in the certificate of
-------
incorporation of the Corporation or these by-laws, at any meeting of
stockholders called expressly for that purpose, any director or the entire board
of directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote on the election of directors;
provided, however, that so long as stockholders have the right to cumulate votes
in the election of directors pursuant to the certificate of incorporation of the
Corporation, if less than the entire board of directors is to be removed, no one
of the directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
5
<PAGE>
3.5 Vacancies. Except as otherwise provided in the certificate of
---------
incorporation of the Corporation or these by-laws, vacancies and newly-created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by the sole remaining director, and each director so chosen shall
hold office until the first annual meeting of stockholders held after his
election and until his successor is elected and qualified or, if earlier, until
his death, resignation, or removal from office. If there are no directors in
office, an election of directors may be held in the manner provided by statute.
If, at the time of filling any vacancy or any newly-created directorship, the
directors then in office shall constitute less than a majority of the whole
board of directors (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least 10% of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly-created directorships or to replace the
directors chosen by the directors then in office. Except as otherwise provided
in these by-laws, when one or more directors shall resign from the board of
directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in these by-laws with respect to the filling of other
vacancies.
3.6 Meetings of Directors. The directors may hold their meetings and
---------------------
may have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.7 First Meeting. Each newly elected board of directors may hold its
-------------
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.
3.8 Election of Officers. At the first meeting of the board of
--------------------
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors shall
----------------
be held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.10 Special Meetings. Special meetings of the board of directors shall
----------------
be held whenever called by the Chairman of the Board, the President, or any
director.
3.11 Notice. The Secretary shall give notice of each special meeting to
------
each director at least 24 hours before the meeting. Notice of any such meeting
need not be given to any director who
6
<PAGE>
shall, either before or after the meeting, submit a signed waiver of notice or
who shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the board of directors
need be specified in the notice or waiver of notice of such meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of directors,
---------------------
a majority of the directors fixed in the manner provided in these by-laws shall
constitute a quorum for the transaction of business. If at any meeting of the
board of directors there be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. Unless the act of a greater number is required by law,
the certificate of incorporation of the Corporation, or these by-laws, the act
of a majority of the directors present at a meeting at which a quorum is in
attendance shall be the act of the board of directors. At any time that the
certificate of incorporation of the Corporation provides that directors elected
by the holders of a class or series of stock shall have more or less than one
vote per director on any matter, every reference in these by-laws to a majority
or other proportion of directors shall refer to a majority or other proportion
of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall
---------
be transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of
the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the meeting. The board of directors shall keep regular minutes of
its proceedings which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is
---------------------
present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority to
------------
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
7
<PAGE>
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted by a
-----------
majority of the entire board of directors, designate one or more committees.
4.2 Number; Qualification; Term. Each committee shall consist of one or
---------------------------
more directors appointed by resolution adopted by a majority of the entire board
of directors. The number of committee members may be increased or decreased
from time to time by resolution adopted by a majority of the entire board of
directors. Each committee member shall serve as such until the earliest of (i)
the expiration of his term as director, (ii) his resignation as a committee
member or as a director, or (iii) his removal as a committee member or as a
director.
4.3 Authority. Each committee, to the extent expressly provided in the
---------
resolution establishing such committee, shall have and may exercise all of the
authority of the board of directors in the management of the business and
property of the Corporation except to the extent expressly restricted by law,
the certificate of incorporation of the Corporation, or these by-laws.
4.4 Committee Changes. The board of directors shall have the power at
-----------------
any time to fill vacancies in, to change the membership of, and to discharge any
committee.
4.5 Alternate Members of Committees. The board of directors may
-------------------------------
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
----------------
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
----------------
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a majority of
---------------------
the number of members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of the members
8
<PAGE>
present may adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present. The act of a majority of
the members present at any meeting at which a quorum is in attendance shall be
the act of a committee, unless the act of a greater number is required by law,
the certificate of incorporation of the Corporation, or these by-laws.
4.9 Minutes. Each committee shall cause minutes of its proceedings to
-------
be prepared and shall report the same to the board of directors upon the request
of the board of directors. The minutes of the proceedings of each committee
shall be delivered to the Secretary of the Corporation for placement in the
minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the board of
------------
directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
--------------
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of
------
the Corporation, or these by-laws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice
required or permitted to be given by telegram, telex, or telefax shall be deemed
to be delivered and given at the time transmitted with all charges prepaid and
addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
------
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these by-laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
9
<PAGE>
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation
------------------------------
shall be a President, a Secretary, and such other officers as the board of
directors may from time to time elect or appoint, including a Chairman of the
Board, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine), and a
Treasurer. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, until his death, or until he shall resign
or shall have been removed in the manner hereinafter provided. Any two or more
offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
6.2 Removal. Any officer or agent elected or appointed by the board of
-------
directors may be removed by the board of directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation
---------
(by death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such
---------
duties in the management of the Corporation as are provided in these by-laws or
as may be determined by resolution of the board of directors not inconsistent
with these by-laws.
6.5 Compensation. The compensation, if any, of officers and agents
------------
shall be fixed from time to time by the board of directors; provided, however,
that the board of directors may delegate the power to determine the compensation
of any officer and agent (other than the officer to whom such power is
delegated) to the Chairman of the Board or the President.
6.6 Chairman of the Board. The Chairman of the Board, if elected by the
---------------------
board of directors, shall have such powers and duties as may be prescribed by
the board of directors. Such officer shall preside at all meetings of the
stockholders and of the board of directors. Such officer may sign all
certificates for shares of stock of the Corporation.
6.7 President. Unless otherwise specified by the Board, the President
---------
shall be the chief executive officer of the Corporation and, subject to the
board of directors, he shall have general executive charge, management, and
control of the properties and operations of the Corporation in the ordinary
course of its business, with all such powers with respect to such properties and
operations as may be reasonably incident to such responsibilities. If the board
of directors has not elected a Chairman of the Board or in the absence or
inability to act of the Chairman of the Board, the President shall exercise all
of the powers and discharge all of the duties of the Chairman of the Board. As
between the Corporation and third parties, any action taken by the President in
the
10
<PAGE>
performance of the duties of the Chairman of the Board shall be conclusive
evidence that there is no Chairman of the Board or that the Chairman of the
Board is absent or unable to act.
6.8 Vice Presidents. Each Vice President shall have such powers and
---------------
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
---------
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as may
be prescribed by the board of directors, the Chairman of the Board, or the
President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such
--------------------
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Treasurer) shall exercise the powers of the Treasurer during
that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these by-laws, the
---------
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with the
Chairman of the Board or the President all certificates for shares of stock of
the Corporation, and he shall have charge of the certificate books, transfer
books, and stock papers as the board of directors may direct, all of which shall
at all reasonable times be open to inspection by any director upon application
at the office of the Corporation during business hours. He shall in general
perform all duties incident to the office of the Secretary, subject to the
control of the board of directors, the Chairman of the Board, and the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
---------------------
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
11
<PAGE>
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
-----------------------
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent, or
registrar who has signed, or whose facsimile signature has been placed upon, a
certificate has ceased to be such officer, transfer agent, or registrar before
such certificate is issued, such certificate may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue. The certificates shall be consecutively numbered and shall
be entered in the books of the Corporation as they are issued and shall exhibit
the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
---------------------------------------------
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
------------------
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to treat
-----------------------
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
-----------
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
12
<PAGE>
7.6 Legends. The board of directors shall have the power and authority
-------
to provide that certificates representing shares of stock bear such legends as
the board of directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
---------
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out of
--------
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to provide
for contingencies, to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the board of directors shall
consider beneficial to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
8.3 Books and Records. The Corporation shall keep correct and complete
-----------------
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by
-----------
the board of directors; provided, that if such fiscal year is not fixed by the
board of directors and the selection of the fiscal year is not expressly
deferred by the board of directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to
----
time may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may resign
------------
by so stating at any meeting of the board of directors or by giving written
notice to the board of directors, the Chairman of the Board, the President, or
the Secretary. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board, the
--------------------------------
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be
13
<PAGE>
held or owned by the Corporation and to make, execute, and deliver any waiver,
proxy, or consent with respect to any such securities.
8.8 Telephone Meetings. Stockholders (acting for themselves or through
------------------
a proxy), members of the board of directors, and members of a committee of the
board of directors may participate in and hold a meeting of such stockholders,
board of directors, or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
8.9 Action Without a Meeting. (a) Unless otherwise provided in the
------------------------
certificate of incorporation of the Corporation, any action required by the
Delaware General Corporation Law to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders (acting for themselves or
through a proxy) of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which the holders of all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent of stockholders
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered in the
manner required by this Section 8.9(a) to the Corporation, written consents
signed by a sufficient number of holders to take action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office, principal place
of business, or such officer or agent shall be by hand or by certified or
registered mail, return receipt requested.
(b) Unless otherwise restricted by the certificate of incorporation of the
Corporation or by these by-laws, any action required or permitted to be taken at
a meeting of the board of directors, or of any committee of the board of
directors, may be taken without a meeting if a consent or consents in writing,
setting forth the action so taken, shall be signed by all the directors or all
the committee members, as the case may be, entitled to vote with respect to the
subject matter thereof, and such consent shall have the same force and effect as
a vote of such directors or committee members, as the case may be, and may be
stated as such in any certificate or document filed with the Secretary of State
of the State of Delaware or in any certificate delivered to any person. Such
consent or consents shall be filed with the minutes of proceedings of the board
or committee, as the case may be.
14
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8.10 Invalid Provisions. If any part of these by-laws shall be held
------------------
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage,
---------------
or other instrument executed by the Corporation through its duly authorized
officer or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation against the
Corporation unless the resolutions, if any, of the board of directors
authorizing such execution expressly state that such attestation is necessary.
8.12 Headings. The headings used in these by-laws have been inserted
--------
for administrative convenience only and do not constitute matter to be construed
in interpretation.
8.13 References. Whenever herein the singular number is used, the same
----------
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments. These by-laws may be altered, amended, or repealed or
----------
new by-laws may be adopted by the stockholders or by the board of directors at
any regular meeting of the stockholders or the board of directors or at any
special meeting of the stockholders or the board of directors if notice of such
alteration, amendment, repeal, or adoption of new by-laws be contained in the
notice of such special meeting.
The undersigned, the Secretary of the Corporation, hereby certifies that
the foregoing by-laws were adopted by unanimous written consent by the directors
of the Corporation, effective as of September 21, 1995.
/s/ Julie Fergerson
_________________________________
Julie Fergerson, Secretary
15
<PAGE>
EXHIBIT 4.4
THIRD
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
CLEARCOMMERCE CORPORATION
DECEMBER 31, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Termination of Second Amended and Restated Agreement.................................... 2
2. Registration Rights..................................................................... 2
2.1 Definitions.................................................................... 2
2.2 Request for Registration....................................................... 3
2.3 Company Registration........................................................... 4
2.4 Obligations of the Company..................................................... 5
2.5 Furnish Information............................................................ 6
2.6 Expenses of Demand Registration................................................ 6
2.7 Expenses of Company Registration............................................... 6
2.8 Underwriting Requirements...................................................... 7
2.9 Delay of Registration.......................................................... 7
2.10 Indemnification................................................................ 7
2.11 Reports Under Securities Exchange Act of 1934.................................. 9
2.12 Form S-3 Registration.......................................................... 10
2.13 Assignment of Registration Rights.............................................. 11
2.14 "Market Stand-Off" Agreement Rights............................................ 12
2.15 Limitations on Subsequent Registration Rights.................................. 12
2.16 Termination of Registration Rights............................................. 13
3. Covenants of the Company................................................................ 13
3.1 Delivery of Financial Statements............................................... 13
3.2 Inspection..................................................................... 14
3.3 Termination of Information and Inspection Covenants; Post-IPO Information
Rights......................................................................... 14
3.4 Right of First Offer........................................................... 14
3.5 Assignments of Rights of First Refusal......................................... 16
3.6 Board of Directors............................................................. 16
3.7 Confidentiality and Non-Disclosure............................................. 19
3.8 Notice Rights in Corporate Events.............................................. 21
4. Miscellaneous........................................................................... 23
4.1 Successors and Assigns......................................................... 23
4.2 Governing Law.................................................................. 23
4.3 Counterparts................................................................... 24
4.4 Titles and Subtitles........................................................... 24
4.5 Notices........................................................................ 24
4.6 Expenses....................................................................... 24
4.7 Amendments and Waivers......................................................... 24
4.8 Severability................................................................... 24
4.9 Aggregation of Stock........................................................... 25
4.10 Entire Agreement............................................................... 25
</TABLE>
i
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SCHEDULE A Schedule of Series C Purchasers
SCHEDULE B Schedule of Founders
SCHEDULE C Schedule of Consenting Holders
ii
<PAGE>
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
December 31, 1999, by and among ClearCommerce Corporation, a Delaware
corporation (the "Company"), the Consenting Holders (as defined below) and the
investors listed on Schedule A hereto, each of which is herein referred to as a
"Series C Purchaser" and the founders listed on Schedule B hereto, each of whom
is herein referred to as a "Founder."
RECITALS
A. The Company and the persons listed on the signatures pages thereto are
entering into that certain Series C Preferred Stock Purchase Agreement as of the
date hereof (the "Series C Purchase Agreement"), pursuant to which the Company
proposes to sell up to an aggregate of 4,600,000 shares of its Series C
Preferred Stock (the "Series C Shares") to the Series C Purchasers.
B. The Company and the persons listed on the attached Schedule C hereto
who are the holders of the Company's Series A Preferred Stock (the "Series A
Holders") or holders of the Company's Series B Preferred Stock (the "Series B
Holders" and collectively with the Series A Holders, the "Consenting Holders"),
are each parties to that certain Second Amended and Restated Investors'
Agreement dated as of April 23, 1999 (the "Second Amended and Restated
Agreement").
C. The Company and the Consenting Holders desire that the Company sell
the Series C Shares to the Series C Purchasers pursuant to the Series C Purchase
Agreement, that the Company grant the Series C Purchasers the rights
contemplated herein and that the Second Amended and Restated Agreement be
amended and restated in its entirety as set forth herein.
D. Pursuant to Section 4.7 thereof, the Second Amended and Restated
Agreement may be amended upon the written consent of (i) the Company and (ii)
Consenting Holders holding at least two-thirds of the Registrable Securities (as
defined therein).
E. The Company and the undersigned Consenting Holders, holding not less
than the minimum number of shares required to amend the Second Amended and
Restated Agreement, hereby consent in writing to the amendment and restatement
in their entirety of the Second Amended and Restated Agreement and the adoption
of this Agreement as the sole agreement concerning the rights set forth in the
Second Amended and Restated Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties hereby agree as follows:
<PAGE>
1. Termination of Second Amended and Restated Agreement.
----------------------------------------------------
The Second Amended and Restated Agreement (as defined above) is hereby
terminated and is of no further force and effect and is amended and restated in
its entirety and superseded by this Third Amended and Restated Agreement.
2. Registration Rights.
-------------------
The Company covenants and agrees as follows:
2.1 Definitions.
-----------
For purposes of this Section 2:
(a) The term "Act" shall mean the Securities Act of 1933, as amended.
(b) The term "Form S-3" shall mean such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" shall mean any holder of outstanding
Registrable Securities which have not been sold to the public, but only if such
holder is a Series A Holder, a Series B Holder, a Series C Purchaser or an
assignee or transferee holding Registrable Securities to whom the rights under
this Agreement have been transferred in accordance with Section 2.13 hereof.
"Holder" will also include HP (as defined below) in the event that HP or any
other Holder exercises its rights under Sections 2.3 or 2.12.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "Preferred Stock" shall mean the Series A, Series B and
Series C Preferred Stock of the Company.
(f) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(g) The term "Registrable Securities" shall mean (i) the Common Stock
issuable or issued upon conversion of the Preferred Stock, (ii) the shares of
Common Stock issued to the Founders upon conversion of the Preferred Stock, and
(iii) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of the shares referenced in (i) and (ii) above, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his rights under this Section 2 are not assigned. For the purposes of
Sections 2.3 and 2.12, the term "Registrable Securities"
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<PAGE>
shall also include the shares of Common Stock issuable to the Hewlett-Packard
Company ("HP") upon the exercise or conversion of its warrant dated February __,
2000 to purchase 551,370 shares of Common Stock.
(h) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding that
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities that are, Registrable Securities.
(i) The term "SEC" shall mean the Securities and Exchange Commission.
2.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
December 30, 2004, or (ii) 180 days after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request from the Holders of fifty
percent (50%) of the Registrable Securities then outstanding that the Company
file a registration statement under the Act, covering at least a majority of the
Registrable Securities, then the Company shall:
(i) within ten (10) days of the receipt thereof, give written
notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within one
hundred twenty (120) days of the receipt of such request, the registration under
the Act of all Registrable Securities that the Holders request to be registered,
subject to the limitations of subsection 2.2(b).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 2.2(a) and the Company
shall include such information in the written notice referred to in subsection
2.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 2.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 2.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Securities that may be included in the
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<PAGE>
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 2.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred eighty
(180) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 2.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 2.2 and such registrations have been declared or
ordered effective;
(ii) Within six (6) months of the effective date of a
registration statement filed pursuant to this Section 2.2; or
(iii) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
registration filed pursuant to Section 2.3 or Section 2.12 hereof; provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective.
2.3 Company Registration.
--------------------
If (but without any obligation to do so) the Company from time to time
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 4.5, the Company shall, subject to the provisions of
Section 2.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered. The
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<PAGE>
Company may, in its sole discretion, abandon or delay any registration initiated
by the Company pursuant to this Section 2.3.
2.4 Obligations of the Company.
--------------------------
Whenever required under this Section 2 to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all practical efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use all practical efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Use all practical efforts to cause all such Registrable
Securities registered pursuant hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed.
5
<PAGE>
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
2.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 2 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.12 if, due to the operation of
subsection 2.5(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 2.12(b)(2).
2.6 Expenses of Demand Registration.
-------------------------------
All expenses other than underwriting discounts and commissions
incurred in connection with registrations, filings or qualifications pursuant to
Section 2.2, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees and fees and disbursements of
counsel for the Company shall be borne by the Company; provided, however, that
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 2.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 2.2; provided further, however, that if at the time of such withdrawal
the Holders have learned of a material adverse change in the condition, business
or prospects of the Company from that known to the Holders at the time of their
request and have withdrawn the request with reasonable promptness following
disclosure by the Company of such material adverse change, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 2.2. All other expenses of any registration proceeding
pursuant to Section 2.2 shall be borne pro-rata by the selling Holders.
2.7 Expenses of Company Registration.
--------------------------------
The Company shall bear and pay all expenses incurred in connection
with any registration, filing or qualification of Registrable Securities with
respect to the registrations pursuant to Section 2.3 for each Holder (which
right may be assigned as provided in Section 2.13), including (without
limitation) all registration, filing, and qualification fees, and printers and
accounting fees relating or apportionable thereto, but excluding underwriting
discounts and commissions relating to Registrable Securities.
6
<PAGE>
2.8 Underwriting Requirements.
-------------------------
In connection with any offering involving an underwriting of shares of
the Company's capital stock, the Company shall not be required under Section 2.3
to include any of the Holders' securities in such underwriting unless they
accept the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders) but in no event shall (i) the amount
of securities of the selling Holders included in the offering be reduced below
fifty percent (50%) of the total amount of securities included in such offering,
unless such offering is the initial public offering of the Company's securities,
in which case the selling Holders may be excluded if the underwriters make the
determination described above and no other stockholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a stockholder
exercising a demand registration right similar to that granted in Section 2.2 be
excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder that is a holder of
Registrable Securities and that is a partnership or corporation, the partners,
affiliated partnerships, retired partners and stockholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder," and any pro-rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.
2.9 Delay of Registration.
---------------------
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.10 Indemnification.
---------------
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder, and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
7
<PAGE>
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 2.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 2.10(b) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 2.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder
(which consent shall not be unreasonably withheld); provided that in no event
shall any indemnity under this subsection 2.10(b) exceed the net proceeds from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however,
8
<PAGE>
that an indemnified party (together with all other indemnified parties that may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.10.
(d) If the indemnification provided for in this Section 2.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided that, in no event will the liability of any Holder
under this Section 2.10(d) exceed the net proceeds from the offering received by
such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
2.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 2, and otherwise.
2.11 Reports Under Securities Exchange Act of 1934.
---------------------------------------------
With a view to making available to the Holders the benefits of Rule
144 promulgated under the Act and any other rule or regulation of the SEC that
may at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:
9
<PAGE>
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the effective date of
the first registration statement filed by the Company for the offering of its
securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
2.12 Form S-3 Registration.
---------------------
In case the Company shall receive a written request from the Holders
of twenty-five percent (25%) of the Registrable Securities then outstanding that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 2.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$500,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith
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<PAGE>
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after receipt of the request of the Holder or Holders
under this Section 2.12; provided, however, that the Company shall not utilize
this right more than once in any twelve (12) month period; (4) if the Company
has, within the twelve (12) month period preceding the date of such request,
already effected two (2) registrations on Form S-3 for the Holders pursuant to
this Section 2.12; or (5) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 2.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company. Registrations effected pursuant to this Section 2.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 2.2 or 2.3, respectively.
2.13 Assignment of Registration Rights.
---------------------------------
The rights to cause the Company to register Registrable Securities
pursuant to this Section 2 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such securities who,
after such assignment or transfer, holds at least 100,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), provided: (a) the Company is, within
a reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of
Section 2.14 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners, affiliated partnerships or retired partners of such partnership
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 2. The share limitations of this Section 2.13 shall not
apply to any transferee or assignee of a Holder who is (a) a partner or retired
partner of any holder that is a partnership, (b) a member of the immediate
family or a trust for the benefit of any
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holder that is an individual, (c) an entity controlling, controlled by or under
common control with any holder that is not an individual or (d) a constituent
member of any holder that is a limited liability company; provided, however,
that such transferee or assignee agrees to be bound by the provisions of this
Agreement.
2.14 "Market Stand-Off" Agreement Rights.
-----------------------------------
Each Investor hereby agrees that, during the period of duration
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company that covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) such market stand-off time period shall not exceed one hundred
eighty (180) days; and
(c) all directors, officers, Holders of Registrable Securities and
all other 5% holders of equity securities of the Company enter into lock-up
agreements on the same terms.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
2.15 Limitations on Subsequent Registration Rights.
---------------------------------------------
From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of two-thirds of the
outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to include such securities in any registration
filed under Section 2.2 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of its securities will not
reduce the amount of the Registrable Securities of the Holders which is included
or (b) to make a demand registration which could result in such registration
statement being declared effective prior to the earlier of either of the dates
set forth in subsection 2.2(a) or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to Section 2.2.
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2.16 Termination of Registration Rights.
-----------------------------------
No Holder shall be entitled to exercise any right provided for in this
Section 2 after five (5) years following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the initial firm commitment underwritten offering of its
securities to the general public or, as to any Holder whose aggregate holdings
of the Company's capital stock are less than 1% of the then outstanding capital
stock, such earlier time at which Registrable Securities held by such Holder can
be sold without registration in compliance with Rule 144(k) of the Act.
3. Covenants of the Company.
------------------------
3.1 Delivery of Financial Statements.
--------------------------------
The Company shall deliver to each Investor who holds at least 100,000
shares of Registrable Securities (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations):
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within thirty (30) days
after the end of each of the first three (3) quarters of each fiscal year of the
Company, an unaudited income statement and statement of cash flows for such
fiscal quarter and an unaudited balance sheet and a statement of stockholder's
equity as of the end of such fiscal quarter;
(c) as soon as practicable, but in any event within thirty (30) days
of the end of each month, an unaudited income statement and statement of cash
flows and balance sheet for and as of the end of such month, in reasonable
detail;
(d) as soon as practicable, but in any event at least thirty (30)
days prior to the end of each fiscal year, a budget for the next fiscal year,
prepared on a monthly basis, including balance sheets and statements of cash
flows, for such months, and, as soon as prepared, any other budgets or revised
budgets prepared by the Company; and
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 3.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such financials
were prepared in accordance with GAAP consistently applied with prior practice
for earlier periods (with the exception of footnotes that may be required by
GAAP) and fairly present the financial condition of the Company and its results
of operation for the period specified, subject to year-end audit adjustment.
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3.2 Inspection.
----------
So long as an Investor holds at least 100,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), the Company shall permit such
Investor, at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor and shall provide to such
investor a monthly summary of the Company's activities within thirty (30) days
of the end of the month; provided, however, that the Company shall not be
obligated pursuant to this Section 3.2 to provide access to any information that
it reasonably considers to be a trade secret or similar confidential information
and shall not be obligated to provide such information to any investor whose
principal business is not the management of investment funds.
3.3 Termination of Information and Inspection Covenants; Post-IPO
-------------------------------------------------------------
Information Rights.
------------------
The covenants set forth in Section 3.1 and Section 3.2 shall terminate
as to Investors and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur. Notwithstanding the foregoing, following the
first to occur of the events specified in the preceding sentence, for so long as
Intel Corporation ("Intel") is a stockholder of the Company, the Company shall
deliver to Intel copies of the Company's 10-K's, 10-Q's, 8-K's and Annual
Reports to Stockholders promptly after such documents are filed with the
Securities and Exchange Commission.
3.4 Right of First Offer.
--------------------
Subject to the terms and conditions specified in this paragraph 3.4,
the Company hereby grants to each Major Investor (as hereinafter defined) a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 3.4, a Major Investor
shall mean any Investor and any Founder that holds 100,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations). A Major Investor includes any
partners and affiliates of a Major Investor and a Major Investor shall be
entitled to apportion the right of first offer hereby granted to it among itself
and its partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for, any shares of any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
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(a) The Company shall deliver a notice by certified mail ("Notice")
to the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within twenty
(20) calendar days after delivery of the Notice, the Major Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of such Shares that equals the proportion that the number of shares
of Common Stock issued and held, or issuable upon conversion of the Preferred
Stock then held, by such Major Investor bears to the total number of shares of
Common Stock of the Company then outstanding (assuming full conversion, exercise
and exchange of all convertible, exercisable or exchangeable securities). The
Company shall promptly, in writing, inform each Major Investor which purchases
all the shares available to it (each, a "Fully Exercising Investor") of any
other Major Investor's failure to do likewise. During the ten-day period
commencing after delivery of notification of such information to the Fully
Exercising Investors, each Fully Exercising Investor shall be entitled to obtain
that portion of the Shares for which Major Investors were entitled to subscribe
but which were not subscribed for by the Major Investors which is equal to the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of Preferred Stock then held, by such Fully Exercising
Investor bears to the total number of shares of Common Stock issued and held, or
issuable upon conversion of the Preferred Stock then held, by all Fully
Exercising Investors who wish to purchase some of the unsubscribed shares.
(c) If all Shares that Major Investors are entitled to obtain
pursuant to subsection 3.4(b) are not elected to be obtained as provided in
subsection 3.4(b) hereof, the Company may, during the sixty (60) day period
following the expiration of the ten-day or twenty-day period provided in
subsection 3.4(b) hereof, as the case may be, offer the remaining unsubscribed
portion of such Shares to any person or persons at a price not less than, and
upon terms no more favorable to the offeree than those specified in the Notice.
If the Company does not enter into an agreement for the sale of the Shares
within such period, or if the transaction contemplated by such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 3.4 shall not be
applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) pursuant to an option or incentive plan or arrangement unanimously
approved by the Board of Directors to employees or directors of or consultants
to the Company for the primary purpose of soliciting or retaining their
services; provided that any shares so issued or sold shall, to the extent
vested, be subject to rights of first refusal in favor of the Company and its
assignees so long as no shares of the Company are sold in an offering registered
under the Act, (ii) to or after consummation of a bona fide, firmly underwritten
public offering of shares of Common Stock, registered under the Act pursuant to
a registration statement on Form S-1 or SB-2, at an offering price of at least
$17.67 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $10,000,000 in gross proceeds, (iii)
the issuance of securities pursuant to the
15
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conversion, exercise or exchange of convertible, exercisable or exchangeable
securities or (iv) the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise.
3.5 Assignments of Rights of First Refusal.
--------------------------------------
So long as a majority of the shares of Preferred Stock are
outstanding, the Company agrees that, as a condition to issuing any shares of
Common Stock to any employee or director of the Company under the Company's 1997
Stock Option Plan, or any successor or subsequent stock option or stock purchase
plan adopted by the Company (each a "Plan"), such employee or director shall be
required to enter into an agreement with the Company which shall provide the
Company, or any assignee or assignees of the Company, with a right of first
refusal to purchase any shares which such employee or director has acquired a
vested interest in and which such employee or director proposes to sell to a
person other than the Company. The Company further covenants and agrees that,
in the event (i) an employee or director who has vested in shares purchased
under a Plan proposes to sell such shares to a person other than the Company,
(ii) the Company has not sold shares of the Company's capital stock in an
offering registered under the Act and (iii) the Company has determined not to
elect to exercise its right of first refusal to purchase all of the vested
shares that are proposed to be sold by such employee or director (such balance
of the shares not elected to be purchased by the Company being the "Available
Shares"), then the Company agrees that it shall assign its right of first
refusal to purchase the Available Shares to the Major Investors by notice to the
Major Investors made at least three (3) business days prior to the expiration of
the Company's right of first refusal, and each Major Investor shall thereafter
have the right to elect to exercise such right of first refusal to purchase its
proportionate share of the Available Shares based on the number of shares of
Registrable Securities then held by such Major Investor bears to the aggregate
number of shares of Registrable Securities then held by all Major Investors.
The exercise of such right of first refusal by the Major Investors shall be made
subject to and in compliance with the terms applicable to the right of first
refusal in favor of the Company as set forth in the applicable agreements used
under the Plan.
3.6 Board of Directors.
------------------
(a) With respect to those two (2) members of the Company's Board of
Directors that the Third Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides are to be elected by the holders of
Series A Preferred Stock, the parties hereby agree to vote all of their shares
of Series A Preferred Stock now owned or hereafter acquired in favor of the
election of (i) one designee from Internet Capital Group, LLC and (ii) one
designee of Austin Ventures V, L.P.;
(b) With respect to those two (2) members of the Company's Board of
Directors that the Certificate of Incorporation provides are to be elected by
the holders of Series B Preferred Stock, the parties hereby agree to vote their
shares of Series B Preferred Stock now owned or hereafter acquired in favor of
the election of (i) one designee of Voyager Capital
16
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Fund I, L.P. and Voyager Founders Fund, L.P. and (ii) one designee of New
Enterprise Associates VIII, Limited Partnership;
(c) With respect to those two (2) members of the Company's Board of
Directors that the Certificate of Incorporation provides are to be elected by
the holders of Common Stock, the parties hereby agree to vote all of their
shares of Common Stock now owned or hereafter acquired in favor of the election
of (1) the Chief Executive Officer of the Company (or, if there is no Chief
Executive Officer of the Company, the President), which shall initially be
Robert J. Lynch, and (2) a person designated by the holders of at least a
majority of the Common Stock who shall initially be R.C. Estes.
(d) With respect to the seventh (7/th/) member of the Company's Board
of Directors that the Certificate of Incorporation provides is to be elected by
the holders of Common Stock and Preferred Stock (voting together as a single
class and on an as-converted basis) (the "At Large Director"), the parties
hereby agree to vote all of their shares of Common Stock and Preferred Stock now
owned or hereafter acquired in favor of the election of Jimmy Treybig or such
other person as shall be acceptable to at least four (4) of the other members of
the Board of Directors.
(e) Any director may be removed during his or her term of office with
cause by the class or series of shares who are entitled to elect such director
or in accordance with the applicable laws. Any director who represents the
holders of Series C Preferred Stock, Series B Preferred Stock, Series A
Preferred Stock, or of Common Stock may be removed without cause by a majority
vote of the Series C Preferred Stock, Series B Preferred Stock, Series A
Preferred Stock or of the Common Stock, respectively. In addition, in the event
that any employee director's employment is terminated for cause (as defined
below) or such employee director ceases employment voluntarily, the parties
hereto shall support a motion to remove such former employee director from his
or her position as a director of the Company and shall vote their shares in
favor of such removal. The parties shall not thereafter vote to elect such
removed director to thereafter be a director of the Company. "Cause" shall be
defined as the commission of a felony or act of moral turpitude, material
violation of proprietary information and inventions agreement (or similar
agreement), gross negligence or willful disregard of such director's obligations
as a member of the Company's Board of Directors on a repeated basis.
(f) New Enterprise Associates VIII, Limited Partnership shall also be
entitled to have one observer attend the meetings of the Company's Board of
Directors in addition to the director designated pursuant to Section 3.6(b).
(g) Notice of Elections.
-------------------
(i) For all elections other than the election of the At Large
Director, the Company shall give written notice to each of (w) the holders of
the Series C Preferred Stock, (x) the holders of the Series B Preferred Stock
then outstanding, (y) the holders of the Series A Preferred Stock then
outstanding and (z) the holders of the Common Stock then outstanding, informing
them of any election of the Board of Directors at least twenty (20) days prior
to such election. Within five (5) days of such notice, such parties shall
furnish written notice to each
17
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other and to the Company of the name of the persons designated by it to serve as
a director. In the absence of such notice, the respective directors then serving
and previously designated by the holders of Series B Preferred Stock in
accordance with subsection (b) hereof, the holders of Series A Preferred Stock
in accordance with subsection (a) hereof and the holders of Common Stock in
accordance with subsection (c) hereof, respectively, shall be re-elected.
(ii) Notwithstanding the foregoing, however, with respect to an
election of At Large Director pursuant to subsection (d) above, the Company
shall give written notice to each of (w) the holders of the Series C Preferred
Stock, (x) the holders of the Series B Preferred Stock then outstanding, (y) the
holders of Series A Preferred Stock then outstanding and (z) the holders of the
Common Stock then outstanding, informing them of the election of the At Large
Director at least ten (10) days prior to such election. Within five (5) days of
such notice, the Board of Directors of the Company shall furnish written notice
to the holders of the Series C Preferred Stock, the Series B Preferred Stock,
the Series A Preferred Stock, the Common Stock, the Founders and the Company of
the name of the person designated by at least four (4) members of the Board of
Directors to serve as the At Large Director.
(h) Subsequent Stockholders. It shall be a condition to transfer of
-----------------------
any or all of the Registrable Securities held by a party hereto that the
transferee of such securities agrees in writing to be bound by this Section 3.6.
(i) Legend on Stock Certificates. The certificates representing the
----------------------------
shares shall have the following legend marked thereon:
THE VOTING OF THE SHARES REPRESENTED HEREBY IS SUBJECT TO THE
TERMS OF AN INVESTORS RIGHTS AGREEMENT AS IT MAY BE AMENDED FROM
TIME TO TIME THAT CONTAINS REQUIREMENTS AS TO VOTING OF THESE
SHARES. A COPY OF SUCH AGREEMENT MAY BE EXAMINED AT THE PRINCIPAL
OFFICE OF THE CORPORATION.
(j) Company Obligations. The Company shall take all commercially
-------------------
reasonable actions to assure compliance with the provisions of subsections (h)
and (i). The Company, the Founders and each other Holder agree that no person
shall acquire any Registrable Securities from any Founder or Investor, as the
case may be, unless such person becomes a party to this Section 3.6 of this
Agreement. The Company shall forthwith notify all parties to this Agreement of
the name and address of any additional party.
(k) Specific Enforcement. It is agreed and understood that monetary
--------------------
damages would not adequately compensate an injured party for the breach of
subsection 3.6 of this Agreement by any party, that this subsection 3.6 of this
Agreement shall be specifically enforceable, and that any breach or threatened
breach of this Agreement shall be the proper subject of a temporary or permanent
injunction or restraining order. Further, each party hereto waives any claim or
defense that there is an adequate remedy at law for such breach or threatened
breach.
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(l) Termination. This Section 3.6 shall terminate in its entirety
-----------
and be of no further force or effect upon the earlier to occur of (i) the sale
of securities pursuant to a registration statement filed by the Company under
the Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated, the public offering price of
which was not less than $17.67 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations), and $10,000,000 in gross
proceeds, or (ii) the date upon which the Company first becomes subject to the
periodic reporting requirements of Sections 13(a), 12(g) or 15(d) of the 1934
Act.
3.7 Board Observer.
--------------
So long as Intel, together with Middlefield Ventures and Intel's
affiliates, holds at least 200,000 shares of Series C Preferred Stock of the
Company (such number to be proportionately adjusted for stock splits, stock
dividends and similar events) or shares issuable upon the conversion of the
Series C Preferred Stock, the Company will permit a representative of Intel (the
"Observer") who is reasonably acceptable to the Company, to attend all meetings
of the Company's Board of Directors (the "Board") and all committees thereof
(whether in person, telephonic or other) in a non-voting, observer capacity and
shall provide to Intel, concurrently with the members of the Board, and in the
same manner, notice of such meeting and a copy of all materials provided to such
members; provided, however, that the Company reserves the right to withhold any
information and to exclude the Observer from any meeting or portion thereof if
the Board reasonably believes upon the advice of counsel that access to such
information or attendance at such meeting would: (a) involve a conflict of
interest regarding any material issue for the Company, (b) be necessary in order
to meet or protect any fiduciary obligations of the Board, or (c) adversely
affect attorney-client privilege between the Company and its counsel. In
clarification of the foregoing, a conflict of interest for the Company shall not
exist with respect to any Board materials, any meeting or portion thereof where
there is discussion or consideration of any bona fide offer relating to a
proposed Corporate Event (as defined below) unless and until such time as Intel
has made a competing offer with respect to such Corporate Event. Exchanges of
confidential and proprietary information between the Company and the Observer
shall be governed by nondisclosure agreements entered into between the Company
and Intel. Specifically, exchanges of confidential and proprietary information
between the Company and the Intel Observer shall be governed by the terms of the
Corporate Non-Disclosure Agreement No. 128210 dated January 25, 1999, executed
by the Company and Intel, and any Confidential Information Transmittal Records
provided in connection therewith.
The Company acknowledges that Intel, including without limitation, the
Observer appointed by Intel will likely have, from time to time, information
that may be of interest to the Company ("Intel Information") regarding a wide
variety of matters including, by way of example only, (a) Intel's technologies,
plans and services, and plans and strategies relating thereto, (b) current and
future investments Intel has made, may make, may consider or may become aware of
with respect to other companies and other technologies, products and services,
including, without limitation, technologies, products and services that may be
competitive with the Company's, and (c) developments with respect to the
technologies, products and services, and plans and strategies relating thereto,
of other companies, including, without limitation,
19
<PAGE>
companies that may be competitive with the Company. The Company recognizes that
a portion of such Intel Information may be of interest to the Company. Such
Intel Information may or may not be known by the Observer. The Company, as a
material part of the consideration for this Agreement, agrees that Intel and its
Observer shall have no duty to disclose any Intel Information to the Company or
permit the Company to participate in any projects or investments based on any
Intel Information, or to otherwise take advantage of any opportunity that may be
of interest to the Company if it were aware of such Intel Information, and
hereby waives, to the extent permitted by law, any claim based on the corporate
opportunity doctrine or otherwise that could limit Intel's ability to pursue
opportunities based on such Intel Information or that would require Intel or
Observer to disclose any such Intel Information to the Company or offer any
opportunity relating thereto to the Company.
This Section 3.7 shall terminate in its entirety and be of no further
force or effect upon the earlier to occur of (i) the sale of securities pursuant
to a registration statement filed by the Company under the Act in connection
with the firm commitment underwritten offering of its securities to the general
public is consummated, the public offering price of which was not less than
$17.67 per share (adjusted to reflect subsequent stock dividends, stock splits
or recapitalizations), and $10,000,000 in gross proceeds, or (ii) the date upon
which the Company first becomes subject to the periodic reporting requirements
of Sections 13(a), 12(g) or 15(d) of the 1934 Act.
3.8 Confidentiality and Non-Disclosure.
----------------------------------
(a) Disclosure of Terms. The terms and conditions of this Agreement,
-------------------
the Series C Purchase Agreement, and the Third Amended and Restated Right of
First Refusal and Co-Sale Agreement (collectively, the "Financing Terms"),
including their existence, shall be considered confidential information and
shall not be disclosed by any party hereto (except Intel) to any third party
except in accordance with the provisions set forth below.
(b) Press Releases, Etc. Within sixty (60) days of the Closing, the
--------------------
Company may issue a press release disclosing that Intel has invested in the
Company; provided that (a) the release does not disclose any of the Financing
Terms, (b) the press release discloses only the entire amount invested in the
investment round, without disclosing the amount invested by Intel or any other
Investor, and (c) the final form of the press release is approved in advance in
writing by Intel. Intel's name and the fact that Intel is an investor in the
Company can be included in a reusable press release boilerplate statement, so
long as Intel has given the Company its initial approval of such boilerplate
statement and the boilerplate statement is reproduced in exactly the form in
which it was approved. No other announcements regarding Intel in a press
release, conference, advertisement, announcement, professional or trade
publication, mass marketing materials or otherwise to the general public may be
made without Intel's prior written consent.
(c) Permitted Disclosures. Notwithstanding the foregoing, (i) the
---------------------
Company may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations; (ii) the Company may
20
<PAGE>
disclose (other than in a press release or other public announcement described
in subsection (b)) solely the fact that Intel has invested in the Company to any
third parties without the requirement for the consent of any other party or
nondisclosure obligations; and (iii) Intel may disclose its investment in the
Company and the Financing Terms to third parties or to the public at its sole
discretion and, if it does so, the Company shall have the right to disclose to
third parties any such information disclosed in a press release or other public
announcement by Intel.
(d) Legally Compelled Disclosure. In the event that any party other
----------------------------
than Intel is requested or becomes legally compelled (including without
limitation, pursuant to securities laws and regulations) to disclose the
existence of the Series C Purchase Agreement, the Third Amended and Restated
Right of First Refusal and Co-Sale Agreement, the Third Amended and Restated
Investors' Rights Agreement, or any of the Financing Terms hereof in
contravention of the provisions of this Section 3.8, the Company (the
"Disclosing Party") shall provide the other parties (the "Non-Disclosing
Parties") with prompt written notice of that fact so that the appropriate party
may seek (with the cooperation and reasonable efforts of the other parties) a
protective order, confidential treatment or other appropriate remedy. In such
event, the Disclosing Party shall furnish only that portion of the information
which is legally required and shall exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded such information
to the extent reasonably requested by any Non-Disclosing Party.
(e) Other Information. The provisions of this Section 3.8 shall be
-----------------
in addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel Corporation (including
without limitation, any exchanges of information with any Intel board observer)
shall be governed by the terms of the Corporate Non-Disclosure Agreement No.
128210, dated January 25, 1999 executed by the Company and Intel, and any
Confidential Information Transmittal Records (CITR) provided in connection
therewith.
(f) All notices required under this section shall be made pursuant to
Section 4.5 of this Agreement.
3.9 Notice Rights in Corporate Events.
---------------------------------
(a) Corporate Event. A "Corporate Event" shall mean any of the
---------------
following, whether accomplished through one or a series of related transactions,
(a) the acquisition of all or substantially all the assets of the Company, (b)
an acquisition of the Company by consolidation, merger, share purchase or
exchange, or other reorganization or transaction in which the holders of the
Company's outstanding voting stock immediately prior to such transaction
(excluding any person and such person's affiliates who may have initiated or
participated in the initiation of such transaction) own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, and (c) any
other transaction or series of related transactions that would result in a
greater than twenty-five percent (25%) change in the total outstanding number of
shares of Series C Preferred Stock of the Company or any other class of voting
securities of the Company. Notwithstanding
21
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the foregoing, an underwritten initial public offering of the Company's
securities on a firm commitment basis shall not be deemed a Corporate Event. The
Company agrees that the Company will provide Intel with detailed written notice
of any bona fide offer from a third party for a proposed Corporate Event within
one (1) business day of the date the Company first becomes aware of such offer
or proposed Corporate Event. In addition, the Company agrees that it will
provide Intel, within one (1) business day of the Company's becoming aware
thereof, with detailed written notice of any bona fide offer or proposal from a
third party to acquire ten percent (10%) or more of the Company's outstanding
voting securities. Such detailed written notices will include, to the extent
reasonably ascertainable by the Company, the name of the third party(ies), the
amount and nature of the consideration for the proposed Corporate Event, and
other material terms and conditions of the offer for the proposed Corporate
Event.
(b) Unsolicited Offer/Solicited Offer. An "Unsolicited Offer" means
---------------------------------
(i) any bona fide offer for a proposed Corporate Event received from a third
party in the absence of any act taken by any officer or director of the Company
with the intent of soliciting such offer, and (ii) any proposal or offer by the
Company to such third party or from such third party for a proposed Corporate
Event arising from negotiations that followed the receipt of an offer described
in 3.10(b)(i). Any bona fide offer for a proposed Corporate Event that is not
an Unsolicited Offer shall be deemed a Solicited Offer.
(c) Solicitation of Offers for Corporate Event
------------------------------------------
(i) Solicitation Notice. The Company agrees that prior to
-------------------
soliciting any offers (other than an offer described in Section 3.10(b)(ii)
above) for a proposed Corporate Event (a "Proposed Event"), the Company will
provide Intel with written notice of such intent to solicit offers (a
"Solicitation Notice"), specifying the terms and conditions of the Proposed
Event, including the proposed selling price for the Company or the Assets (the
"Proposed Selling Price"), the proposed structure of the transaction, a list of
the persons from whom the Company in good faith intends to solicit such offers,
when the Proposed Event involves an acquisition of assets, a description of the
assets to be sold (the "Assets"), and the other material terms and conditions of
------
the Proposed Event.
(ii) Additional Parties Notice. The Company agrees that prior
-------------------------
to soliciting any offers (other than an offer described in Section 3.10(b)(ii)
above) for the consummation of the Proposed Event described in the Solicitation
Notice from any parties that were not listed in the Solicitation Notice
("Additional Parties"), the Company will provide Intel with written notice of
such intent to solicit such offers from such Additional Parties (the "Additional
Parties Notice").
(iii) Different Terms and Conditions. In the event that the
------------------------------
Company proposes to accept a Solicited Offer for the consummation of a Proposed
Event on terms and conditions that are not substantially the same as the terms
and conditions specified in the last Solicitation Notice, the Company agrees to
provide Intel with a new Solicitation Notice pursuant to Section 3.10(c)(i).
Without limiting the generality of the foregoing, a purchase price that is less
than the purchase price in the last Solicitation Notice received by Intel shall
be deemed not
22
<PAGE>
to be substantially the same terms and conditions as specified in the last
Solicitation Notice and shall require the Company to deliver to Intel a new
Solicitation Notice subject to 3.10(e) below.
(d) Unsolicited Offers for Corporate Event. If the Company receives
--------------------------------------
an Unsolicited Offer from a third party for a proposed Corporate Event (an
"Offered Event"), the Company agrees that it will provide Intel with detailed
written notice of the Offered Event specifying the terms and conditions of the
Offered Event including the name of such third party, the proposed purchase
price for the Company or the Offered Assets (as defined below) (the "Offered
Purchase Price"), the proposed structure of the Offered Event, when the Offered
Event involves an acquisition of assets, a description of the assets to be sold
(the "Offered Assets"), and the other material terms and conditions of the
Offered Event.
(e) Notice Rights for Preferred Corporate Event Offer.
-------------------------------------------------
Notwithstanding the foregoing, after such time as Intel has made an offer
competitive to the offer contained in a Solicitation Notice or the Offered Event
Notice for a proposed Corporate Event, the Company agrees to provide Intel with
written notice that it has received a bona fide offer preferred by the Company.
The Company is not obligated to provide Intel details of the terms and
conditions of such bona fide preferred offer.
(f) Term of Notice Rights for Corporate Event. The covenants set
-----------------------------------------
forth in Section 3.10 shall terminate as to Intel and be of no further force or
effect upon the first to occur of the following: (i) Intel is no longer a
stockholder of the Company, (ii) the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or (iii) when the Company first becomes subject to the periodic
reporting requirements of Sections 12(g) or 15(d) of the 1934 Act.
4. Miscellaneous.
-------------
4.1 Successors and Assigns.
----------------------
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties (including permitted transferees
of any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.2 Governing Law.
-------------
This Agreement shall be governed by and construed under the laws of
the State of Texas (without giving effect to any choice of law or conflict of
law provision or rule).
23
<PAGE>
4.3 Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
4.4 Titles and Subtitles.
--------------------
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
4.5 Notices.
-------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
4.6 Expenses.
---------
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
4.7 Amendments and Waivers.
----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of two-thirds of the Registrable
Securities then outstanding; provided, however, that in the event such amendment
or waiver adversely affects the rights and/or obligations of the Founders under
this Agreement in a different manner than the other Holders, such amendment or
waiver shall also require the written consent of a majority of the Common Stock
held by the Founders. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company. Notwithstanding the foregoing, Sections 3.1, 3.3, 3.7, 3.8, 3.9, 3.10
and 4.7 of this Agreement may be amended or waived only with the written consent
of Intel.
4.8 Severability.
------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
24
<PAGE>
4.9 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 of any rights under this Agreement.
4.10 Entire Agreement.
----------------
This Agreement (including the Exhibits hereto, if any) and the
agreements referred to herein constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CLEARCOMMERCE CORPORATION
By: _________________________________________
Michael Grajeda, Chief Financial Officer
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENTS
<PAGE>
CONSENTING HOLDERS: AUSTIN VENTURES V, L.P.
By: AV Partners V, L.P.,
its General Partner
By: ________________________________________
General Partner
AUSTIN VENTURES V AFFILIATES FUND, L.P.
By: AV Partners V, L.P.,
its General Partner
By: ________________________________________
General Partner
R.C. ESTES
____________________________________________
JULIE FERGERSON
____________________________________________
INTERNET CAPITAL GROUP, INC.
By: ________________________________________
Kenneth A. Fox, Managing Director
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENTS
<PAGE>
NEW ENTERPRISE ASSOCIATES VIII, LIMITED
PARTNERSHIP
By: NEA Partners VIII, Limited Partnership
Its General Partner
By: ___________________________________________
NEA PRESIDENTS FUND, L.P.
By: NEA General Partners, L.P.
By: ___________________________________________
NEA VENTURES 1999, LIMITED PARTNERSHIP
By: ___________________________________________
Vice President
JIMMY TREYBIG
------------------------------------------------
VOYAGER CAPITAL FUND I, L.P.
By: ___________________________________________
Title: _________________________________________
VOYAGER CAPITAL FOUNDERS FUND, L.P.
By: ___________________________________________
Title: _________________________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
ROBERT J. LYNCH
------------------------------------------
MICHAEL S. GRAJEDA
------------------------------------------
SCOTT CLAVER
------------------------------------------
JOHNNY KING
------------------------------------------
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
BURTZLOFF FAMILY TRUST
By:__________________________________
Name:________________________________
Its:_________________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
CAESAR BERGER
--------------------------------------------
INTEL CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
FOUNDERS: R.C. ESTES
--------------------------------------------
JULIE FERGERSON
--------------------------------------------
BILL FERGERSON
--------------------------------------------
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
SERIES C PURCHASERS
AUSTIN VENTURES V, L.P.
By: AV Partners V, L.P.,
its General Partner
By: _______________________________________
Name: ______________________________________
Title: General Partner
AUSTIN VENTURES V AFFILIATES FUND,
L.P.
By: AV Partners V, L.P.,
its General Partner
By: _______________________________________
Name: ______________________________________
Title: General Partner
AUSTIN VENTURES VII, L.P.
By: AV Partners VII, L.P.,
its General Partner
By: _______________________________________
Name: ______________________________________
Title: General Partner
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
FINANCIAL TECHNOLOGY (Q) VENTURES,
L.P., a Delaware Limited Partnership
By: ________________________________________
Print Name: ________________________________
Title:______________________________________
By: FINANCIAL TECHNOLOGY
MANAGEMENT, L.L.C., a Delaware
Limited Liability Company
By: ________________________________________
Richard Garman, Managing Member
FINANCIAL TECHNOLOGY VENTURES, L.P.,
a Delaware Limited Partnership
By: ________________________________________
Print Name: ________________________________
Title:______________________________________
By: FINANCIAL TECHNOLOGY
MANAGEMENT, L.L.C., a Delaware
Limited Liability Company
By: ________________________________________
Richard Garman, Managing Member
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
HEWLETT-PACKARD COMPANY
By: _______________________________
Print Name: _______________________
Title: ____________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INTERNET CAPITAL GROUP, INC.
By: _____________________________
Name: Kenneth A. Fox
Title: __________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
VOYAGER CAPITAL FUND I, L.P.
By: _______________________________
Name: _____________________________
Title: ____________________________
VOYAGER CAPITAL FOUNDERS FUND I, L.P.
By: _______________________________
Name: _____________________________
Title: ____________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
NEW ENTERPRISE ASSOCIATES VIII,
LIMITED PARTNERSHIP
By: NEA Partners VIII, Limited Partnership
its General Partner
By: _________________________________________
Name:_________________________________________
Title: _______________________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INTEL CORPORATION
By: ________________________________________
Print Name: _________________________________
Title: ______________________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
MIDDLEFIELD VENTURES, INC.
By: _______________________________
Print Name: _______________________
Title: ____________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
BURTZLOFF FAMILY TRUST
By: ______________________________
Name: ____________________________
Title: ___________________________
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
WS INVESTMENT COMPANY 99B
By: ____________________________________
General Partner
________________________________________
R.C. Estes
________________________________________
Robert Lynch
________________________________________
Elizabeth Hudson
________________________________________
Jimmy Treybig
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
________________________________________
Alan Scutt
________________________________________
Steve Atherton
________________________________________
Arthur Cinnader, Jr.
________________________________________
Bill Powar
________________________________________
Tom Kippola
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
________________________________________
Patrick Bultema
________________________________________
Janet Wynn
________________________________________
Jack Chapman
________________________________________
John Elliott
________________________________________
Paul Bauersfeld
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
________________________________________
Lauren Freedman
________________________________________
Janie Rakich
________________________________________
Robert E. Kornblum
________________________________________
Julie Fergerson
________________________________________
Scott Claver
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
SCHEDULE A
Series C Purchasers
<TABLE>
<CAPTION>
Number of Shares Purchase Price
Investor Purchased of Shares
- -------- ---------------- --------------
<S> <C> <C>
Austin Ventures V, L.P. 230,674 $ 1,630,865.18
114 West 7/th/ Street, Suite 1300
Austin, TX 78701
11,691 $ 82,655.37
Austin Ventures V Affiliates Fund, L.P.
114 West 7/th/ Street, Suite 1300
Austin, TX 78701
Austin Ventures VII, L.P. 1,368,235 $ 9,673,421.45
114 West 7/th/ Street, Suite 1300
Austin, TX 78701
Internet Capital Group, Inc. 265,698 $ 1,878,484.86
44 Montgomery Street, Suite 3705
San Francisco, CA 94104
Voyager Capital Fund I, L.P. 304,354 $ 2,151,782.78
800 Fifth Avenue, Suite 4100
Seattle, WA 98104
Voyager Capital Founders Fund I, L.P. 16,525 $ 116,831.75
800 Fifth Avenue, Suite 4100
Seattle, WA 98104
New Enterprise Associates VIII, 819,843 $ 5,796,290.01
Limited Partnership
2490 Sand Hill Road
Menlo Park, CA 94025
[TO COME]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investor
- --------
<S> <C> <C>
Michael S. Grajeda 1,667 $ 11,785.69
c/o ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, TX 78758
Intel Corporation
2200 Mission College Blvd. 212,056 $ 1,499,235.92
Santa Clara, CA 95052
Middlefield Ventures, Inc. 59,072 $ 417,639.04
c/o Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
R.C. Estes 54,076 $ 362,323.36
c/o ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, TX 78758
Robert Lynch 70,892 $ 501,206.44
c/o ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, TX 78758
Steve Atherton 35,360 $ 249,995.20
8106 Crabtree Cove
Austin, TX 78750
Elizabeth Hudson 1,000 $ 7,070.00
P.O. Box 96
Benicia, CA 94510-0096
Burtzloff Family Trust 12,200 $ 86,254.00
26775 Malibu Hills Road
Agoura Hills, CA 91301
Caesar Berger 6,778 $ 47,920.46
26775 Malibu Hills Road
Agoura Hills, CA 91301
Jimmy Treybig 21,335 $ 150,838.45
10915 Bee Caves Road
Austin, TX 78733
WS Investment Company 99B 3,536 $ 24,999.52
650 Page Mill Road
Palo Alto, CA 94304
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investor
- --------
<S> <C> <C>
Alan Scutt
24 Cedar Drive 1,414 $ 9,996.98
Fetchum, Surrey
KT 22 9ET UK
Arthur Cinnader, Jr. 3,536 $ 24,999.52
18 East 81/st/, Apt. 4B
New York, NY 10028
William L. Powar 8,400 $ 59,388.00
Venture Architecture
125 California Avenue
Suite D200
Palo Alto, CA 94306
Tom Kippola 8,400 $ 59,388.00
The Chasm Group
411 Borel Avenue
Suite 500
San Mateo, CA 94402-3520
Patrick Bultema 2,828 $ 19,993.96
17960 New London Road
Monument, CO 80132-1704
Jack Chapman 3,536 $ 24,999.52
1 St. Mary Close
Redbourn, Herts
UK AL3 7DD
Scott Claver 867 $ 6,129.69
9508 Bell Mountain Drive
Austin, TX 78730
John Elliott 5,002 $ 35,364.14
22 Pelican Isle
Ft. Lauderdale, FL 33301-1522
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investor
- --------
<S> <C> <C>
Paul Bauersfeld 2,501 $ 17,682.07
28 28/th/ St., 10/th/ Fl.
New York, NY 10016
Lauren Freedman 500 $ 3,535.00
308 W. Erie, Suite 710
Chicago, IL 60610
Janie Rakich 2,121 $ 14,995.47
P.O. Box 2124
El Granada, CA 94018
Robert E. Kornblum 1,414 $ 9,996.98
114 W. 7/th/ St., Suite 1300
Austin, TX 78701
Julie Fergerson 543 $ 3,839.01
11500 Metric Blvd., Suite 300
Austin, TX 78758
Financial Technology Ventures, L.P. 15,149 $ 81,000.99
601 California Street
22/nd/ Floor
San Francisco, CA 94108
Financial Technology (Q) Ventures, L.P. 409,179 $ 2,892,895.53
601 California Street
22/nd/ Floor
San Francisco, CA 94108
Hewlett-Packard Company 282,885 $ 1,999,996.95
3000 Hanover Street
Palo Alto, California 94304
Attn: General Counsel
TOTAL: 4,243,267 $29,999,897.69
</TABLE>
** Notices should be sent to the following parties:
<PAGE>
To either Middlefield Ventures, Inc. or Intel Corporation, as appropriate.
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn.: M&A Portfolio Manager M/S RN6 46
Fax Number: (408) 765-6038
With copies to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
and
Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower, 26/th/ and 31/st/ Floors
San Francisco, CA 94104
Attn: Lisa A. Fontenot
Fax Number: (415) 986-5309
<PAGE>
SCHEDULE B
Schedule of Founders
R.C. Estes
1781 Spyglass, #306
Austin, Texas 78758
Julie Fergerson
10314 Stubble Quail Dr.
Austin, Texas 78758
Bill Fergerson
10314 Stubble Quail Dr.
Austin, Texas 78758
<PAGE>
SCHEDULE C
Schedule of Consenting Holders
Voyager Capital Fund I, L.P.
800 Fifth Avenue, Suite 4100
Seattle, Washington 98104
Voyager Capital Founders Fund, L.P.
800 Fifth Avenue, Suite 4100
Seattle, Washington 98104
New Enterprise Associates VIII, Limited Partnership
2490 Sand Hill Road
Menlo Park, California 94025
NEA Presidents Fund, L.P.
2490 Sand Hill Road
Menlo Park, California 94025
NEA Ventures 1999, Limited Partnership
2490 Sand Hill Road
Menlo Park, California 94025
Austin Ventures V, L.P.
114 West 7th Street, Suite 1300
Austin, Texas 78701
Austin Ventures V Affiliates Fund, L.P.
114 West 7th Street, Suite 1300
Austin, Texas 78701
Internet Capital Group, LLC
44 Montgomery Street, Suite 3705
San Francisco, California 94104
Julie Fergerson
10314 Stubble Quail Dr.
Austin, Texas 78758
R.C. Estes
1781 Spyglass, #306
Austin, Texas 78746
Jimmy Treybig
10915 Bee Caves Road
Austin, Texas 78733
<PAGE>
Robert J. Lynch
5 Ehrlich Rd.
Austin, Texas 78746
Michael S. Grajeda
6509 Staghorn Cove
Austin, Texas 78759
Scott Claver
5806 Spanish Moss Ct.
Spring, Texas 77379
Johnny King
9805 Thinleaf
Austin, Texas 78759
Intel Corporation
2200 Mission College Blvd.
Santa Clara, California 95052
Burtzloff Family Trust
c/o Cardservice International
Attn: Chuck Burtzloff
26775 Malibu Hills Road
Agoura Hills, CA 91301
Caesar Berger
c/o Cardservice International
26775 Malibu Hills Road
Agoura Hills, CA 91301
3
<PAGE>
EXHIBIT 4.4
ADDENDUM TO CLEARCOMMERCE CORPORATION THIRD AMENDED
AND RESTATED INVESTORS' RIGHTS AGREEMENT
Reference is made to the Third Amended and Restated Investors' Rights
Agreement, dated as of December 31, 1999 (the "Agreement"), among ClearCommerce
Corporation, a Delaware corporation (the "Company"), the Founders, the Series C
Purchasers and the Consenting Holders named therein (capitalized terms used
herein but not otherwise defined shall have the meanings given to such terms in
the Agreement).
The undersigned hereby agree that Cardservice International, Inc., a
California corporation ("CSI") and The Burtzloff Family Trust (the "Trust")
hereby become parties to the Agreement to enjoy the rights and benefits and to
be bound by and to observe and perform all obligations, including the Market
Stand-Off provisions of Section 2.14, of a "Series C Purchaser" under the
Agreement with respect to the shares of Common Stock of the Company (the "Common
Shares") acquired pursuant to that certain Common Stock Purchase Agreement dated
March 6, 2000 between the Company, CSI and the Trust; provided, however, that
the Common Shares shall be Registrable Securities only for the purposes of
section 2.3 and 2.12 of the Agreement.
This Addendum will be attached to and become a part of the Agreement and
will be binding upon and inure to the benefit of the Company, CSI, the Trust and
each other party to the Agreement.
CLEARCOMMERCE CORPORATION, a
Delaware corporation
By:
-----------------------------------
Michael S. Grajeda, Chief Financial
Officer
CARDSERVICE INTERNATIONAL, a California
corporation
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
<PAGE>
BURTZLOFF FAMILY TRUST
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT 4.5
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWSKristine
HackfeldFinancial Printing GroupTHE SECURITIES REPRESENTED BY THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
OUTREACH COMMUNICATIONS CORPORATION
(hereinafter referred to as the "Company")
Incorporated Under the Laws of the State of Delaware
Right to purchase twenty thousand three hundred (20,300) shares of the
Company's $.001 par value Common Stock (the "Common Stock") at a price of one
cent ($.01) per share (or such other number as determined hereunder) exercisable
at any time in whole or in part, on or before the expiration date hereof as set
forth herein.
THIS CERTIFIES THAT, for value received, Gerald Youngblood (hereinafter the
"Holder"), is entitled to purchase and receive the aforementioned number of
shares of the stock of the Company at the time of exercise upon payment of the
aforementioned price per share.
This Warrant shall expire on the tenth (10th) anniversary date hereof.
This Warrant shall be registered on the books of the Company, which shall
be kept at its principal office for that purpose and shall be transferable in
whole or in part only on said books by the registered holder hereof in person or
by duly authorized attorney.
The Warrant shall not entitle the Holder to any of the rights of a
shareholder of the Company.
This Warrant may be exercised in whole or in part at any time or times on
or before the expiration date above mentioned.
This Warrant shall be exercised by delivery (for notation in the case of
partial exercise or surrender in the case of total exercise) of this Warrant
together with the Subscription Agreement attached hereto as Addendum A at the
principal office of the Company prior to the expiration hereof and upon payment
to the Company of the aggregate price (or the proportionate part thereof if
exercised in part) for the shares so purchased.
If all or any portion of this Warrant shall be exercised subsequent to any
stock dividend, split-up, recapitalization, merger, consolidation, combination
or exchange of shares, separation, reorganization or liquidation of the Company
occurring after the date hereof, as a result of which
<PAGE>
shares of any class shall be issued in respect of outstanding shares of Common
Stock of the Company (or shall be issuable in respect of securities convertible
into shares of Common Stock) or upon exercise of rights (other than this
Warrant) to purchase shares of Common Stock or shares of such Common Stock shall
be changed into the same or a different number of shares of the same or another
class or classes, the holder exercising this Warrant shall receive, for the
aggregate price paid upon such exercise, the aggregate number and class of
shares which such holder would have received if this Warrant had been exercised
immediately prior to such stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, separation, reorganization or
liquidation.
Neither this Warrant nor the shares issuable upon exercise of this Warrant
have been registered under the Securities Act of 1933 (the "Act"), as amended,
or any applicable "Blue Sky" laws and, therefore, the transfer of such
securities is restricted by the Act and applicable Blue Sky laws. By acceptance
of this Warrant, the Holder represents and warrants to the Company that this
Warrant is acquired for the Holder's own account, for investment and not with a
view to distribution within the meaning of the Act and the Holder agrees that
the Holder will not offer, distribute, sell, transfer or otherwise dispose of
this Warrant or the shares issuable upon exercise of this Warrant except
pursuant to (i) an effective registration statement under the Act and any
applicable Blue Sky laws with respect thereto, or (ii) an opinion, satisfactory
to the Company, addressed to the Company, of counsel satisfactory to the
Company, that such offering, distribution, sale, transfer or disposition is
exempt from registration under the Act and any applicable Blue Sky laws, or
(iii) a letter from the staff of the Securities and Exchange Commission or any
state securities commissioner, as the case may be, to the effect that it will
recommend that no action be taken with respect to such transaction. The Holder
agrees, by acceptance of this Warrant, to execute any and all documents deemed
necessary by the Company and required by the regulatory authority of any state
in connection with any public offering by the Company of its securities.
Subject to the restrictions set forth above, the right to purchase all or any
part of the shares granted by this Warrant shall be assignable or transferable,
in whole or in part, by the Holder. If this Warrant is assigned, this Warrant
shall be surrendered at the principal office of the Company with a written form
of assignment satisfactory to the Company duly executed. Such assignment or
transfer shall confer upon such assignee or transferee all rights and benefits
granted to the Holder under this Warrant, subject to the obligations and
limitations herein contained, and the Company shall execute and deliver to such
assignee or transferee a new Warrant in the same form and substance as this
Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered effective as of February 1, 1997.
Outreach Communications Corporation,
a Delaware corporation
By: /s/ R. C. Estes
-------------------------------------
R. C. Estes, Chief Executive Officer
<PAGE>
ADDENDUM A
SUBSCRIPTION AGREEMENT
(Subscription Form to be Executed Upon Exercise of Warrant)
The undersigned, holder or assignee of such holder of the within Warrant,
hereby (1) subscribes for shares of stock which the undersigned is entitled to
purchase under the terms of the within Warrant, and (2) directs that the stock
issuable upon exercise of said Warrant be issued and delivered to the following
named person(s), payment of the exercise price to be made on delivery as
follows:
Date:
-------------------- ------------------------------
Name
Address:
-------------------------------
-------------------------------
-------------------------------
Signature
ASSIGNMENT
(To be executed by the registered holder to effect a transfer of the within
Warrant)
FOR VALUE RECEIVED, (name) hereby sell(s), assign(s) and transfer(s) unto
(name) the right to purchase Common Stock evidenced by the within Warrant, and
do(es) hereby irrevocably constitute and appoint _________ to transfer the said
right on the books of the Company, with full power of substitution.
Date:
---------------------- ---------------------------------
Signature
<PAGE>
EXHIBIT 4.6
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
CLEARCOMMERCE CORPORATION
STOCK PURCHASE WARRANT
THIS CERTIFIES that Imperial Bank (the "Holder") is entitled, upon the terms
------
and subject to the conditions hereinafter set forth, at any time on or after the
date of this Warrant and on or prior to February 28, 2004 (the "Expiration
----------
Date"), but not thereafter, to subscribe for and purchase from ClearCommerce
- ----
Corporation a Delaware corporation (the "Company"), 14,144 Shares (as
-------
hereinafter defined). "Shares" shall be the Company's Series C Preferred Stock.
The "Exercise Price" shall be $7.07 per Share. This Warrant is being issued in
--------------
conjunction with termination of that certain First Amendment to the Credit
Agreement and Promissory Note and Forbearance dated as of September 14, 1999.
1. Exercise of Warrant.
-------------------
(a) Unless earlier terminated under Section 8, the purchase rights
represented by this Warrant are exercisable by the Holder, in whole or in part,
at any time after the date hereof and before the close of business on the
Expiration Date, by the surrender of this Warrant and the Notice of Exercise
annexed hereto duly executed at the principal executive office of the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company), and upon payment of the Exercise Price of the Shares thereby purchased
(by cash or by check or bank draft payable to the order of the Company in an
amount equal to the Exercise Price of the shares thereby purchased); whereupon
the Holder shall be entitled to receive a certificate for the number of Shares
so purchased. The Company agrees that if at the time of the surrender of this
Warrant and purchase of the Shares, the Holder shall be entitled to exercise
this Warrant, the Shares so purchased shall be and be deemed to be issued to
such holder as the record owner of such Shares as of the close of business on
the date on which this Warrant shall have been exercised as aforesaid.
(b) Certificates for Shares purchased hereunder shall be delivered to
the Holder within a reasonable time after the date on which this Warrant shall
have been exercised as aforesaid.
(c) The Company covenants that all Shares that may be issued upon the
exercise of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant, be
<PAGE>
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
2. Net Exercise.
(a) In lieu of exercising this Warrant by payment of cash or check, the
Holder may elect to receive shares equal to the value of this Warrant (or the
portion thereof being exercised), at any time after the date hereof and before
the close of business on the Expiration Date, by surrender of this Warrant at
the principal executive office of the Company, together with the Notice of
Conversion annexed hereto, in which event the Company will issue to the Holder
Shares in accordance with the following formula:
Y(A-B)
------
X = A
Where, X = the number of Shares to be issued to Holder;
Y = the number of Shares for which the Warrant is being
exercised;
A = the fair market value of one Share; and
B = the Exercise Price.
(b) For purposes of this Section 2, the fair market value of a Share is
defined as follows:
(i) if the exercise is in connection with an initial public offering of
the Common Stock, and if the Company's registration statement relating to such
offering has been declared effective by the Securities and Exchange Commission,
then the fair market value shall be the initial "Price to Public" specified in
the final prospectus with respect to the offering;
(ii) if the exercise is in connection with a transaction described in
Section 8, then the fair market value shall be the value received pursuant to
such transaction as determined in good faith by the board of directors of the
Company;
(iii) if the exercise occurs after, and not in connection with the
Company's initial public offering, and:
(1) if traded on a securities exchange or the Nasdaq Stock Market,
the value shall be deemed to be the average of the closing prices of the
securities on such exchange or market over the 20-day period ending three (3)
days prior to the closing of such transaction; or
(2) if actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid prices over the 30-day period ending three
(3) days prior to the closing of such transaction;
2
<PAGE>
(iv) if there is no active public market, the value shall be the
fair market value thereof, as determined in good faith by the board of directors
of the Company.
3. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each Share may be purchased hereunder shall be paid in cash to
the Holder.
4. Charges, Taxes and Expenses. Issuance of certificates for Shares upon
---------------------------
the exercise of this Warrant shall be made without charge to the holder hereof
for any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder.
5. No Rights as Shareholders. This Warrant does not entitle the Holder to
-------------------------
any voting rights or other rights as a shareholder of the Company prior to the
exercise thereof.
6. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
---------------------------------
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or a legal holiday.
8. Automatic Conversion on Merger, etc. If the Company merges with or into
-----------------------------------
any other corporation or entity, effects a reorganization, or sells or conveys
all or substantially all of its assets to any other corporation or entity in a
transaction in which the shareholders of the Company immediately before the
transaction own immediately after the transaction less than a majority of the
outstanding voting securities of the surviving or corporation or entity (or its
parent), then, unless previously exercised, the Warrant will be deemed to have
been converted immediately prior to the effective date of the transaction
pursuant to Section 2(a) hereof. The Holder will receive certificates
representing the Shares due to the Holder as a result of any such deemed
conversion upon surrender of this Warrant at the principal executive office of
the Company. Notwithstanding the foregoing, if the fair market value of one
Share (as defined in Section 2(b)) is less than the Exercise Price, then the
Warrant shall terminate immediately prior to the effective date.
9. Adjustments. The Exercise Price and the number of shares purchasable
-----------
hereunder are subject to adjustment from time to time as follows:
(a) Reclassification, etc. If the Company, at any time while this
---------------------
Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
3
<PAGE>
different number or securities or any other class or classes, this Warrant shall
thereafter represent the right to acquired such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 9.
(b) Split, Subdivision or Combination of Shares. If the Company at any
-------------------------------------------
time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of combination, in both cases by the ratio which the total number of
such securities to be outstanding immediately after such event bears to the
total number of such securities outstanding immediately prior to such event.
(c) Cash Distributions. No adjustment on account of cash dividends or
------------------
interest on the securities as to which purchase rights under this Warrant exist
will be made to the Exercise Price under this Warrant.
10. Miscellaneous.
-------------
(a) Issue Date. The provisions of this Warrant shall be construed and
----------
shall be given effect in all respect as if it had been issued and delivered by
the Company on the date set forth below.
(b) Governing Law. THIS WARRANT SHALL BE GOVERNED IN ALL RESPECTS BY
-------------
THE LAWS OF THE STATE OF TEXAS AS SUCH LAWS ARE APPLIED TO AGREEMENTS BETWEEN
TEXAS RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN TEXAS.
(c) Restrictions. By acceptance hereof, the Holder acknowledges that
------------
the Shares acquired upon the exercise of this Warrant may have restrictions upon
its resale imposed by state and federal securities laws.
(d) Waivers and Amendments. This Warrant and any provisions hereof may
----------------------
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(e) Assignment. This Warrant may be assigned or transferred by the
----------
Holder only with the prior written approval of the Company; provided, however,
that Holder may transfer all or part of this Warrant to its affiliates,
including, without limitation, Imperial Bancorp, at any time without notice to
the Company, and such affiliate shall then be entitled to all the rights of
Holder under this Warrant and any related agreements. Any affiliate assignee of
Holder shall cooperate fully by delivering, on its own behalf, to the Company
the representations and covenants made by Holder in the Warrant Purchase
Agreement, as requested by the Company, and the Company shall cooperate fully in
ensuring that any stock issued upon exercise of this Warrant is issued in the
name
4
<PAGE>
of the affiliate that exercises the Warrant. This Warrant shall be binding
upon the permitted successors or their assigns of Holder and the Company.
(f) Construction. The language used in this Warrant will be deemed to
be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.
(g) Market Stand-off Covenant. The Bank agrees, in connection with the
Company's initial public offering of the Company's securities, (i) not to sell,
make short sales of, loan, grant any options for the purchase of, or otherwise
dispose of any securities of the Company held by the Bank (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration and (ii) further agrees to execute any agreement
reflecting (i) above as may be requested by the underwriters at the time of the
public offering. The Bank further agrees that the Company may impose stop
transfer instructions in order to enforce the foregoing covenants.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: February 28, 2000.
ClearCommerce Corporation
By: /s/ Michael S. Grajeda
------------------------------------------
Michael S. Grajeda, Vice President and
Chief Financial Officer
5
<PAGE>
NOTICE OF EXERCISE
------------------
TO: ClearCommerce Corporation
11500 Metric Blvd., Suite 300
Austin, Texas 78758
ATTN: Secretary
1. The undersigned hereby elects to purchase ______________ shares of the
_________________ (the "Shares") of ClearCommerce Corporation pursuant to the
--------
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing the Shares in
the name of the undersigned or in such other name as is specified below:
-------------------------------------------------
(Print Name)
Address:
----------------------------------------
----------------------------------------
3. The undersigned confirms that the Shares are being acquired for the
account of the undersigned for investment only and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or selling the Shares.
- ------------------------------------ --------------------------------------
(Date) (Signature)
--------------------------------------
(Print Name)
<PAGE>
NOTICE OF CONVERSION
--------------------
TO: ClearCommerce Corporation
11500 Metric Blvd., Suite 300
Austin, Texas 78758
ATTN: Secretary
1. The undersigned hereby elects to convert the attached Warrant into such
number of shares of _________________ ClearCommerce Corporation (the "Shares")
--------
as is determined pursuant to Section 2 of such Warrant, which conversion shall
be effected pursuant to the terms of the attached Warrant.
2. Please issue a certificate or certificates representing the Shares in
the name of the undersigned or in such other name as is specified below:
-------------------------------------------------
(Print Name)
Address:
----------------------------------------
----------------------------------------
3. The undersigned represents that the Shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares.
- ------------------------------------ --------------------------------------
(Date) (Signature)
--------------------------------------
(Print Name)
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
CLEARCOMMERCE CORPORATION
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that Hewlett-Packard Company (the "Holder") is
------
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after the date of this Warrant and on or prior to March 1, 2004
(the "Expiration Date"), but not thereafter, to subscribe for and purchase from
---------------
ClearCommerce Corporation, a Delaware corporation (the "Company"), 125,000
-------
shares of the Company's Common Stock (the "Shares"). The per share "Exercise
--------
Price" shall be $5.00.
- -----
1. Exercise of Warrant.
-------------------
(a) Unless earlier terminated under Section 8, the purchase rights
represented by this Warrant are exercisable by the Holder, in whole or in part,
at any time after the date hereof and before the close of business on the
Expiration Date, by the surrender of this Warrant and the Notice of Exercise
annexed hereto duly executed at the principal executive office of the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company), and upon payment of the Exercise Price of the Shares thereby purchased
(by cash or by check or bank draft payable to the order of the Company in an
amount equal to the Exercise Price of the shares thereby purchased); whereupon
the Holder shall be entitled to receive a certificate for the number of Shares
so purchased. The Company agrees that if at the time of the surrender of this
Warrant and purchase of the Shares, the Holder shall be entitled to exercise
this Warrant, the Shares so purchased shall be and be deemed to be issued to
such holder as the record owner of such Shares as of the close of business on
the date on which this Warrant shall have been exercised as aforesaid.
(b) Certificates for Shares purchased hereunder shall be delivered to
the Holder within a reasonable time after the date on which this Warrant shall
have been exercised as aforesaid.
(c) The Company covenants that all Shares that may be issued upon the
exercise of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant, be
<PAGE>
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
2. Net Exercise.
------------
(a) In lieu of exercising this Warrant by payment of cash or check,
the Holder may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), at any time after the date hereof and
before the close of business on the Expiration Date, by surrender of this
Warrant at the principal executive office of the Company, together with the
Notice of Conversion annexed hereto, in which event the Company will issue to
the Holder Shares in accordance with the following formula:
Y(A-B)
X = ------
A
Where, X = the number of Shares to be issued to Holder;
Y = the number of Shares for which the Warrant is being
exercised;
A = the fair market value of one Share; and
B = the Exercise Price.
(b) For purposes of this Section 2, the fair market value of a Share
is defined as follows:
(i) if the exercise is in connection with a transaction
described in Section 8, then the fair market value shall be the value received
pursuant to such transaction as determined in good faith by the board of
directors of the Company;
(ii) (1) if traded on a securities exchange or the Nasdaq Stock
Market, the value shall be deemed to be the average of the closing prices of the
securities on such exchange or market over the 20-day period ending three (3)
days prior to the closing of such transaction; or (2) if actively traded over-
the-counter, the value shall be deemed to be the average of the closing bid
prices over the 30-day period ending three (3) days prior to the closing of such
transaction;
(iii) if there is no active public market, the value shall be the
fair market value thereof, as determined in good faith by the board of directors
of the Company.
3. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each Share may be purchased hereunder shall be paid in cash to
the Holder.
2
<PAGE>
4. Charges, Taxes and Expenses. Issuance of certificates for Shares upon
---------------------------
the exercise of this Warrant shall be made without charge to the holder hereof
for any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder.
5. No Rights as Shareholders. This Warrant does not entitle the Holder
-------------------------
to any voting rights or other rights as a shareholder of the Company prior to
the exercise thereof.
6. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
-------------------------------------------------
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or a legal holiday.
8. Automatic Conversion on Merger, etc. If the Company merges with or
------------------------------------
into any other corporation or entity, effects a reorganization, or sells or
conveys all or substantially all of its assets to any other corporation or
entity in a transaction in which the shareholders of the Company immediately
before the transaction own immediately after the transaction less than a
majority of the outstanding voting securities of the surviving or corporation or
entity (or its parent), then, unless previously exercised or the consideration
received per common share is less than $10.00 (as adjusted for stock splits,
stock dividends, recapitalizing and the like), the Warrant will be deemed to
have been converted immediately prior to the effective date of the transaction
pursuant to Section 2(a) hereof. The Holder will receive certificates
representing the Shares due to the Holder as a result of any such deemed
conversion upon surrender of this Warrant at the principal executive office of
the Company. Notwithstanding the foregoing, if the fair market value of one
Share (as defined in Section 2(b)) is less than the Exercise Price, then the
Warrant shall terminate immediately prior to the effective date. If the merger
consideration per share is below $10.00 (as adjusted for stock splits, stock
dividends, recapitalizations and the like), then the Company represents and
warrants that it will take whatever action is necessary to ensure that such
successor corporation or entity assumes this warrant and the Holder shall
thereafter be entitled to receive upon proper exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, (A) to the extent the consideration received by the Company or its
shareholders consists of stock or other securities, the number of shares of
stock or other securities of the successor company resulting from such
reorganization, merger, consolidation, sale or transfer which a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such event if this Warrant had been exercised immediately before such
event, and (B) to the extent that the consideration received by the Company or
its shareholders in connection with such event consists of cash or property
other than securities, the number of shares of common stock (or its equivalent)
of the successor company that could be purchased at the fair market value of
such securities on the closing date of the event for the total value of the cash
and/or property other than securities to which the Holder would have been
3
<PAGE>
entitled if this Warrant had been exercised immediately prior to the record date
taken in connection with such event, in both cases (A) or (B) subject to further
adjustment as provided in Section 9.
9. Adjustments. The Exercise Price and the number of shares purchasable
-----------
hereunder are subject to adjustment from time to time as follows:
(a) Reclassification, etc. If the Company, at any time while this
----------------------
Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number or securities or any other class or classes, this Warrant shall
thereafter represent the right to acquired such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 9.
(b) Split, Subdivision or Combination of Shares. If the Company at
-------------------------------------------
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of combination, in both cases by the ratio which the total number of
such securities to be outstanding immediately after such event bears to the
total number of such securities outstanding immediately prior to such event.
(c) Cash Distributions. No adjustment on account of cash dividends or
------------------
interest on the securities as to which purchase rights under this Warrant exist
will be made to the Exercise Price under this Warrant.
(d) Certificate to Adjustments. Upon the occurrence of each
--------------------------
adjustment or readjustment pursuant to this Section 9, the Company at its
expenses shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written request,
at any time, of the Holder, furnish or cause to be furnished to the Holder a
like certificate setting forth: (i) such adjustments and readjustments; (ii)
the Exercise Price at the time in effect; and (iii) the number of shares and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
10. Market Stand-Off Agreement. Holder agrees, in connection with the
--------------------------
Company's initial public offering of the Company's securities, not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of capital stock of the Company, including, but not
limited to, the Shares (other than those included in the registration), without
the prior written consent of the underwriters, for one hundred eighty (180) days
from the effective date of such registration. Holder further agrees that the
Company may impose stop transfer instructions in order to enforce the foregoing
covenant.
4
<PAGE>
11. Miscellaneous.
-------------
(a) Issue Date. The provisions of this Warrant shall be construed and
----------
shall be given effect in all respect as if it had been issued and delivered by
the Company on the date set forth below.
(b) Governing Law. THIS WARRANT SHALL BE GOVERNED IN ALL RESPECTS BY
-------------
THE LAWS OF THE STATE OF CALIFORNIA AS SUCH LAWS ARE APPLIED TO AGREEMENTS
BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN
CALIFORNIA.
(c) Restrictions. By acceptance hereof, the Holder acknowledges that
------------
the Shares acquired upon the exercise of this Warrant may have restrictions upon
its resale imposed by state and federal securities laws.
(d) Waivers and Amendments. This Warrant and any provisions hereof may
----------------------
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(e) Assignment. This Warrant may be assigned or transferred by the
----------
Holder only with the prior written approval of the Company. This Warrant shall
be binding upon any successors or assigns of the Company.
(f) Construction. The language used in this Warrant will be deemed
------------
to be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: March 6, 2000.
ClearCommerce Corporation
By: /s/ MICHAEL S. GRAJEDA
-----------------------------------
Its: Chief Financial Officer
----------------------------------
5
<PAGE>
NOTICE OF EXERCISE
------------------
TO: ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
1. The undersigned hereby elects to purchase ______________ shares of the
_________________ (the "Shares") of ClearCommerce Corporation pursuant to the
------
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing the Shares in
the name of the undersigned or in such other name as is specified below:
------------------------------
(Print Name)
Address:
----------------------
------------------------------
3. The undersigned confirms that the Shares are being acquired for the
account of the undersigned for investment only and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or selling the Shares.
- ------------------------------ ------------------------------
(Date) (Signature)
------------------------------
(Print Name)
<PAGE>
NOTICE OF CONVERSION
--------------------
TO: ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
1. The undersigned hereby elects to convert the attached Warrant into
such number of shares of _________________ ClearCommerce Corporation (the
"Shares") as is determined pursuant to Section 2 of such Warrant, which
- -------
conversion shall be effected pursuant to the terms of the attached Warrant.
2. Please issue a certificate or certificates representing the Shares in
the name of the undersigned or in such other name as is specified below:
------------------------------
(Print Name)
Address:
----------------------
------------------------------
3. The undersigned represents that the Shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares.
- ------------------------------ ------------------------------
(Date) (Signature)
------------------------------
(Print Name)
<PAGE>
EXHIBIT 4.8
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "1933 ACT") OR QUALIFIED OR REGISTERED UNDER THE CALIFORNIA CORPORATE
SECURITIES LAW OF 1968hpFinancial Printing GroupNEITHER THIS WARRANT NOR THE
SHARES OF STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") OR QUALIFIED
OR REGISTERED UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968 (THE
"CALIFORNIA LAW") OR THE SECURITIES LAWS OF ANY OTHER STATE ("LAWS"). THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NEITHER SAID SECURITIES NOR ANY
INTEREST THEREIN MAY BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT AND
QUALIFICATION OR REGISTRATION UNDER THE CALIFORNIA LAW AND OTHER LAWS AS
APPLICABLE, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION AND QUALIFICATION OR REGISTRATION ARE NOT REQUIRED AS TO SAID SALE,
OFFER OR TRANSFER.
CLEARCOMMERCE CORPORATION
WARRANT TO PURCHASE COMMON STOCK
555,183 Shares (subject to adjustment)
This certifies that, for value received, Hewlett-Packard Company, or
permitted assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from ClearCommerce Corporation (the "Company"), a California
corporation, 555,183 shares of the Common Stock of the Company (the current
terms of which are set forth in the Company's Amended and Restated Articles of
Incorporation filed December 30, 1999 and as corrected on January 11, 2000,
referred to herein as the "Articles"), as constituted on the date of exercise
hereof, upon surrender hereof, at the principal office of the Company referred
to below, with the subscription form attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States or otherwise
as hereinafter provided, at the Exercise Price as set forth in Section 2 below.
The number, character and Exercise Price of such shares of Common Stock are
subject to adjustment as provided below. The term "Warrant" as used herein
shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein.
1. Term of Warrant.
---------------
(a) Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, during the term commencing on
the date of issuance of this Warrant (the "Warrant Issue Date") and ending upon
the later to occur of (i) February 4, 2004 and (ii) a Termination Event, and
shall be void thereafter. A "Termination Event" means the earliest to occur of
the following (A) five (5) trading days after the effective date of a public
offering of the securities of the Company in connection with which all of the
Company's preferred stock converts to common stock (a "Qualified Offering"); (B)
five (5) trading days after the effective date of the initial public offering of
a successor to the Company which is not traded on the Nasdaq or a nationally
recognized stock exchange on the closing date of its Acquisition of the Company;
(C) 90 days after the closing of an Acquisition of the company or any successor
to the Company by a company whose shares are, on the closing date of such
Acquisition, traded on the Nasdaq or a nationally recognized stock exchange (a
"Public Company"), if (but only if) the Company's common stock receives
consideration of at least $10.00 per share (as adjusted for stock splits, stock
dividends, recapitalizations and the like) in connection with such Acquisition;
or (D) if the Company is the target of an Acquisition by a Public Company in
connection with which the holders of the Company's common stock receive
consideration of less than $10.00 per share (as adjusted for stock splits, stock
dividends, recapitalizations and the like), upon the earlier of (1) 90 days
following the delivery of notice from the Company to Holder that stock issued to
each share of the Company's common stock in connection with such Acquisition (or
the shares purchasable with any cash paid to each share of common stock of the
company at the closing of such Acquisition) has at the close of a day of trading
on the Nasdaq or a nationally recognized exchange had a value of at least $10.00
per share, and (2) February 3, 2004. "Acquisition" shall mean (i) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company
1
<PAGE>
is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (ii) the sale or transfer of the Company's assets and properties
as, or substantially as, an entirety to any other person or persons; of (iii) a
series of related transactions in which a controlling interest in the Company is
transferred.
2. Exercise Price. The Exercise Price at which this Warrant may be
--------------
exercised shall be $7.07 per share of Common Stock, as adjusted from time to
time pursuant to Section 11 hereof.
3. Exercise of Warrant.
-------------------
(a) The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, but not for less than One Hundred
Thousand (100,000) shares at a time (or such lesser number of shares which may
then constitute the maximum number purchasable; such number being subject to
adjustment as provided in Section 11 below), at any time, or from time to time,
during the term hereof as described in Section 1 above, by the surrender of this
Warrant and the Notice of Exercise annexed hereto as Schedule A duly completed
----------
and executed on behalf of the Holder, at the office of the Company (or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company), upon payment (i) in cash or by check acceptable to the Company, (ii)
by cancellation by the Holder of indebtedness of the Company to the Holder, or
(iii) by a combination of (i) and (ii), of the purchase price of the shares to
be purchased. Holder may make the election to exercise this Warrant contingent
upon the occurrence of the effectiveness or closing of a Termination Event so
long as such contingency is noted in writing by Holder at the time of surrender.
In lieu of cash exercising this Warrant, the Holder may, at any
time that Holder would be entitled to cash exercise of this Warrant, elect to
receive shares of Common Stock equal to the value of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with notice of such election, in which event the
Company shall issue to the holder hereof a number of shares of Common Stock
computed using the following formula:
D(A-B)
C = ------
A
Where
C = The number of shares of Common Stock to be issued to the holder
of this Warrant.
D = The number of shares of Common Stock purchasable under this
Warrant.
A = The fair market value of one share of the Company's Common
Stock (as determined below).
B = The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Paragraph 3(a), if the Common Stock is not
traded on the over-the-counter market or on an exchange, the fair market value
shall be as determined in good faith by the Company's Board of Directors. If the
Common Stock is publicly traded on the Nasdaq or on an exchange, the fair market
value shall be deemed to be the average of the closing price of the Common Stock
for the twenty trading days (or such lesser number of days as the Common Stock
has traded publicly) prior to the date on which the Holder exercises the
Warrant. In the event that this Warrant is exercised in connection with an
Acquisition, the fair market value shall be the value per share of Common Stock
(determined in the same manner set forth above) paid by the purchaser of the
Company's assets or capital stock.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of record of
such shares as of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons entitled
to receive the same a
2
<PAGE>
certificate or certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part, the Company at
its expense will execute and deliver a new Warrant of like tenor exercisable for
the number of shares for which this Warrant shall then remain exercisable. If
not otherwise executed prior to its termination, this Warrant shall
automatically be deemed to have been exercised in accordance with the cashless
exercise provisions of Section 3(a) hereof immediately prior to its termination.
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall issue cash to the Holder in lieu of the fractional
share.
5. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of loss, theft, or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this
----------------------
Warrant, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of securities of the Company that may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value, or change of stock to no
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the shares purchasable upon the
exercise hereof shall have been issued, as provided herein. Notwithstanding the
foregoing, nothing contained in this paragraph shall limit any right granted
elsewhere in this Warrant.
7. Transfer of Warrant.
-------------------
(a) Transferability and Non-negotiability of Warrant. This
------------------------------------------------
Warrant may not be transferred or assigned in whole or in part except between
and among Hewlett-Packard Company and its subsidiaries and affiliated companies.
Transfer of this Warrant shall be effected by surrender of this Warrant for
exchange, properly endorsed on the Assignment Form attached hereto as Schedule B
as provided herein.
(b) Exchange of Warrant Upon a Transfer. On surrender of this
-----------------------------------
Warrant for exchange, properly endorsed on the Assignment Form and subject to
the provisions of this Warrant with respect to compliance with the Act and with
the limitations on assignments and transfers and contained in this Section 7,
the Company at its expense shall issue to or on the order of the Holder a new
warrant or warrants of like tenor, in the name of the Holder or as the Holder
(on payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof, and shall indicate the transfer
on the Warrant Register. By acceptance of the Warrant so issued, the transferee
shall be bound by all of the terms, conditions, restriction and covenants
applicable to Holder hereunder.
(c) Compliance with Securities Laws.
-------------------------------
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares to be issued upon exercise hereof
or conversion thereof are being acquired solely for the Holder's own account and
not as a nominee for any other party or with a view to or for sale in connection
with any distribution, and for investment, and that the Holder will not offer,
sell, or otherwise dispose of this Warrant or any shares to be issued upon
exercise hereof or conversion thereof except under circumstances that will not
result in a violation of the Act or any state securities laws. Upon exercise of
this Warrant, the Holder shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the shares of Common Stock so
purchased are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale. The Holder is an "accredited investor" within the
meaning of Securities and Exchange Commission Rule 501 of Regulation D.
3
<PAGE>
(ii) Any warrant issued in replacement or upon
transfer of all or any portion of this Warrant shall bear a legend substantially
identical to the legend appearing at the head of this Warrant.
(iii) All shares of Common Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws), as
well as any legends required by the Shareholders Agreement:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR
QUALIFIED OR REGISTERED UNDER THE CALIFORNIA CORPORATE SECURITIES LAW
OF 1968 (THE "CALIFORNIA LAW") OR THE SECURITIES LAWS OF ANY OTHER
STATE ("LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NEITHER SAID SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, OFFERED
FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT AND QUALIFICATION OR
REGISTRATION UNDER THE CALIFORNIA LAW AND OTHER LAWS AS APPLICABLE, OR
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION AND QUALIFICATION OR REGISTRATION ARE NOT REQUIRED AS TO
SAID SALE, OFFER OR TRANSFER.. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
8. Reservation of Stock. The Company covenants that during the period
--------------------
commencing 90 days after the date of this Warrant and continuing throughout the
Term this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the exercise of this Warrant and shares of its
Common Stock for issuance upon conversion of such Common Stock and, from time to
time, will take all steps necessary, if any, to amend the Articles to provide
sufficient reserves of shares of Common Stock issuable upon exercise of the
Warrant and shares of its Common Stock for issuance upon conversion of such
Common Stock. The Company further covenants that all shares that may be issued
upon the exercise of rights represented by this Warrant, upon exercise of the
rights represented by this Warrant and payment of the Exercise Price, all as set
forth herein, will be free from all taxes, liens, and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
9. Notices.
-------
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first class mail, postage prepaid) to the Holder of this Warrant (at Hewlett-
Packard Company, 3000 Hanover Street, Palo Alto, California 94304, Attn: General
Counsel, or such other address as HP may provide in writing).
(b) In case
(i) the Company shall take a record of the holders
of its Common Stock (or other stock or securities at the time receivable upon
the exercise of this Warrant) for the purpose of entitling
4
<PAGE>
them to receive any dividend or other distribution, or any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right; or
(ii) of any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
transfer (in one agreement or a series of related agreements) of more than fifty
percent (50%) of the voting power of the Company; or
(iii) of any voluntary dissolution, liquidation of
winding-up of the Company; or
(iv) of the redemption of any of the Company's
capital stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (A) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or (B)
the date on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record of Common Stock
(or such stock or securities at the time receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
15 days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been delivered (i) in the case of personal delivery, on the date of such
delivery, and (ii) in the case of mailing, on the fifth business day following
the date such notice, advice or communication is deposited with a U.S. post
office as registered mail.
10. "Market Stand-Off" Agreement. Holder agrees that, during the period of
----------------------------
duration specified by the Company and an underwriter of its Common Stock or
other securities of the Company, following the effective date of a registration
statement of the Company filed under the Act, Holder shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in such
registration; provided, however, that (a) such agreement shall be applicable
only to the first such registration statement of the Company; (b) such market
stand-off time period shall not exceed 180 days; and (c) such agreement shall be
contingent upon the officers of the company signing restrictions no less onerous
than those stated herein. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the shares of
Common Stock issued upon exercise of this Warrant until the end of such period.
11. Amendments. This Warrant and any term hereof may be changed, waived,
----------
discharged or terminated only by an instrument in writing signed by the party
against whom enforcement of such change, waiver, discharge or termination is
sought, provided that in the event of transfer of this Warrant in respect of
less than all of the shares issuable upon the exercise hereof, any amendment or
modification of the terms of this Warrant and all warrants issued as a result of
the transfer hereof (the "Transfer Warrants") shall be binding upon and
enforceable against the holder of this Warrant and all Transfer Warrants if
approved by the holder(s) of such warrants representing a majority in interest
of the shares subject to purchase upon exercise of such Warrants of like tenor
then remaining outstanding, unexpired and unexercised.
12. Adjustments. The Exercise Price and the number or character of shares
-----------
purchasable hereunder are subject to adjustment from time to time as follows:
5
<PAGE>
11.1 Merger, Sale of Assets, etc. If at any time, while this Warrant,
---------------------------
or any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another entity in which the Company is
not the surviving entity, or a reverse triangular merger in which the Company is
the surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash, or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person or persons (which person or persons shall, for
purposes of this Warrant, be considered a successor to the Company even if for
other purposes such person or persons would not be deemed a successor) (each, an
"Exchange Event"), then, as a part of such Exchange Event, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon proper exercise of this Warrant, during the period specified herein
and upon payment of the Exercise Price then in effect, (A) to the extent the
consideration received by the Company or its shareholders consists of stock or
other securities, the number of shares of stock or other securities of the
successor company resulting from such reorganization, merger, consolidation,
sale or transfer which a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such Exchange Event if this
Warrant had been exercised immediately before such Exchange Event, and (B) to
the extent that the consideration received by the Company or its shareholders in
connection with such Exchange Event consists of cash or property other than
securities, the number of shares of common stock (or its equivalent) of the
successor company that could be purchased at the fair market value of such
securities on the closing date of the Exchange Event for the total value of the
cash and/or property other than securities to which the Holder would have been
entitled if this Warrant had been exercised immediately prior to the record date
taken in connection with such Exchange Event, in both cases (A) and (B) subject
to further adjustment as provided in this Section 11. The foregoing provisions
of this Section 11.2 shall similarly apply to successive reorganizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation which are at the time receivable upon the exercise of this
Warrant. If the shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale or
transfer, to which Holder would be entitled upon exercise hereof in lieu of
shares of Common Stock of the Company, are in a form other than cash or
marketable securities, then the value of such consideration shall be determined
in good faith by the Company's Board of Directors. In all events, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Holder after the transaction, to the end that
the provisions of this Warrant shall be applicable after that event, as nearly
as reasonably may be feasible, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant. The Company
represents and warrants that it will take whatever action is necessary to ensure
that any successors are bound by the terms of this Section 11.2.
11.2 Reclassification, etc. If the Company at any time while this
---------------------
Warrant, or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change, and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
11.3 Split, Subdivision or Combination of Shares. If the Company at any
-------------------------------------------
time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, this Warrant shall thereafter represent the right to acquire the
number of such shares as would have been issuable as the result of the split,
subdivision or combination with respect to the shares that were subject to the
purchase rights under this Warrant immediately prior to the split, subdivision
or combination, and the Exercise Price shall be proportionately divided in the
case of a split or subdivision or proportionately multiplied in the case of a
combination.
11.4 Adjustments for Dividends in Stock or Other Securities or
---------------------------------------------------------
Property. If, while this Warrant, or any portion hereof, remains outstanding and
- --------
unexpired, the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or
6
<PAGE>
additional stock or other securities or property (other than cash) of the
Company by way of dividend, then and in each case, this Warrant shall represent
the right to acquire, in addition to the number of shares of the security
receivable upon exercise of this Warrant, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Company which Holder would hold
on the date of such exercise had it been the holder of record of the security
receivable upon exercise of this Warrant on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock available by it
as aforesaid during such period, giving effect to all adjustments called for
during such period by the provisions of this Section 11.
11.5 Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of the Holder, furnish or cause to be furnished to the
Holder a like certificate setting forth: (i) such adjustments and readjustments;
(ii) the Exercise Price at the time in effect; and (iii) the number of shares
and the amount, if any, of other property which at the time would be received
upon the exercise of this Warrant.
11.6 No Impairment. The Company will not, by any voluntary action,
-------------
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
13. Investor Rights Agreement. Upon exercise of this Warrant, Holder
-------------------------
shall become a party to, and thereby receive the rights and benefits granted
under, that certain Third Amendment and Restated Investors' Rights Agreement
attached hereto as Schedule C. The Company represents and warrants that it will
----------
use commercially reasonable efforts to ensure that all necessary actions to
authorize the addition of Holder and the securities to be issued upon the
exercise of this Warrant to the Registration Rights Agreement are taken for the
purpose of treating the shares issued upon the exercise of this Warrant as
Registrable Securities for the limited purpose of providing the Holder with the
Company Registration Rights and S-3 Rights provided for in Sections 2.3 and 2.12
thereof.
14. Governing Law. This Warrant shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
15. Counterparts. this Warrant may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Venue. All disputes arising out of this Warrant shall be subject
-----
to the jurisdiction of the state and federal courts located in the
County of Santa Clara, California.
7
<PAGE>
IN WITNESS WHEREOF, CLEARCOMMERCE CORPORATION has caused this Warrant
to be executed by its officer thereunto duly authorized.
Dated: February 4, 2000
CLEARCOMMERCE CORPORATION
By: /s/ Michael Grajeda
__________________________________
Michael Grajeda, Vice President and CFO
ACKNOWLEDGED AND AGREED:
HEWLETT-PACKARD COMPANY
By: /s/ Kenneth Wach
------------------------
Name: Kenneth Wach
----------------------
Title: SSO Controller
---------------------
8
<PAGE>
SCHEDULE A
----------
NOTICE OF EXERCISE
To: CLEARCOMMERCE CORPORATION
(1) The undersigned hereby elects to purchase
_______ shares of Common Stock of ClearCommerce Corporation, pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price for such shares in full.
(2) In exercising this Warrant, the undersigned
hereby confirms and acknowledges that the shares of Common Stock are being
acquired solely for the account of the undersigned and not as a nominee for any
other party or with a view to or in connection with any distribution or resale,
and for investment, and that the undersigned will not offer, sell, or otherwise
dispose of any such shares of Common Stock except under circumstances that will
not result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.
(3) By signing below, the undersigned agrees to
enter into, as a holder of shares of Common Stock, the Company's Shareholders
Agreement identified in the Warrant, as the same is in effect on the date
hereof.
(4) Please issue a certificate or certificates
representing said shares of Common Stock in the name of the undersigned or in
such other name as is specified below:
----------------------------------
[Name]
----------------------------------
[Name]
(5) Please issue a new Warrant for the unexercised
portion of the attached Warrant in the name of the undersigned or in such other
name as is specified below:
----------------------------------
[Name]
----------------------------------
- -------------------- ----------------------------------
[Date] [Signature]
9
<PAGE>
SCHEDULE B
----------
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ----------------------------- --------------------------- ---------------
and does hereby irrevocably constitute and appoint ____________________ Attorney
to make such transfer on the books of _____________ maintained for the purpose,
with full power of substitution in the premises.
The undersigned also represents that, by acceptance of the assignment
hereunder, the Assignee acknowledges that: (i) the rights under this Warrant so
assigned, and the shares of stock to be issued upon exercise of the replacement
warrant to be issued to the Assignee thereupon, are being acquired for
investment, and the Assignee will not offer, sell or otherwise dispose of this
Warrant or any shares of stock to be issued upon exercise hereof or conversion
thereof except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws; (ii) the
Assignee shall be bound by all of the terms, conditions, restriction and
covenants applicable to Holder under this Warrant; and (iii) upon exercise of
this Warrant, the Assignee shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of stock so
purchased are being acquired for investment and not with a view toward
distribution or resale.
DATED: _____________________
----------------------------------
Signature of Holder
----------------------------------
(Witness)
10
<PAGE>
SCHEDULE C
----------
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
11
<PAGE>
EXHIBIT 10.1
CLEARCOMMERCE CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
____________________, 2000 by and between ClearCommerce Corporation, a Delaware
corporation (the "Company"), and _________________________________
("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
-------------------
a. "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the
<PAGE>
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation
other than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
b. "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
c. References to the "Company" shall include, in addition to
ClearCommerce Corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
ClearCommerce Corporation (or any of its wholly owned subsidiaries) is a party
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
d. "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
e. "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such
-2-
<PAGE>
settlement is approved in advance by the Company, which approval shall not be
unreasonably withheld) of any Claim and any federal, state, local or foreign
taxes imposed on the Indemnitee as a result of the actual or deemed receipt of
any payments under this Agreement.
f. "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).
h. References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
i. "Reviewing Party" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.
j. "Section" refers to a section of this Agreement unless otherwise
indicated.
k. "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
---------------
a. Indemnification of Expenses. Subject to the provisions of Section
---------------------------
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part
-3-
<PAGE>
out of a Covered Event), including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses.
b. Review of Indemnification Obligations. Notwithstanding the
-------------------------------------
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder
under applicable law; provided, however, that if Indemnitee has commenced or
-------- -------
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee is entitled to be indemnified hereunder
under applicable law, any determination made by any Reviewing Party that
Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
c. Indemnitee Rights on Unfavorable Determination; Binding Effect.
--------------------------------------------------------------
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
d. Selection of Reviewing Party; Change in Control. If there has not
-----------------------------------------------
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages
-4-
<PAGE>
arising out of or relating to this Agreement or its engagement pursuant hereto.
Notwithstanding any other provision of this Agreement, the Company shall not be
required to pay Expenses of more than one Independent Legal Counsel in
connection with all matters concerning a single Indemnitee, and such Independent
Legal Counsel shall be the Independent Legal Counsel for any or all other
Indemnitees unless (i) the employment of separate counsel by one or more
Indemnitees has been previously authorized by the Company in writing, or (ii) an
Indemnitee shall have provided to the Company a written statement that such
Indemnitee has reasonably concluded that there may be a conflict of interest
between such Indemnitee and the other Indemnitees with respect to the matters
arising under this Agreement.
e. Mandatory Payment of Expenses. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
----------------
a. Obligation to Make Expense Advances. Upon receipt of a written
-----------------------------------
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.
b. Form of Undertaking. Any obligation to repay any Expense Advances
-------------------
hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured
and no interest shall be charged thereon.
c. Determination of Reasonable Expense Advances. The parties agree
--------------------------------------------
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
---------------------------------------------------
a. Timing of Payments. All payments of Expenses (including without
------------------
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such written
demand by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than ten (10) business days after such
written demand by Indemnitee is presented to the Company.
-5-
<PAGE>
b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
c. No Presumptions; Burden of Proof. For purposes of this Agreement,
--------------------------------
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
---------------
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement under applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder under applicable law, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
d. Notice to Insurers. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
e. Selection of Counsel. In the event the Company shall be obligated
--------------------
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by
-6-
<PAGE>
Indemnitee has been previously authorized by the Company, (B) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's separate counsel shall be Expenses for which
Indemnitee may receive indemnification or Expense Advances hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
a. Scope. The Company hereby agrees to indemnify the Indemnitee to
-----
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a) hereof.
b. Nonexclusivity. The indemnification and the payment of Expense
--------------
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under
--------------------------
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee
---------------------
acknowledge that in certain instances, federal law or applicable public policy
may prohibit the Company from
-7-
<PAGE>
indemnifying its directors, officers, employees, agents or fiduciaries under
this Agreement or otherwise. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
-------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement,
----------
the Company shall not be obligated pursuant to the terms of this Agreement:
a. Excluded Actions or Omissions. To indemnify or make Expense
-----------------------------
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
b. Claims Initiated by Indemnitee. To indemnify or make Expense
------------------------------
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances, or insurance recovery, as
the case may be.
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses
------------------
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
d. Claims Under Section 16(b). To indemnify Indemnitee for Expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
-8-
<PAGE>
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
--------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or
------------------------------------------------------
Interpretation. In the event that any action is instituted by Indemnitee under
- --------------
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.
14. Period of Limitations. No legal action shall be brought and no
---------------------
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such
-9-
<PAGE>
two year period; provided, however, that if any shorter period of limitations is
-------- -------
otherwise applicable to any such cause of action, such shorter period shall
govern.
15. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
17. Severability. The provisions of this Agreement shall be
------------
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law. Furthermore, to the fullest extent possible, the provisions of this
Agreement (including without limitation each portion of this Agreement
containing any provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies,
-------------
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of Delaware
as applied to contracts between Delaware residents entered into and to be
performed entirely in the State of Delaware without regard to principles of
conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification,
-------------------------
termination or cancellation of this Agreement shall be effective unless it is in
writing signed by both the parties hereto. No waiver of any of the provisions
of this Agreement shall be deemed to be or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.
-10-
<PAGE>
21. Integration and Entire Agreement. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in
---------------------------------------
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries or affiliated entities.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
ClearCommerce Corporation
By:___________________________________________
Name: Robert J. Lynch
Title: Chief Executive Officer and President
Address: 11500 Metric Boulevard, Ste 300
Austin, TX 78758
AGREED TO AND ACCEPTED
INDEMNITEE:
___________________________________
(Signature)
___________________________________
Name
Address:___________________________
___________________________
<PAGE>
EXHIBIT 10.2
CLEARCOMMERCE CORPORATION
1997 STOCK OPTION/STOCK ISSUANCE PLAN
Adopted December 10, 1997
1. PURPOSES OF THE PLAN.
The purposes of this Stock Option/Stock Issuance Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Directors and Employees of the Company and
its Subsidiaries, and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonqualified Stock
Options, as determined by the Administrator at the time of grant of an Option
and subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder. In addition, Common Stock may be issued to
eligible persons directly, either through the immediate purchase of such shares
or as a bonus for services rendered to the Company (or any Parent or
Subsidiary).
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or a Compensation Committee appointed
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options are, or will be, granted under the
Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock, par value $0.001 per share, of
the Company.
(g) "Company" means ClearCommerce Corporation (f/k/a Outreach
Communications Corporation), a Delaware corporation.
<PAGE>
(h) "Continuous Status as an Employee" means that the employment
relationship with the Company or any Parent or Subsidiary is not interrupted or
terminated. Continuous Status as an Employee shall not be considered interrupted
in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company or any Parent
or Subsidiary or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on the 91st day of such leave any Incentive Stock Option held by the Optionee
shall cease to be treated for tax purposes as an Incentive Stock Option and
shall be treated for tax purposes as a Nonqualified Stock Option.
(i) "Corporate Transaction" shall mean either of the following
stockholder-approved transactions to which the Company is party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or dissolution of the
Company.
(j) "Director" means a member of the Board of Directors of the Company,
including any non-employee members of the Board of Directors.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the
-----------------------
Administrator deems reliable;
2
<PAGE>
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Involuntary Termination" shall mean the termination of Optionee's
employment that occurs by reason of:
(i) Optionee's involuntary dismissal or discharge by the Company for
reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Company that materially reduces Optionee's
level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee's place of employment
by more than fifty (50) miles, provided and only if such change, reduction
or relocation is effected by the Company without Optionee's consent.
(p) "Misconduct" shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Company (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Company (or any Parent or Subsidiary)
in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of Optionee
or any other person in the Service of the Company (or any Parent or Subsidiary).
(q) "Nonqualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
3
<PAGE>
(t) "Option Agreement" shall mean the written option agreement,
substantially in the form attached hereto as Exhibit I (or such other form as
---------
may be approved by the Administrator for use under the Plan), between the
Company and Optionee evidencing the grant of an Option.
(u) "Optioned Stock" means the Common Stock subject to an Option.
(v) "Optionee" means a Director or Employee who receives an Option.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Participant" means any Person who is issued shares of Common Stock
under the Stock Issuance Program.
(y) "Person" means an individual or entity.
(z) "Plan" means this ClearCommerce Corporation 1997 Stock Option/Stock
Issuance Plan, as amended.
(aa) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor thereto.
(bb) "Section 16(b)" means Section 16(b) of the Securities Exchange Act of
1934, as amended.
(cc) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 13 below.
(dd) "Stock Issuance Agreement" means the agreement entered into by the
Participant and the Company at the time of issuance of Shares of Common Stock
under the Stock Issuance Program.
(ee) "Stock Purchase Agreement" means the agreement entered into by the
Optionee and the Company upon the exercise of an Option and the acquisition of
Shares of Common Stock.
(ff) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares that may be issued under the Plan is 1,044,750 Shares. The
Shares may be authorized but unissued or reacquired Common Stock.
4
<PAGE>
If an Option expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares that were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). The preceding
sentence shall apply only for purposes of determining the aggregate number of
Shares that may be subject to Options but shall not apply for purposes of
determining the maximum number of Shares subject to Options that may be granted
to any individual Optionee under the Plan. However, Shares that have actually
been issued under the Plan, upon exercise of an Option, shall not be returned to
the Plan and shall not become available for future distribution under the Plan.
Unvested Shares issued under the Plan, and subsequently repurchased by the
Company, at the original issue price paid per share, pursuant to the Company's
repurchase rights under the Plan, shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent Option grants or stock
issuances under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a Committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company Becomes
---------------------------------------------------------------------
Subject to the Exchange Act.
- ---------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
------------------------------
Plan may be administered by different bodies with respect to Directors,
Officers, and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options to Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board,
if the Board may administer the Plan in compliance with the rules under
Rule 16b-3 relating to the disinterested administration of employee benefit
plans under which Section 16(b) exempt discretionary grants and awards of
equity securities are to be made, or (B) a Committee designated by the
Board to administer the Plan, which Committee shall be constituted to
comply with the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans
5
<PAGE>
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made.
(iii) Administration With Respect to Other Employees. With respect to
----------------------------------------------
grants of Options to Employees who are neither Directors nor Officers of
the Company, the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which committee shall be constituted in
such a manner as to satisfy Applicable Laws. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed
by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause), and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the Plan
---------------------------
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock;
(ii) to select the Directors and Employees to whom Options or stock
issuances may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options (or any
combination thereof) or stock issuances are granted hereunder;
(iv) to determine the number of Shares to be covered by each such
award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine whether and under what circumstances an Option may
be settled in cash under Section 9(e) instead of Common Stock;
(vii) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), waiver of forfeiture restrictions of Options or Shares, and any
restriction or limitation regarding any Option or the shares of Common
Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
6
<PAGE>
(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be final and binding on all
Optionees, Participants and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonqualified Stock Options may be granted to Directors or Employees.
Incentive Stock Options may be granted only to Employees. An Employee who has
been granted an Option may, if otherwise eligible, be granted additional
Options. Stock may be issued under the Plan's Stock Issuance Program to
Directors and Employees.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonqualified Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. For purposes of this Section 5(b), the Fair Market Value of the
Shares shall be determined as of the time the Option with respect to such Shares
is granted.
(c) Neither the Plan nor any Option or stock issuance under the Plan shall
confer upon any Optionee or Participant any right with respect to continuation
of his or her employment or consulting relationship with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
6. TERM OF PLAN.
The Plan shall become effective upon the earlier to occur of its adoption
by the Board of Directors or its approval by the stockholders of the Company, as
described in Section 19 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 15 of the Plan.
7. TERM OF OPTIONS.
7
<PAGE>
The term of each Option shall be the term stated in the Option Agreement;
provided, however, that the term shall be no more than ten (10) years from the
date of grant thereof; and provided further that in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be no more than five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon exercise
of an Option shall be such price as is determined by the Administrator, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall not be less than 110% of the Fair
Market Value per Share on the date of grant; and
(B) granted to any other Employee, the per Share exercise price
shall not be less than 100% of the Fair Market Value per Share on the
date of grant.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (i) cash,
(ii) a check, (iii) a promissory note, (iv) other Shares that (A) in the case of
Shares acquired directly or indirectly from the Company, have been owned by the
Optionee for more than six months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which such Option shall be exercised, (v) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and a broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price, or (vi) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
8
<PAGE>
An Option may not be exercised for a fraction of a Share. Exercise of an
Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
Subject to Section 16, an Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option Agreement by the Person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. To the extent required by applicable federal,
state, local or foreign law, an Optionee shall make arrangements satisfactory to
the Company for the satisfaction of any withholding tax obligations that arise
by reason of an Option exercise or any sale of Shares, which obligations may, as
authorized by the Administrator, consist of any consideration and method of
payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote, receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment shall be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 13 hereof.
(b) Termination of Employment Relationship. Subject to Paragraph (c)
--------------------------------------
below, in the event of termination of an Optionee's Continuous Status as an
Employee, such Optionee may exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination; provided,
however, that such Option may be exercised only within such period of time as is
determined by the Administrator at the date of grant. Such time period shall be
at least thirty (30) days but shall not, in the case of an Incentive Stock
Option, exceed three (3) months after the date of such termination and shall
not, in any case, be later than the expiration date of the term of such Option
as set forth in the Option Agreement. To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or if the
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan. Notwithstanding anything else herein to the
contrary or in the Option Agreement, in the event the Optionee's Continuous
Status as an Employee is terminated by the Company for Misconduct, then all
outstanding Options held by the Optionee shall terminate immediately and cease
to be outstanding, and the Shares covered by such Options shall revert to the
Plan.
(c) Disability of Optionee. In the event of termination of an Optionee's
----------------------
Continuous Status as an Employee as a result of his or her disability, the
Optionee may, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
he or she was otherwise entitled to exercise it at the date of such termination.
If such disability is not a "disability"
9
<PAGE>
as such term is defined in Section 22(e)(3) of the Code, then in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically cease to
be treated for tax purposes as an Incentive Stock Option and shall be treated
for tax purposes as a Nonqualified Stock Option on the day three (3) months and
one day following such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of termination, or if the Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement) by the Optionee's estate or by any
person who acquired the right to exercise the Option by bequest or inheritance
(the "Option Beneficiary"), but only to the extent that the Optionee was
entitled to exercise the Option on the date of death. To the extent that, at the
time of death, the Optionee was not entitled to exercise the Option, or if the
Option Beneficiary does not exercise the Option within the time specified
herein, the Option shall terminate and the Shares covered by such Option shall
revert to the Plan. If, after the Optionee's death, the Optionee's estate or any
person who acquires the right to exercise the Option by bequest or inheritance
does not exercise the Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
-----------------
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. STOCK ISSUANCE PROGRAM.
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening Option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement
(substantially in the form attached hereto as Exhibit II) that complies with the
----------
terms specified below.
(a) Purchase Price.
--------------
(i) The purchase price per Share shall be fixed by the Administrator
and may be less than, equal to or greater than the Fair Market Value per
Share of Common Stock on the stock issuance date.
(ii) Shares of Common Stock may be issued under the Stock Issuance
Program for one or both of the following items of consideration, which the
Administrator may deem appropriate in each individual instance:
(A) cash or check made payable to the Company, or
10
<PAGE>
(B) past services rendered to the Company (or any Parent or
Subsidiary).
(b) Vesting Provisions.
------------------
(i) Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's service to the Company or upon attainment of specified
performance objectives.
(ii) Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) that the
Participant may have the right to receive with respect to the Participant's
unvested Shares of Common Stock by reason of any stock dividend, stock
split, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Company's receipt of consideration shall be issued subject to (A) the same
vesting requirements applicable to the Participant's unvested Shares of
Common Stock and (B) such escrow arrangements as the Administrator shall
deem appropriate.
(iii) The Participant shall have full stockholder rights with respect
to any Shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those Shares
is vested. Accordingly, the Participant shall have the right to vote such
Shares and to receive any regular cash dividends paid on such Shares.
(iv) Should the Participant cease to remain in Service (as defined in
the Participant's Stock Issuance Agreement) while holding one or more
unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or
more such unvested Shares of Common Stock, then those Shares shall be
immediately surrendered to the Company for cancellation, and the
Participant shall have no further stockholder rights with respect to those
Shares. To the extent the surrendered Shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money indebtedness), the Company shall repay to
the Participant the cash consideration paid for the surrendered Shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered Shares.
(v) The Administrator may in its discretion waive the surrender and
cancellation of one or more unvested Shares of Common Stock (or other
assets attributable thereto) that would otherwise occur upon the cessation
of the Participant's Service or the non-attainment of the performance
objective applicable to such Shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the Shares of Common
Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
11
<PAGE>
(c) First Refusal Rights. Until such time as the Common Stock is first
--------------------
registered under Section 12 of the Exchange Act, the Company shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Administrator and
set forth in the Stock Issuance Agreement.
11. CORPORATE TRANSACTION.
(a) All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the Shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.
(b) Unvested Shares may, in the Administrator's discretion, be held in
escrow by the Company until the Participant's interest in such Shares vests or
may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested Shares.
12. LIMITED TRANSFERABILITY OF OPTIONS.
An Incentive Stock Option shall not be transferrable except by will or by
the laws of descent and distribution and shall be exercisable during the
lifetime of the person to whom the Incentive Stock Option is granted only by
such person. A Nonqualified Stock Option shall not be transferrable except by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order, as defined by the Code or by Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder (a
"QDRO"), and shall be exercisable during the lifetime of the person to whom the
Option is granted only by such person or any transferee pursuant to a QDRO.
However, a Nonqualified Stock Option may, in connection with the Optionee's
estate plan, be assigned in whole or in part during the Optionee's lifetime to
one or more members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
Option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the Option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Administrator may deem appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTION.
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and each stock issuance under the Stock Issuance
Program, and the number of shares of Common Stock which
12
<PAGE>
have been authorized for issuance under the Plan but as to which no Options or
stock issuances have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or unvested Shares, as well as the
price per share of Common Stock covered by each such outstanding Option, shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible or exchangeable into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, the Administrator shall notify the Optionee at
least fifteen (15) days prior to such proposed action. To the extent it has not
been previously exercised, the Option shall terminate immediately prior to the
consummation of such proposed action; provided, however, that the Administrator
may, in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of an earlier date fixed by the Administrator and give
each Optionee the right to exercise his or her Option as to all or any part of
the Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable.
(c) Corporate Transaction. In the event of any Corporate Transaction,
---------------------
each outstanding Option shall be (i) assumed or a comparable option to purchase
shares of the capital stock of the successor corporation shall be substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation, (ii) replaced with a cash incentive program of the successor
corporation that preserves the spread existing on the unvested Optioned Stock at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such Option or (iii)
subject to such other acceleration of terms and other limitations imposed by the
Administrator at the time of the Option grant. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option (provided it has not
already terminated) as to all of the Optioned Stock, including Shares as to
which it would not otherwise be vested or exercisable. If an Option becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a Corporate Transaction, the Administrator shall notify the Optionee that the
Option shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the Option shall, in the discretion of the
Administrator, terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
Corporate Transaction, the option substituted for such Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the Corporate Transaction, the per Share consideration
(whether stock, cash or other securities or property) received in the Corporate
Transaction, by holders of Common Stock for each Share held on the effective
date of the Corporate Transaction
13
<PAGE>
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Corporate
Transaction is not solely common stock of the successor corporation or its
Parent (if any), the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent (if any) equal in fair
market value to the per Share consideration received by holders of Common Stock
in the Corporate Transaction.
(d) Further Adjustments. In the event of any change of a type described
-------------------
in Paragraphs (a) or (c) above, the Administrator shall make any further
adjustment to the maximum number of Shares that may be acquired under the Plan
pursuant to the exercise of Options, the maximum number of Shares for which
Options may be granted to any one Employee, and the number of Shares and price
per Share subject to outstanding Options as shall be equitable to prevent
dilution or enlargement of rights under such Options, and the determination of
the Administrator as to these matters shall be conclusive and binding on the
Optionee; provided, however, that (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the Code
(or any successor provision) and (ii) in no event shall any adjustment be made
which would render any Incentive Stock Option granted hereunder other than an
"incentive stock option" as defined in Section 422 of the Code.
14. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option, or such
other date as is determined by the Administrator. Notice of the determination
shall be given to each Employee to whom an Option is so granted within a
reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. No amendment of
the Plan shall, without approval of the stockholders of the Company, (i)
increase the maximum number of Shares that may be subject to Options or stock
issuances under the Plan or the maximum number of Shares subject to Options or
stock issuances that may be granted to any individual Optionee under the Plan,
(ii) modify the requirements as to eligibility for Options or stock issuances
under the Plan or (iii) materially increase the benefits to Optionees or
Participants under the Plan. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 or with Section 422 of the Code or Section 162(m) of
the Code (or any other Applicable Law, including the requirements of the NASD or
an established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.
14
<PAGE>
(b) Effect of Amendment or Termination. Any amendment or termination of
----------------------------------
the Plan shall not affect Options or stock issuances already granted, and such
Options or stock issuances shall remain in full force and effect as if this Plan
had not been amended or terminated, unless mutually agreed otherwise between the
Optionee (or Participant) and the Administrator, which agreement must be in
writing and signed by the Optionee (or Participant) and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all Applicable Laws, including, without limitation,
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed or any automatic
quotation system upon which the Shares may then be quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
The Company may require any Optionee, or any Person to whom an Option is
transferred under Section 12, as a condition of exercising any such Option, (i)
to give written assurances satisfactory to the Company as to the Optionee's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matter, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; (ii) to give
written assurances satisfactory to the Company stating that such Person is
acquiring the Shares subject to the Option for such Person's own account and not
with any present intention of selling or otherwise distributing such Shares; and
(iii) to deliver such other documentation as may be necessary to comply with
federal and state securities laws. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
Shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act and all
applicable state securities laws, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Shares, and may enter
stop-transfer orders against the transfer of the Shares issued upon the exercise
of an Option.
17. RESERVATION OF SHARES.
The Company, during the term of this Plan, shall at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
15
<PAGE>
18. AGREEMENTS.
Options shall be evidenced by Option Agreements in such form as the
Administrator shall approve from time to time. Stock issuances under the Stock
Issuance Program shall be evidenced by Stock Issuance Agreements in such form as
the Administrator shall approve from time to time.
19. STOCKHOLDER APPROVAL.
Continuance of the Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under Applicable Laws and the rules of any stock exchange upon which
the Common Stock is listed or any automatic quotation system upon which the
Common Stock is quoted.
20. MISCELLANEOUS
(a) Rule 16b-3. With respect to Persons subject to Section 16 of the
----------
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 and with respect to such Persons all
transactions shall be subject to such conditions regardless of whether they are
expressly set forth in the Plan or the Option Agreement. To the extent any
provision of the Plan or action by the Administrator fails to so comply, it
shall not apply to such Persons or their transactions and shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Administrator.
(b) Grants Exceeding Allotted Shares. If the number of shares of Optioned
--------------------------------
Stock exceeds, as of the date of grant, the number of Shares that may be issued
under the Plan without additional stockholder approval, such Option shall be
void with respect to such excess Shares, unless stockholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15 of the Plan.
(c) Notice. Any written notice to the Company required by any of the
------
provisions of the Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received. Any written notice to the Optionees
required by any provisions of the Plan shall be addressed to the Optionee at the
address on file with the Company and shall become effective three days after it
is mailed by certified mail, postage prepaid to such address or at the time of
delivery if delivered sooner by messenger or overnight courier.
(d) Savings Clause. Notwithstanding any other provision hereof, the Plan
--------------
is intended to qualify as a plan pursuant to which Incentive Stock Options may
be issued under Section 422 of the Code. If the Plan or any provision of the
Plan shall be held to be invalid or to fail to meet the requirements of Section
422 of the Code or the regulations promulgated thereunder, such invalidity or
failure shall not affect the remaining parts of the Plan, but rather it shall be
construed and enforced as if the Plan or the affected provision thereof, as the
case may be, complied in all respects with the requirements of Section 422 of
the Code.
16
<PAGE>
(e) Governing Law. The Plan and all rights and obligations thereunder
-------------
shall be construed in accordance with and governed by the laws of the State of
Delaware without regard to its conflict of laws rules.
17
<PAGE>
OUTREACH COMMUNICATIONS CORPORATION
FIRST AMENDMENT OF 1997 STOCK OPTION/STOCK ISSUANCE PLAN
--------------------------------------------------------
WHEREAS, Outreach Communications Corporation, a Delaware corporation (the
"Company") adopted the Company's 1997 Stock Option/Stock Issuance Plan (the
"Plan") to, among other things, attract and retain the best available personnel
for positions of substantial responsibilities, to provide additional incentive
to Employees and Directors (each as defined in the Plan) and to promote the
success of the Company's business;
WHEREAS, the Company desires to amend the Plan to increase the number of
Shares (as defined in the Plan) that may be issued under the Plan from 1,044,750
to 1,241,240 Shares.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Amendment
shall have the meanings ascribed thereto in the Plan.
2. The first sentence of Section 3 of the Plan is hereby amended and
restated in its entirety as follows:
"Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of Shares that may be issued under the Plan is 1,241,240."
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed and delivered as of
December 19, 1997.
OUTREACH COMMUNICATIONS CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------
Robert Lynch, President
<PAGE>
SECOND AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company")
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and;
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to increase the number of Shares that may be issued
under the Plan from 1,241,240 to 1,251,240 and to permit the Administrator to
increase the number of Shares reserved for issuance under the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Second
Amendment shall have the meanings ascribed thereto in the Plan.
2. The first sentence of Section 3 of the Plan, as amended, is hereby
amended and restated in its entirety as follows:
"Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of Shares that may be issued under the Plan shall be
1,251,240."
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Second Amendment has been executed and delivered,
effective as of December 9, 1998.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
THIRD AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the"Company")
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to increase the number of Shares that may be issued
under the Plan from 1,251,240 to 1,901,240 and to permit the Administrator to
increase the number of Shares reserved for issuance under the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Third
Amendment shall have the meanings ascribed thereto in the Plan.
2. The first sentence of Section 3 of the Plan, as amended, is hereby
amended and restated in its entirety as follows:
"Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of Shares that may be issued under the Plan shall be
1,901,240."
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Third Amendment has been executed and delivered,
effective as of December 17, 1998.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
FOURTH AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company"),
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to provide that all Options shall immediately vest an
additional twelve (12) months upon the consummation of a Corporate Transaction
(as defined in the Plan) and to further amend the Plan to expand the definition
of a Corporate Transaction.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Fourth
Amendment shall have the meanings ascribed thereto in the Plan.
2. The definition of "Corporate Transaction" in Section 2 of the Plan (and
---------------------
the appendices to each of the Stock Purchase Agreement and Stock Issuance
Agreement attached to the Plan) is hereby amended to provide as follows:
(i) "Corporate Transaction" shall mean the occurrence of any of the
following:
*****
(iii) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding
these securities immediately prior to such transaction.
3. The following new sentence is hereby added to the vesting schedule to
the Stock Option Agreement attached as an exhibit to the Plan:
"Notwithstanding the foregoing, if a Corporate Transaction occurs,
then effective immediately prior to the closing of the Corporate
Transaction, Optionee's vesting and exercise schedule shall be deemed
accelerated by twelve (12) months."
4. A new clause (iii) is hereby added to Section D.3. of the Stock
Purchase Agreement attached as an exhibit to the Plan:
<PAGE>
"(iii) Notwithstanding the foregoing, if a Corporate Transaction
occurs, then effective immediately prior to the closing of the
Corporate Transaction, Optionee's vesting schedule shall be deemed
accelerated by twelve (12) months, and the Repurchase Right shall
accordingly lapse with respect to such Purchased Shares."
5. A new clause (iii) is hereby added to Section D.3. of the Stock
Issuance Agreement attached as an exhibit to the Plan:
"(iii) Notwithstanding the foregoing, if a Corporate Transaction
occurs, then effective immediately prior to the closing of the
Corporate Transaction, Participant's vesting schedule shall be deemed
accelerated by twelve (12) months, and the Repurchase Right shall
accordingly lapse with respect to such Purchased Shares."
6. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Fourth Amendment has been executed and delivered,
effective as of March 26, 1999.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
FIFTH AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/PLAN ISSUANCE PLAN
--------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company"),
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan as set forth herein.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Fifth
Amendment shall have the meanings ascribed thereto in the Plan.
2. Section 13(c) of the Plan is hereby amended and restated in its
entirety to provide as follows:
"In the event of a Corporate Transaction the successor corporation, or
its Parent or a Subsidiary of the successor corporation, shall
substitute for each Option then outstanding under this Plan an option
of equivalent value; provided that with respect to a Corporate
Transaction as defined in Section 2(i)(i) and Section 2(i)(iii) of
this Plan, the successor corporation, or its Parent or a Subsidiary of
the successor corporation, shall be required to issue such equivalent
options only if all of the Company's issued and outstanding voting
securities are transferred in the subject transaction to the successor
corporation or its Parent."
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Fifth Amendment has been executed and delivered,
effective as of June 4, 1999.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
SIXTH AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company")
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to increase the number of Shares that may be issued
under the Plan from 1,901,240 to 2,001,940 and to permit the Administrator to
increase the number of Shares reserved for the issuance under the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Sixth
Amendment shall have the meanings ascribed thereto in the Plan.
2. The first sentence of Section 3 of the Plan, as amended, is hereby
amended and restated in its entirety as follows:
"Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of Shares that may be issued under the Plan is 2,001,940."
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Sixth Amendment has been executed and delivered,
effective as of October 15, 1999.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
SEVENTH AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company")
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to accelerate vesting of stock options issued upon
Involuntary Termination after a Corporate Transaction.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms upon in this Seventh
Amendment shall have the meanings ascribed thereto in the Plan.
2. The following new Section 11(c) of the Plan, as amended, is hereby
added to the Plan:
(c) Notwithstanding the foregoing, if a Corporate Transaction occurs,
then the option shall vest in full, upon an Involuntary
Termination of Optionee's Service within 18 months following the
effective date of a Corporate Transaction in which this Option
has been assumed or assigned.
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Seventh Amendment has been executed and
delivered, effective as of October 29, 1999.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
EIGHTH AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company")
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to increase the number of Shares that may be issued
under the Plan from 2,001,940 to 3,415,710 and to permit the Administrator to
increase the number of Shares reserved for the issuance under the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Eighth
Amendment shall have the meanings ascribed thereto in the Plan.
2. The first sentence of Section 3 of the Plan, as amended, is hereby
amended and restated in its entirety as follows:
"Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of Shares that may be issued under the Plan is 3,415,710."
3. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Eighth Amendment has been executed and delivered,
effective as of February 3, 2000.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Robert Lynch
---------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
NINTH AMENDMENT
OF
CLEARCOMMERCE 1997 STOCK OPTION/STOCK ISSUANCE PLAN
---------------------------------------------------
WHEREAS, ClearCommerce Corporation, a Delaware corporation (the "Company")
adopted the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") to,
among other things, attract and retain the best available personnel for
positions of substantial responsibilities, to provide additional incentive to
Employees and Directors and to promote the success of the Company's business;
WHEREAS, the Board of Directors and Stockholders wish to correct a
misstatement in the Plan and clarify that options may be granted not only to
employees and directors but also to consultants of the Company, with such
clarification for all purposes to be effective as of the date of initial
adoption of the Plan; and
WHEREAS, the Board of Directors and Stockholders have authorized the
Company to amend the Plan to increase the number of Shares that may be issued
under the Plan from 3,415,710 to 3,961,710 and to permit the Administrator to
increase the number of Shares reserved for the issuance under the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Unless otherwise defined herein, all terms used in this Ninth Amendment
shall have the meanings ascribed thereto in the Plan.
2. The first sentence of Section 3 of the Plan, as amended, is hereby
amended and restated in its entirety as follows:
"Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of Shares that may be issued under the Plan is
3,961,710."
3. The definition of "Optionee" in the Plan is hereby amended and restated
to read in its entirety as follows:
"'Optionee' means a Director, Employee or Consultant who receives an
Option."
4. The following definition of "Consultant" is hereby inserted immediately
prior to the definition of "Continuous Status as an Employee" to read in its
entirety as follows:
"'Consultant' means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such
entity.
5. Except as otherwise expressly set forth herein, all terms and
conditions of the Plan shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, this Ninth Amendment has been executed and delivered,
effective as of March ___, 2000.
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By:
----------------------------------------------------
Robert Lynch, President and Chief Executive Officer
<PAGE>
EXHIBIT 10.2.1
Exhibit I to Stock Option/
-------------------------
Stock Issuance Plan
-------------------
CLEARCOMMERCE CORPORATION
1997 STOCK OPTION/STOCK ISSUANCE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's name and address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Option Agreement and the Plan,
including the provisions thereof relating to increases in the number of shares
covered by this Option upon the occurrence of certain specified events, as
follows:
Grant Number __________________________
Date of Grant __________________________
Vesting Commencement Date __________________________
Exercise Price per Share $_________________________
Total Number of Shares Granted __________________________
Total Exercise Price $_________________________
Type of Option ___ Incentive Stock Option
___ Nonqualified Stock Option
Date Exercisable Immediately Exercisable
Term/Expiration Date __________________________
(No more than 10 years from date
of grant, 5 years for certain grants)
Vesting Schedule
- ----------------
The Optioned Stock shall be unvested and subject to repurchase by the
Company at the Exercise Price paid per Share. Optionee shall acquire a vested
interest in, and the Company's repurchase right shall lapse with respect to,
twenty-five percent (25%) of the Optioned Stock on the first anniversary of the
Vesting Commencement Date. Commencing on the first anniversary of the Vesting
Commencement Date, the balance of the Optioned Stock shall vest in thirty-six
(36) successive equal monthly installments over the thirty-six (36) month period
measured from the first anniversary of the Vesting Commencement Date. In no
event shall any additional Optioned Stock vest after Optionee's cessation of
Service.
Optionee acknowledges and agrees that this Option is granted subject to and
in accordance with the terms of the ClearCommerce Corporation 1997 Stock
Option/Stock Issuance Plan. Optionee further agrees to be bound by the terms of
the Plan and this Stock Option Agreement.
1
<PAGE>
Optionee understands that any Optioned Stock purchased under this Option shall
be subject to the terms set forth in the Stock Purchase Agreement.
Termination Period
- ------------------
You may exercise this Option for three months after your employment with
the Company terminates, or for such longer period upon your death or disability
as provided in the Plan. In no case may you exercise this Option after the
Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. ClearCommerce Corporation (f/k/a Outreach
---------------
Communications Corporation) (the "Company") hereby grants to the Optionee named
in Section I hereof (the "Optionee") an option (the "Option") to purchase the
total number of shares of Common Stock (the "Shares") set forth in Section I
hereof, at the exercise price per share set forth in Section I hereof (the
"Exercise Price") subject to the terms, definitions and provisions of the 1997
Stock Option/Stock Issuance Plan (the "Plan") adopted by the Company, which is
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option
Agreement.
If designated in Section I hereof as an Incentive Stock Option, this Option
is intended (subject to Section 5(b) of the Plan) to qualify as an Incentive
Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent
that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be
treated as a Nonqualified Stock Option.
2. Exercise of Option.
------------------
(a) Right to Exercise. Subject to the restrictions set forth in this
-----------------
Paragraph (a), this Option shall be exercisable during its term in accordance
with the Vesting Schedule set out in Section I hereof and with the applicable
provisions of the Plan and this Option Agreement. In the event of Optionee's
death, disability or other termination of the employment or consulting
relationship, this Option shall be exercisable in accordance with the applicable
provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice (substantially in the form attached hereto as Exhibit A) that shall state
---------
the election to exercise the Option, the number of Shares in respect of which
the Option is being exercised, and such other representations and agreements as
to the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price. Upon exercise of the Option in accordance with the terms and
conditions set forth herein, the Optionee agrees to execute the Stock Purchase
Agreement (substantially in the form attached hereto as Exhibit B) to evidence
---------
the acquisition of the Optioned Stock.
2
<PAGE>
The Optionee shall, upon notification of the amount due (if any) as a
result of the exercise of the Option and prior to or concurrent with delivery of
the certificate representing the Shares, pay to the Company amounts necessary to
satisfy applicable federal, state and local tax withholding requirements.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed
or any automatic quotation system upon which the Shares may then be quoted.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Lock-Up Period. Optionee hereby agrees that if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
Optionee shall not sell or otherwise transfer any Shares or other securities of
the Company during the one hundred eighty (180) day period (or such longer
period as may be requested in writing by the Managing Underwriter and agreed to
in writing by the Company) (the "Market Standoff Period") following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to the
first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
4. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company that (A)
in the case of Shares acquired directly or indirectly from the Company, have
been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.
THE USE OF SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED TO PAY FOR EXERCISED
SHARES MAY HAVE INCOME TAX CONSEQUENCES FOR THE OPTIONEE.
3
<PAGE>
5. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company, and may
not be exercised if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as
promulgated by the Federal Reserve Board.
6. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution or
as otherwise set forth in the Plan and may be exercised during the lifetime of
Optionee only by Optionee or a permitted transferee as set forth in the Plan.
The terms of the Plan and this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
7. Term of Option. This Option may be exercised only within the term set
--------------
out in Section I hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) stockholders shall apply to
this Option.
8. Tax Consequences. The grant and/or exercise of the Option will have
----------------
federal and state income tax consequences. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER UPON THE GRANT OF THE OPTION AND BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES ACQUIRED UPON EXERCISE, PARTICULARLY WITH RESPECT TO HIS
OR HER STATE'S TAX LAWS.
9. Repurchase Rights. ALL OPTIONED STOCK ACQUIRED UPON EXERCISE OF THIS
-----------------
OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE COMPANY AND ITS ASSIGNS TO
REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE STOCK
PURCHASE AGREEMENT.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan, this Option Agreement and the Stock Purchase Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and this Option Agreement may not be amended except by means of a
writing signed by the Company and Optionee. This Option Agreement is governed
by Delaware law except for that body of law pertaining to conflict of laws.
11. Warranties, Representations and Covenants. The undersigned Optionee
-----------------------------------------
warrants and represents that he or she has reviewed the Plan, this Option
Agreement and the Stock Purchase Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan, this Option
Agreement and the Stock Purchase Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan, this Option Agreement and
Stock Purchase Agreement. Optionee further agrees to notify the Company upon
any change in the residence address indicated below. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS
4
<PAGE>
EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING
SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
OPTION AGREEMENT, NOR IN THE PLAN, WHICH IS INCORPORATED HEREIN BY REFERENCE,
SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT
OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY
AT ANY TIME, WITH OR WITHOUT CAUSE.
CLEARCOMMERCE CORPORATION (F/K/A
OUTREACH COMMUNICATIONS CORPORATION),
a Delaware corporation
By: ___________________________________________________
Name: _________________________________________________
Title: ________________________________________________
OPTIONEE:
_______________________________________________________
Signature
_______________________________________________________
Print Name
_______________________________________________________
Residence Address
_______________________________________________________
Area Code/Telephone Number
5
<PAGE>
EXHIBIT A
---------
CLEARCOMMERCE CORPORATION
1997 STOCK OPTION PLAN
EXERCISE NOTICE
ClearCommerce Corporation
11500 Metric Blvd., Suite 300
Austin, Texas 78758
Attention: Secretary
1. Exercise of Option. Effective as of today, _____________, the
------------------
undersigned ("Purchaser") hereby elects to purchase __________ shares (the
"Shares") of the Common Stock of ClearCommerce Corporation (f/k/a Outreach
Communications Corporation), a Delaware corporation (the "Company") under and
pursuant to the 1997 Stock Option/Stock Issuance Plan (the "Plan") and the Stock
Option Agreement dated ___________, (the "Option Agreement"). The purchase
price for the Shares shall be $__________, as specified in the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares of __________________________________________
_________________________________________________________________. THE USE OF
SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED FOR EXERCISED SHARES MAY HAVE INCOME
TAX CONSEQUENCES FOR THE OPTIONEE.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. The Purchaser shall not be deemed to be the
---------------------
holder of, or to have any of the rights of a holder with respect to, any Shares
subject for which such Option is exercised including, but not limited to, rights
to vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date all the conditions set forth above are
satisfied, except as provided in Section 13 of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
Exhibit A - Page 1
<PAGE>
6. Entire Agreement; Governing Law. The Plan, the Option Agreement and
-------------------------------
the Stock Purchase Agreement are incorporated herein by reference. This
Agreement, the Plan, the Option Agreement and the Stock Purchase Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Agreement may not be amended except by means of a writing
signed by the Company and Purchaser. This Agreement is governed by Delaware law
except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: CLEARCOMMERCE CORPORATION (F/K/A
OUTREACH COMMUNICATIONS CORPORATION),
a Delaware corporation
_________________________ By: _________________________________________
Signature Its: ________________________________________
_________________________
Print Name
Address: Address:
- ------- -------
_________________________ 11500 Metric Blvd., Suite 300
_________________________ Austin, Texas 78758
Exhibit A - Page 2
<PAGE>
EXHIBIT 10.2.2
EXHIBIT B
---------
CLEARCOMMERCE CORPORATION
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this ______ day of ____ 19__, by and among
C1earCommerce Corporation (f/k/a Outreach Communications Corporation), a
Delaware corporation (the "Company") and _______________ (the "Optionee") under
the Company's 1997 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning assigned to
them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
------------------
1. Purchase. Optionee hereby purchases ____________ shares of Common
--------
Stock (the "Purchased Shares") pursuant to that certain option (the "Option")
granted Optionee on ____________, 199_ (the "Grant Date") to purchase up to
_____ shares of Common Stock under the Plan at the exercise price of $_______
per share (the "Exercise Price").
2. Payment. Concurrently with the delivery of this Agreement to the
-------
Company, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver a duly-
executed blank Assignment Separate from Certificate (in the form attached hereto
as Schedule 1) with respect to the Purchased Shares.
----------
3. Escrow. The Company shall have the right to hold the Purchased
------
Shares in escrow until those shares have vested in accordance with the Vesting
Schedule.
4. Stockholder Rights. Until such time as the Company exercises the
------------------
Repurchase Right or the First Refusal Right, Optionee (or any successor in
interest) shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. Restricted Securities. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under
<PAGE>
the 1933 Act which exempts certain resales of unrestricted securities is not
presently available to exempt the resale of the Purchased Shares from the
registration requirements of the 1933 Act.
2. Restrictions on Disposition of Purchased Shares. Optionee shall
-----------------------------------------------
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Company with a written summary
of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that (a) the
proposed disposition does not require registration of the Purchased Shares
under the 1933 Act or (b) all appropriate action necessary for compliance
with the registration requirements of the 1933 Act or any exemption from
registration available under the 1933 Act (including Rule 144) has been
taken.
The Company shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with the following restrictive legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a `no action' letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Company that registration under such Act is
not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
are subject to certain repurchase rights and rights of first refusal
granted to the Company and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in conformity
with the terms of a written agreement dated ___________, 199__ between the
Company and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the
Company's principal corporate offices."
-2-
<PAGE>
C. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Fight or the Market Stand-Off.
2. Transferee Obligations. Each person (other than the Company) to
----------------------
whom the Purchased Shares are transferred by means of a Permitted Transfer must,
as a condition precedent to the validity of such transfer, acknowledge in
writing to the Company that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
3. Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the 1933 Act, including the Company's initial public offering, Owner
shall not sell, make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any Purchased Shares without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time from and after the effective date of the final prospectus
for the offering as may be requested by the Company or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180) days and the
Market Stand-Off shall in all events terminate two (2) years after the effective
date of the Company's initial public offering.
(b) Owner shall be subject to the Market Stand-Off, provided and
------------
only if the officers and directors of the Company are also subject to similar
- -------
restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Company may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.
-3-
<PAGE>
D. REPURCHASE RIGHT
----------------
1. Grant. The Company is hereby granted the right (the "Repurchase
-----
Right"), exercisable at any time during the ninety (90)-day period following the
date Optionee ceases for any reason to remain in Service, to repurchase at the
Exercise Price all or any portion of the Purchased Shares in which Optionee is
not, at the time of his or her cessation of Service, vested in accordance with
the Vesting Schedule (such shares to be hereinafter referred to as the "Unvested
Shares").
2. Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Company prior to the close of
business on the date specified for the repurchase. Concurrently with the receipt
of such stock certificates, the Company shall pay to Owner, in cash or cash
equivalents (including the cancellation of an purchase-money indebtedness), an
amount equal to the Exercise Price previously paid for the Unvested Shares which
are to be repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Optionee vests in accordance with the following Vesting Schedule:
(i) Upon Optionee's completion of one (1) year of Service measured
from _____________, 199__ (the "Vesting Commencement Date"), Optionee shall
acquire a vested interest in, and the Repurchase Right shall lapse with
respect to, twenty-five percent (25%) of the Purchased Shares.
(ii) Optionee shall acquire a vested interest in, and the Repurchase
Right shall lapse with respect to, the balance of the Purchased Shares
commencing with the first anniversary of the Vesting Commencement Date in a
series of successive equal monthly installments upon Optionee's completion
of each additional month of Service over the thirty-six (36) month period
measured from the first anniversary of the Vesting Commencement Date under
subparagraph (i) above.
All Purchased Shares as to which the Repurchase Right lapses shall,
however, remain subject to (i) the First Refusal Right and (ii) the Market
Stand-Off.
4. Aggregate Vesting Limitation. If the Option is exercised in more
----------------------------
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of
-4-
<PAGE>
Purchased Shares in which Optionee would otherwise at the time be vested, in
accordance with the Vesting Schedule, had all the Purchased Shares (including
those acquired under the Prior Purchase Agreements) have been acquired
exclusively under this Agreement.
5. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Company's capital structure;
provided, however, that the aggregate purchase price shall remain the same.
- -------- -------
6. Corporate Transaction.
---------------------
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is assigned to the successor Company
(or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure; provided, however, that the
--------
aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Corporate Transaction shall immediately
be deposited in escrow with the Company (or the successor entity) and shall not
be released from escrow until Optionee vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.
(c) The Repurchase Right shall automatically lapse in its
entirety, and all the Purchased Shares shall immediately vest in full, upon an
Involuntary Termination of Optionee's Service within eighteen (18) months
following the effective date of a Corporate Transaction in which the Repurchase
Right has been assigned.
E. RIGHT OF FIRST REFUSAL
----------------------
1. Grant. The Company is hereby granted the right of first refusal
-----
(the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the Vesting Schedule. For purposes of this Article E.
-5-
<PAGE>
the term "transfer" shall include any sale, assignment, pledge, encumbrance or
other disposition of the Purchased Shares intended to be made by Owner, but
shall not include any Permitted Transfer.
2. Notice of Intended Disposition. In the event any Owner of
------------------------------
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Company written notice (the
"Disposition Notice") of the terms of the offer, including the purchase price
and the identity of the third-party offeror, and (ii) provide satisfactory proof
that the disposition of the Target Shares to such third-party offeror would not
be in contravention of the provisions set forth in Articles B and C.
3. Exercise of the First Refusal Right. The Company shall, for a
-----------------------------------
period of forty five (45) days following receipt of the Disposition Notice, have
the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
forty-five (45)-day exercise period. If such right is exercised with respect to
all the Target Shares, then the Company shall effect the repurchase of such
shares, including payment of the purchase price, not more than fifteen (15)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the Company.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the Company
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If Owner and the Company cannot agree on
such cash value within thirty (30) days after the Company's receipt of the
Disposition Notice, the valuation shall be made by an appraiser of recognized
standing selected by Owner and the Company or, if they cannot agree on an
appraiser within forty-five (45) days after the Company's receipt of the
Disposition Notice, each shall select an appraiser of recognized standing and
the two (2) appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such appraisal
shall be shared equally by Owner and the Company. The closing shall then be held
on the later of (i) the fifteenth business day following delivery of the
-----
Exercise Notice or (ii) the fifteenth business day after such valuation shall
have been made.
4. Non-Exercise of the First Refusal Right. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the forty-five
(45)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
-------- -------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or
-6-
<PAGE>
disposition of the Target Shares within the specified thirty (30)-day period,
the First Refusal Right shall continue to be applicable to any subsequent
disposition of the Target Shares by Owner until such right lapses.
5. Partial Exercise of the First Refusal Right. In the event the
-------------------------------------------
Company makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Company
delivered within fifteen (15) business days after Owner's receipt of the
Exercise Notice, to effect the sale of the Target Shares pursuant to either of
the following alternatives:
(i) sale or other disposition of all the Target Shares to the third-
party offeror identified in the Disposition Notice, but in full compliance
with the requirements of Paragraph E.4, as if the Company did not exercise
the First Refusal Right; or
(ii) sale to the Company of the portion of the Target Shares which
the Company has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First
Refusal Right shall continue to be applicable to any subsequent disposition
of the remaining Target Shares until such right lapses.
Failure of Owner to deliver timely notification to the Company shall
be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. Recapitalization/Reorganization.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. Lapse. The First Refusal Right shall lapse upon the earliest to
-----
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
-7-
<PAGE>
F. SPECIAL TAX ELECTION
--------------------
1. Section 83 (b) Election. Under Code Section 83, the excess of
----------------------
the fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Exercise Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Purchased Shares pursuant to the Repurchase Right. Optionee may
elect under Code Section 83(b) to be taxed at the time the Purchased Shares are
acquired, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares on the date of this Agreement
equals the Exercise Price paid (and thus no tax is payable), the election must
be made to avoid adverse tax consequences in the future. THE FORM FOR MAKING
THIS ELECTION IS ATTACHED AS SCHEDULE 2 HERETO. OPTIONEE UNDERSTANDS THAT
----------
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS
LAPSE.
2. FILING RESPONSIBILITY. OPTIONEE ACKNOWLEDGES THAT IT IS
---------------------
OPTIONEE'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TT1MELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
------------------
1. Assignment. The Company may assign the Repurchase Right and/or
----------
the First Refusal Right to any person or entity selected by the Board, including
(without limitation) one or more stockholders of the Company.
2. No Employment or Service Contract. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
Optionee) or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without cause.
3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
-8-
<PAGE>
4. No Waiver. The failure of the Company in any instance to
---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Company and Optionee. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
5. Cancellation of Shares. If the Company shall make available, at
----------------------
the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the Company
shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
6. Optionee Undertaking. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Company may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
7. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware without resort
to that State's conflict-of-laws rules.
8. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Company and its successors and
assigns and upon Optionee, Optionee's assigns and the legal representatives,
heirs and legatees of Optionee's estate, whether or not any such person shall
have become a party to this Agreement and have agreed in writing to join herein
and be bound by the terms hereof.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first indicated above.
CLEARCOMMERCE CORPORATION (F/K/A
OUTREACH COMMUNICATIONS
CORPORATION), a Delaware corporation
By:___________________________________
Title:________________________________
Address:______________________________
______________________________________
______________________________________
OPTIONEE
Address:______________________________
______________________________________
-10-
<PAGE>
SCHEDULE 1
----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED __________________ hereby sell(s), assign(s) and
transfer(s) unto C1earCommerce Corporation (f/k/a Outreach Communications
Corporation), a Delaware corporation (the "Company"), ____________ (_________)
shares of the Common Stock of the Company standing in his or her name on the
books of the Company represented by Certificate No. ________________ herewith
and do(es) hereby irrevocably constitute and appoint ___________________
Attorney to transfer the said stock on the books of the Company with full power
of substitution in the premises.
Dated:___________
Signature____________________
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Company to exercise
the Repurchase Right without requiring additional signatures on the part of
Optionee.
<PAGE>
SCHEDULE 2
----------
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg, Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _________
shares of the common stock of ClearCommerce Corporation (f/k/a Outreach
Communications Corporation).
(3) The property was issued on __________, 199___.
(4) The taxable year in which the election is being made is the calendar year
199___.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of installments over a four
(4)-year period ending on ____________, 199___.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_______ per share.
(7) The amount paid for such property is $_________ per share.
(8) A copy of this statement was furnished to C1earCommerce Corporation for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on __________________ 199__.
_______________________ ________________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested
Optionee must retain two (2) copies of the completed form for filing with his or
<PAGE>
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Purchase Agreement.
---------
B. Board shall mean the Company's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Company's common stock.
------------
E. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions to which the Company is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or dissolution of the
Company.
F. Company shall mean C1earCommerce Corporation (f/k/a Outreach
-------
Communications Corporation), a Delaware corporation.
G. Disposition Notice shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. Exercise Notice shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. Exercise Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
J. Fair Market Value of a share of Common Stock on any relevant date
------------------
prior to the initial public offering of the Common Stock shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
K. First Refusal Right shall mean the right granted to the Company in
-------------------
accordance with Article E.
A-1
<PAGE>
L. Grant Date shall have the meaning assigned to such term in Paragraph
----------
A.1.
M. Grant Notice shall mean the Notice of Stock Option Grant pursuant to
------------
which Optionee has been informed of the basic terms of the Option.
N. Involuntary Termination shall mean the termination of Optionee's
-----------------------
Service that occurs by reason of
(i) Optionee's involuntary dismissal or discharge by the Company for
reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Company which materially reduces Optionee's
level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee's place of employment
by more than fifty (50) miles, provided and only if such change, reduction
or relocation is effected by the Company without Optionee's consent.
O. Market Stand-Off shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
P. Misconduct shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Company (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Company (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Company (or any Parent or Subsidiary) may
consider as grounds for the dismissal or discharge of Optionee or any other
person in the Service of the Company (or any Parent or Subsidiary).
Q. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
R. Option shall have the meaning assigned to such term in Paragraph A.1.
------
S. Option Agreement shall mean all agreements and other documents
----------------
evidencing the Option.
T. Optionee shall mean the person to whom the Option is granted, under
--------
the Plan.
U. Owner shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
A-2
<PAGE>
V. Parent shall mean any corporation (other than the Company) in an
------
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Optionee obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Company in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
X. Plan shall mean the Company's 1997 Stock Option/Stock Issuance Plan.
----
Y. Plan Administrator shall mean either the Board or a committee of Board
------------------
members, to the extent the committee is at the time responsible for
administration of the Plan.
Z. Prior Purchase Agreement shall have the meaning assigned to such term
------------------------
in Paragraph D.4.
AA. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
BB. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Company's receipt
of consideration.
CC. Reorganization shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are transferred in
whole or in part to a person or persons different from the persons holding
those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which
the Company is incorporated or to create a holding company structure.
A-3
<PAGE>
DD. Repurchase Right shall mean the right granted to the Company in
----------------
accordance with Article D.
EE. SEC shall mean the Securities and Exchange Commission.
---
AA. Service shall mean the Optionee's performance of services to the
-------
Company (or any Parent or Subsidiary) in the capacity of an employee, subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance, or a non-employee member of
the board of directors.
AB. Stock Issuance Program shall mean the Stock Issuance Program under
----------------------
the Plan.
AC. Subsidiary shall mean any corporation (other than the Company) in an
----------
unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AD. Target Shares shall have the meaning assigned to such term in
-------------
Paragraph E.2.
AE. Vesting Schedule shall mean the vesting schedule specified in
----------------
Paragraph D.3, subject to the acceleration provisions upon an Involuntary
Termination following a Corporate Transaction.
AF. Unvested Shares shall have the meaning assigned to such term in
---------------
Paragraph D.1.
A-4
<PAGE>
EXHIBIT 10.2.3
Exhibit II to Stock Option/
---------------------------
Stock Issuance Plan
-------------------
CLEARCOMMERCE CORPORATION
STOCK ISSUANCE AGREEMENT
------------------------
AGREEMENT made as of this ______ day of ____________ 19__, by and among
ClearCommerce Corporation (f/k/a Outreach Communications Corporation), a
Delaware corporation _____________________________, and Participant in the
Company's 1997 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning assigned to
them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
------------------
1. Purchase. Participant hereby purchases ____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $_________ per share (the "Purchase
Price").
2. Payment. Concurrently with the delivery of this Agreement to the
-------
Company, Participant shall pay the Purchase Price for the Purchased Shares in
cash or check payable to the Company and shall deliver a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as
Schedule 1) withrespect to the Purchased Shares.
- ----------
3. Escrow. The Company shall have the right to hold the Purchased
------
Shares in escrow until those shares have vested in accordance with the Vesting
Schedule.
4. Stockholder Rights. Until such time as the Company exercises the
------------------
Repurchase Right or the First Refusal Right, Participant (or any successor in
interest) shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. Restricted Securities. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Participant in reliance
upon the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Participant hereby
confirms that Participant has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Participant hereby acknowledges that Participant is prepared to hold the
Purchased Shares for an indefinite period and that Participant is aware that SEC
Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
<PAGE>
2. Disposition of Purchased Shares. Participant shall make no
-------------------------------
disposition of the Purchased Shares (other than a Permitted Transfer) unless
and until there is compliance with all of the following requirements:
(1) Participant shall have provided the Company with a written summary
of the terms and conditions of the proposed disposition.
(2) Participant shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(3) Participant shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that (a) the
proposed disposition does not require registration of the Purchased Shares
under the 1933 Act or (b) all appropriate action necessary for compliance
with the registration requirements of the 1933 Act or any exemption from
registration available under the 1933 Act (including Rule 144) has been
taken.
The Company shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with the following restrictive legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a 'no action' letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Company that registration under such Act is
not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and are
subject to certain repurchase rights and rights of first refusal granted to
the Company and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with the
terms of a written agreement dated __________, 199___ between the Company
and the registered holder of the shares (or the predecessor in interest to
the shares). A copy of such agreement is maintained at the Company's
principal corporate offices.
-2-
<PAGE>
C. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Fight or the Market Stand-Off.
2. Transferee Obligations. Each person (other than the Company)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as acondition precedent to the validity of such transfer, acknowledge in
writing to the Company that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Participant.
3. Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the 1933 Act, including the Company's initial public offering, Owner
shall not sell, make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any Purchased Shares without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time from and after the effective date of the final prospectus
for the offering as may be requested by the Company or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180) days and the
Market Stand-Off shall in all events terminate two (2) years after the effective
date of the Company's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided
--------
and only if the officers and directors of the Company are also subject to
- ----------
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Company may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.
-3-
<PAGE>
D. REPURCHASE RIGHT
----------------
1. Grant. The Company is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule (such shares to be hereinafter referred
to as the "Unvested Shares").
2. Exercise of the Repurchase Right. The Repurchase Right shall
--------------------------------
be exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Company prior to the close of
business on the date specified for the repurchase. Concurrently with the receipt
of such stock certificates, the Company shall pay to Owner, in cash or cash
equivalents (including the cancellation of an purchase-money indebtedness), an
amount equal to the Purchase Price previously paid for the Unvested Shares which
are to be repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right
-----------------------------------
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Participant vests in accordance with the following Vesting Schedule:
(i) Upon Participant's completion of one (1) year of Service
measured from _____________, 199_____ (the "Vesting Commencement Date"),
Participant shall acquire a vested interest in, and the Repurchase Right
shall lapse with respect to, twenty-five percent (25%) of the Purchased
Shares.
(ii) Participant shall acquire a vested interest in, and the
Repurchase Right shall lapse with respect to, the balance of the Purchased
Shares commencing with the first anniversary of the Vesting Commencement
Date in a series of successive equal monthly installments upon
Participant's completion of each additional month of Service over the
thirty-six (36) month period measured from the first anniversary of the
Vesting Commencement Date under subparagraph (i) above.
All Purchased Shares as to which the Repurchase Right lapses shall,
however, remain subject to (i) the First Refusal Right and (ii) the Market
Stand-Off.
4. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
balance of the Purchased Shares shall be immediately subject to the Repurchase
Right, but only to the extent the Purchased Shares are at the time covered
-4-
<PAGE>
by such right. Appropriate adjustments to reflect such distribution shall be
made to the number and/or class of Purchased Shares subject to this Agreement
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such Recapitalization upon the Company's
capital structure; provided, however, that the aggregate purchase price shall
-------- -------
remain the same.
5. Corporate Transaction.
---------------------
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure; provided, however, that
--------
the aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Corporate Transaction shall immediately
be deposited in escrow with the Company (or the successor entity) and shall not
be released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.
(c) The Repurchase Right shall automatically lapse in its
entirety, and all the Purchased Shares shall immediately vest in full, upon an
Involuntary Termination of Participant's Service within eighteen (18) months
following the effective date of a Corporate Transaction in which the Repurchase
Right has been assigned.
E. RIGHT OF FIRST REFUSAL
----------------------
1. Grant. The Company is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any
proposed transfer of the Purchased Shares in which Participant has vested in
accordance with the Vesting Schedule. For purposes of this Article E. the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
2. Notice of Intended Disposition. In the event any Owner of
------------------------------
Purchased Shares in which Participant has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Company written notice (the
"Disposition Notice") of the terms of the offer, including the purchase price
and the identity of the third-party
-5-
<PAGE>
offeror, and (h) provide satisfactory proof that the disposition of the Target
Shares to such third-party offeror would not be in contravention of the
provisions set forth in Articles B and C.
3. Exercise of the First Refusal Right. The Company shall, for a
-----------------------------------
period of forty-five (45) days following receipt of the Disposition Notice, have
the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
forty-five (45)-day exercise period. If such right is exercised with respect to
all the Target Shares, then the Company shall effect the repurchase of such
shares, including payment of the purchase price, not more than fifteen (15)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the Company.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the Company
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If Owner and the Company cannot agree on
such cash value within thirty (30) days after the Company's receipt of the
Disposition Notice, the valuation shall be made by an appraiser of recognized
standing selected by Owner and the Company or, if they cannot agree on an
appraiser within forty-five (45) days after the Company's receipt of the
Disposition Notice, each shall select an appraiser of recognized standing and
the two (2) appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by Owner and the Company. The closing shall
then be held on the later of (i) the fifteenth business day following delivery
-----
of the Exercise Notice or (ii) the fifteenth business day after such valuation
shall have been made.
4. Non-Exercise of the First Refusal Right. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the forty-five
(45)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
--------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. Partial Exercise of the First Refusal Right. In the event the
-------------------------------------------
Company makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Company
delivered within fifteen (15) business days after Owner's receipt of the
Exercise Notice, to
-6-
<PAGE>
effect the sale of the Target Shares pursuant to either of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph E.4, as if the Company did
not exercise the First Refusal Right; or
(ii) sale to the Company of the portion of the Target Shares which
the Company has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First
Refusal Right shall continue to be applicable to any subsequent disposition
of the remaining Target Shares until such right lapses.
Failure of Owner to deliver timely notification to the Company shall
be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. Recapitalization/Reorganization.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. Lapse. The First Refusal Right shall lapse upon the earliest to
-----
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F. SPECIAL TAX ELECTION
--------------------
1. Section 83(b) Election. Under Code Section 83, the excess of
----------------------
the fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Purchased Shares pursuant to the Repurchase Right. Participant
may elect under Code Section 83(b) to be taxed at the time the Purchased Shares
are acquired, rather than when and as such
-7-
<PAGE>
Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the fair market value of the Purchased
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS SCHEDULE 2 HERETO.
----------
PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE COMPANY OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
------------------
1. Assignment. The Company may assign the Repurchase Right
----------
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Company.
2. No Employment or Service Contract. Nothing in this Agreement
---------------------------------
or in the Plan shall confer upon Participant any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Company (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. No Waiver. The failure of the Company in any instance to
---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Company and Participant. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
5. Cancellation of Shares. If the Company shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased
-8-
<PAGE>
Shares to be repurchased in accordance with the provisions of this Agreement,
then from and after such time, the person from whom such shares are to be
repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed purchased in accordance with the
applicable provisions hereof, and the Company shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
6. Participant Undertaking. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the Company
may deem necessary or advisable in order to carry out or effect one or more of
the obligations or restrictions imposed on either Participant or the Purchased
Shares pursuant to the provisions of this Agreement.
7. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware without resort
to that State's conflict-of-laws rules.
8. Successors and Assigns. The provisions of this Agreement
----------------------
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
CLEARCOMMERCE CORPORATION (F/K/A
OUTREACH COMMUNICATIONS
CORPORATION), a Delaware corporation
By:
------------------------------------
Title:
----------------------------------
Address:
--------------------------------
---------------------------------------
---------------------------------------
PARTICIPANT
Address:
-------------------------------
---------------------------------------
-10-
<PAGE>
SCHEDULE 1
----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ____________________ hereby sell(s), assign(s) and
transfer(s) unto ClearCommerce Corporation (f/k/a Outreach Communications
Corporation), a Delaware corporation (the "Company"), _____________ (______)
shares of the Common Stock of the Company standing in his or her name on the
books of the Company represented by Certificate No. ______________ herewith and
do(es) hereby irrevocably constitute and appoint ___________________ Attorney to
transfer the said stock on the books of the Company with full power of
substitution in the premises. Dated:
---------------
Signature
---------------------------------
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Company to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
SCHEDULE 2
----------
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _________
shares of the common stock of ClearCommerce Corporation (f/k/a Outreach
Communications Corporation), a Delaware corporation.
(3) The property was issued on ____________, 199____.
(4) The taxable year in which the election is being made is the calendar year
199___.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of installments over a four
(4)-year period ending on ___________________, 199__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $__________ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to ClearCommerce Corporation for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ___________________________ 199____.
- ------------------- ------------------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Issuance Agreement.
---------
B. Board shall mean the Company's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Company's common stock.
------------
E. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or dissolution of the
Company.
F. Company shall mean ClearCommerce Corporation (f/k/a Outreach
-------
Communications Corporation), a Delaware corporation.
G. Disposition Notice shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. Exercise Notice shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. Fair Market Value of a share of Common Stock on any relevant date
------------------
prior to the initial public offering of the Common Stock shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
J. First Refusal Right shall mean the right granted to the Company in
-------------------
accordance with Article E.
K. Involuntary Termination shall mean the termination of Participant's
-----------------------
Service which occurs by reason of:
A-1
<PAGE>
(i) Participant's involuntary dismissal or discharge by the Company for
reasons other than Misconduct, or
(ii) Participant's voluntary resignation following (A) a change in
Participant's position with the Company which materially reduces Participant's
level of responsibility, (B) a reduction in Participant's level of compensation
(including base salary, fringe benefits and participation in corporate-
performance based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of Participant's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Company without Participant's consent.
L. Market Stand-Off shall mean the market stand-off restriction
----------------
specified in Paragraph C.3.
M. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by Participant, any unauthorized use or disclosure
by Participant of confidential information or trade secrets of the Company (or
any Parent or Subsidiary), or any other intentional misconduct by Participant
adversely affecting the business or affairs of the Company (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Company (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of
Participant or any other person in the Service of the Company (or any Parent or
Subsidiary).
N. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
O. Owner shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
P. Parent shall mean any corporation (other than the Company) in
------
an unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Q. Participant shall mean the person to whom shares are issued under
-----------
the Stock Issuance Program.
R. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Participant's will or the laws of intestate
succession following Participant's death or (iii) a transfer to the Company in
pledge as security for any purchase-money indebtedness incurred by Participant
in connection with the acquisition of the Purchased Shares.
A-2
<PAGE>
S. Plan shall mean the Company's 1997 Stock Option/Stock Issuance
----
Plan.
T. Plan Administrator shall mean either the Board or a committee of
------------------
Board members, to the extent the committee is at the time responsible for
administration of the Plan.
U. Purchase Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
V. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
W. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Company's receipt
of consideration.
X. Reorganization shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving
entity but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons different from
the persons holding those securities immediately prior to the merger,
or
(iv) any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding company
structure.
Y. Repurchase Right shall mean the right granted to the Company in
----------------
accordance with Article D.
Z. SEC shall mean the Securities and Exchange Commission.
---
AA. Service shall mean the Participant's performance of services to
-------
the Company (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors.
AB. Stock Issuance Program shall mean the Stock Issuance Program
----------------------
under the Plan.
AC. Subsidiary shall mean any corporation (other than the Company)
----------
in an unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3
<PAGE>
AD. Target Shares shall have the meaning assigned to such term in
-------------
Paragraph E.2.
AE. Vesting Schedule shall mean the vesting schedule specified in
----------------
Paragraph D.3, subject to the acceleration provisions upon an Involuntary
Termination following a Corporate Transaction.
AF. Unvested Shares shall have the meaning assigned to such term in
---------------
Paragraph D.1.
A-4
<PAGE>
EXHIBIT 10.3
CLEARCOMMERCE CORPORATION
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions
of substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means ClearCommerce Corporation, a Delaware corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
--------
<PAGE>
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
-2-
<PAGE>
(q) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
------
(s) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 2000 Stock Plan.
----
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b) " means Section 16(b) of the Exchange Act.
-------------
(cc) "Service Provider" means an Employee, Director or Consultant.
----------------
(dd) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
-3-
<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is equal to the lesser of (a) 1,000,000 Shares, or (b) any Shares
which have been reserved but unissued under the Company's 1997 Stock
Option/Stock Issuance Plan, as amended (the "Old Plan"), as of the date of
stockholder approval of this Plan, together with any Shares returned to the Old
Plan after the date of stockholder approval of this Plan as a result of the
termination of options under the Old Plan; plus an annual increase to be added
on the first day of each fiscal year of the Company beginning in 2001 equal to
the lesser of (i) 2,500,000 shares, (ii) 5% of the outstanding shares on such
date, or (iii) a lesser amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. Different Committees with
------------------------------
respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator
-------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
-4-
<PAGE>
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
-5-
<PAGE>
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 1,000,000
Shares, which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
------------
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of the
Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock
-6-
<PAGE>
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and
-7-
<PAGE>
(B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
-------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the
-8-
<PAGE>
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
-9-
<PAGE>
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
-10-
<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
-11-
<PAGE>
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-12-
<PAGE>
EXHIBIT 10.3.1
CLEARCOMMERCE CORPORATION
2000 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number __________________________
Date of Grant __________________________
Vesting Commencement Date __________________________
Exercise Price per Share $_________________________
Total Number of Shares Granted __________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: __________________________
Vesting Schedule:
----------------
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates].
<PAGE>
Termination Period:
------------------
This Option may be exercised for [three months] after Optionee ceases to be
a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for [twelve months] after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
---------
A. Grant of Option.
----------------
The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
-------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to [title] of the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
C. Method of Payment.
------------------
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check[; or
3. consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan][; or
4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares[; or
5. with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement][; or
6. to the extent permitted by the Administrator, delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale proceeds required to pay
the Exercise Price.]
D. Non-Transferability of Option.
------------------------------
This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
E. Term of Option.
---------------
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. Tax Consequences.
-----------------
Some of the federal tax consequences relating to this Option, as of
the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
OPTIONEE SHOULD
-3-
<PAGE>
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
G. Exercising the Option.
----------------------
1. Nonstatutory Stock Option. The Optionee may incur regular
-------------------------
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
2. Incentive Stock Option. If this Option qualifies as an ISO, the
----------------------
Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on
the date of exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee ceases to be an Employee but remains a Service
Provider, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3) months and one (1)
day following such change of status.
3. Disposition of Shares.
---------------------
(a) NSO. If the Optionee holds NSO Shares for at least one
---
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
-4-
<PAGE>
H. Entire Agreement; Governing Law.
--------------------------------
The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
[state].
I. NO GUARANTEE OF CONTINUED SERVICE.
----------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: CLEARCOMMERCE CORPORATION
_____________________________ __________________________________
Signature By
_____________________________ __________________________________
Print Name Title
_____________________________
Residence Address
_____________________________
-5-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
___________________________________
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
CLEARCOMMERCE CORPORATION
2000 STOCK OPTION PLAN
EXERCISE NOTICE
ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
Attention: Michael S. Grajeda
1. Exercise of Option. Effective as of today, ________________, _____,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of ClearCommerce Corporation (the "Company")
under and pursuant to the 2000 Stock Plan (the "Plan") and the Stock Option
Agreement dated ____________ ___, ______ (the "Option Agreement"). The purchase
price for the Shares shall be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
[state].
Submitted by: Accepted by:
PURCHASER: CLEARCOMMERCE CORPORATION
_______________________________ ____________________________________
Signature By
_______________________________ ____________________________________
Print Name Its
Address: Address:
- ------- -------
ClearCommerce Corporation
_______________________________
7
Austin, Texas 78758
_______________________________
____________________________________
Date Received
-2-
<PAGE>
EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of __________, _____ between
ClearCommerce Corporation, a Delaware corporation ("Pledgee"), and
_________________________ ("Pledgor").
Recitals
--------
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 2000 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
---------------------------------------------
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the [state] Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Shares to Pledgee if, as and
when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the Option,
and the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
-----------------------
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
------------
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE>
(c) Margin Regulations. In the event that Pledgee's Common Stock is
------------------
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
-------------
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
-----------------
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
------------------
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
-------
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the [state]
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
---------------------
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
-2-
<PAGE>
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
----
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
----------------------
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
-----------------------------------
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the internal substantive laws, but not the choice of law rules,
of [state].
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" _____________________________________________
Signature
_____________________________________________
Print Name
Address: __________________________________
__________________________________
"PLEDGEE" CLEARCOMMERCE CORPORATION
a Delaware corporation
_____________________________________________
Signature
_____________________________________________
Print Name
_____________________________________________
Title
"PLEDGEHOLDER" _____________________________________________
Secretary of ClearCommerce Corporation
-4-
<PAGE>
EXHIBIT C
---------
NOTE
$_______________ [City, State]
__________________, _____
FOR VALUE RECEIVED, _____________________ promises to pay to ClearCommerce
Corporation, a Delaware corporation (the "Company"), or order, the principal sum
of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on _______________, _____.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
____________________________________
<PAGE>
CLEARCOMMERCE CORPORATION
2000 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 2000 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: CLEARCOMMERCE CORPORATION
________________________________ _____________________________________
Signature By
________________________________ _____________________________________
Print Name Title
<PAGE>
EXHIBIT 10.3.2
EXHIBIT A-1
-----------
CLEARCOMMERCE CORPORATION
2000 STOCK OPTION PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is a
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
-------------
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
-------------------------
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
-----------------
(a) In the event the Purchaser ceases to be a Service Provider for any
or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
canceling an amount of the Purchaser's
<PAGE>
indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by
a combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice
and the payment of the aggregate Repurchase Price, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares
to be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
----------------------------------------
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [one year] after the Date of
----------
Grant and __________________ percent (______%) of the Shares [at the end of each
------------------
month thereafter], provided that the Purchaser does not cease to be a Service
- ----------------
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6
-----------------------
or the transfer of the Shares to the Company or its assignees contemplated by
this Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
----------------
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's
-2-
<PAGE>
Repurchase Option expires. As a further condition to the Company's obligations
under this Agreement, the Company may require the spouse of Purchaser, if any,
to execute and deliver to the Company the Consent of Spouse attached hereto as
Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued
-------
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares that may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that
-3-
<PAGE>
the Purchaser (and not the Company) shall be responsible for the Purchaser's own
tax liability that may arise as a result of the transactions contemplated by
this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the
difference between the purchase price for the Shares and the Fair Market Value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to the Repurchase Option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Repurchase Option expires by filing an election under Section 83(b) of
the Code with the IRS within 30 days from the date of purchase. The form for
making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
------------------
(a) This Agreement shall be governed by the internal substantive laws,
but not the choice of law rules of [state]. This Agreement, subject to the
terms and conditions of the Plan and the Notice of Grant, represents the entire
agreement between the parties with respect to the purchase of the Shares by the
Purchaser. Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of the Plan shall prevail. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are
-4-
<PAGE>
cumulative and shall not constitute a waiver of either party's right to assert
any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further documents
or instruments necessary or desirable to carry out the purposes or intent of
this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED: __________________________
PURCHASER: CLEARCOMMERCE CORPORATION
__________________________________ ___________________________________
Signature By
__________________________________ ___________________________________
Print Name Title
-5-
<PAGE>
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _______________________________, hereby sell, assign
and transfer unto _____________________ (__________) shares of the Common Stock
of ClearCommerce Corporation, standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint _____________________________________________
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, _____.
Dated: _______________, _____
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
__________________, ____
Corporate Secretary
ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
Dear __________:
As Escrow Agent for both ClearCommerce Corporation, a Delaware corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities.
<PAGE>
Subject to the provisions of this paragraph 3, Purchaser shall exercise all
rights and privileges of a shareholder of the Company while the stock is held by
you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
PURCHASER: _________________________________
_________________________________
_________________________________
ESCROW AGENT: Corporate Secretary
ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
-3-
<PAGE>
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of [state].
Very truly yours,
CLEARCOMMERCE CORPORATION
_____________________________________
By
_____________________________________
Title
PURCHASER:
_____________________________________
Signature
_____________________________________
Print Name
ESCROW AGENT:
_____________________________________
Corporate Secretary
-4-
<PAGE>
EXHIBIT A-4
-----------
CONSENT OF SPOUSE
I, _________________________, spouse of ________________________, have read
and approve the foregoing Restricted Stock Purchase Agreement (the "Agreement").
In consideration of the Company's grant to my spouse of the right to purchase
shares of ClearCommerce Corporation, as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: ____________________, _____
_______________________________________
Signature of Spouse
<PAGE>
EXHIBIT A-5
-----------
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: _____ shares (the "Shares") of the Common Stock of ClearCommerce
Corporation (the "Company").
3. The date on which the property was transferred is: ______, ____.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $__________.
6. The amount (if any) paid for such property is: $___________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: _________________, ____ _______________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
<PAGE>
Dated: _________________, ____ _______________________________________
Spouse of Taxpayer
-2-
<PAGE>
EXHIBIT 10.4
CLEARCOMMERCE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of ClearCommerce Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company or
-----
any committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean ClearCommerce Corporation and any
-------
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
------------
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has
---------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
-------------
Purchase Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after February 15 and
August 15 of each year and terminating on the last Trading Day in the periods
ending twenty-four months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
August 15, 2002. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
-2-
<PAGE>
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after February 15 and August 15 each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
August 15, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
-3-
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen (15%) of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
---------------
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
12,500 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of
-4-
<PAGE>
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
-5-
<PAGE>
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be six hundred thousand (600,000) shares plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2001, equal
to the lesser of (i) 2,500,000 shares, (ii) 5% of the outstanding shares on such
date or (iii) a lesser amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
-6-
<PAGE>
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
-------
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
--------------------------------------------------------
Liquidation, Merger or Asset Sale.
- ---------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of
-7-
<PAGE>
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount
-8-
<PAGE>
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
-9-
<PAGE>
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE>
EXHIBIT 10.4.1
EXHIBIT A
---------
CLEARCOMMERCE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the ClearCommerce
Corporation Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") and subscribes to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock Purchase
Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to _____%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing within 30 days after the date
---------------------------------------------------------------------------
of any disposition of my shares and I will make adequate provision for
----------------------------------------------------------------------
Federal, state or other tax withholding obligations, if any, which arise
------------------------------------------------------------------------
upon the
--------
<PAGE>
disposition of the Common Stock. The Company may, but will not be
--------------------------------
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ _______________________________________
Relationship
_______________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ _______________________________________
Signature of Employee
_____________________________________________
Spouse's Signature (If beneficiary other than
spouse)
-3-
<PAGE>
EXHIBIT B
---------
CLEARCOMMERCE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the ClearCommerce
Corporation Employee Stock Purchase Plan which began on ____________, ______
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
___________________________________
___________________________________
___________________________________
Signature:
___________________________________
Date:______________________________
<PAGE>
EXHIBIT 10.5
CLEARCOMMERCE CORPORATION
2000 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 2000 Director Option
--------------------
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the common stock of the Company.
------------
(d) "Company" means ClearCommerce Corporation, a Delaware
-------
corporation.
(e) "Director" means a member of the Board.
--------
(f) "Disability" means total and permanent disability as
----------
defined in section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and
--------
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(i) "Fair Market Value" means, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall
<PAGE>
be the mean between the high bid and low asked prices for the Common Stock for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Inside Director" means a Director who is an Employee.
---------------
(k) "Option" means a stock option granted pursuant to the Plan.
------
(l) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(m) "Optionee" means a Director who holds an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 2000 Director Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 300,000 Shares (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside Directors
--------------------
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
-2-
<PAGE>
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 20,000 Shares (the "First Option") on the date on which the
later of the following events occurs: (A) the effective date of this Plan, as
determined in accordance with Section 6 hereof, or (B) the date on which such
person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 20,000 Shares (a "Subsequent Option") at the next meeting of
the Board of Directors following the Annual Meeting of Stockholders in each year
commencing with the 2001 Annual Meeting of Stockholders provided he or she is
then an Outside Director and if as of such date, he or she shall have served on
the Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has obtained
stockholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable with respect to 25% of the Shares subject to the First Option
on each anniversary of its date of grant, provided that the Optionee continues
to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
-3-
<PAGE>
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable with respect to 25% of the Shares subject to the
Subsequent Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors.
-----------
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of Shares acquired upon exercise of an option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan, or (v) any combination of the foregoing
methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however,
-4-
<PAGE>
that no Options shall be exercisable until stockholder approval of the Plan in
accordance with Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
----------------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration
-5-
<PAGE>
of its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of death, and to the extent that the Optionee's
estate or a person who acquired the right to exercise such Option does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
------------------------------
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger
---------------------------------------------------------------
or Asset Sale.
- -------------
(a) Changes in Capitalization. Subject to any required action
-------------------------
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(b) through (d)
above.
-6-
<PAGE>
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall,
------------------------
for all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-7-
<PAGE>
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Stockholder Approval. The Plan shall be subject to approval by
--------------------
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.
-8-
<PAGE>
EXHIBIT 10.5.1
CLEARCOMMERCE CORPORATION
DIRECTOR OPTION AGREEMENT
ClearCommerce Corporation, a Delaware corporation (the "Company"), has
granted to ___________________ (the "Optionee"), an option to purchase a total
of [________ (____)] shares of the Company's Common Stock (the "Optioned
Stock"), at the price determined as provided herein, and in all respects subject
to the terms, definitions and provisions of the Company's 2000 Director Option
Plan (the "Plan") adopted by the Company which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined meanings
herein.
1. Nature of the Option. This Option is a nonstatutory option and is
--------------------
not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of
--------------
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its
------------------
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option shall become exercisable in installments
cumulatively with respect to______percent (__%) of the Optioned Stock one year
after the date of grant, and as to an additional______percent (__%) of the
Optioned Stock on each anniversary of the date of grant, so that one hundred
percent (100%) of the Optioned Stock shall be exercisable [__________] years
after the date of grant; provided, however, that in no event shall any Option be
exercisable prior to the date the stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by
------------------
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
4. Method of Payment. Payment of the exercise price shall be by any
-----------------
of the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
<PAGE>
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred
-----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten
--------------
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the
-2-
<PAGE>
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
DATE OF GRANT: ______________
ClearCommerce Corporation,
a Delaware corporation
By:____________________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
______________________________
Optionee
-3-
<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
ClearCommerce Corporation
11500 Metric Boulevard, Suite 300
Austin, Texas 78758
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of ClearCommerce Corporation (the "Company") under and pursuant to the
Company's 2000 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
--------------------------------
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
[state] law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: CLEARCOMMERCE CORPORATION
By:__________________________ By:________________________________
Its:_______________________________
Address:
Dated:_______________________ Dated:_____________________
-2-
<PAGE>
EXHIBIT 10.8
LEASE AGREEMENT
Between
CFH-FTAX Limited Partnership,
as Landlord,
and
ClearCommerce Corporation,
as Tenant
Covering approximately 22,344 gross square feet
of the Building known as
Braker M-3
located at
11500 Metric Boulevard
Suite 300
Austin, Texas, 78758.
<PAGE>
STANDARD INDUSTRIAL LEASE AGREEMENT
TRAMMELL CROW COMPANY - (AUS/91)
Approximately 22,344 gross square feet
11500 Metric Boulevard - Suite 300
Austin, Texas 78758
(Braker M-3)
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between CFH-FTAX Limited
Partnership, hereinafter referred to as "Landlord," and ClearCommerce
Corporation, hereinafter referred to as "Tenant."
1. PREMISES AND TERM. In consideration of the mutual obligations of Landlord and
Tenant set forth herein, Landlord leases to Tenant, and Tenant hereby takes from
Landlord, certain leased premises situated within the County of Travis, State of
Texas, as more particularly described on EXHIBIT "A" attached hereto and
incorporated herein by reference (the "Premises"), to have and to hold, subject
to the terms, covenants and conditions in this Lease. The term of this Lease
shall commence on the Commencement Date hereinafter set forth and shall end on
the last day of the month that is thirty-six (36) months after the Commencement
Date.
B. Building or Improvements to be Constructed. If the Premises or part thereof
------------------------------------------
are to be constructed, the "Commencement Date" shall be deemed to be the later
of (ii) the date on which the Premises or such improvements would have been
substantially completed but for delays caused directly or indirectly by Tenant,
including Plan delays or change orders; (iii) the date on which Tenant occupies
any part of the Premises; or (iv) January 15, 1999. As used herein, the term
"substantially completed" shall mean that, in the opinion of the architect or
space planner that prepared the Plans, such improvements have been completed in
accordance with the Plans, and the Premises are in good and satisfactory
condition, with the exception of completion of minor punch list items. As soon
as such improvements have been substantially completed, Landlord shall notify
Tenant in writing that the Commencement Date has occurred. If the Premises are
-------------------
vacant prior to the Commencement Date, Tenant shall be permitted access to the
- ------------------------------------------------------------------------------
Premises to install furniture and equipment so long as such access does not
- ---------------------------------------------------------------------------
interfere with construction. Landlord and Tenant acknowledge that prior
- -----------------------------------------------------------------------
tenant(s) may sell office furniture to Tenant. Such furniture may remain in the
- -------------------------------------------------------------------------------
Premises between the vacation of Premises by tenant(s) and Tenant's
- -------------------------------------------------------------------
Commencement Date.
- ------------------
2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.
A. Base Rent. Tenant agrees to pay Landlord rent for the Premises, in
---------
advance, without demand, deduction or set off, at the rate of
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Months Monthly Base Rental Per Square Foot Total Monthly Base Rental
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1-12 $0.800 $17,875.20
-------------------------------------------------------------------------------------------------------------
13-36 $0.825 $18,433.80
-------------------------------------------------------------------------------------------------------------
</TABLE>
per month during the term hereof. One such monthly installment, plus the other
monthly charges set forth in Paragraph 2C below, shall be due and payable on the
date hereof, and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the Commencement Date,
except that all payments due hereunder for any fractional calendar month shall
be prorated.
B. Security Deposit. In addition, Tenant agrees to deposit with Landlord on
----------------
the date hereof the sum of Seventeen Thousand Eight Hundred Seventy Five and
20/100 Dollars ($17,875.20), which shall be held by Landlord, without obligation
for interest, as security for the performance of Tenant's obligations under this
Lease (the "Security Deposit"), it being expressly understood and agreed that
the Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon occurrence of an Event of Default,
Landlord may use all or part of the Security Deposit to pay past due rent or
other payments due Landlord under this Lease or the cost of any other damage,
injury, expense or liability caused by such Event of Default, without prejudice
to any other remedy provided herein or provided by law. On demand, Tenant shall
pay Landlord the amount that will restore the Security Deposit to its original
amount. The Security Deposit shall be deemed the property of Landlord, but any
remaining balance of the Security Deposit shall be returned by Landlord to
Tenant when all of Tenant's present and future obligations under this Lease have
been fulfilled. If Tenant does not supply written evidence of a new equity
----------------------------------------------------------
financing (such financing to be in excess of $5 million) prior to the
- ---------------------------------------------------------------------
Commencement Date, Tenant shall provide a Letter of Credit, from a bank
- -----------------------------------------------------------------------
acceptable to Landlord, in the amount of $53,000.00, as an additional Security
- ------------------------------------------------------------------------------
Deposit.
- --------
C. Escrow Deposits. Without limiting in any way Tenant's other obligations
----------------
under this Lease, Tenant agrees to pay to Landlord its Proportionate Share (as
defined in this Paragraph 2C below) of (i) Taxes (hereinafter defined) payable
by Landlord pursuant to Paragraph 3A below, and the cost of any tax consultant
to assist Landlord in determining the fair tax valuation of the building and
land (ii) the cost of utilities payable by Landlord pursuant to Paragraph 8
below, (iii) Landlord's cost of maintaining any insurance or insurance related
expense applicable to the Building and Landlord's personal property used in
connection therewith including, but not limited to, insurance pursuant to
Paragraph 9A below, and (iv) Landlord's cost of maintaining the Premises which
include but are not limited to (a) maintenance and repairs, (b) landscaping, (c)
common area utilities, (d) water and sewer, (e) roof repairs, (f) reasonable
management fees, (g) exterior painting, and (h) parking lot maintenance and
repairs (collectively, the "Tenant's Costs"). Escrow deposits shall not include
the following expenses: (a) any costs for interest, amortization, or other
payments on loans to Landlord; (b) expenses incurred in leasing or procuring
tenants, (c) legal expenses other than those incurred for the general benefit of
the Building's tenants, (d) allowances, concessions, and other costs of
renovating or otherwise improving space for occupants of the Building or vacant
space in the Building, (e) rents under ground leases, and (f) costs incurred in
selling, syndicating, financing, mortgaging or hypothecating any of Landlord's
interests in the Building. During each month of the term of this Lease, on the
same day the rent is due hereunder, Tenant shall deposit in escrow with Landlord
an amount equal to one-twelfth (1/12) of the estimated amount of Tenant's
Proportionate Share of the Tenant Costs. Tenant authorizes Landlord to use the
funds deposited with Landlord under this Paragraph 2C to pay such Tenant Costs.
The initial monthly escrow payments are based upon the estimated amounts for the
year in question and shall be increased or decreased annually to reflect the
projected actual amount of all Tenant Costs. If the Tenant's total escrow
deposits for any calendar year are less than Tenant's actual Proportionate Share
of the Tenant Costs for such calendar year, Tenant shall pay the difference to
Landlord within ten (10) days after demand if Tenant owes less than $10,000.00.
-----------------------------------
If Tenant owes more than $10.000.00, Tenant shall pay $10,000.00 within ten (10)
- --------------------------------------------------------------------------------
days after demand and fifty percent (50%) of the remaining balance within forty
- -------------------------------------------------------------------------------
(40) days after demand and the remaining fifty percent (50%) of the remaining
- -----------------------------------------------------------------------------
balance within seventy (70) days after the demand. If the total escrow deposits
- -------------------------------------------------
of Tenant for any calendar year are more than Tenant's actual Proportionate
Share of the Tenant Costs for such calendar year, Landlord shall retain such
excess and credit it against Tenant's escrow deposits next maturing after such
determination. In the event the Premises constitute a portion of a multiple
occupancy building (the "Building"). Tenant's "Proportionate Share" with respect
to the Building, as used in this Lease, shall mean a fraction, the numerator of
which is the gross rentable area contained in the Premises and the denominator
of which is the gross rentable area contained in the entire Building. In the
event the Premises or the Building is part of a project or business park owned,
managed or leased by Landlord or an affiliate of Landlord (the "Project").
Tenant's "Proportionate Share" of the Project, as used in this Lease, shall mean
a fraction, the numerator of which is the gross rentable area contained in the
Premises and the denominator of which is the gross rentable area contained in
all of the buildings (including the Building) within the Project. Landlord will
--------------
warrant that, except for Property Taxes, all other expenses will not exceed 105%
- --------------------------------------------------------------------------------
of the estimate during calendar year 1999. Estimated Common Area Maintenance,
- --------------------------------------------------------------------------------
Insurance and Management fees for 1999 are $0.0483 per square foot per month,
- --------------------------------------------------------------------------------
$0.0068 per square foot per month, $0.0425 per square foot per month,
- --------------------------------------------------------------------------------
respectively. Landlord will not warranty expenses for any such succeeding year.
- --------------------------------------------------------------------------------
3. TAXES
A. Real Property Taxes. Subject to reimbursement under Paragraph 2C herein,
-------------------
Landlord agrees to pay all taxes, assessments and governmental charges of any
kind and nature (collectively referred to herein as "Taxes") that accrue against
the Premises, the Building and/or the land of which the Premises or the Building
are a part. If at any time during the term of this Lease there shall be
1
<PAGE>
levied, assessed or imposed on Landlord a capital levy or other tax directly on
the rents received therefrom and/or a franchise tax, assessment, levy or charge
measured by or based in whole or in part, upon such rents from the Premises
and/or the land and improvements of which the Premises are a part, then all such
taxes, assessments, levies or charges, or the part thereof so measured or based
shall be deemed to be included within the term "Taxes" for the purposes hereof.
B. Personal Property Taxes. Tenant shall be liable for all taxes levied or
-----------------------
assessed against any personal property or fixtures placed in or on the Premises.
If any such taxes are levied or assessed against Landlord or Landlord's property
and (i) Landlord pays the same or (ii) the assessed value of Landlord's property
is increased by inclusion of such personal property and fixtures and Landlord
pays the increased taxes, then Tenant shall pay to Landlord, upon demand, the
amount of such taxes. Tenant shall not be liable for taxes against any personal
---------------------------------------------------------
property belonging to the prior tenant(s).
- ------------------------------------------
4. LANDLORD'S REPAIRS AND MAINTENANCE
A. Structural Repairs. Landlord, at its own cost and expense, shall
-------------------
maintain the foundation and the structural soundness of the exterior walls of
the Building in good repair, reasonable wear and tear excluded. The term "walls"
as used herein shall not include windows, glass or plate glass, any doors,
special store fronts or office entries, and the term "foundation" as used herein
shall not include loading docks. Tenant shall immediately give Landlord written
notice of defect or need for repairs, after which Landlord shall have reasonable
opportunity to effect such repairs or cure such defect. Landlord shall be
responsible for structural integrity of roof.
5. TENANTS REPAIRS.
A. Maintenance of Premises and Appurtenances. Tenant, at its own cost and
-----------------------------------------
expense, shall (i) maintain all parts of the interior of the Premises and
promptly make all necessary repairs and replacements to the interior of the
Premises (except those for which Landlord is expressly responsible hereunder),
and (ii) keep the parking areas, driveways and alleys surrounding the Premises
free of trash and debris from Tenant's use. Tenant's obligation to maintain,
repair and make replacements to the Premises shall cover, but not be limited to,
pest control (including termites), trash removal and the maintenance, repair and
replacement of all HVAC, electrical, plumbing, sprinkler and other mechanical
systems.
C. Parking. Tenant and its employees, customers and licensees shall have
-------
the right to use only its Proportionate Share of any parking areas that have
been designated for such use by Landlord in writing, subject to (i) all rules
and regulations promulgated by Landlord, and (ii) rights of ingress and egress
of other lessees. Landlord shall not be responsible for enforcing Tenant's
parking rights against any third parties, and Tenant expressly does not have the
right to tow or obstruct improperly parked vehicles. Tenant agrees not to park
on any public streets or private roadways adjacent to or in the vicinity of the
Premises if such public streets or roadways are designated as "no parking"
-----------------------------------------------------------------
areas. Tenant shall have the right to park 92 cars in front of and to the sides
- -------------------------------------------------------------------------------
of the Premises and additional cars in Tenant's designated truck court.
- -----------------------------------------------------------------------
D. System Maintenance. Landlord shall service HVAC equipment prior to
------------------ --------
Tenant's occupancy to ensure such HVAC equipment is in good working order.
Tenant, at its own cost and expense, shall enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor approved
by Landlord for servicing all hot water, heating and air conditioning systems
and equipment within the Premises. The service contract must include the
replacement of filters on a regular basis and all services suggested by the
equipment manufacturer in its operations/maintenance manual and must become
effective within thirty (30) days of the date Tenant takes possession of the
Premises. Landlord shall service the HVAC, provide a report of its working order
----------------------------------------------------------------------
and warranty the HVAC for a period of ninety (90) days from the Commencement
- ----------------------------------------------------------------------------
Date.
- ----
E. Option to Maintain Premises. Landlord reserves the right to perform,
---------------------------
in whole or in part and without notice to Tenant, maintenance, repairs and
replacements to the Premises, paving, common area, landscape, exterior painting,
common sewage line plumbing and any other items that are otherwise Tenant's
obligations under this Paragraph 5, in which event, Tenant shall be liable for
its Proportionate Share of the cost and expense of such repair, replacement,
maintenance and other such items.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord, and
---
such consent shall not be unreasonably withheld, delayed or conditioned for non-
- --------------------------------------------------------------------------------
structural alterations; under $5,000.00. Landlord shall not be required to
- ---------------------------------------
notify Tenant of whether it consents to any alteration, addition or improvement
until it (a) has received plans and specifications in a CAD disk format
therefor which are sufficiently detailed to allow construction of the work
depicted thereon to be performed in a good and workmanlike manner, and (b) has
had a reasonable opportunity to review them. If the alteration, addition or
improvement will affect the Building's structure, HVAC system, or mechanical,
electrical, or plumbing systems, then the plans and specifications therefor must
be prepared by a licensed engineer reasonably acceptable to Landlord and
provided to Landlord in a CAD disk format. Landlord's approval of any plans and
specifications shall not be a representation that the plans or the work depicted
thereon will comply with law or be adequate for any purpose, but shall merely be
Landlord's consent to performance of the work. Upon completion of any
alteration, addition or improvement, Tenant shall deliver to Landlord accurate,
reproducible as-built plans therefor in a CAD disk format. Tenant may erect
shelves, bins, machinery and trade fixtures provided that such items (1) do not
alter the basic character of the Premises or the Building; (2) do not overload
or damage the same; and (3) may be removed without damage to the Premises.
Unless Landlord specifies in writing otherwise, all alterations, additions, and
improvements, except for equipment in server room that is added by Tenant,
-----------------------------------------------------------
shall be Landlord's property when installed in the Premises. All shelves, bins,
machinery and trade fixtures installed by Tenant shall be removed on or before
the earlier to occur of the day of termination or expiration of this Lease or
vacating the Premises, at which time Tenant shall restore the Premises to their
original condition, reasonable wear and tear excepted. All work performed by a
---------------------------------
Tenant in the Premises (including that relating to the installations, repair
replacements, or removal of any item) shall be in accordance with all applicable
governmental laws, ordinances, regulations, and with Landlord's specifications
and requirements, in a good and workmanlike manner, and so as not to damage or
alter the Building's structure or the Premises. Tenant shall be responsible for
compliance with The Americans With Disabilities Act of 1990. In connection with
any such alteration, addition or improvement, Tenant shall pay to Landlord an
administration fee of five percent (5%) of all costs incurred for such work in
--
excess of $5,000.00 in consideration for construction administration services.
- -----------------------------------------------------------------------------
7. SIGNS. Any signage Tenant desires for the Premises shall be subject to
Landlord's written approval and shall be submitted to Landlord prior to the
Commencement Date of this Lease. Notwithstanding anything hereinabove, Tenant
--------------------------------------------
shall have the right to exclusive signage on the Premises. Tenant shall repair,
- ---------------------------------------------------------
paint and/or replace the Building fascia surface to which its signs are attached
upon Tenant's vacating the Premises or the removal or alteration of its signage.
Tenant shall not, without Landlord's prior written consent, (i) make any changes
to the exterior of the Premises, such as painting; (ii) install any exterior
lights, decorations, balloons, flags, pennants or banners; or (iii) erect or
install any signs, windows or door lettering, placards, decorations or
advertising media of any type which can be viewed from the exterior of the
Premises. All signs, decorations, advertising media, blinds, draperies and other
window treatment or bars or other security installations visible from outside
the Premises shall conform in all respects to the criteria established by
Landlord or shall be otherwise subject to Landlord's prior written consent.
8. UTILITIES. Landlord agrees to provide normal water and electricity service to
the Premises. Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer, sprinkler charges and other utilities and services used on or
at the Premises, together with any taxes, penalties, surcharges or the like
pertaining to the Tenant's use of the Premises and any maintenance charges for
utilities. Landlord shall have the right to cause any of said services to be
separately metered to Tenant, at Tenant's expense. Tenant shall pay its pro rata
share, as reasonably determined by Landlord, of all charges for jointly metered
utilities. Landlord shall not be liable for any interruption or failure of
utility service on the Premises, and Tenant shall have no rights or claims as a
result of any such failure unless such interruption or failure of utility
----------------------------------------------
service is caused by Landlord's gross negligence or willful misconduct. In the
- ----------------------------------------------------------------------
event water is not separately metered to Tenant, Tenant agrees that it will not
use water and sewer capacity for uses other than normal domestic restroom and
kitchen usage, and Tenant further agrees to reimburse Landlord for the entire
amount of common water and sewer costs as additional rental if, in fact, Tenant
uses water or sewer capacity for uses other than normal domestic kitchen uses
without first obtaining Landlord's written permission, including but not limited
to the cost for acquiring additional sewer capacity to service Tenant's excess
sewer use. Furthermore, Tenant agrees in such event to install at its own
expense a submeter to determine Tenant's usage.
2
<PAGE>
9. INSURANCE.
A. Landlord's Insurance. Subject to reimbursement under Paragraph 2C
--------------------
herein, Landlord shall maintain insurance covering the Building in an amount not
less than eighty percent (80%) of the "replacement cost" thereof, insuring
against the perils of fire, lightning, extended coverage, vandalism and
malicious mischief.
B. Tenant's Insurance. Tenant, at its own expense, shall maintain during
------------------
the term of this Lease a policy or policies of workers' compensation and
comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in the amount of Five
Hundred Thousand Dollars ($500,000.00) for property damage and One Million
Dollars ($1,000,000.00) per occurrence and One Million Dollars ($1,000,000.00)
in the aggregate for personal injuries or deaths of persons occurring in or
about the Premises. Tenant, at its own expense, shall also maintain during the
term of this Lease fire and extended coverage insurance covering the replacement
cost of (i) all alterations, additions, partitions and improvements installed or
placed on the Premises by Tenant or by Landlord on behalf of Tenant; and (ii)
all of Tenant's personal property contained within the Premises. Said policies
shall (i) name the Landlord and management company as additional insured and
insure Landlord's and management company's contingent liability under or in
connection with this Lease (except for the workers' compensation policy, which
instead shall include a waiver of subrogation endorsement in favor of Landlord);
(ii) be issued by an insurance company which is acceptable to Landlord; and
(iii) provide that said insurance shall not be canceled unless thirty (30) days
prior written notice has been given to Landlord. Said policy or policies or
certificates thereof shall be delivered to Landlord by Tenant on or before the
Commencement Date and upon each renewal of said insurance.
C. Prohibited Uses. Tenant will not permit the Premises to be used for any
---------------
purpose or in any manner that would (i) void the insurance thereon, (ii)
increase the insurance risk or cost thereof, or (iii) cause the disallowance of
any sprinkler credits; including without limitation, use of the Premises for the
receipt, storage or handling of any product, material or merchandise that is
explosive or highly inflammable. If any increase in the cost of any insurance on
the Premises or the Building is caused by Tenant's use of the Premises or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord upon demand therefor.
10. FIRE AND CASUALTY DAMAGE.
A. Total or Substantial Damage and Destruction. If the Premises or the
-------------------------------------------
Building should be damaged or destroyed by fire or other peril, Tenant shall
immediately give written notice to Landlord of such damage or destruction. If
the Premises or the Building should be totally destroyed by any peril covered by
the insurance to be provided by Landlord under Paragraph 9A above, or if they
should be so damaged thereby that, in Landlord's estimation, rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage or after such completion there would not be enough time remaining
under the terms of this Lease to fully amortize such rebuilding or repairs, then
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective upon the due of the occurrence of such damage.
B. Partial Damage or Destruction. If the Premises or the Building should
-----------------------------
be damaged by any peril covered by the insurance to be provided by Landlord
under Paragraph 9A above and, in Landlord's estimation, rebuilding or repairs
can be substantially completed within one hundred eighty (180) days after the
date of such damage, then this Lease shall not terminate and Landlord shall
substantially restore the Premises to its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of,
by or for Tenant.
C. Lienholders' Rights in Proceeds. Notwithstanding anything herein to the
-------------------------------
contrary, in the event the holder of any indebtedness secured by a mortgage or
deed of trust covering the Premises requires that the insurance proceeds be
applied to such indebtedness, then Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within fifteen
(15) days after such requirement is made known to Landlord by any such holder,
whereupon all rights and obligations hereunder shall cease and terminate.
D. Waiver of Subrogation. Notwithstanding anything in this Lease to the
---------------------
contrary, Landlord and Tenant hereby waive and release each other of and from
any and all rights of recovery, claims, actions or causes of action against each
other, or their respective agents, officers and employees, for any loss or
damage that may occur to the Premises, improvements to the Building or personal
property (Building contents) within the Building and/or Premises, for any reason
regardless of cause or origin. Each party to this Lease agrees immediately after
execution of this Lease to give written notice of the terms of the mutual
waivers contained in this subparagraph to each insurance company that has issued
to such party policies of fire and extended coverage insurance and to have the
insurance policies properly endorsed to provide that the carriers of such
policies waive all rights of recovery under subrogation or otherwise against the
other party.
11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of recovery and
causes of action that Landlord has released, Tenant shall hold Landlord harmless
from and defend Landlord against any and all claims or liability for any injury
or damage (i) to any person or property whatsoever occurring in, or on or about
the Premises or any part thereof, the Building and/or other common areas, the
use of which Tenant may have in accordance with this Lease, if (and only if)
such injury or damage shall be caused in whole or in part by the act, neglect,
fault or omission of any duty by Tenant, its agents, servants, employees or
invitees: (ii) arising from the conduct or management of any work done by the
Tenant in or about the Premises; (iii) arising from transactions of the Tenant;
and (iv) all costs, counsel fees, expenses and liabilities incurred in
connection with any such claim or action or proceeding brought thereon. The
provisions of this Paragraph 11 shall survive the expiration or termination of
this Lease. Landlord shall not be liable in any event for personal injury or
loss of Tenant's property caused by fire, flood, water leaks, rain, hail, ice,
snow, smoke, lightning, wind, explosion, interruption of utilities or other
occurrences. Landlord strongly recommends that Tenant secure Tenant's own
insurance in excess of the amounts required elsewhere in this Lease to protect
against the above occurrences if Tenant desires additional coverage for such
risks. Tenant shall give prompt notice to Landlord of any significant accidents
involving injury to persons or property. Furthermore, Landlord shall not be
responsible for lost or stolen personal property, equipment, money or jewelry
from the Premises or from the public areas of the Building or the Project,
regardless of whether such loss occurs when the area is locked against entry.
Landlord shall not be liable to Tenant or Tenant's employees, customers or
invitees for any damages or losses to persons or property caused by any lessees
in the Building or the Project, or for any damages or losses caused by theft,
burglary, assault, vandalism or other crimes. Landlord strongly recommends that
Tenant provide its own security systems and services and secure Tenant's own
insurance in excess of the amounts required elsewhere in this Lease to protect
against the above occurrences if Tenant desires additional protection or
coverage for such risks. Tenant shall give Landlord prompt notice of any
criminal or suspicious conduct within or about the Premises, the Building or the
Project and/or any personal injury or property damage caused thereby. Landlord
may, but is not obligated to, enter into agreements with third parties for the
provision, monitoring, maintenance and repair of any courtesy patrols or similar
services or fire protective systems and equipment and, to the extent same is
provided at Landlord's sole discretion, Landlord shall not be liable to Tenant
for any damages, costs or expenses which occur for any reason in the event any
such system or equipment is not properly installed, monitored or maintained or
any such services are not properly provided. Landlord shall use reasonable
diligence in the maintenance of existing lighting, if any, in the parking garage
or parking areas servicing the Premises, and Landlord shall not be responsible
for additional lighting or any security measures in the Project, the Premises,
the parking garage or other parking areas. Landlord will indemnify and hold
--------------------------------
Tenant harmless from all suits, actions, damages, liability and expense in
- --------------------------------------------------------------------------
connection with loss of life, bodily or personal injury or property damage
- --------------------------------------------------------------------------
arising from any gross negligence or willful misconduct of Landlord, its agents
- -------------------------------------------------------------------------------
or invitees.
- -----------
12. USE. The Premises shall be used only for general office use and for the
--------------------------
purpose of receiving, storing, shipping and selling (other than retail)
products, materials and merchandise made and/or distributed by Tenant and for
such other lawful purposes as may be directly incidental thereto. Outside
storage, including without limitation storage of trucks and other vehicles, is
prohibited without Landlord's prior written consent. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the use of the
Premises and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in, upon or connected
with the Premises, all at Tenant's sole expense. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, nor take any other action that would constitute a
nuisance or would disturb, unreasonably interfere with or endanger Landlord or
any other lessees of the Building or the Project.
13. HAZARDOUS WASTE. The term "Hazardous Substances" as used in this Lease,
shall mean pollutants, contaminants, toxic or hazardous wastes, radioactive
materials or any other substances, the use and/or the removal of which is
required or the use of which is restricted, prohibited or penalized by any
"Environmental Law," which term shall mean any federal, state or local statute,
ordinance, regulation or other law of a governmental or quasi-governmental
authority relating to pollution or protection of the environment or the
regulation of the storage or handling of Hazardous Substances. Tenant hereby
agrees that: (i) no activity will be
3
<PAGE>
conducted on the Premises that will produce any Hazardous Substances, except for
such activities that are part of the ordinary course of Tenant's business
activities (the "Permitted Activities"), provided said Permitted Activities are
conducted in accordance with all Environmental Laws and have been approved in
advance in writing by Landlord and, in connection therewith, Tenant shall be
responsible for obtaining any required permits or authorizations and paying any
fees and providing any testing required by any governmental agency; (ii) the
Premises will not be used in any manner for the storage of any Hazardous
Substances, except for the temporary storage of such materials that are used in
the ordinary course of Tenant's business (the "Permitted Materials"), provided
such Permitted Materials are properly stored in a manner and location meeting
all Environmental Laws and have been approved in advance in writing by Landlord,
and, in connection therewith, Tenant shall be responsible for obtaining any
required permits or authorizations and paying any fees and providing any testing
required by any governmental agency; (iii) no portion of the Premises will be
used as a landfill or a dump; (iv) Tenant will not install any underground tanks
of any type; (v) Tenant will not allow any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time may
constitute, a public or private nuisance; and (vi) Tenant will not permit any
Hazardous Substances to be brought onto the Premises, except for the Permitted
Materials, and if so brought or found located thereon, the same shall be
immediately removed, with proper disposal, and all required clean-up procedures
shall be diligently undertaken by Tenant at its sole cost pursuant to all
Environmental Laws. Landlord and Landlord's representatives shall have the right
but not the obligation to enter the Premises for the purpose of inspecting the
storage, use and disposal of any Permitted Materials to ensure compliance with
all Environmental Laws. Should it be determined, in Landlord's sole opinion,
that any Permitted Materials are being improperly stored, used or disposed of,
then Tenant shall immediately take such corrective action as requested by
Landlord. Should Tenant fail to take such corrective action within twenty-four
(24) hours, Landlord shall have the right to perform such work and Tenant shall
reimburse Landlord, on demand, for any and all costs associated with said work.
If at any time during or after the term of this Lease, the Premises is found to
be contaminated with Hazardous Substances, Tenant shall diligently institute
proper and thorough clean-up procedures, at Tenant's sole cost. Tenant agrees to
indemnify and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, damages, penalties and obligations of any nature
arising from or as a result of any contamination of the Premises with Hazardous
Substances, or otherwise arising from the use of the Premises by Tenant. The
foregoing indemnification and the responsibilities of Tenant shall survive the
termination or expiration of this Lease.
14. INSPECTION. Landlord's agents and representatives shall have the right to
enter the Premises at any reasonable time during business hours (or at any time
in case of emergency) (i) to inspect the Premises, (ii) to make such repairs as
may be required or permitted pursuant to this Lease, and/or (iii) during the
last six (6) months of the Lease term, for the purpose of showing the Premises.
In addition, Landlord shall have the right to erect a suitable sign on the
Premises stating the Premises are available for lease. Tenant shall notify
Landlord in writing at least thirty (30) days prior to vacating the Premises and
shall arrange to meet with Landlord for a joint inspection of the Premises prior
to vacating. If Tenant fails to give such notice or to arrange for such
inspection, then Landlord's inspection of the Premises shall be deemed correct
for the purpose of determining Tenant's responsibility for repairs and
restoration of the Premises.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to sublet, assign
or otherwise transfer or encumber this Lease, or any interest therein, without
the prior written consent of Landlord, which shall not be unreasonably withheld,
----------------------------------------
delayed or conditioned. Any attempted assignment, subletting, transfer or
- ----------------------
encumbrance by Tenant in violation of the terms and covenants of this paragraph
shall be void. Any assignee, sublessee or transferee of Tenant's interest in
this Lease (all such assignees, sublessees and transferees being hereinafter
referred to as "Transferees"), by assuming Tenant's obligations hereunder, shall
assume liability to Landlord for all amounts paid to persons other than Landlord
by such Transferees to which Landlord is entitled or is otherwise in
contravention of this Paragraph 15. No assignment, subletting or other transfer,
whether or not consented to by Landlord or permitted hereunder, shall relieve
Tenant of its liability under this Lease. If an Event of Default occurs while
the Premises or any part thereof are assigned or sublet, then Landlord, in
addition to any other remedies herein provided or provided by law, may collect
directly from such Transferee all rents payable to the Tenant and apply such
rent against any sums due Landlord hereunder. No such collection shall be
construed to constitute a novation or a release of Tenant from the further
performance of Tenant's obligations hereunder. If Landlord consents to any
subletting or assignment by Tenant as hereinabove provided and any category of
rent subsequently received by Tenant under any such sublease is in excess of the
same category of rent payable under this Lease, or any additional consideration
is paid to Tenant by the assignee under any such assignment, then Landlord may,
at its option, declare fifty percent (50%) of such excess rents under any
-------------------
sublease or fifty percent (50%) of such additional consideration for any
-------------------
assignment to be due and payable by Tenant to Landlord as additional rent
hereunder. The following shall additionally constitute an assignment of this
Lease by Tenant for the purposes of this Paragraph 15: (i) if Tenant is a
corporation, any merger, consolidation, dissolution or liquidation, or any
change in ownership or power to vote of thirty percent (30%) or more of Tenant's
outstanding voting stock; (ii) if Tenant is a partnership, joint venture or
other entity, any liquidation, dissolution or transfer of ownership of any
interests totaling thirty percent (30%) or more of the total interests in such
entity; (iii) the sale, transfer, exchange, liquidation or other distribution of
more than thirty percent (30%) of Tenant's assets, other than this Lease; or
(iv) the mortgage, pledge, hypothecation or other encumbrance of or grant of a
security interest by Tenant in this Lease, or of any of Tenant's rights
hereunder, provided however, that such transfer may occur without Landlord's
-----------------------------------------------------------------
consent so long as the primary business or the new entity remains the same as
- -----------------------------------------------------------------------------
Tenant's primary business and the tangible net worth of the new entity is equal
- -------------------------------------------------------------------------------
to or greater than that of the Tenant's.
- ----------------------------------------
16. CONDEMNATION. If more than eighty percent (80%) of the Premises are taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain or private purchase in lieu thereof,
and the taking prevents or materially interferes with the use of the remainder
of the Premises for the purpose for which they were leased to Tenant, then this
Lease shall terminate and the rent shall be abated during the unexpired portion
of this Lease, effective on the date of such taking. If less than eighty percent
(80%) of the Premises are taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain or
private purchase in lieu thereof, or if the taking does not prevent or
materially interfere with the use of the remainder of the Premises for the
purpose for which they were leased to Tenant, then this Lease shall not
terminate, but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances. All compensation awarded in connection with or as a result of
any of the foregoing proceedings shall be the property of Landlord, and Tenant
hereby assigns any interest in any such award to Landlord; provided, however,
Landlord shall have no interest in any award made to Tenant for loss of business
or goodwill or for the taking of Tenant's trade fixtures and personal property,
if a separate award for such items is made to Tenant.
17. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant shall immediately deliver possession of the Premises to
Landlord with all repairs and maintenance required herein to be performed by
Tenant completed. If, for any reason, Tenant retains possession of the Premises
after the expiration or termination of this Lease, unless the parties hereto
otherwise agree in writing, such possession shall be deemed to be a tenancy at
will only, and all of the other terms and provisions of this Lease shall be
applicable during such period, except that Tenant shall pay Landlord from time
to time, upon demand, as rental for the period of such possession, an amount
equal to one and one-half (1 1/2) times the rent in effect on the date of such
termination of this Lease, computed on a daily basis for each day of such
period. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided. The
preceding provisions of this Paragraph 17 shall not be construed as consent for
Tenant to retain possession of the Premises in the absence of written consent
thereto by Landlord.
18. QUIET ENJOYMENT. Landlord represents that it has the authority to enter into
this Lease and that, so long as Tenant pays all amounts due hereunder and
performs all other covenants and agreements herein set forth, Tenant shall
peaceably and quietly have, hold and enjoy the Premises for the term hereof
without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease.
19. EVENTS OF DEFAULT. The following events (herein individually referred to as
an "Event of Default") each shall be deemed to be a default in or breach of
Tenant's obligations under this Lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due, and such failure shall continue for a period of five (5) days from the date
such payment was due and written notice was provided to Tenant. Landlord will
---------------------------------------------------------
only be required to provide such written notice once during any calendar year.
- -----------------------------------------------------------------------------
B. Tenant shall (i) vacate or abandon all or a substantial portion of the
Premises or (ii) fail to continuously operate its business at the Premises for
the permitted use set forth herein, but only if Tenant is in default of the
-----------
rental payments due under this Lease.
C. Tenant shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 22 hereof within twenty (20) days after any such lien or
encumbrance is filed against the Premises.
4
<PAGE>
D. Tenant shall default in the performance of any of its obligations under
any other lease to Tenant from Landlord, or from any person or entity affiliated
with or related to Landlord, and same shall remain uncured after the lapsing of
any applicable cure periods provided for under such other lease.
E. Tenant shall fail to comply with any term, provision or covenant of this
Lease (other than those listed above in this paragraph) and shall not cure such
failure within twenty (20) days after written notice thereof from Landlord.
20. REMEDIES. Upon each occurrence of an Event of Default, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand:
(a) Terminate this Lease;
(b) Enter upon and take possession of the Premises without terminating
this Lease;
(c) Make such payments and/or take such action and pay and/or perform
whatever Tenant is obligated to pay or perform under the terms of this Lease,
and Tenant agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action; and/or
(d) Alter all locks and other security devices at the Premises, with or
without terminating this Lease, and pursue, at Landlord's option, one or more
remedies pursuant to this Lease, and Tenant hereby expressly agrees that
Landlord shall not be required to provide to Tenant the new key to the Premises,
regardless of hour, including Tenant's regular business hours;
and in any such event Tenant shall immediately vacate the Premises, and if
Tenant fails to do so, Landlord, without waiving any other remedy it may have,
may enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying such Premises or any part thereof,
without being liable for prosecution or any claim of damages therefore. The
provisions of this Lease are intended to supersede Section 93.002 of the Texas
Property Code and Tenant hereby expressly waives any and all rights and remedies
Tenant may have under Paragraph (g) of such Section 93.002.
A. Damages upon Termination. If Landlord terminates this Lease at
------------------------
Landlord's option, Tenant shall be liable for and shall pay to Landlord the sum
of all rental and other payments owed to Landlord hereunder accrued to the date
of such termination, plus, as liquidated damages, an amount equal to (i) the
present value of the total rental and other payments owed hereunder for the
remaining portion of the Lease term, calculated as if such term expired on the
date set forth in Paragraph 1, less (ii) the present value of the then fair
market rental for the Premises for such period, provided that, because of the
difficulty of ascertaining such value and in order to achieve a reasonable
estimate of liquidated damages hereunder, Landlord and Tenant stipulate and
agree, for the purposes hereof, that such fair market rental shall in no event
exceed seventy-five percent (75%) of the rental amount for such period set forth
in Paragraph 2 above.
B. Damages upon Repossession. If Landlord repossesses the Premises without
-------------------------
terminating this Lease, Tenant, at Landlord's option, shall be liable for and
shall pay Landlord on demand all rental and other payments owed to Landlord
hereunder, accrued to the date of such repossession, plus all amounts required
to be paid by Tenant to Landlord until the date of expiration of the term as
stated in Paragraph 1, diminished by all amounts actually received by Landlord
through reletting the Premises during such remaining term (but only to the
extent of the rent herein reserved). Actions to collect amounts due by Tenant
to Landlord under this paragraph may be brought from time to time, on one or
more occasions, without the necessity of Landlord's waiting until expiration of
the Lease term.
C. Costs of Reletting, Removing, Repairs and Enforcement. Upon an Event of
-----------------------------------------------------
Default, in addition to any sum provided to be paid under this Paragraph 20,
Tenant also shall be liable for and shall pay to Landlord (i) brokers' fees and
all other costs and expenses incurred by Landlord in connection with reletting
the whole or any part of the Premises; (ii) the costs of removing, storing or
disposing of Tenant's or any other occupant's property; (iii) the costs of
repairing, altering, remodeling or otherwise putting the Premises into condition
acceptable to a new tenant or tenants; (iv) any and all costs and expenses
incurred by Landlord in effecting compliance with Tenant's obligations under
this Lease; and (v) all reasonable expenses incurred by Landlord in enforcing or
defending Landlord's rights and/or remedies hereunder, including without
limitation all reasonable attorneys' fees and all court costs incurred in
connection with such enforcement or defense.
D. Late Charge. In the event Tenant fails to make any payment due hereunder
-----------
within five (5) days after such payment is due, including without limitation any
rental or escrow payment, in order to help defray the additional cost to
Landlord for processing such late payments and not as interest, Tenant shall pay
to Landlord on demand a late charge in an amount equal to five percent (5%) of
such payment. The provision for such late charge shall be in addition to all of
Landlord's other rights and remedies hereunder or at law, and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner.
E. Interest on Past Due Amounts. If Tenant fails to pay any sum which at
----------------------------
any time becomes due to Landlord under any provision of this Lease as and when
the same becomes due hereunder, and such failure continues for ten (10) days
after the due date for such payment, then Tenant shall pay to Landlord interest
on such overdue amounts from the date due until paid at an annual rate which
equals the lesser of (i) eighteen percent (18%) or (ii) the highest rate then
permitted by law.
F. No Implied Acceptances or Waivers. Exercise by Landlord of any one or
---------------------------------
more remedies hereunder granted or otherwise available shall not be deemed to be
an acceptance by Landlord of Tenant's surrender of the Premises, it being
understood that such surrender can be effected only by the written agreement of
Landlord. Tenant and Landlord further agree that forbearance by Landlord to
enforce any of its rights under this Lease or at law or in equity shall not be a
waiver of Landlord's right to enforce any one or more of its rights, including
any right previously forborne, in connection with any existing or subsequent
default. No re-entry or taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention is given to Tenant, and, notwithstanding any such
reletting or re-entry or taking possession of the Premises, Landlord may at any
time thereafter elect to terminate this Lease for a previous default. Pursuit of
any remedies hereunder shall not preclude the pursuit of any other remedy herein
provided or any other remedies provided by law, nor shall pursuit of any remedy
herein provided constitute a forfeiture or waiver of any rent due to Landlord
hereunder or of any damages occurring to Landlord by reason of the violation of
any of the terms, provisions and covenants contained in this Lease. Landlord's
acceptance of any rent following an Event of Default hereunder shall not be
construed as Landlord's waiver of such Event of Default. No waiver by Landlord
of any violation or breach of any of the terms, provisions and covenants of this
Lease shall be deemed or construed to constitute a waiver of any other violation
or default.
G. Reletting of Premises. In the event of any termination of this Lease
---------------------
and/or repossession of the Premises for an Event of Default, Landlord shall use
reasonable efforts to relet the Premises and to collect rental after reletting,
with no obligation to accept any lessee that Landlord deems undesirable or to
expend any funds in connection with such reletting or collection of rents
therefrom. Tenant shall not be entitled to credit for or reimbursement of any
proceeds of such reletting in excess of the rental owed hereunder for the period
of such reletting. Landlord may relet the whole or any portion of the Premises,
for any period, to any tenant and for any use or purpose.
H. Landlord's Default. If Landlord fails to perform any of its obligations
------------------
hereunder within thirty (30) days after written notice from Tenant specifying
such failure, Tenant's exclusive remedy shall be an action for damages. Unless
and until Landlord fails to so cure any default after such notice, Tenant shall
not have any remedy or cause of action by reason thereof. All obligations of
Landlord hereunder will be construed as covenants, not conditions; and all such
obligations will be binding upon Landlord only during the period of its
possession of the premises and not thereafter. The term "Landlord" shall mean
only the owner, for the time being, of the Premises and, in the event of the
transfer by such owner of its interest in the Premises, such owner shall
thereupon be released and discharged from all covenants and obligations of the
Landlord thereafter accruing, provided that such covenants and obligations shall
be binding during the Lease term upon each new owner for the duration of such
owner's ownership. Notwithstanding any other provision of this Lease, Landlord
shall not have any personal liability hereunder. In the event of any breach or
default by Landlord in any term or provision of this Lease, Tenant agrees to
look solely to the equity or interest then owned by Landlord in the Premises or
the Building; however, in no event shall any deficiency judgment or any money
judgment of any kind be sought or obtained against any Landlord.
I. Tenant's Personal Property. If Landlord repossesses the Premises
--------------------------
pursuant to the authority herein granted, or if Tenant vacates or abandons all
or any part of the Premises at any time when Tenant is in default of the rental
---------------------------------------------------
payments due under this Lease, then, in addition to Landlord's rights under
- -----------------------------
Paragraph 27 hereof, Landlord shall have the right to (i) remove and store, all
of the furniture, fixtures and equipment at the Premises, including that which
is owned by or leased to Tenant,
5
<PAGE>
at all times prior to any foreclosure thereon by Landlord or repossession
thereof by any lessor thereof or third party having a lien thereon. In addition
to the Landlord's other rights hereunder, Landlord may dispose of the stored
property if Tenant does not claim the property within ten (10) days after the
date the property is stored. Landlord shall give Tenant at least ten (10) days
prior written notice of such intended disposition. Landlord shall also have the
obligation to relinquish possession of all or any portion of such furniture,
- ----------
fixtures, equipment and other property to any person ("Claimant") who presents
to Landlord a copy of any instrument represented by Claimant to have been
executed by Tenant (or any predecessor of Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity or legality of said instrument. The rights of
Landlord herein stated shall be in addition to any and all other rights that
Landlord has or may hereafter have at law or in equity, and Tenant stipulates
and agrees that the rights granted Landlord under this paragraph are
commercially reasonable. The Landlord's rights hereunder are subject and
-----------------------------------------------
subordinate to any prior lien rights held by any creditor of Tenant on the
- --------------------------------------------------------------------------
personal property within the Premises. Upon the written request from time to
- ----------------------------------------------------------------------------
time from Tenant or any of its lenders, Landlord agrees to subordinate its lien
- -------------------------------------------------------------------------------
to any lenders providing general operating capital to Tenant.
- -------------------------------------------------------------
21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated thereon or the
Building, provided, however, that if the mortgagee, trustee or holder of any
such mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant,
at any time hereafter on demand, shall execute any instruments, releases or
other documents that may be required by any mortgagee, trustee or holder for the
purpose of subjecting and subordinating this Lease to the lien of any such
mortgage. Tenant shall not terminate this Lease or pursue any other remedy
available to Tenant hereunder for any default on the part of Landlord without
first giving written notice by certified or registered mail, return receipt
requested, to any mortgagee, trustee or holder of any such mortgage or deed of
trust, the name and post office address of which Tenant has received written
notice, specifying the default in reasonable detail and affording such
mortgagee, trustee or holder a reasonable opportunity (but in no event less than
thirty (30) days to make performance, at its election, for and on behalf of
Landlord.
22. MECHANIC'S LIENS. Tenant has no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind, the interest of Landlord or Tenant in the Premises. Tenant will
save and hold Landlord harmless from any and all loss, cost or expense,
including without limitation attorneys' fees, based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the Premises or under the terms of this
Lease.
23. MISCELLANEOUS.
A. Interpretation. The captions inserted in this Lease are for
--------------
convenience only and in no way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease. Any reference in this Lease to rentable area shall
mean the gross rentable area as determined by the roofline of the building in
question.
B. Binding Effect. Except as otherwise herein expressly provided, the
--------------
terms, provisions and covenants and conditions in this Lease shall apply to,
inure to the benefit of and be binding upon the parties hereto and upon their
respective heirs, executors, personal representatives, legal representatives,
successors and assigns. Landlord shall have the right to transfer and assign, in
whole or in part, its rights and obligations in the Premises and in the Building
and other property that are the subject of this Lease.
C. Evidence of Authority. Tenant agrees to furnish to Landlord, promptly
---------------------
upon demand, a corporate resolution, proof of due authorization by partners or
other appropriate documentation evidencing the due authorization of such party
to enter into this Lease.
D. Force Majeure. Neither Tenant nor Landlord shall not be held
------------- ------------------
responsible for delays in the performance of its obligations hereunder when
caused by material shortages, acts of God, labor disputes or other events beyond
the control of Landlord or Tenant.
---------
E. Payments Constitute Rent. Notwithstanding anything in this Lease to the
------------------------
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated as rent, shall constitute rent.
F. Estoppel Certificates. Tenant agrees, from time to time, within ten
---------------------
(10) days after request of Landlord, to deliver to Landlord, or Landlord's
designee, an estoppel certificate stating that this Lease is in full force and
effect, the date to which rent has been paid, the unexpired term of this Lease,
any defaults existing under this Lease (or the absence thereof) and such other
factual or legal matters pertaining to this Lease as may be requested by
Landlord. It is understood and agreed that Tenant's obligation to furnish such
estoppel certificates in a timely fashion is a material inducement for
Landlord's execution of this Lease.
G. Entire Agreement. This Lease and associated exhibits constitutes the
---------------- -----------------------
entire understanding and agreement of Landlord and Tenant with respect to the
subject matter of this Lease, and contains all of the covenants and agreements
of Landlord and Tenant with respect thereto. Landlord and Tenant each
acknowledge that no representations, inducements, promises or agreements, oral
or written, have been made by Landlord or Tenant, or anyone acting on behalf of
Landlord or Tenant, which are not contained herein, and any prior agreements,
promises, negotiations or representations not expressly set forth in this Lease
are of no force or effect. EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, TENANT
HEREBY WAIVES THE BENEFIT OF ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO
THE PREMISES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY THAT THE
PREMISES ARE SUITABLE FOR ANY PARTICULAR PURPOSE. Landlord's agents and
employees do not and will not have authority to make exceptions, changes or
amendments to this Lease, or factual representations not expressly contained in
this Lease. Under no circumstances shall Landlord or Tenant be considered an
agent of the other. This Lease may not be altered, changed or amended except by
an instrument in writing signed by both parties hereto.
H. Survival of Obligations. All obligations of Tenant hereunder not fully
-----------------------
performed as of the expiration or earlier termination of the term of this Lease
shall survive the expiration or earlier termination of the term hereof,
including without limitation all payment obligations with respect to taxes and
insurance and all obligations concerning the condition and repair of the
Premises. Upon the expiration or earlier termination of the term hereof, and
prior to Tenant vacating the Premises, Tenant shall pay to Landlord any amount
reasonably estimated by Landlord as necessary to put the Premises in good
condition and repair, reasonable wear and tear excluded, including without
limitation the cost of repairs to and replacements of all heating and air
conditioning systems and equipment therein. Tenant shall also, prior to vacating
the Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which the Lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefore upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have been
determined and satisfied, as the case may be. Any Security Deposit held by
Landlord may, at Landlord's option, be credited against any amounts due from
Tenant under this Paragraph 23H.
I. Severability of Terms. If any clause or provision of this Lease is
---------------------
illegal, invalid or unenforceable under present or future laws effective during
the term of this Lease, then, in such event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby, and it is
also the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added, as a part of this Lease, a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid or enforceable.
J. Effective Date. All references in this Lease to "the date hereof" or
--------------
similar references shall be deemed to refer to the last date, in point of time,
on which all parties hereto have executed this Lease.
K. Brokers' Commission. Tenant represents and warrants that is has
-------------------
dealt with and will deal with no broker, other than Diana Barbour of Colliers
Oxford Commercial, agent or other person in connection with this transaction or
future related transactions and that no other broker, agent or other person
brought about this transaction, and Tenant agrees to indemnify and hold Landlord
harmless from and against any claims by any other broker, agent or other person
claiming a commission or other form of compensation by virtue of having dealt
with Tenant with regard to this leasing transaction.
L. Ambiguity. Landlord and Tenant hereby agree and acknowledge that this
---------
Lease has been fully reviewed and negotiated by both Landlord and Tenant, and
that Landlord and Tenant have each had the opportunity to have this Lease
reviewed by their respective legal counsel, and, accordingly, in the event of
any ambiguity herein, Tenant does hereby waive the rule of construction that
such ambiguity shall be resolved against the party who prepared this Lease.
6
<PAGE>
M. Joint Several Liability. If there be more than one Tenant, the
-----------------------
obligations hereunder imposed upon Tenant shall be joint and several. If there
be a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be joint and several obligations of Tenant and such
guarantor, and Landlord need not first proceed against Tenant before proceeding
against such guarantor, nor shall any such guarantor be released from its
guaranty for any reason whatsoever, including, without limitation, in case of
any amendments hereto, waivers hereof or failure to give such guarantor any
notices hereunder.
N. Third Party Rights. Nothing herein expressed or implied is intended,
------------------
or shall be construed, to confer upon or give to any person or entity, other
than the parties hereto, any right or remedy under or by reason of this Lease.
O. Exhibits and Attachments. All exhibits, attachments, riders and
------------------------
addenda referred to in this Lease, and the exhibits listed herein below and
attached hereto, are incorporated into this Lease and made a part hereof for all
intents and purposes as if fully set out herein. All capitalized terms used in
such documents shall, unless otherwise defined therein, have the same meaning as
are set forth herein.
P. Applicable Law. This Lease has been executed in the State of Texas
--------------
and shall be governed in all respects by the laws of the State of Texas. It is
the intent of Landlord and Tenant to conform strictly to all applicable state
and federal usury laws. All agreements between Landlord and Tenant, whether now
existing of hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event whatsoever shall the amount
contracted for, charged or received by Landlord for the use, forebearance or
retention of money hereunder or otherwise exceed the maximum amount which
Landlord is legally entitled to contract for, charge or collect under the
applicable state or federal law. If, from any circumstances whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall be automatically reduced to the limit
of such validity, and if from any such circumstances Landlord shall ever receive
as interest or otherwise an amount in excess of the maximum that can be legally
collected, then such amount which would be excessive interest shall be applied
to the reduction of rent hereunder, and if such amount which would be excessive
interest exceeds such rent, then such additional amount shall be refunded to
Tenant.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivering of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and If the following steps are taken:
(i) All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address for Landlord set forth
below or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay rent
and any other amounts to Landlord under the terms of this Lease shall not be
deemed satisfied until such rent and other amounts have been actually received
by Landlord.
(ii) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address set forth below, or at such other
address within the continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
(iii) Except as expressly provided herein, any written notice, document or
payment required or permitted to be delivered hereunder shall be deemed to be
delivered when received or, whether actually received or not, when deposited in
the United States Mail, postage prepaid, Certified or Registered Mail, addressed
to the parties hereto at the respective addresses set out below, or at such
other address as they have theretofore specified by written notice delivered in
accordance herewith.
25. ADDITIONAL PROVISIONS, See EXHIBIT "C" attached hereto and incorporated
herein by reference.
7
<PAGE>
EXECUTED BY LANDLORD, this 4 day of October, 1998.
CFH-FTAX Limited Partnership:
By: CFH-FTGP, L.L.C, it General Partner
By: Crow Family Holdings Industrial
Limited Partnership, its sole Member
By: CFH Industrial Trust, Inc.;
its General Partner
-----------------------------------------------
Attest/Witness: By: /s/ [ILLEGIBLE]
-----------------------------------------------
Virginia C. Bennett Title: Vice-President
- ------------------------- -----------------------------------------------
_________________________
Title: Office Assistant Address: c/o Trammel Crow Central Texas, Inc.
- ------------------------- -----------------------------------------------
301 Congress Avenue, Suite 1300, Austin, TX 78701
-------------------------------------------------
EXECUTED BY TENANT, this 19 day of October, 1998.
Clear Commerce Corporation:
Attest/Witness:
/s/ [ILLEGIBLE]
- -------------------------
Title: [ILLEGIBLE]
By: /s/ [ILLEGIBLE]
-------------------------------------------
Title: Vice President, CFO
----------------------------------------
Address: 9801 Burnet Rd. Ste. 207
Austin, TX 78758
EXHIBIT "A" - Description of Premises
EXHIBIT "B" - Plans
EXHIBIT "C" - Additional Provisions
8
<PAGE>
EXHIBIT "A"
BUILDING: Braker M-3
LEGAL DESCRIPTION: Lot 2, Stonehollow Section 5, Acres 7.43
ADDRESS: 11500 Metric Boulevard, Suite
Austin, Texas 78758
[PLAN APPEARS HERE]
<PAGE>
Exhibit "B"
Construction Plans
BRAKER M-3
11500 METRIC BOULEVARD
[PLAN APPEARS HERE]
NOTE:
Indicates walls to be demolished.
1. Replace doors to loading area.
2. It is our understanding that the dishwasher will remain with the space.
3. Install carpet.
4. Add door.
NOTE: TENANT AND LANDLORD ACKNOWLEDGE THAT THERE ARE SEVERAL EXISTING OFFICES
NOT DEPICTED ON THIS FLOOR PLAN.
<PAGE>
EXHIBIT "C"
ADDITIONAL PROVISIONS
INTERIOR IMPROVEMENTS
- ---------------------
Tenant shall accept the Premises in its current "as is" condition with the
exception that the Landlord shall replace the two staircases, which connect the
two levels of the facility. Also, Landlord shall paint interior walls, clean all
carpet, clean all light fixtures, replace non-working bulbs and add new carpet
in areas depicted on attached plan (Exhibit B). Landlord shall clean and
make the space ready. Landlord shall add doors and demolish walls where
depicted on the attached plan. These improvements must comply with Trammell
Crow Company's standard specifications (see Standards and Specifications for
--------------------------------
Office/Warehouse Buildings) and all applicable governmental regulations. Prior
- --------------------------
to beginning construction of any such improvements, Tenant shall submit
architectural drawings of the proposed improvements to Landlord and shall obtain
Landlord's written consent to begin construction.
RIGHT OF FIRST OFFER
- --------------------
In the event that any space in the building immediately west of the Premises
(known as Braker M-2) becomes available during the term of this Lease, Landlord
shall first offer such space in writing for lease to Tenant at current market
rates. Tenant shall have five (5) days in which to accept such space on the
terms offered by Landlord. In the event that Tenant refuses such offer or fails
to respond in writing within the five (5) day period, Tenant's Right of First
Offer shall expire and be of no further force or effect for such space offered.
The Right of First Offer shall be subject to the existing rights of other
tenants in the building as of the execution date of this Lease.
TOXIC WASTE
- -----------
Tenant covenants not to introduce any form of hazardous or toxic materials onto
the Premises without complying with all applicable Federal, State and local laws
or ordinances pertaining to the transportation, storage, use or disposal of such
material, including but not limited to obtaining proper permits.
If Tenant's transportation, storage, use or disposal of hazardous or toxic
materials on the Premises results in: 1) contamination of the soil or surface or
ground water; or 2) loss or damage to person (s) or property, then Tenant agrees
to respond in accordance with the following paragraph.
Tenant agrees: (i) to notify Landlord immediately of any contamination, claim of
contamination, loss or damage; (ii) after consultation and approval by Landlord,
to clean up the contamination in full compliance with all applicable statues,
regulations and standards; and (iii) to indemnify claims, suits, causes of
action, costs and fees, including attorneys' fees, arising from or connected
with any such contamination, claim of contamination, loss or damage. These
Provisions shall survive termination of this Lease.
RENEWAL OPTION
- --------------
Tenant shall have the right and option to renew this Lease for one (1)
additional thirty six (36) month term by delivering written notice thereof to
Landlord at least One Hundred Eighty (180) days prior to the expiration date of
the lease term, provided that at the time of such notice and at the end of the
lease term, Tenant is not in default hereunder. Upon the delivery of said notice
and subject to the conditions set forth in the preceding sentence, this Lease
shall be extended upon the same terms, covenants and conditions as provided in
this Lease, except that the rental payable during said extended term shall be
the prevailing market rental rate for space of comparable size, quality and
location at the commencement of such extended term (the "Market Rate"). This
right and option shall apply to the initial lease term only. In the event
Landlord and Tenant are unable to agree upon the Market Rate, Landlord and
Tenant shall each promptly appoint a real estate broker who is licensed by the
Texas Real Estate Commission (TREC) and active in the Austin industrial market,
to assist in the determination of the Market Rate, and the two brokers shall
appoint a third broker who is also licensed by the Texas Real Estate Commission
and active in the Austin industrial market. The determination of the Market Rate
by the agreement of any two of such three brokers shall be accepted by and shall
be binding upon Landlord and Tenant as the Market Rate, which rate shall
thereafter be payable until further adjusted. Landlord and Tenant agree to use
all reasonable diligence to cause their appointed brokers to perform in good
faith and in a timely manner in order to make the determination of the Market
Rate on or before the date on which the Market Rate is to become effective. In
the event the brokers do not make such determination in a timely manner, this
Lease shall nevertheless continue in full force and effect until such
determination is made, and the rental for such period shall be payable at the
rate otherwise payable hereunder. Upon the determination of the Market Rate, the
payment of the Market Rate shall commence on the first day of the month
following the date of such determination, and in addition to such monthly
installment of rental, Tenant shall pay to Landlord the increase in rental
payable hereunder, if any, applicable to the period from the date on which the
Market Rate was scheduled to become effective to the payment of the first
installment at the Market Rate. Landlord and Tenant shall each bear the cost and
fees of their respective brokers and shall share equally the cost of the third
broker, if needed.
9
<PAGE>
[LOGO]
May 6, 1999
Ms. Sophie Tschosik
ClearCommerce Corp.
11500 Metric Boulevard
Suite 300
Austin, TX 78758
Re: First Amendment to Lease Agreement between CFH-FTAX Limited Partnership, as
Landlord and ClearCommerce Corporation, as Tenant at Braker M-3
Dear Sophie:
Please let this letter serve to document our understanding that you will accept
and will occupy the facility at 11500 Metric Blvd., Suite 410, Austin, Texas,
effective June 15, 1999. Under the term of our Lease Agreement, dated April 13,
1999, the rental and any other monthly expenses, such as operating expenses,
utility and security costs, if any, for the facility accrue from June 15, 1999.
Commencement date of the lease term shall be established as June 15, 1999, and
the expiration date shall be established as shown on the Lease Agreement.
Please be advised that power will be discontinued in Lessor's name within three
(3) days of occupancy and that a representative of your firm should contact the
Electric Company to make appropriate arrangements as soon as possible.
Please indicate your acceptance of the above by signing all three (3) copies of
this letter, maintaining one (1) copy for your files and returning two (2)
copies to this office.
Sincerely,
TRAMMELL CROW CENTRAL TEXAS, LTD.
AGREED AND ACCEPTED:
By: /s/ [ILLEGIBLE]
-----------------------
Title: Vice President, CFO
--------------------
Date: 5/10/99
--------------------
CC: Rebecca Nixon
Connie Shelton
<PAGE>
[LOGO]
May 3, 1999
Sophie Tschosik
ClearCommerce
11500 Metric Blvd.
Suite 300
Austin, TX 78758
Re: First Right of Offer - Lease Agreement between CFH-FTAX Limited
Partnership, Ltd., as Landlord and ClearCommerce, as Tenant In Braker M-2
Dear Sophie:
In accordance with the above mentioned Lease Agreement, please let this letter
serve as notice that Suite 250, a 3,946 square foot space in Braker M-2 will be
available as of October 1, 1999. Please note, the space may be available in May,
1999 as Kent Electronics has indicated they will move out early. The monthly
base rental shall be Three Thousand Thee Hundred Fifty Four and 10/100 Dollars
($3,354. 10). Tenant shall accept the space on an "As-Is" basis for a three-year
(3) term. As provided in Exhibit "C" of the Lease Agreement, ClearCommerce shall
have five (5) days from receipt of this letter to exercise the First Right of
Offer and deliver to Landlord written notice thereof.
If ClearCommerce wishes to take the First Right of Offer space, please execute
all three (3) copies of this letter acknowledging receipt of this notice and
return two (2) to me. The other copy is for your files. Thank you for your
attention to this matter, and if you have any questions, please feel free to
contact me at (512) 320-5525.
Sincerely,
TRAMMELL CROW CENTRAL TEXAS, INC.
/s/ Chad Marsh
Chad Marsh
Marketing Director
CAM/cah
PLEASE EXECUTE IF APPROPRIATE
- -----------------------------
Tenant exercises its right to the "First Right of Offer Space".
By: /s/ [ILLEGIBLE] Title: Vice President, CFO Date: 5/12/99
------------------ ------------------- -------
<PAGE>
[LETTER HEAD APPEARS HERE]
April 9, 1999
Sophie Tschosik
ClearCommace
11500 Metric Blvd.
Suite 300
Austin, TX 78758
RE: First Amendment to the Lease Agreement between CFH-FTAX Limited
Partnership as Landlord; and ClearCommerce, as Tenant; located at 11500
Metric Blvd., Suite 300, Austin, Texas; known as Braker M-3
Dear Sophie:
We have enclosed four (4) copies of the above referenced Amendment. Please
execute, initial, witness and date where indicated and return all four (4)
Amendments to my attention for further processing. A fully executed original
Amendment will be sent to you for your files.
We look forward to ClearCommerce continuing as a tenant in our Braker M
buildings. Please do not hesitate to contact me at 512-320-5525 if I can answer
any questions or provide any additional information.
Sincerely,
TRAMMELL CROW CENTRAL TEXAS, LTD.
/s/ Chad A. Marsh
Chad A. Marsh
Marketing Director
CAM/cah
Enclosure
15
<PAGE>
EXHIBIT 10.8.1
FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN
CFH-FTAX LIMITED PARTNERSHIP, AS LANDLORD, AND
CLEARCOMMERCE CORPORATION, AS TENANT
To be attached to and form a part of Lease made on or about
the 4th day of November, 1998 (which together with any
amendments, modifications and extensions thereof, is
hereunder called the Lease between Landlord and Tenant,
covering a total of 22,344 square feet and located at 11500
Metric Boulevard, Suite 300, Austin, Texas, known as Braker
M-3.
WITNESSETH THAT:
WHEREAS, by Agreement of Lease dated November 4, 1998, Landlord leased to
Tenant certain space, containing approximately 22,344 square feet in the
building located at 11500 Metric Boulevard, Suite 300, Austin, Texas for a
period of thirty six (36) months commencing January 15, 1999 and ending January
31, 2002, and
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto.
Now, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agree as follows:
1. Effective June 15, 1999 the demised premises shall contain, in addition
to the approximately 22,344 square fed originally demised ("Original Space"), an
additional area, hereinafter called the "Expansion Space", containing
approximately 2,432 square feet (Suite 410) adjacent thereto (see Exhibit "A"
attached hereto), thus making the aggregate area of the demised premises
approximately 24,776 square feet. The Term of the Lease shall end on January 31,
2002. Tenant shall accept the Expansion Space in its current "as is" condition
and all improvements must comply with Landlord's Standards and Specifications
----------------------------
for Office/Warehouse Buildings.
- -------------------------------
2. Effective June 15,1999, the monthly base rental shall be
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Monthly Base Monthly Base Total Monthly Base Total Monthly
Rent "Original Rental PSF Rental "Expansion Base Rental
Space" "Expansion Space" Space"
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6/15/99-01/14/00 $17,875.20 $0.85 $2,067.20 $19,942.40
- -----------------------------------------------------------------------------------------------------------------
1/15/00-01/31/02 $18,433.80 $0.85 $2,067.20 $20,501.00
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
plus property taxes, common area maintenance, management fees and insurance as
provided in the Lease, payable on the first day of each month during the balance
of the term.
3. Tenant, at Tenant's expense, may install underground voice and data
lines between the Expansion Space and Original Space. These improvements must
comply with Trammell Crow Company's standard specifications (see Standards and
-------------
Specifications for Office/Warehouse Buildings) and all applicable governmental
- ---------------------------------------------
regulations. Prior to beginning construction of any such improvements, Tenant
shall submit architectural drawings of the proposed improvements to Landlord and
shall obtain Landlord's written consent to begin construction.
4. Except as herein and hereby modified and amended the Agreement of Lease
shall remain in full force and effect and all the terms, provisions, covenants
and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 13 DAY OF April, 1999.
-- ------ --
WITNESS: CFH-FTAX Limited Partnership:
By: CFH-FTGP, L.L.C., it General Partner
By: Crow Family Holdings Industrial Limited
Partnership, its Sole Member
By: CFH Industrial, Trust, Inc., its General
Partner
[ILLEGIBLE] /s/ Jeanna R. Camp 5/4/99
- ----------------------- ---------------------------------
By: JEANNA K. CAMP
---------------------------------
Title: VICE PRESIDENT
---------------------------------
WITNESS: ClearCommerce Corporation
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ------------------------ ---------------------------
By: /s/ [ILLEGIBLE]
---------------------------
Title: Vice President, CFO
16
<PAGE>
EXHIBIT "A"
BUILDING: BRAKER M-3 AND M-4
LEGAL DESCRIPTION: Lot 2, Stonehollow Section 5, Acres 7.43
ADDRESS: 11500 Metric Boulevard, Suite
Austin, Texas 78758
[Building Plan appears here]
17
<PAGE>
Trammel Crow Company
10/19/1999
Clear Commerce
Sophie Tschosik
Fax# 512-832-8901
Sophie,
Per our conversation from this morning; I have broken down your rent roll for
you. If you have any questions or concerns, please feel free to call me and I
will forward you to the right contact.
As of October 1, 1999 your rent roll will be: Base Rent...............23,296.50
Insurance..................194.11
Mgmt Fees................1,171.38
Operating Expenses.......1,535.91
Property Tax.............3,084.98
Total...................29,282.88
Also, just as another reminder that your outstanding amount for October is
4,176.54. Please remit this payment as soon as possible.
Thank you,
/s/ JoAnn Teneyuca
JoAnn Teneyuca
Associate Accountant
Trammell Crow Company
512-320-5599
<PAGE>
Exhibit 10.8.2
SECOND AMENDMENT TO LEASE AGREEMENT BETWEEN
CFH-FTAX LIMITED PARTNERSHIP, AS LANDLORD, AND
CLEARCOMMERCE CORPORATION, AS TENANT
To be attached to and form a part of Lease made on or about
the 4th day of November, 1998 (which together with any
amendments, modifications and extensions thereof, is hereinafter
called the Lease), between Landlord and Tenant, covering
a total of 24,776 square feet and located at 11500 Metric Boulevard,
Suites 300 and 410, Austin, Texas, known as Braker M-3 and Braker M-4
WITNESSETH THAT:
WHEREAS, by Agreement of Lease dated November 4, 1998, Landlord leased to
Tenant certain space containing approximately 24,776 square feet in the
buildings located at 11500 Metric Boulevard, Suites 300 and 410, Austin, Texas,
for a period ending January 31, 2002 and
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent thereto.
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agrees as follows:
1. Effective October 1, 1999, the demised premises shall contain, in
addition to the approximately 24,776 square feet originally demised ("Original
Space"), an additional area, hereinafter called the "Expansion Space", thus
making the aggregate area of the demised premises approximately 28,722 square
feet. The Term for the Original Space shall end on January 31, 2002, and the
Term for the Expansion Space shall end on September 30, 2002. Except for where
noted below, Tenant shall accept the Expansion Space in its current "as is"
conditions and all improvements must comply with Landlord's Standards and
-------------
Specifications for Office/Warehouse Buildings.
- ---------------------------------------------
2. Effective October 1, 1999, the monthly base rental shall be
<TABLE>
<CAPTION>
Monthly Base Rent Monthly Base Rental PSF Total Monthly Base Total Monthly Base
"Original Space" "Expansion Space" Rental "Expansion Space" Rental
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/1/99-01/14/00 $19,942.40 $0.85 $3,354.10 $23,296.50
- -------------------------------------------------------------------------------------------------------------------------------
1/15/00-1/31/02 $20,501.00 $0.85 $3,354.10 $23,855.10
- -------------------------------------------------------------------------------------------------------------------------------
2/1/02-9/30/02 N/A $0.85 $3,354.10 $ 3,354.10
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Plus property taxes, common area maintenance, management fees and insurance as
provided in the Lease, payable on the first day of each month during the balance
of the term.
3. Tenant, at Tenant's expense, may install underground voice and data
lines between the Expansion Space and Original Space. These improvements must
comply with Trammell Crow Company's standard specifications (see Standards and
-------------
Specifications for Office/Warehouse Buildings) and all applicable governmental
- ---------------------------------------------
regulations. Prior to beginning construction of any such improvements, Tenant
shall submit architectural drawings of the proposed improvements to Landlord and
shall obtain Landlord's written consent to begin construction.
4. Landlord shall ensure that the carpet is cleaned in the Expansion
Space.
5. Landlord shall put the Expansion Space HVAC system in good working
order prior to October 1, 1999 and warranty the same until December 31, 1999
provided that Tenant enters into a regularly scheduled maintenance/service
contract as required in the Lease.
6. Landlord shall ensure that previous tenant's sign is removed from the
building fascia surface and such fascia surface is repaired, if necessary.
7. Landlord, at Landlord's expense, shall paint the interior walls.
8. Except as herein and hereby modified and amended the Agreement of
Lease shall remain in full force and effect and all the terms, provisions,
covenants and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 19/TH/ DAY OF JULY, 1999.
WITNESS: CFH-FTAX Limited Partnership
By: CFH-FTGP, L.L.C, it General Partner
By: Crow Family Holdings Industrial Limited
Partnership, its Sole Member
By: CFH Industrial Trust, Inc., its General Partner
/s/ Jeanna K. Camp
- -------------- ---------------------------
By: Jeanna K. Camp
---------------------------
Title: Vice President
---------------------------
WITNESS: ClearCommerce Corporation
/s/ [ILLEGIBLE]
- -------------- ---------------------------
By: [ILLEGIBLE]
---------------------------
Title: Vice President, CEO
---------------------------
<PAGE>
CFH-FTAX LIMITED PARTNERSHIP, AS LANDLORD, AND
CLEARCOMMERCE CORPORATION, AS TENANT
To be attached to and form a part of Lease made on or about
the 4th day or November; 1998 (which together with any amendments,
modifications and extensions thereof, is hereafter called the Lease),
between Landlord and Tenant, covering a total of 22,344 square feet
and located at 11500 Metric Boulevard, Suite 300, Austin, Texas,
known as Braker M-3.
WITNESSETH, THAT:
WHEREAS, by Agreement of Lease dated November 4, 1998, Landlord leased to
Tenant certain space containing approximately 22,344 square feet in the building
located at 11500 Metric Boulevard, Suite 300, Austin, Texas, for a period of
thirty six (36) months commencing January 15, 1999 and ending January 31, 2002
and
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto.
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agrees as follows:
1. Effective June 15, 1999, the demised premises shall contain, in addition
to the approximately 22,344 square feet originally demised ("Original Space"),
an additional area, hereinafter called the "Expansion Space", containing
approximately 2,432 square feet (Suite 410) adjacent thereto (see Exhibit "A"
attached hereto), thus making the aggregate area of the demised premises
approximately 24,776 square feet. The Term of the Lease shall end on January
31, 2002. Tenant shall accept the Expansion Space in its current "as is"
conditions and all improvements must comply with Landlord's Standards and
-------------
Specifications for Office/Warehouse Buildings.
- ---------------------------------------------
2. Effective June 15, 1999, the monthly base rental shall be
<TABLE>
<CAPTION>
Monthly Base Rent Monthly Base Rental PSF Total Monthly Base Total Monthly Base
"Original Space" "Expansion Space" Rental "Expansion Space" Rental
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06/15/99-01/14/00 $17,875.20 $0.85 $2,067.20 $19,942.40
- -------------------------------------------------------------------------------------------------------------------------------
1/15/00-1/31/02 $18,433.80 $0.85 $2,067.20 $20,501.00
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Plus property taxes, common area maintenance, management fees and insurance as
provided in the Lease, payable on the first day of each month during the balance
of the term.
3. Tenant, at Tenant's expense, may install underground voice and data
lines between the Expansion Space and Original Space. These improvements must
comply with Trammell Crow Company's standard specifications (see Standards and
-------------
Specifications for Office/Warehouse Buildings) and all applicable governmental
- ---------------------------------------------
regulations. Prior to beginning construction of any such improvements, Tenant
shall submit architectural drawings of the proposed improvements to Landlord and
shall obtain Landlord's written consent to begin construction.
4. Except as herein and hereby modified and amended the Agreement of Lease
shall remain in full force and effect and all the terms, provisions, covenants
and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 13 DAY OF April , 1999.
WITNESS: CFH-FTAX Limited Partnership
By: CFH-FTGP, L.L.C, it General Partner
By: Crow Family Holdings Industrial Limited
Partnership, its Sole Member
By: CFH Industrial Trust, Inc., its General Partner
/s/ [ILLEGIBLE] /s/ Jeanna K. Camp
- ------------------ ----------------------------
By: Jeanna K. Camp
----------------------------
Title: Vice President
----------------------------
WITNESS: ClearCommerce Corporation
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ------------------ -----------------------------
By: /s/ [ILLEGIBLE]
-----------------------------
Title: Vice President, CFO
-----------------------------
<PAGE>
STANDARD INDUSTRIAL LEASE AGREEMENT
TRAMMELL CROW COMPANY - (AUS/91)
Approximately 22,344 gross square feet
11500 Metric Boulevard - Suite 300
Austin, Texas 78758
(Braker M-3)
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between CFH-FTAX Limited
Partnership, hereinafter referred to as "Landlord" and ClearCommerce
Corporation, hereinafter referred to as "Tenant".
1. PREMISES AND TERM In consideration of the mutual obligations of Landlord and
Tenant set forth herein, Landlord leases to Tenant, and Tenant hereby takes from
Landlord, certain leased premises situated within the County of Travis, State of
Texas, as more particularly described on EXHIBIT "A" attached hereto and
incorporated herein by reference (the "Premises"), to have and to hold, subject
to the terms, covenants and conditions in this Lease. The term of this Lease
shall commence on the Commencement Date hereinafter set forth and shall end of
the last day of the month that is thirty six (36) months after the Commencement
Date.
B. Buildings or Improvements to be Constructed. If the Premises or part thereof
are to be constructed, the "Commencement Date" shall be deemed to be the later
of (ii) the date on which the Premises or such improvements would have been
substantially completed but for delays caused directly or indirectly by Tenant,
including Plan delays or change orders; (iii) the date on which Tenant occupies
any part of the Premises; or (iv) January 15, 1999. As used herein, the term
"substantially completed" shall mean that, in the opinion of the architect or
space planner that prepared the Plans, such improvements have been completed in
accordance with the Plans, and the Premises are in good and satisfactory
condition, with the exception of completion of minor punch list items. As soon
as such improvements have been substantially completed, Landlord shall notify
Tenant in writing that the Commencement Date has occurred. If the Premises are
-------------------
vacant prior to the Commencement Date, Tenant shall be permitted access to the
- ------------------------------------------------------------------------------
Premises to install furniture and equipment so long as such access does not
- ---------------------------------------------------------------------------
interfere with construction. Landlord and Tenant acknowledge that prior tenant
- -------------------------------------------------------------------------------
(s) may sell office furniture to Tenant. Such furniture may remain in the
- -------------------------------------------------------------------------
Premises between the vacation of Premises by tenant (s) and Tenant's
- --------------------------------------------------------------------
Commencement Date.
- -----------------
2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.
A. Base Rent. Tenant agrees to pay Landlord rent for the Premises, in
---------
advance, without demand, deduction or set off, at the rate of
Months Monthly Base Rental Per Square Foot Total Monthly Base Rental
- --------------------------------------------------------------------------------
1-12 $0.800 $17,875.20
- --------------------------------------------------------------------------------
13-36 $0.825 $18,433.80
- --------------------------------------------------------------------------------
Per month during the term hereof. One such monthly installment, plus the other
monthly charges set forth in Paragraph 2C below, shall be due and payable on the
date hereof, and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the Commencement Date,
except that all payments hereunder for any fractional calendar month shall be
prorated.
B. Security Deposit. In addition, Tenant agrees to deposit with Landlord on the
----------------
date hereof the sum of Seventeen Thousand Eight Hundred Seventy five and 20/100
Dollars ($17,875.20), which shall be held by Landlord, without obligation for
interest, as security for the performance of Tenant's obligations under this
Lease (the "Security Deposit"), it being expressly understood and agreed that
the Security Deposit is not an advance rental deposit or a measure of Landlords
damages in case of Tenant's default. Upon occurrence of an Event of Default,
Landlord may use all or part of the Security Deposit to pay past due rent or
other payments due Landlord under this Lease or the cost of any other damage,
injury, expense or liability caused by such Event of Default, without prejudice
to any other remedy provided herein or provided by law. On demand, Tenant shall
pay Landlord the amount that will restore the Security Deposit to its original
amount. The Security Deposit shall be deemed the property of Landlord, but any
remaining balance of the Security Deposit shall be returned by Landlord to
Tenant when all of Tenant's present and future obligations under this Lease have
been fulfilled. If Tenant does not supply written evidence of a new equity
----------------------------------------------------------
financing (such financing to be in excess of $5 million) prior to the
- ----------------------------------------------------------------------
Commencement Date, Tenant shall provide a Letter of Credit, from a bank
- -----------------------------------------------------------------------
acceptable to Landlord, in the amount of $53,000.00, as an additional Security
- ------------------------------------------------------------------------------
Deposit.
- --------
C. Escrow Deposits. Without limiting in any way Tenant's other obligations
----------------
under this Lease, Tenant agrees to pay to Landlord its Proportionate Share (as
defined in this Paragraph 2C below) of (i) Taxes (hereinafter defined) payable
by Landlord pursuant to paragraph 3A below, and the cost of any tax consultant
to assist Landlord in determining the fair tax valuation of the building and
land (ii) the cost of utilities payable by Landlord pursuant to Paragraph 8
below, (iii) Landlord's cost of maintaining any insurance or insurance related
expense applicable to the Building and Landlord's personal property used in
connection therewith including, but not limited to, insurance pursuant to
Paragraph 9A below, and (iv) Landlord's cost of maintaining the Premises which
include but are not limited to (a) maintenance and repairs, (b) landscaping, (c)
common area utilities, (d) water and sewer, (e) roof repairs, (f) reasonable
----------
management fees, (g) exterior painting, and (h) parking lot maintenance and
repairs (collectively, the "Tenant's Costs"). Escrow deposits shall not include
the following expenses: (a) my costs for interest, amortization, or other
payments on loans to Landlord; (b) expenses incurred in leasing or procuring
tenants, (c) legal expenses other then those incurred for the general benefit of
the Building's tenants, (d) allowances, concessions, and other costs of
renovating or otherwise improving space for occupants of the Building or vacant
space in the Building, (e) rents under ground leases, and (f) costs incurred in
selling, syndicating, financing, mortgaging or hypothecating any of Landlord's
interests in the Building. During each month of the term of this Lease, on the
same day the rent is due hereunder, Tenant shell deposit in escrow with
Landlord an amount equal to one-twelfth (1/12) of the estimated amount of
Tenant's Proportionate Share of the Tenant Costs. Tenant authorizes Landlord to
use the funds deposited with Landlord under this Paragraph 2C to pay such Tenant
Costs. The initial monthly escrow payments are based upon the estimated amounts
for the year in question and shall be increased or decreased annually to reflect
the projected actual amount of all Tenant Costs. If the Tenants total escrow
deposits for any calendar year are less than Tenant's actual Proportionate Share
of the Tenant Costs for such calendar year, Tenant shell pay the difference to
Landlord within ten (10) days after demand if Tenant owes less than $10,000.00.
-------------------------------------
If Tenant owes more than $10.000.00, Tenant shall pay $10,000.00 within ten (10)
- --------------------------------------------------------------------------------
days after demand and fifty percent (50%) of the remaining balance within Forty
- -------------------------------------------------------------------------------
(40) days after demand and the remaining fifty percent (50%) of the remaining
- -----------------------------------------------------------------------------
balance within seventy (70) days after the demand. If the total escrow deposits
- -------------------------------------------------
of Tenant for any calendar year are more than Tenant's actual Proportionate
Share of the Tenants cost for such calendar year, Landlord shall retain such
excess and credit it against Tenant's escrow deposits next maturing after such
determination. In the event the Premises constitute a portion of a multiple
occupancy building (the "Building"). Tenant's Proportionate Share with respect
to the building, as used in this Lease, shall mean a fraction, the numerator of
which is the gross rentable area contained in the Premises or the Building is
part of a project or business park owned, managed or leased by Landlord or an
affiliate of Landlord (the "Project"). Tenant's "Proportionate Share" of the
Project, as used in this Lease, shall mean a fraction, the numerator of which is
the gross rentable area contained in the Premises and the denominator of which
is the gross rentable area contained in all of the buildings (including the
Building) within the Project. Landlord will warrant that, except for Property
-----------------------------------------------
Taxes, all other expenses will not exceed 105% of the estimate during calendar
- ------------------------------------------------------------------------------
year 1999. Estimated Common Area Maintenance, Insurance and Management fees for
- --------------------------------------------------------------------------------
1999 are $0.0483 per square foot per month, $0.0068 per square foot per month,
- ------------------------------------------------------------------------------
$0.0425 per square foot per month, respectively. Landlord will not warranty
- ----------------------------------------------------------------------------
expenses for any such succeeding year.
- -------------------------------------
3. TAXES
A. Real Property Taxes. Subject to reimbursement under Paragraph 2C herein,
Landlord agrees to pay all taxes, assessments and governmental charges of any
kind and nature (collectively referred to herein as "Taxes") that accrue against
the Premises, the Building and/or the land of which the Premises or the Building
are a part. If at any time during the term of the Lease there shall be
<PAGE>
EXHIBIT 10.9
CREDIT AGREEMENT
----------------
This Credit Agreement ("Agreement") is made and entered into on July 20, 1999,
by and between ClearCommerce Corporation, a Delaware corporation ("Borrower"),
and Imperial Bank, a California banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security agreement(s)
executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loans and or advances
(individually a "Loan" and collectively "Loans") referred to below to Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
--------------------------
1.01 Equipment Line Commitment.
(a) Equipment Line of Credit. Subject to the terms and conditions of this
Agreement, between the date hereof and May 31, 2000 (the "Draw Down Date"),
provided that no event of default then has occurred and is continuing, Bank
shall provide a non-revolving equipment line of credit (the "Equipment Line of
Credit") in an amount not to exceed $1,000,000. At the Draw Down Date, all
amounts previously drawn ("Equipment Loans") will then be due upon two years
thereafter (the "Due Date"). The proceeds of the Equipment Line of Credit shall
be used only for the purchase of new equipment.
(b) Equipment Loan Note. The interest rate, principal and interest payments,
maturity date and certain other terms of the Equipment Loan(s) will be contained
in a promissory note dated the date of this agreement, as such may be amended or
replaced from time to time.
1.02 Domestic Asset Based Line of Credit Commitment
(a) Line of Credit - Accounts Receivable Borrowing Base Constrained. Subject
to all the terms and conditions of this Agreement, provided that no event of
default then has occurred and is continuing, Bank shall upon Borrower's request,
make advances ("ABL Loans") to Borrower, from time to time and in such amounts
as Borrower shall request up to an aggregate principal amount outstanding not to
exceed:
(1) Eighty percent (80%) of Eligible Accounts, not to exceed $3,000,000 as
such Eligible Accounts may be adjusted from time to time as provided for under
Section 4.15 hereof (the "Borrowing Base") and in no event more than $3,000,000
(the "ABL Line of Credit"). If at any time or for any reason, the outstanding
principal amount of the ABL Loan Account (as defined below) is greater than the
lessor of: (x) the Borrowing Base or (y) the ABL Line of Credit, Borrower shall
immediately pay to Bank, in cash, the
1
<PAGE>
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Agreement, to make ABL Loans shall expire on the ABL Maturity Date (as
hereinafter defined), subject to Bank's right to renew said commitment in its
sole and absolute discretion at Borrower's request. Any such renewal of said
commitment shall not be binding upon Bank unless it is in writing and signed by
an officer of Bank. Provided that no Event of Default (as hereinafter defined)
has occurred and is continuing, all or any portion of the ABL Loans advanced by
Bank which are repaid by Borrower shall be available for reborrowing in
accordance with the terms hereof. Borrower promises to pay to Bank the entire
outstanding unpaid principal balance (and all accrued unpaid interest thereon)
of the ABL Loan Account on the earlier of demand by Bank or July 18, 2000 ("ABL
Maturity Date").
(b) Limitation on Advance of any ABL Loans. Notwithstanding any of the
provisions contained in Section 1.02 (a) hereof, prior to any advance of a ABL
Loan, a representative of Bank shall have conducted an audit of Borrower's books
and records relating to the Accounts and Inventory and any other Collateral for
the ABL Loans and made extracts therefrom, and arranged for verification of the
Accounts, directly with the account debtors or otherwise, and of the Inventory
all with results satisfactory to Bank, the cost of such audit of which shall be
at Borrower's sole expense. Based on Bank's review of such audit, and prior to
the advance of an ABL Loan in accordance with the terms of this hereof, Bank may
adjust the Borrowing Base percentage, in its sole and reasonable discretion, as
provided for under Section 4.15 hereof.
(c) Loan Ledger Account; Use of Proceeds. The amount of each ABL Loan made
by Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the ABL Line of Credit (herein called the "ABL
Loan Account") and Bank shall credit the ABL Loan Account with all loan
repayments in respect thereof made by Borrower. ABL Loans may only be used for
working capital.
(d) ABL Loans Interest. Borrower further promises to pay to Bank from the
date of the advance of the initial ABL Loan through the ABL Maturity Date, on or
before the 23rd day of each month, interest on the unpaid balance of the ABL
Loan Account at a rate of interest equal to one-quarter of one percent (.25%)
per annum in excess of the rate of interest which Bank has announced as its
prime lending rate (the "Prime Rate"), which shall vary concurrently with any
change in the Prime Rate, at the rate as specified in the pricing grid attached
hereto. Interest shall be computed at the above rate on the basis of the actual
number of days during which the principal balance of the ABL Loans are
outstanding divided by 360, which shall for interest computation purposes be
considered one (1) year.
(e) Application of Receipts. All sums received by Bank, whether from
Borrower or from Borrower's account debtors shall be applied to the outstanding
ABL Loan balance immediately upon receipt thereof by the Bank. The Borrower will
be charged, on a monthly basis, for the uncollected balance fees.
(f) Certain Definitions. As used herein the following terms shall have the
following meanings:
2
<PAGE>
"Accounts" means any right to payment for goods sold or leased, or rented,
or to be sold or to be leased, or to be rented, or for services rendered or to
be rendered no matter how evidenced, including accounts receivable, contract
rights, chattel paper, instruments, purchase orders, notes, drafts, acceptances,
general intangibles and other forms of obligations and receivables.
"Collateral" means any and all property of Borrower which is assigned or
hereafter is assigned to Bank as security or in which Bank now has or hereafter
acquires a security interest.
"Eligible Accounts" Eligible Accounts shall only include such accounts as
Bank in its sole discretion shall determine are eligible from time to time.
"Eligible Accounts" shall also NOT include any of the following:
(1) All Accounts under which payment is not received within 90 days from
any invoice date;
(2) All Accounts against which the account debtor or any other person
obligated to make payment thereon asserts any defense, offset, counterclaim or
other right to avoid or reduce the liability represented by the Account;
(3) Any Accounts if the account debtor or any other person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower.
(4) Credit balances greater than 90 days from invoice date.
(5) Accounts due from a debtor if 25% or more of the aggregate amount
of accounts of such debtor have at that time remained unpaid for more then 90
days from invoice date.
(6) For accounts representing more than 25% of Borrower's total
accounts receivable, the balance in excess of the 25% is not eligible. However,
the Bank may deem, in its sole discretion, the entire amount, or any portion
thereof, eligible. On a case by case basis, Bank may permit, in its sole
discretion, concentrations up to 60% for publicly traded companies, in good
standing, with a market capitalization in excess of $250,000,000.
(7) Accounts with respect to international transactions unless insured
by an insurance company acceptable to the Bank or covered by letters of credit
issued or confirmed by a bank acceptable to the Bank. Bank, in its sole
discretion, may deem as eligible amounts due from major, publicly owned foreign
companies.
(8) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee, subsidiary or affiliate of Borrower.
3
<PAGE>
(9) Accounts where the account debtor is a seller to Borrower, whereby
a potential offset (contra) exists.
(10) Consignment or guaranteed sales.
(11) Bill and hold accounts.
(12) Collection accounts.
(13) C.O.D. accounts.
(14) Salesmen's accounts for promotional purposes.
(15) All United States Government receivables, unless formally assigned
to the Bank.
(16) Accounts representing billings for service or maintenance contracts
or for inventory or equipment on rent to the account debtor.
(17) Deferred revenues.
(18) Pre-billings.
(g) Requests for ABL Loans. Requests for ABL Loans hereunder shall be in
writing duly executed by Borrower in a form satisfactory to Bank and shall
contain a certification setting forth the matters referred to in Section 1,
which shall disclose that Borrower is entitled to the amount of loan being
requested.
(h) Late Charge. If any installment payment, interest payment, principal
payment or principal balance due under the ABL Line of Credit is delinquent
twenty (20) or more days, Borrower agrees to pay Bank a late charge in the
amount of five percent (5%) of the payment so due and unpaid, in addition to the
payment; but nothing in this paragraph is to be construed as any obligation on
the part of the Bank to accept payment of any payment past due or less than the
total unpaid principal balance after maturity. All payments, at Bank's sole
discretion, shall be applied first to any late charges owing, then to interest
and the remainder, if any, to principal.
(i) Default Rate. If an Event of Default occurs hereunder, then during
the continuance thereof at the Bank's option, the interest rate shall be five
percent (5%) per year in excess of the rate otherwise applicable.
(j) Interest Calculations. The term "Prime Rate" shall mean the rate
that the Bank has announced as its prime lending rate, which shall vary
concurrently with any change in the Prime Rate. Interest based on the Prime Rate
shall vary concurrently with any change in the Prime Rate. All interest shall be
computed at the rate specified in any note on the basis of the actual number of
days during which
4
<PAGE>
the principal balance of the corresponding Loans are outstanding divided by 360,
which shall for interest computation purposes be considered one (1) year.
(k) Non-Formula Based Advances. Notwithstanding anything to the contrary
contained herein, so long as total advances under this Section 1.02 do not
exceed $650,000, such advances may be made without regard to the Borrowing Base.
1.03 Prior Loan(s). All loans from Bank to Borrower and other obligations
outstanding from Borrower to Bank are subject to the terms and conditions of
this Agreement and that the interest rate, payments of principal and interest
and other the terms contained in any note[s] evidencing the prior loan[s] remain
in full force and effect, and Borrower agrees to continue to make payments in
accordance with the terms of the prior note[s].
1.04 Documentation Fee, Costs and Expenses. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $500.00, and all
other costs and expenses incurred by the Bank in the preparation of this
Agreement, the other Loan Documents and the perfection of any security interest
granted to Bank by Borrower.
1.05 Collateral. Borrower shall grant or cause to be granted to Bank a
first priority lien on any and all personal property assets of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest or pursuant to the terms of any
security agreement, any intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank, all as may be subject to
Section 5.03 herein.
1.06 Collection of Payments. Borrower authorizes Bank to collect all
interest, fees, costs, and/or expenses due under this Agreement by charging
Borrower's demand deposit account number 21001740 with Bank, or any other demand
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such demand deposit account to pay all
such sums when due, the full amount of such deficiency shall be immediately due
and payable by Borrower.
2. REPRESENTATIONS OF BORROWER
---------------------------
Borrower represents and warrants that:
2.01 Existence and Rights. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of Delaware, without
limit as to the duration of its existence. Borrower is authorized and in good
standing to do business in the state of its incorporation; Borrower has the
appropriate powers and adequate authority, rights and franchises to own its
property and to carry on its business as now conducted, and is duly qualified
and in good standing in each state in which the character of the properties
owned by it therein or the conduct of its business makes such qualification
5
<PAGE>
necessary; and Borrower has the power and adequate authority to make and carry
out this Agreement. Borrower has no investment in any other business entity
unless specified in writing to Bank.
2.02 Agreement Authorized. The execution, delivery and performance of
this Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation or similar document as the
case may be, and this Agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms; subject only to bankruptcy,
insolvency or similar laws affecting creditors rights generally.
2.03 No Conflict. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by which
it or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 Litigation. Except as disclosed in writing to bank by Borrower,
there is no litigation or other proceeding pending or threatened against or
affecting Borrower which if determined adversely to Borrower or its interest
would have a material adverse effect on the financial condition of Borrower, and
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or other governmental or regulatory authority.
2.05 Financial Condition. The balance sheet of Borrower as of May 31,
1999, and the related profit and loss statement for the 8 month period ended as
of that date, a copy of which has heretofore been delivered to Bank by Borrower,
and all other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said balance
sheet truly presents the financial condition of Borrower as of the date thereof,
and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the financial condition or business of Borrower.
Borrower has no knowledge of any liabilities, contingent or otherwise, at such
date not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.
2.06 Title to Assets. Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.
2.07 Tax Status. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
6
<PAGE>
2.08 Trademarks, Patents. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
2.09 Regulation U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
2.11 Year 2000 Compliance. Borrower and its subsidiaries, as applicable,
have reviewed the areas within their operations and business which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the Year 2000 Problem and have made related appropriate
inquiry of material suppliers and vendors, and based on such review and program,
the Year 2000 Problem will not have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates one or after December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN
----------------------------
Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in form
and substance satisfactory to Bank:
3.01 Promissory Note(s). Original, executed promissory note(s) as
applicable.
3.02 Security Agreement. Original, executed security agreement(s)
covering the personal property collateral securing the Loan(s).
3.03 Financing Statement. Financing statement(s) executed by Borrower and
any grantor of a security interest.
3.04 Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to that Agreement to Provide Insurance
executed by Borrower, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.
3.05 Organizational Documents. Copies of the articles of incorporation,
or similar document as the case may be, of the any Borrower.
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3.06 Authorizations. Certified copies of all action taken by any Borrower
to authorize the execution, delivery and performance of the Loan Documents.
3.07 Good Standing. Good standing certificates from the appropriate
secretary of state of the state in which any Borrower is organized and in each
state in which it is required to be qualified to do business.
3.08 Additional Documents. Such other documents as Bank may reasonably
deem necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
---------------------------------
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 Rights and Facilities. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
4.02 Use of Proceeds. Use the proceeds of the Loans only for purposes
specified in Section 1 of this Agreement.
4.03 Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.
4.04 Taxes and Other Liabilities. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate proceedings
in such manner as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it to be adequate
with respect thereto.
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4.05 Records and Reports. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
(a) Monthly Financial Statement. As soon as available, and in any event
within twenty-five (25) days after the close of each month a consolidated
balance sheet, profit and loss statement and reconciliation of Borrower's
capital balance accounts as of the close of such period and covering operations
for the portion of Borrower's fiscal year ending on the last day of such period,
all in reasonable detail and reasonably acceptable to Bank, in accordance with
generally accepted accounting principles on a basis consistently maintained by
Borrower and certified by an appropriate officer of Borrower.
(b) Annual Financial Statement. As soon as available, and in any event
within ninety (90) days after and as of the close of each fiscal year of
Borrower, a consolidated report of audit of Company, all in reasonable detail,
audited by an independent certified public accountant selected by Borrower and
reasonably acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified by an
appropriate officer of Borrower;
(c) Officer's Certificate. Within twenty-five (25) days after the end of
each month and fiscal year of Borrower, a certificate of the chief financial
officer of Borrower, stating that Borrower has performed and observed each and
every covenant contained in this Agreement to be performed by it and that no
event has occurred and no condition then exists which constitutes an event of
default hereunder or would constitute such an event of default upon the lapse of
time or upon the giving of notice and the lapse of time specified herein; or, if
any such event has occurred or any such condition exists, specifying the nature
thereof in the form of exhibit 4.05 (c) attached hereto.
(d) Audit Reports. Promptly after the receipt thereof by Borrower, copies of
any detailed audit reports submitted to Borrower by independent accountants in
connection with each annual or interim work on the accounts of Borrower made by
such accountants;
(e) Accounts Receivable And Accounts Payable Agings; Within 25 days from
each month-end, deliver to Bank a detailed accounts receivable aging reconciled
to the general ledger of Borrower, a detailed accounts payable aging reconciled
to the Borrower's general ledger. All the foregoing will be in a form and with
such detail as Bank may request from time to time.
(f) Borrowing Base Certificate. Deliver to Bank within 25 days after month-
end, a Borrowing Base Certificate.
(g) Transaction Reports. Deliver to Bank monthly transaction reports,
together with payments in kind, including Collateral activity and appropriate
loan activity, certified by an authorized signer of Borrower. monthly reports
delivered to Bank include the following Bank forms: AC-1 Accounts Receivable
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And Inventory Transaction Report, AC-1 Schedule of Accounts Receivable Assigned,
and AC-3 Schedule of Collections.
(h) List of Customers. On a quarterly basis or more frequently if requested
by Bank, provide Bank with an alphabetized list of customers including
addresses.
(i) Stockholder, Security and Exchange Commission Statements and Reports
Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower or any subsidiary shall send to its
members or stockholders as appropriate, if any, and copies of all reports which
Borrower or any subsidiary may file with the Securities and Exchange Commission.
j) Other Information. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.
4.06 Minimum Liquidity Ratio. Maintain at all times on a monthly basis, a
minimum Liquidity Ratio (defined as unrestricted cash and cash equivalents plus
80% of eligible trade accounts receivable less outstanding balance under the ABL
Line of Credit divided by total of Borrower's obligations to Bank hereunder) of
at least 1.50 to 1.00.
4.07 Minimum Revenue. Meet or exceed the following revenue milestones for
the following time periods:
3 months ending June 30, 1999 $1,800,000
3 months ending September 30, 1999 $2,800,000
3 months ending December 31, 1999 $1,600,000
3 months ending March 31, 2000 $4,000,000
each calendar quarter end thereafter $4,000,000
4.08 Additional Equity. Have received term sheets for new equity
investment totaling at least $4,000,000 ("New Equity") on or before September
30, 1999, and to have closed on the New Equity on or before October 31, 1999.
4.09 ERISA. Cause all defined benefit pension plans, as defined in ERISA,
of Borrower to, at all times, meet the minimum funding standards of Section 302
of ERISA, and ensure that no Reportable Event or Prohibited Transaction, as
defined in ERISA, will occur with respect to any such plan.
4.10 Laws. At all times comply with, or cause to be complied with, all
laws, statues, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
4.11 GAAP. Compliance with all financial covenants shall be calculated
based on generally accepted accounting principles applied on a consistent basis
as maintained by Borrower.
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4.12 Year 2000 Compliant. Borrower shall perform all acts reasonably
necessary to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems and
adopting a detailed plan, with itemized budget, for the remediation, monitoring
and testing of such systems. As used in this paragraph, "Year 2000 Compliant"
shall mean, in regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall, immediately
upon request, provide to Agent such certifications or other evidence of
Borrower's compliance with the terms of this paragraph as Bank may from time to
time require.
4.13 Operating Accounts. Maintain all primary accounts and banking
relationship with the Bank. Maintain, or cause to be maintained, on deposit with
Bank, non-interest bearing demand deposit balances sufficient to compensate Bank
for all services provided by Bank. Balances shall be calculated after reduction
for the reserve requirement of the Federal Reserve Board and uncollected funds.
Any deficiencies shall be charged directly to the Borrower on a monthly basis.
4.14 Notices. Promptly notify Bank in writing of (i) the occurrence of
any Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default; (ii) all litigation affecting Borrower where the
amount is $100,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.
4.15 Audits. Permit representatives of Bank to conduct audits of
Borrower's books and records relating to the Accounts, Inventory and other
Collateral and make extracts therefrom, with results satisfactory to Bank,
provided that Bank shall use its best efforts to not interfere with the conduct
of Borrower's business, and to the extent possible to arrange for verification
of the Accounts directly with the account debtors obligated thereon or
otherwise, all under reasonable procedures acceptable to Bank and at Borrower's
sole expense; Notwithstanding any of the provisions contained in Section 1.02
hereof, Borrower hereby acknowledges and agrees that upon completion of any such
audit Bank shall have the right to adjust the Borrowing Base percentage, in its
sole and reasonable discretion, based on its review of the results of such
collateral audit.
4.16 Covenants Relating to Collateral. In addition to any covenants in
any Loan Document relating to any Collateral the Borrower agrees:
(a) To execute and deliver to Bank such assignments, including Bank's standard
forms of Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may require in
order to affirm, effectuate or further assure the assignment to Bank of
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the Collateral or to give any third party, including the account debtors
obligated on the Accounts, notice of Bank's interest in the Collateral.
(b) Until Bank exercises its rights to collect the Accounts and Inventory
proceeds pursuant to Section 4.16 (e), Borrower will collect with diligence all
Borrower's Accounts and Inventory proceeds. Any collection of Accounts or
Inventory proceeds by Borrower, whether in the form of cash, checks, notes, or
other instruments for the payment of money (properly endorsed or assigned where
required to enable Bank to collect same), shall be in trust for Bank, and
Borrower shall keep all such collections separate and apart from all other funds
and property so as to be capable of identification as the property of Bank and
deliver said collections, together with the proceeds of all cash sales, daily to
Bank in the identical form received. The proceeds of such collections when
received by Bank may be applied by Bank directly to the payment of Borrower's
Loan Account or any other obligation secured hereby. Any credit given by Bank
upon receipt of said proceeds shall be conditional credit subject to collection.
Returned items at Bank's option may be charged to Borrower's general account.
All collections of the Accounts and Inventory proceeds shall be set forth on an
itemized schedule, showing the name of the account debtor, the amount of each
payment and such other information as Bank may request.
(c) That until Bank exercises its rights to collect the Accounts or Inventory
proceeds pursuant to Section 4.16 (e), Borrower may continue its present
policies with respect to returned merchandise and adjustments. However, Borrower
shall, within 25 days of the end of each month notify Bank of all cases
involving returns, repossessions, and loss or damage of or to merchandise
represented by the Accounts or constituting Inventory and of any credits,
adjustments or disputes arising in connection with the goods or services
represented by the Accounts or constituting Inventory and, in any of such
events, Borrower will immediately pay to Bank from its own funds (and not from
the proceeds of Accounts or Inventory) for application to Borrower's Loan
Account or any other obligation secured hereby the amount of any credit for such
returned or repossessed merchandise and adjustments made to any of the Accounts.
Until payment is made as provided herein or until release by Bank from its
security interest, all merchandise returned to or repossessed by Borrower shall
be set aside and identified as the property of Bank and Bank shall be entitled
to enter upon any premises where such merchandise is located and take immediate
possession thereof and remove same.
(d) To promptly notify Bank of any attachment or other legal process levied
against any of the Collateral and any information received by Borrower relative
to the Collateral, including the Accounts, the account debtors or other persons
obligated in connection therewith, which may in any way affect the value of the
Collateral or the rights and remedies of Bank in respect thereto
(e) That Bank may at any time, without prior notice to Borrower, collect the
Accounts and Inventory proceeds and may give notice of assignment to any and all
account debtors, and Borrower does hereby make, constitute and appoint Bank its
irrevocable, true and lawful attorney with power to receive, open and dispose of
all mail addressed to Borrower, to endorse the name of Borrower upon any checks
or other evidences of payment that may come into the possession of Bank upon the
Accounts or as proceeds of Inventory; to endorse the name of the undersigned
upon any document or instrument relating to the Collateral; in its name or
otherwise, to demand, sue for, collect and give acquittances for any and all
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moneys due or to become due upon the Accounts; to compromise, prosecute or
defend any action, claim or proceeding with respect thereto; and to do any and
all things necessary and proper to carry out the purpose herein contemplated.
(f) To do all acts necessary to maintain, preserve, and protect the Inventory,
keep all Inventory in good condition and repair and not to cause any waste or
unusual or unreasonable depreciation thereof.
(g) In the event any unpaid balance of Borrower's Loan Account shall exceed the
maximum amount of outstanding Loans to which the Borrower is entitled under
Section 1 hereof, Borrower shall immediately pay to Bank for credit to
Borrower's Loan Account the amount of such excess.
5. NEGATIVE COVENANTS OF BORROWER
------------------------------
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:
5.01 Type of Business; Management; Change in Control. Make any substantial
change in the character of its business; make any change in its executive
management; or permit the current shareholders to decrease their ownership in
Borrower.
5.02 Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated May 31, 1999,
excluding those obligations being refinanced by Bank, or sell or transfer,
either with or without recourse, any accounts or notes receivable or any moneys
due or to become due.
5.03 Liens and Encumbrances. Create, incur, permit to exist, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, other than liens for taxes not delinquent and
liens in Bank's favor and other than liens agreed to in writing by Bank.
5.04 Loans, Investments, Secondary Liabilities. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5.05 Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed
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assets, or any property or other assets necessary for the continuance of its
business as now conducted, including without limitation the selling of any
property or other asset accompanied by the leasing back of the same.
5.06 Capital Expenditures. Make or incur obligations for fixed or capital
assets, which includes purchase money indebtedness or capital lease obligations
in excess of $100,000 from the date hereof until May 31, 2002 or $100,000 in any
twelve month period thereafter.
5.07 Operating Lease Expenditures. Make or incur obligations for operating
leases for real or personal property in excess of $100,000 from the date hereof
until May 31, 2002 or $100,000 in any twelve (12) month period thereafter.
5.08 Dividends Declare or pay any dividend or make any other distribution
on any of its capital stock now outstanding or hereafter issued or purchase,
redeem or retire any of such stock other than in dividends or distributions
payable in Borrower's capital stock, except for the repurchase of Borrower's
capital stock from officers, directors, employees or consultants of Borrower
upon termination of their employment with or rendering of service to Borrower.
5.09 Subordinated Liabilities. Make any payments on any Borrower's
obligation subordinated to the obligations to Bank, other than in accordance
with the provisions of any subordination agreement executed by the Bank and the
subordinated debt holder.
6. EVENTS OF DEFAULT
-----------------
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
6.01 Failure to Pay. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to Bank within, five (5) days of its
due date.
6.02 Breach of Covenant. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 Breach of Warranty. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.
6.04 Insolvency; Receiver or Trustee. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
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6.05 Judgments, Attachments. Any money judgment in excess of $100,000, writ
or warrant of attachment, or similar process shall be entered or filed against
Borrower or any of its assets and shall remain unvacated, unbonded or unstayed
for a period of ten (10) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder.
6.06 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 Cessation of Business. Borrower shall voluntarily suspend its business.
6.08 Adverse Change. Any change which, in the opinion of Bank, is materially
adverse to the financial condition of Borrower or any Guarantor; or should Bank,
for any reason, believe that the prospect of Borrower's payment or performance
hereunder or under any other agreement or instrument with Bank be impaired.
6.09 Other Defaults. Borrower, or any Guarantor of Borrower's obligations
to Bank, shall commit or do or fail to commit or do any act or thing which would
constitute an event of default under any of the terms of any other agreement,
document or instrument executed or to be executed by it concerning the
obligation to pay money.
6.10 Advances. Notwithstanding anything to the contrary contained herein,
Bank shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
------------------------
7.01 Failure or Indulgence Not Waiver. No failure or delay on the part of
Bank or any holder of notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note (s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
7.02 Counterparts; Entire Agreement. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
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7.03 Attorney's Fees. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 Additional Remedies. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 Inurement. The benefits of this Agreement shall inure to the successors
and assigns of Bank and the permitted successors and assigns of Borrower.
7.06 Applicable Law. This Agreement and all other agreements and instruments
required by Bank in connection therewith shall be governed by and construed
according to the laws of the state of California, to the jurisdiction of whose
courts the parties hereby agree to submit.
7.07 Offset. In addition to and not in limitation of all rights of offset
that Bank or other holder of the Loan may have under applicable law, Bank or
other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
7.08 Severability. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 Time of the Essence. Time is hereby declared to be of the essence of
this Agreement and of every part hereof.
7.10 Accounting. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
7.11 Reference Provision.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or
any note executed by Borrower in favor of Bank or
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any other agreement or instrument issued in favor of Bank by Borrower
(collectively in this Section, the "Agreement") which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
----------
(defined as the date on which a party subject to this Agreement gives written
notice to all other parties that a controversy, dispute or claim exists), will
be settled by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
-- ---
their successor section ("CCP"), which shall constitute the exclusive remedy for
---
the settlement of any controversy, dispute or claim concerning this Agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP (S)170.6. The
referee shall (a) be requested to set the matter for hearing within sixty (60)
days after the date of selection of the referee and (b) try any and all issues
of law or fact and report a statement of decision upon them, if possible, within
ninety (90) days of the Claim Date. Any decision rendered by the referee will be
final, binding and conclusive and judgment shall be entered pursuant to CCP
(S)644 in any court in the state of California having jurisdiction. Any party
may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute or
claim, by filing a petition for a hearing and/or trial. All discovery permitted
by this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state
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of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(d) In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S)1280 through (S)1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
7.12 This Agreement may be modified only by a writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK CLEARCOMMERCE CORPORATION
("Bank") ("Borrower")
By:________________________ By:_____________________________
Its:________________________ Its:____________________________
18
<PAGE>
EXHIBIT 10.9.1
FIRST AMENDMENT
TO
CREDIT AGREEMENT AND PROMISSORY NOTE
AND
FORBEARANCE
This First Amendment and Forbearance Agreement ("Amendment") is made as of
September 14, 1999 by and between ClearCommerce Corporation, ("Borrower") and
Imperial Bank, a California banking corporation, ("Bank") and amends certain
provisions of that Credit Agreement dated as of July 20, 1999 ("Agreement"), by
and between Borrower and Bank and contains certain waivers by the Bank of the
Borrower complying with certain provisions of the Agreement as follows:
1. Borrower has requested the Bank to make a $500,000 advance which will cause
the following Event of Default to occur:
Pursuant to Section 4.06 of the Agreement the Borrower is required to
maintain a minimum Liquidity Ratio of at least 1.50:1.00. If Borrower is
advanced the above amount it will not be in compliance with the Liquidity Ratio.
2. Forbearance: As a result of the above Event of Default the Bank would have
certain rights and remedies pursuant to the Agreement and Law. The Borrower has
requested that the Bank forbear from exercising any such rights and remedies.
The Bank hereby agrees to forbear from exercising the above referenced rights or
remedies through September 30, 1999, but only on the following terms:
A. The Borrower must comply with all the terms and conditions contained in this
Amendment.
B. No further Events of Default shall occur in the Agreement.
C. Borrowers must make all scheduled payments monthly interest and principal on
all loans from the Bank.
D. The Bank must receive a fee of $ 15,000 upon execution of this Amendment.
E. The Borrower must execute an Intellectual Property Security Agreement in
form and substance satisfactory to Bank granting to Bank a security interest in
it's intellectual property.
F. The Bank will file the Intellectual Property Security Agreement with the
appropriate federal offices and will file the UCC 2 financing statement which
includes the Borrower's Intellectual property.
II Amendments
A. Promissory Note dated July 20, 1999: The interest rate of the Promissory
-----------------------------------
Note dated July 20, 1999 is amended to "one and one half percent (1.50%) over
the Index."
<PAGE>
B. Schedule to Starter Kit Loan and Security Agreement (Equipment Advances):
-------------------------------------------------------------------------
The interest rate of the Credit Line Equipment shown on the Schedule to Starter
Kit Loan and Security Agreement (Equipment Advances): dated December 23, 1997 is
amended to "one and one half percent (1.50%) over the Prime Rate".
C. Section 1.02 (e) of the Agreement: The interest rate of the ABL Loan Account
---------------------------------
shown in Section 1.02 of the Agreement is 1997 is amended to "one and one half
percent (1.50%) over the Prime Rate".
D. New Section 4.17 to the Agreement. The following is hereby added as
---------------------------------
Section 4.17 the Agreement:
"4.17 Continent Forbearance Fee. In consideration of the forbearance by the
Bank pursuant to that First Amendment to Agreement and Promissory Note and
Forbearance dated September 13, 1999, the Borrower agrees to pay to the Bank a
fee of One Hundred Thousand Dollars if the Borrower agrees to a formal
commitment to sell the Borrower which is executed on or before March 13, 2000.
The fee will be payable upon closing the sale."
iii. The forbearance contained herein is specific as to content and time, and
does not waive any rights or remedies that Bank may have as a result of the
above Event of Default or any other breaches or violations past, present, or
future of the Agreement or any other agreement between Borrower and Bank, and
Bank reserves all rights, powers and remedies available to it. After September
30, 1999 or should any of the conditions listed above not be complied with, the
forbearances contained herein shall be null and void and the Bank may exercise
all rights and remedies it may have pursuant to the Agreement and the law.
iv. Except as provided above, the Agreement remains unchanged. Any capitalized
terms used herein and not defined herein shall have the meanings defined in the
Agreement.
iv. This First Amendment is effective as of September 14, 1999 and the parties
hereby confirm that the Agreement as amended is in full force and effect.
ClearCommerce Corporation
By:______________________________
Name:___________________________
Title:_____________________________
IMPERIAL BANK
By:______________________________
Name:___________________________
Title:____________________________
<PAGE>
EXHIBIT 10.9.2
SECOND AMENDMENT
TO
CREDIT AGREEMENT AND PROMISSORY NOTE
This Second Amendment ("Second Amendment") is made effective as of February 28,
2000 between ClearCommerce Corporation ("Borrower") and Imperial Bank, a
California banking corporation ("Bank") and amends certain provisions of that
certain Credit Agreement dated as of July 20, 1999 (the "Credit Agreement") and
that certain First Amendment to Credit Agreement and Promissory Note and
Forbearance dated as of September 14, 1999 (the "First Amendment") between
Borrower and Bank as provided below. The Credit Agreement and First Amendment
shall be referred to jointly as the Agreement. Unless specifically defined, all
terms as used herein shall have the meanings set forth in the Agreement and
First Amendment.
1. Waiver and Termination of Forbearance. Bank waives Borrower's default for
-------------------------------------
the months ending September, October and November, 1999 of Section 4.06 of
the Credit Agreement requiring Borrower to maintain a minimum Liquidity
Ratio of at least 1.50:1.00. The forbearance set forth in Section 2 of the
First Amendment is hereby terminated, nullified and of no further force and
effect.
2. Compliance with Liquidity Covenant. Borrower and Bank hereby acknowledge
-----------------------------------
that for the month ending December 31, 1999, Borrower was in compliance with
Section 4.06 of the Credit Agreement.
3. Interest Rate.
--------------
(a) Promissory Note dated July 20, 199. The interest rate of the
-----------------------------------
Promissory Note dated July 20, 199 is amended to one quarter of one
percent (0.25%) over the Index.
(b) Schedule to Starter Kit Loan and Security Agreement
---------------------------------------------------
(Equipment Advances).
---------------------
The interest rate of the Credit Line Equipment shown on the Schedule to
Starter Kit Loan and Security Agreement (Equipment Advances): dated
December 23, 1997 is amended to "the Prime Rate".
(c) Section 1.02(d) of the Agreement. The interest rate of the ABL Loan
---------------------------------
Account shown in Section 1.02 of the Agreement is 1997 is amended to
"one quarter of one percent (.25%)" over the Prime Rate".
4. Contingent Forbearance Fee. Section 4.17 of the Agreement is hereby deleted
--------------------------
in its entirety and of no further force or effect.
5. Warrant. In consideration of the waiver and termination of forbearance by
-------
Bank and other modifications described in this Second Amendment, Borrower
shall issue to Bank a warrant to purchase shares of Borrower's Series C
Preferred Stock pursuant to that certain Warrant Purchase Agreement dated as
of the date of this Second Amendment.
6. Borrower's Intellectual Property Assets. Concurrently herewith, Bank shall
---------------------------------------
release its security interest in Borrower's Intellectual Property as such
term is defined in the Intellectual Property Security Agreement dated as of
September 13, 1999 between Bank and Borrower (the "IP Agreement"). The IP
Agreement is hereby revoked, rescinded and of no further force or effect,
provided, however that Borrower shall not transfer, assign or pledge a
security interest in the Intellectual Property to any party without Bank's
consent. Bank agrees to file promptly such UCC termination statements as may
be required to release its security interest in Borrower's Intellectual
Property.
7. Commercial Security Agreement. The provisions of that certain Commercial
------------------------------
Security Agreement dated July 20, 1999 (the "Security Agreement") and signed
by Borrower are
<PAGE>
hereby reinstated in their original entirety and Borrower hereby reaffirms
its grant to Bank of a security interest in the Collateral and on the terms
described therein. Bank hereby releases any security interest in Borrower's
assets to the extent not presently granted by the terms of the Security
Agreement, as reinstated. Borrower shall execute and deliver to Bank such
financing statements to perfect Bank's security interest in the Collateral
described in the Security Agreement as Bank may reasonably request.
8. Full Force and Effect. Except as modified by this Second Amendment, the
---------------------
Agreement remains unaltered and in full force and effect. The waiver set
forth in this Second Amendment is specific as to content and time and shall
not constitute a waiver of any other current or future default or breach of
any covenants contained in the Agreement or the terms and conditions of any
other documents signed by Borrower in favor of Bank.
ClearCommerce Corporation
By: /s/ Michael S. Grajeda
--------------------------------
Michael S. Grajeda, Vice President and
Chief Financial Officer
IMPERIAL BANK
By: /s/ Tony Schell
--------------------------------
Its: SVP/Mgr.
--------------------------------
<PAGE>
EXHIBIT 10.10
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars of terms and conditions
of employment.
These particulars were issued on the following date: 2nd of November 1998.
Employer: ClearCommerce ("the Company")
Employee: Alan Scutt
1 Position
Your job title is Vice President Europe reporting directly to Robert Lynch,
President and CEO. Your employment will commence on the 2nd of November
1998. Your employment with any previous employer will not count as part of
your continuous period of employment with the Company.
2 Duties /Territories/ Vertical Markets
Your duties are described in the Job Specification given to you at the
commencement of your employment but you will be expected to carry out any
duties within your capabilities should the needs of the Company require.
Additionally your job role may involve the Company assigning your
activities to a territory, or marketplace. The Company reserves the right
at any time to vary, change, remove, or reassign your activities with
respect to a territory or marketplace.
3 Probationary Period
The first three months of your employment with the Company will be
probationary. Your continued employment will be reviewed at any time
during the probationary period and in any event prior to the end of the
period. The notice entitlement during the probationary period is one week.
4 Working Hours
Your normal hours of work are 8.30 am - 5.30 pm, Monday to Friday with a
lunch break of one hour. The arrangement of the hours may be varied to
suit the needs of the Company. However, you may be required to work
outside these hours at the discretion of the Company to meet the needs of
its business or as may be necessary for the efficient discharge of your
duties without any further remuneration.
You hereby consent to work more than an average of 48 hours per week in any
relevant statutory reference period (currently 17 weeks) to the extent that
it is necessary for you to discharge your duties. You shall not withdraw
this consent otherwise than by giving 2 months written notice.
5 Place of Work
Your normal place of work will be initially your home address until the
Company finds suitable premises. The Company reserves the right to change
your normal place of work to any place within the United Kingdom. You will
be given at least
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
one month's notice of any such change. In addition you may be required to
work at any of the Company's premises or at the premises of its customers,
clients, suppliers or associates within the United Kingdom, the EMEA
region, and the USA from time to time.
6 Earnings
Your salary will be (Pounds)84,800 per annum. Your salary will be paid
monthly in arrears directly into your bank account. You will be eligible
to participate in the Company's annual Variable Compensation Plan
applicable from time to time. Details, targets, rates will be provided
separately. Targeted annual earnings will be (Pounds)21,200. You will be
paid this bonus monthly being (Pounds)1766.67, as a recoverable draw for
your first six months. Any amounts paid will be deducted from your actual
year-end bonus.
7 Company Car Scheme
You are eligible to receive a car allowance of (Pounds)850 per month.
Details of the Company Car Allowance Policy will be given to you when you
commence employment with ClearCommerce.
8 Expenses
The Company will pay or reimburse to you any reasonable Company expenses
properly incurred in the course of your employment and in accordance with
the Company Expense Policy. Details of this policy will be given to you
when you commence employment with the Company. The policy may be changed
at any time and employees will be notified in writing of any such changes.
The Company reserves the right to refuse payment of any expenses if you are
unable to provide the Company with such vouchers or other evidence of
actual payment as the Company may reasonably require. You agree that the
Company is entitled to deduct from your pay at any time during your
employment, or upon the termination of your employment, however arising,
any money you may owe to the Company including but limited to any
outstanding loans, advances, relocation expenses, training costs, excess
holiday pay and any other monies owed by you to the Company.
9 Holiday
Annual holiday entitlement is 20 days plus all statutory holidays, dates of
which must be agreed with your manager in advance. Holiday entitlement is
measured from January 1st each year. For periods of employment of less
than a full year, a pro rata entitlement of 1.9 days per full month's
employment will be allowed. Entitlements can only be taken in complete
half days, and where there are fractions these will be rounded up or down
to the nearest half day.
Where employees are dismissed for gross misconduct or resign without giving
the necessary period of notice they forfeit any right to accrued holiday
pay. In addition, if at termination date employees have taken holiday in
excess of their accrued entitlement the Company reserves the right to make
the deduction from final
-2-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
moneys owing to the employee. Where employees resign or their employment
is terminated and notice is given ClearCommerce is entitled to ask the
employee to take any accrued holiday as part of that notice period. Accrued
holiday pay in lieu will be calculated on the basis of one over two hundred
and sixty (1/260th) of annual salary per working day. Probationary staff
are not entitled to pay in lieu of holiday entitlement.
10 Employment Benefits
The Company has established Company Employment Benefit schemes. You will
be advised by Churchills of the details of the schemes. You will be
eligible to join the insurance schemes from commencement.
11 Stock Incentive Plan
You will receive a grant of options, pursuant to the ClearCommerce
Corporation 1997 Stock Incentive Plan, that will vest over time on 56,000
shares of stock. The exercise price of the options will be the fair market
value of the stock at the time of the grant as determined by the company's
Board of Directors. Vesting will occur over a four year period with the
first 25% issued 1 year after the first date of employment and an
additional 2.08% of the total issued for each month during which you are
employed by ClearCommerce after year one
12 Illness and Sick Pay
The Company must be notified in accordance with the Company's standard
procedures set out in the Company's Illness and Sick Pay Policy in all
cases of absence from work. If absence is as a result of an injury at work
the manager must be informed without delay. A copy of the above mentioned
policy will be given to you when you commence employment with the Company.
The standard procedures may be changed at any time without notice and
employees will be notified in writing of any such changes.
13 Open Door Policy
If you have a grievance you should first bring this to the attention of
your manager, and if it cannot be resolved with him/her you may, at any
time, put your grievance into writing to his or her senior, who will
attempt to negotiate a mutually satisfactory solution to the problem for
both you and the Company. The solution as defined will be final and
binding on the employee.
14 Disciplinary Procedures
The purpose of the Company's disciplinary procedures is to ensure that the
standards established by the Company both in relation to your employment
and generally are maintained and that any failure to observe such standards
are fairly dealt with in accordance with the Company's guide to
disciplinary procedures. A copy of the guide will be given to you when you
commence employment with the Company.
-3-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
The procedures outlined in the guide may be changed at any time and
employees will be notified in writing of any such changes.
15 Ethics
You recognise that the Company's objective is that its business shall be
carried out in compliance with all applicable laws and regulations and in
an honest and ethical manner. In the performance of your duties hereunder
you agree that you will at all times conduct yourself and the affairs of
the Company in accordance with that objective. If at any time you feel you
need guidance to resolve any doubts you may have concerning the ethics of
any activity in which you may be engaged, you should discuss the situation
with your manager or one of the Officers of the Parent Company.
Without prejudice to the generality of the foregoing the Company may
require you not to accept any gift and/or favour of whatever kind from any
customer, client or supplier of the Company or any prospective customer,
client or supplier of the Company.
16 Intellectual Property
(i) Without prejudice to the generality of clause 2 above, your duties may
include activities that involve developing applications and code or
enhancing existing applications and code or developing or creating other
intellectual property.
In this clause the expression "intellectual property" shall mean (a) every
invention, discovery, design or improvements (b) every work in which
copyright may subsist and (c) moral rights as defined by Section 77 and
Section 80 of the Copyright, Design and Patents Act 1988.
You shall forthwith communicate to the Company in confidence all
intellectual property which you may make or originate either solely or
jointly with another or others during your employment.
In the case of such intellectual property as is made or originated wholly
or substantially in the course of your normal duties or in the course of
duties specifically assigned to you and which relate to the affairs of the
Company the following sub-clauses shall apply:
(a) such intellectual property (or in the case of intellectual property
made or originated by you jointly with another or others to the full extent
of your interest therein so far as the law allows) shall be and become the
exclusive property of the Company and shall not be disclosed to any other
person, firm or Company without the consent of the Company being previously
obtained which if given may be subject to conditions. Provisions of this
sub-clause shall not entitle you to any compensation beyond the salary
herein mentioned in clause 6 except that in the case of any invention on
which a British Patent has been granted or assigned to the Company and the
Company has derived outstanding benefit from such Patent, you
-4-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
may be entitled by virtue of Section 40 of the Patents Act 1977 to claim
additional compensation. The provisions of this clause shall not restrict
your rights under Sections 39 to Sections 43 of the Patents Act 1977.
(b) you shall if and when required by the Company and at the expense of the
Company do and/or combine with others in doing all acts and sign and
execute all applications and other documents (including Powers of Attorney
in favour of nominees of the Company) necessary or incidental to obtaining
maintaining or extending Patent or other forms of protection for such
intellectual property in the UK and in any other part of the world or for
transferring to or vesting in the Company or its nominees your entire right
title and interest to and in such intellectual property or to and in any
application, Patent or other form of protection or copyright as the case
may be including the right to file applications in the name of the Company
or its nominees for Patent or other forms of protection or for registration
of copyright in any country claiming priority from the date of filing of
any application or other date from which priority may run in any other
country.
(c) any copyright works or designs shall be the property of the Company
whether or not the work was made by direction of the Company or was
intended for the Company and the copyright in it and the rights in any
design shall belong to the Company and to the extent that such copyright or
design rights are not otherwise vested in the Company you hereby assign the
same to the Company.
(ii) the provisions of this clause with regard to intellectual property
shall remain in force notwithstanding the termination of your employment
and shall be binding on your personal representatives.
17 Confidential and Proprietary Information
You shall not either during your employment, otherwise than in the proper
course of your duties, or following the termination of your employment,
without the consent in writing of the Company being first obtained, divulge
to any person firm or company and shall during the continuance of this
agreement use your best endeavours to prevent the publication or disclosure
of any confidential information of the Company or any of its secrets,
dealings or transactions whatsoever which may have come or may come to your
knowledge during the course of your employment or previously or otherwise
and including but not limited to the following matters:
(i) any and all technical and non-technical information including patent,
copyright and, trade secret;
(ii) proprietary information, including lists of customers and potential
customers of or suppliers and potential suppliers to the Company and any
other information collected by the Company in relation to those customers
or suppliers;
(iii) new products or services to be sold or supplied or proposed to be
sold or supplied by the Company;
-5-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
(iv) the Company's pricing policies and private terms of business relating
to its customers and suppliers;
(v) any systems methods or other computer software developed and used by
the Company including software programmes, software source documents and
formulae related to the current future and proposed products and services
of the Company;
(vi) the designs or transactions or other business affairs of the Company
its finances or management accounts;
(vii) any information which the Company has access to only by virtue of an
obligation of confidence to any third party.
18 Delivery of Documents and Property
You hereby agree upon request at anytime and in any event upon the
termination of your employment immediately to deliver up to the Company or
its authorised representatives all plans, keys, security passes, credit
cards, statistics, documents, records, papers, magnetic disks, tapes or
other software storage media and all property of whatsoever nature which
may be in your possession or control and relate in any way to the business
affairs of the Company and you shall not, without written consent of the
Company, retain any copies thereof.
19 Other Business Interests
Without the prior written consent of the Directors of the Company you will
not be permitted during the period of your employment to:-
(i) engage in any other business, or
(ii) be concerned or interested in any other business of a similar nature
to or competitive with that carried on by the Company or any subsidiaries
for the time being of the Company provided always that nothing in this
paragraph will preclude you from holding or being otherwise interested in
any shares or other securities of any Company where such securities are for
the time being quoted on any recognised Stock Exchange.
20 Limitations
You acknowledge that you understand and accept that it is the employment
policy of the Company:
(a) to develop and adopt employment practices which seek to provide a
stable and quality workforce; and
(b) to promote personal and individual contract negotiations with its
employees.
-6-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
Accordingly the terms and conditions of employment of staff employed by the
Company are regarded by the Company as confidential information and the
employee accepts he will treat all such information as confidential and
shall not at any time disclose to any person firm or company such
confidential information.
You shall not during the course of your employment with the Company
(whether on your own account or for any other person firm or corporation)
solicit or endeavour to entice away from or discourage from being employed
by the Company any other employee of the Company nor will you employ any
other employee.
You shall not for a period of six months after the termination of your
employment (whether on your own account or for any other person firm or
corporation) directly or indirectly solicit or endeavour to entice away
from or discourage from being employed by the Company any of its employees
who are employed by the Company at the date of the termination of your
employment and with whom you had contact during your employment with the
Company.
Non solicitation of customers
You hereby undertake that you will not for a period of 6 months after the
termination of this employment (without the previous consent in writing of
the Company) and whether on your own account or for any other person, firm,
or company directly or indirectly, in connection with any business similar
to or in competition with the business of the Company, solicit or endeavour
to entice away from the Company any person, firm or company who or which in
the period of 1 year prior to the end of your employment shall have been a
customer or prospective customer of, or in the habit of dealing with, the
Company and with whom or which you had personal dealings in the course of
your employment in the year prior to the end of your employment.
21 Health and Safety
In accordance with the Company's policy statement issued under the
provisions of the Health & Safety at Work etc Act 1974, all members of
staff are expected to have regard to the requirements of the Act while they
are at work by taking reasonable care for the health and safety of
themselves and of other persons who may be affected by their acts or
omissions and by co-operating with management so far as is necessary to
enable it to perform or comply with any duty laid upon it by the Act or
otherwise to fulfil its responsibilities adequately.
22 Equal Opportunities
The Sex Discrimination Acts 1975 and 1986, the race Relations act 1976 and
the Disability Discrimination Act 1995 make it unlawful to discriminate
against a person on the grounds of sex or marital status, colour, race,
nationality, ethnic or national origin or on the grounds of any disability.
It is the policy of the Company that all eligible persons shall have equal
opportunity for employment and
-7-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
advancement within the Company on the basis of their ability,
qualifications and aptitude for work. The Company is committed to being an
equal opportunities employer and to the creation of an entirely non-
discriminatory working environment. There shall be no discrimination on the
grounds of an individual's nationality, sex, race, colour, ethnic or
national origin, religion, sexual orientation, marital status or
disability. In order that the Company may maintain a positive work
environment for all employees, you are required not to engage in or permit
any fellow employee to engage in any sexual, racial or other harassment of
or unlawful discrimination against any person in the course of your or
their employment by the Company.
23 Normal Retirement Age
The Company's normal retirement age is 60 for both men and women.
24 Changes to Your Terms of Employment
The Company reserves the right to make reasonable changes to any of your
terms and conditions of employment or any of the policies referred to in
these terms and conditions. You will be notified of minor changes of detail
by way of a general notice to all employees and any such changes will take
immediate effect.
You will be given not less than one month's written notice of any
significant changes which may be given by way of an individual notice or a
general notice to all employees. Such changes will be deemed to be accepted
unless you notify the Company of any objection in writing before the expiry
of the notice period.
25 Notice
You are entitled (other than in your probationary period) to six months
written notice of termination of employment with the Company. The Company
shall have the right to terminate your employment without notice in the
case of serious misconduct by you. You are required to give a minimum of
one month's written notice if you wish to terminate your employment. All
benefits cease upon termination of employment. The Company has the power to
make a payment in lieu of notice.
I have read, understood and accept employment with ClearCommerce upon the
terms and conditions set out on pages I to 8.
-8-
<PAGE>
ClearCommerce Europe Limited
Contract of Employment containing statutory particulars and conditions of
employment
Employee: Employer:
Name: Illegible Name: Robert I. Lynch
-------------------- --------------------
Signed: Illegible Signed: /s/ Robert I. Lynch
------------------- --------------------
Date: August 9, 1999
--------------------------
-9-
<PAGE>
EXHIBIT 10.11
REPURCHASE AGREEMENT
This Repurchase Agreement (the "Agreement") dated as of September 15,
1997, is entered into by and between Outreach Communications Corporation, a
Delaware corporation (the "Company"), and R.C. Estes (the "Shareholder").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings assigned to them in the attached Appendix or Exhibits hereto.
WHEREAS, as of the date of this Agreement, the Shareholder owns an
aggregate of 1,151,348 shares of the Company's Common Stock, $0.001 par value
(the "Common Stock");
WHEREAS, the Company desires to sell and issue shares of its Series A
Preferred Stock to certain investors (the "Investors"); and
WHEREAS, to encourage and facilitate such a Series A Preferred Stock
financing, the Shareholder has agreed to subject such shares to vesting
arrangements whereby a certain fraction of such shares shall vest according to
the terms of this Agreement.
In consideration of the foregoing and the agreements set forth below,
the parties agree with the Company as follows:
1. REPURCHASE RIGHT
----------------
1.1 Grant. The Company is hereby granted the right (the "Repurchase
-----
Right"), exercisable at any time during the thirty (30) day period following
the date Shareholder ceases for any reason to remain in Service (other than
as a result of Shareholder's death or any disability that will preclude
Shareholder from remaining in Service for a period of at least 12 months),
to repurchase at the Purchase Price any portion of the Shares in which
Shareholder is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth on Exhibit I attached hereto
---------
(such shares to be hereinafter referred to as the "Unvested Shares").
1.2 Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice to Shareholder on or prior to the expiration
of the thirty (30) day exercise period. The notice shall indicate the number
of Unvested Shares to be repurchased and the date on which the repurchase is
to be effected, such date to be not more than thirty (30) days after the
date of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Company prior to the close of business
on the date specified for the repurchase. Concurrently with the receipt of
such stock certificates, the Company shall pay to Shareholder, in cash or
cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the number of shares so repurchased times
the Purchase Price (appropriately adjusted for all splits, dividends,
combinations and recapitalizations).
1
<PAGE>
1.3 Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Section 1.2 herein. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to (i) any and all Shares
in which Shareholder vests in accordance Section 1.4 herein or with the
vesting schedule (the "Vesting Schedule") set forth on Exhibit I attached
---------
hereto, or (ii) any Unvested Shares owned by Shareholder if Shareholder's
cessation of Service results from Shareholder's death or any disability that
will preclude Shareholder from remaining in Service for a period of at least
12 months. All Shares as to which the Repurchase Right lapses shall,
however, remain subject to the Market Stand-Off provisions as set forth
herein.
1.4 Change in Control. Immediately prior to the consummation of any
-----------------
Change in Control, the Repurchase Right shall automatically lapse with
respect to all of the then Unvested Shares, provided, that the Repurchase
--------
Right shall not so lapse in the event that the acquiring entity or its
parent (the "Acquiror") in such Change in Control shall assume all of the
obligations and liabilities of the Company pursuant to this Agreement and
continue to employ Shareholder such that Shareholder shall continue to vest
in the Unvested Shares based upon his continued Service with the Acquiror.
Shareholder shall acquire a vested interest in, and the Company's Repurchase
Right will accordingly lapse with respect to, all of the Unvested Shares
upon Shareholder's Involuntary Termination from Service in connection with,
or within the twelve month period following, the Change in Control.
"Involuntary Termination" shall mean the termination of Shareholder's
Service which occurs by reason of: Shareholder's involuntary dismissal or
discharge by the Company for reasons other than Misconduct, or Shareholder's
voluntary resignation following (A) a change in his position with the
Company which materially reduces his level of responsibility, (B) a
reduction in his level of compensation (including base salary and target
bonus), (C) a relocation of Shareholder's place of employment by more than
thirty (30) miles, or (D) the inability of Shareholder to remain actively
employed due to physical or mental disability or other medical condition,
provided and only if (in the case of (A) through (C)) such change, reduction
or relocation is effected by the Company without Shareholder's consent.
"Misconduct" shall mean persistent failure of Shareholder to perform the
lawful duties and responsibilities assigned by the Acquiror which are not
cured within a reasonable time following Shareholder's receipt of written
notice of such failure from the Acquiror, the commission of any act of
fraud, embezzlement or dishonesty by Shareholder, any unauthorized use or
disclosure by such person of confidential information or trade secrets of
the Company, or any other intentional misconduct by such person adversely
affecting the business or affairs of the Company in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Company may consider as grounds for the dismissal or
discharge of any person in the Service of the Company.
1.5 Recapitalization. Any new, substituted or additional securities or
----------------
other property (including cash paid other than as a regular cash dividend),
which is by reason of any Recapitalization distributed with respect to the
Shares, shall be immediately subject to the Repurchase Right, but only to
the extent the Shares are at the time covered by such right.
2
<PAGE>
Appropriate adjustments to reflect such distribution shall be made to the
number and/or class of Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to
reflect the effect of any such Recapitalization upon the Company's capital
structure; provided, however, that the aggregate Purchase Price shall
--------
remain the same.
2. Reissuance of Certificates. Upon receipt by the Company of each
--------------------------
Certificate representing the Shares, the Company shall issue a new duly executed
certificate representing the Shares that shall include each of the legends
required by the Purchase Agreement and this Agreement. Each such certificate
representing Unvested Shares shall be held in escrow in accordance with the
provisions of this Agreement.
3. Stockholder Rights. Until such time as the Company exercises the
------------------
Repurchase Right pursuant to this Agreement, Shareholder (or any successor in
interest) shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Shares, including the Shares held in
escrow hereunder, subject, however, to the transfer restrictions set forth
herein and in any other agreements between or among the Company, the Investors
or other stockholders of the Company to which Shareholder is a party.
4. Transfer Restrictions.
----------------------
4.1 Restriction on Transfer. Shareholder shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Shares in contravention of the
Market Stand-Off under Section 4.4 or the Company's Repurchase Right under
Section 1. Such restrictions on transfer, however, shall not be applicable
to (i) a gratuitous transfer of the Shares made to Shareholder's spouse or
issue, including adopted children, or to a trust for the exclusive benefit
of Shareholder or Shareholder's spouse or issue, provided and only if
--------------------
Shareholder obtains the Company's prior written consent to such transfer or
(ii) a transfer of title to the Shares effected pursuant to Shareholder's
will or the laws of intestate succession.
4.2 Transferee Obligations. Each person (other than the Company) to whom
----------------------
the Shares are transferred by means of one of the permitted transfers
specified in Section 4.1 must, as a condition precedent to the validity of
such transfer, acknowledge in writing to the Company that such person is
bound by the provisions of this Agreement and that the transferred shares
are subject to (i) the Company's Repurchase Right granted hereunder and
(ii) the market stand-off provisions of Section 4.4, to the same extent
such shares would be so subject if retained by Shareholder.
Definition of Owner. For purposes of Section 4 of this Agreement, the term
- -------------------
"Owner" shall include Shareholder and all subsequent holders of the Shares who
derive their chain of ownership through a permitted transfer from Shareholder in
accordance with Section 4.1.
3
<PAGE>
4.3 Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the 1933 Act, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Company or such underwriters; provided, however, that
--------
in no event shall such period exceed one hundred-eighty (180) days.
(b) In the event of any stock dividend, stock split,
recapitalization or other change affecting the Company's outstanding Common
Stock effected as a class without receipt of consideration, any new, substituted
or additional securities distributed with respect to the Shares shall be
immediately subject to the provisions of this Section 4.3, to the same extent
the Shares are at such time covered by such provisions.
(c) In order to enforce the limitations of this Section 4.3, the
Company may impose stop-transfer instructions with respect to the Shares until
the end of the applicable stand-off period.
4.4 Restrictive Legends. In addition to any other legends otherwise
-------------------
required, the stock certificates for the Shares shall be endorsed with the
following restrictive legend:
"A portion of the shares represented by this certificate are
unvested and subject to certain repurchase rights granted to the Company and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement between
the Company and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the Company's
principal corporate offices."
5. Escrow.
------
5.1 Deposit. The certificate(s) for the Shares that are subject to
-------
the Repurchase Right shall promptly be deposited in escrow with the Company
to be held in accordance with the provisions of this Section 5. Each
deposited certificate shall be accompanied by two duly-executed Assignments
Separate from Certificate in the form of Exhibit II. The deposited
----------
certificates, together with any other assets or securities from time to
time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the
certificates (or other assets and securities) are to be released or
otherwise surrendered for cancellation in accordance with Section 5.3. Upon
delivery of the certificates (or other assets and securities) to the
Company, Shareholder shall be issued a receipt acknowledging the number of
Shares (or other assets and securities) delivered in escrow.
4
<PAGE>
5.2 Recapitalization/Reorganization. Any new, substituted or additional
-------------------------------
securities or other property which is by reason of any Recapitalization or
Reorganization distributed with respect to the Shares shall be immediately
delivered to the Company to be held in escrow under this Section 5, but
only to the extent the Shares are at the time subject to the escrow
requirements hereunder. However, all regular cash dividends on the Shares
(or other securities at the time held in escrow) shall be paid directly to
Shareholder and shall not be held in escrow.
5.3 Release/Surrender. The Shares, together with any other assets or
-----------------
securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Repurchase Right
with respect to any Unvested Shares, then the escrowed certificates for those
Unvested Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Company concurrently with the payment to
Shareholder of an amount equal to the aggregate Purchase Price for such Unvested
Shares, and Shareholder shall cease to have any further rights or claims with
respect to such Unvested Shares (or other assets or securities attributable
thereto).
(b) Should the Company elect not to exercise the Repurchase Right
with respect to any Unvested Shares held at the time in escrow hereunder, then
the escrowed certificates for those shares (together with any other assets or
securities attributable thereto) shall be immediately released to Shareholder.
(d) As the Shares (or any other assets or securities attributable
thereto) vest in accordance with the Vesting Schedule, the certificates for
those vested shares (as well as all other vested assets and securities) shall be
released from escrow upon Shareholder's request, but not more frequently than
once every three (3) months.
(e) All Shares that are vested (and any other vested assets and
securities attributable thereto) shall be released from the escrow within thirty
(30) days after Shareholder's cessation of Service (subject to any right of
first refusal outstanding as of the time of Shareholder's cessation of Service).
6. Miscellaneous Provisions.
------------------------
6.1 Notices. Unless otherwise provided, any notice required or permitted
-------
under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
6.2 Further Actions. The parties hereby agree to take whatever additional
---------------
actions and execute whatever additional documents they may deem necessary
or advisable in order to
5
<PAGE>
carry out or effect one or more of the obligations or restrictions imposed
on either of them or on the Shares pursuant to the provisions of this
Agreement.
6.3 Amendments and Waivers. This Agreement represents the entire
----------------------
understanding of the parties with respect to the subject matter hereof and
supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of the Shareholder
and the Company, or the successors or assigns of the foregoing, and no oral
waiver or amendment shall be effective under any circumstances whatsoever.
6.4 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Texas without resort to that
State's conflict-of-laws rules.
6.5 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
6.6 Successors and Assigns. The terms and provisions of this Agreement
----------------------
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and upon Shareholder, Shareholder's permitted
assigns and legal representatives, heirs and legatees of Shareholder's
estate, whether or not any such person shall have become a party to this
Agreement and have agreed in writing to join herein and be bound by the
terms hereof.
6.7 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.8 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OUTREACH COMMUNICATIONS CORPORATION
By: /s/
--------------------------------------
Title: CEO
Address: 9101 Burnet Road, Suite 207
Austin, Texas 78758
SHAREHOLDER:
/s/ R.C. Estes
-----------------------------------------
R.C. Estes
Address: 1781 SpyGlass #306
--------------------------------
Austin, TX
--------------------------------
78748
--------------------------------
7
<PAGE>
EXHIBIT I
---------
VESTING SCHEDULE
That number of the Shares shall be vested as of the date of execution
hereof as is indicated below. The remaining Shares shall be unvested as of the
date of execution hereof and shall be subject to repurchase by the Company at
the Purchase Price (the "Unvested Shares"). Shareholder shall acquire a vested
interest in and the Company's Repurchase Right will lapse with respect to the
total number of Unvested Shares as of the date of this Agreement on the
following basis:
Shareholder: Riss Estes
Total Number of Shares: 1,151,348
Number of Shares Vested
as of Date of this Agreement: 383,783
Total Unvested Shares: 767,565
Vesting Schedule: Total Unvested Shares shall vest (and the
Company's Repurchase Right shall lapse) on
the basis of one forty-second (1/42) per
month on the 15th day of each month, with
vesting to begin as of September 15, 1997
and to continue until March 15, 2001.
<PAGE>
EXHIBIT II
----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED [Name] hereby sells, assigns and transfers unto Outreach
Communications Corporation (the "Company") __________________________
(______________) shares of the Common Stock of the Company standing in his/her
name in the books of the Company represented by Certificate Number(s)
_____________ herewith and does hereby irrevocably constitute and appoint
_____________________ its attorney-in-fact to transfer such stock on the books
of the Company with full power of substitution in the premises.
Dated: _______________
-----------------------------------------
This Assignment Separate from Certificate was executed in conjunction with
the terms of the Repurchase Agreement by and between the above assignor and
Outreach Communications Corporation dated September __, 1997.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
Agreement shall mean this Stock Repurchase Agreement.
- ---------
Board shall mean the Company's Board of Directors.
- -----
Code shall mean the Internal Revenue Code of 1986, as amended.
- ----
Common Stock shall mean the Company's common stock.
- ------------
Change in Control shall mean:
- -----------------
a) The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger,
consolidation or other reorganization; or
b) The sale, transfer or other disposition of all or substantially all of
the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the company's securities immediately before such transaction.
Company shall mean Outreach Communications Corporation., a Delaware corporation.
- -------
1933 Act shall mean the Securities Act of 1933, as amended.
- --------
Purchase Price shall mean $.01 per share.
- --------------
Recapitalization shall mean any stock split, stock dividend, recapitalization,
- ----------------
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock as a class without the Company's receipt of
consideration.
Reorganization shall mean any of the following transactions:
- --------------
(a) a merger or consolidation in which the Company is not the surviving
entity,
(b) a sale, transfer or other disposition of all or substantially all of
the Company's assets,
2
<PAGE>
(c) a reverse merger in which the Company is the surviving entity but in
which the Company's outstanding voting securities are transferred in
whole or in part to a person or persons different from the persons
holding those securities immediately prior to the merger, or
(d) any transaction effected primarily to change the state in which the
Company is incorporated or to create a holding company structure.
SEC shall mean the Securities and Exchange Commission.
- ---
Service shall mean the provision of services to the Company (or any Parent or
- -------
Subsidiary) by a person in his or her capacity as an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, as a non-employee member of the Board
of Directors or as a consultant.
Shares shall mean 1,151,348 shares of the Common Stock owned by Shareholder.
- ------
3
<PAGE>
EXHIBIT 10.11.1
FIRST AMENDMENT
OF
REPURCHASE AGREEMENT
--------------------
THIS FIRST AMENDMENT OF REPURCHASE AGREEMENT (this "Amendment") is entered
into effective as of March 26, 1999, by and between ClearCommerce Corporation
(f/k/a Outreach Communications Corporation), a Delaware corporation (the
"Corporation"), and R.C. Estes ("Estes").
RECITALS
--------
WHEREAS, the Corporation and Estes entered into that certain Repurchase
Agreement, dated September 15, 1997 (the "Repurchase Agreement"), providing for,
among other things, certain vesting provisions with respect to the Corporation's
Common Stock owned by Estes; and
WHEREAS, the parties to the Repurchase Agreement desire to amend certain
provisions of the Repurchase Agreement to provide for twelve (12) months
accelerated vesting and to amend the definition of "Change in Control" as set
forth herein.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the
Repurchase Agreement as follows:
1. Terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Repurchase Agreement.
2. Exhibit I to the Repurchase Agreement is hereby amended to add the
---------
following sentence at the end of the "Vesting Schedule":
----------------
"Notwithstanding the foregoing, if a Change in Control occurs, then
effective immediately prior to the closing of the Change in Control,
the vesting of Shareholder's Unvested Shares shall be deemed
accelerated by twelve (12) months."
3. A new clause (c) is hereby added to the definition of "Change in
---------
Control" in the Appendix to the Repurchase Agreement to provide as follows:
- -------
"(c) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding
these securities immediately prior to such transaction."
-1-
<PAGE>
4. Except as herein modified and amended, all terms and conditions of the
Repurchase Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed and delivered as of
the date first written above.
CORPORATION:
-----------
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: _____________________________________
Robert Lynch, Chief Executive Officer
ESTES:
-----
By: /s/ R.C. Estes
-------------------------------------
R.C. Estes
-2-
<PAGE>
EXHIBIT 10.12
REPURCHASE AGREEMENT
This Repurchase Agreement (the "Agreement") dated as of September 15,
1997, is entered into by and between Outreach Communications Corporation, a
Delaware corporation (the "Company"), and Julie Fergerson (the "Shareholder").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings assigned to them in the attached Appendix or Exhibits hereto.
WHEREAS, as of the date of this Agreement, the Shareholder owns an
aggregate of 649,759 shares of the Company's Common Stock, $0.001 par value (the
"Common Stock");
WHEREAS, the Company desires to sell and issue shares of its Series A
Preferred Stock to certain investors (the "Investors"); and
WHEREAS, to encourage and facilitate such a Series A Preferred Stock
financing, the Shareholder has agreed to subject such shares to vesting
arrangements whereby a certain fraction of such shares shall vest according to
the terms of this Agreement.
In consideration of the foregoing and the agreements set forth below,
the parties agree with the Company as follows:
1. REPURCHASE RIGHT
----------------
1.1 Grant. The Company is hereby granted the right (the "Repurchase
-----
Right"), exercisable at any time during the thirty (30) day period following
the date Shareholder ceases for any reason to remain in Service (other than
as a result of Shareholder's death or any disability that will preclude
Shareholder from remaining in Service for at least 12 months), to repurchase
at the Purchase Price any portion of the Shares in which Shareholder is not,
at the time of his cessation of Service, vested in accordance with the
Vesting Schedule set forth on Exhibit I attached hereto (such shares to be
---------
hereinafter referred to as the "Unvested Shares").
1.2 Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice to Shareholder on or prior to the expiration
of the thirty (30) day exercise period. The notice shall indicate the number
of Unvested Shares to be repurchased and the date on which the repurchase is
to be effected, such date to be not more than thirty (30) days after the
date of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Company prior to the close of business
on the date specified for the repurchase. Concurrently with the receipt of
such stock certificates, the Company shall pay to Shareholder, in cash or
cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the number of shares so repurchased times
the Purchase Price (appropriately adjusted for all splits, dividends,
combinations and recapitalizations).
1
<PAGE>
1.3 Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Section 1.2 herein. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to (i) any and all Shares
in which Shareholder vests in accordance Section 1.4 herein or with the
vesting schedule (the "Vesting Schedule") set forth on Exhibit I attached
hereto, or (ii) any Unvested Shares owned by Shareholder if Shareholder's
cessation of Service results from Shareholder's death or any disability that
will preclude Shareholder from remaining in Service for a period of at least
12 months. All Shares as to which the Repurchase Right lapses shall,
however, remain subject to the Market Stand-Off provisions as set forth
herein.
1.4 Change in Control. Immediately prior to the consummation of any Change
-----------------
in Control, the Repurchase Right shall automatically lapse with respect to
all of the then Unvested Shares, provided, that the Repurchase Right shall
not so lapse in the event that the acquiring entity or its parent (the
"Acquiror") in such Change in Control shall assume all of the obligations
and liabilities of the Company pursuant to this Agreement and continue to
employ Shareholder such that Shareholder shall continue to vest in the
Unvested Shares based upon his continued Service with the Acquiror.
Shareholder shall acquire a vested interest in, and the Company's Repurchase
Right will accordingly lapse with respect to, all of the Unvested Shares
upon Shareholder's Involuntary Termination from Service in connection with,
or within the twelve month period following, the Change in Control.
"Involuntary Termination" shall mean the termination of Shareholder's
Service which occurs by reason of: Shareholder's involuntary dismissal or
discharge by the Company for reasons other than Misconduct, or Shareholder's
voluntary resignation following (A) a change in his position with the
Company which materially reduces his level of responsibility, (B) a
reduction in his level of compensation (including base salary and target
bonus), (C) a relocation of Shareholder's place of employment by more than
thirty (30) miles, or (D) the inability of Shareholder to remain actively
employed due to physical or mental disability or other medical condition,
provided and only if (in the case of (A) through (C)) such change, reduction
or relocation is effected by the Company without Shareholder's consent.
"Misconduct" shall mean persistent failure of Shareholder to perform the
lawful duties and responsibilities assigned by the Acquiror which are not
cured within a reasonable time following Shareholder's receipt of written
notice of such failure from the Acquiror, the commission of any act of
fraud, embezzlement or dishonesty by Shareholder, any unauthorized use or
disclosure by such person of confidential information or trade secrets of
the Company, or any other intentional misconduct by such person adversely
affecting the business or affairs of the Company in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Company may consider as grounds for the dismissal or
discharge of any person in the Service of the Company.
1.5 Recapitalization. Any new, substituted or additional securities or other
----------------
property (including cash paid other than as a regular cash dividend), which
is by reason of any Recapitalization distributed with respect to the Shares,
shall be immediately subject to the Repurchase Right, but only to the extent
the Shares are at the time covered by such right.
2
<PAGE>
Appropriate adjustments to reflect such distribution shall be made to the
number and/or class of Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to
reflect the effect of any such Recapitalization upon the Company's capital
structure; provided, however, that the aggregate Purchase Price shall remain
--------
the same.
2. Reissuance of Certificates. Upon receipt by the Company of each Certificate
--------------------------
representing the Shares, the Company shall issue a new duly executed certificate
representing the Shares that shall include each of the legends required by the
Purchase Agreement and this Agreement. Each such certificate representing
Unvested Shares shall be held in escrow in accordance with the provisions of
this Agreement.
3. Stockholder Rights. Until such time as the Company exercises the Repurchase
------------------
Right pursuant to this Agreement, Shareholder (or any successor in interest)
shall have all the rights of a stockholder (including voting, dividend and
liquidation rights) with respect to the Shares, including the Shares held in
escrow hereunder, subject, however, to the transfer restrictions set forth
herein and in any other agreements between or among the Company, the Investors
or other stockholders of the Company to which Shareholder is a party.
4. Transfer Restrictions.
----------------------
4.1 Restriction on Transfer. Shareholder shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Shares in contravention of the
Market Stand-Off under Section 4.4 or the Company's Repurchase Right under
Section 1. Such restrictions on transfer, however, shall not be applicable
to (i) a gratuitous transfer of the Shares made to Shareholder's spouse or
issue, including adopted children, or to a trust for the exclusive benefit
of Shareholder or Shareholder's spouse or issue, provided and only if
--------------------
Shareholder obtains the Company's prior written consent to such transfer or
(ii) a transfer of title to the Shares effected pursuant to Shareholder's
will or the laws of intestate succession.
4.2 Transferee Obligations. Each person (other than the Company) to whom
----------------------
the Shares are transferred by means of one of the permitted transfers
specified in Section 4.1 must, as a condition precedent to the validity of
such transfer, acknowledge in writing to the Company that such person is
bound by the provisions of this Agreement and that the transferred shares
are subject to (i) the Company's Repurchase Right granted hereunder and
(ii) the market stand-off provisions of Section 4.4, to the same extent
such shares would be so subject if retained by Shareholder.
Definition of Owner. For purposes of Section 4 of this Agreement, the term
- -------------------
"Owner" shall include Shareholder and all subsequent holders of the Shares who
derive their chain of ownership through a permitted transfer from Shareholder in
accordance with Section 4.1.
3
<PAGE>
4.3 Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the 1933 Act, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Company or such underwriters; provided, however, that
--------
in no event shall such period exceed one hundred-eighty (180) days.
(b) In the event of any stock dividend, stock split,
recapitalization or other change affecting the Company's outstanding Common
Stock effected as a class without receipt of consideration, any new, substituted
or additional securities distributed with respect to the Shares shall be
immediately subject to the provisions of this Section 4.3, to the same extent
the Shares are at such time covered by such provisions.
(c) In order to enforce the limitations of this Section 4.3,
the Company may impose stop-transfer instructions with respect to the Shares
until the end of the applicable stand-off period.
4.4 Restrictive Legends. In addition to any other legends otherwise
-------------------
required, the stock certificates for the Shares shall be endorsed with the
following restrictive legend:
"A portion of the shares represented by this certificate are
unvested and subject to certain repurchase rights granted to the Company and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement between
the Company and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the Company's
principal corporate offices."
5. Escrow.
------
5.1 Deposit. The certificate(s) for the Shares that are subject to the
-------
Repurchase Right shall promptly be deposited in escrow with the Company
to be held in accordance with the provisions of this Section 5. Each
deposited certificate shall be accompanied by two duly-executed
Assignments Separate from Certificate in the form of Exhibit II. The
----------
deposited certificates, together with any other assets or securities
from time to time deposited with the Company pursuant to the
requirements of this Agreement, shall remain in escrow until such time
or times as the certificates (or other assets and securities) are to be
released or otherwise surrendered for cancellation in accordance with
Section 5.3. Upon delivery of the certificates (or other assets and
securities) to the Company, Shareholder shall be issued a receipt
acknowledging the number of Shares (or other assets and securities)
delivered in escrow.
4
<PAGE>
5.2 Recapitalization/Reorganization. Any new, substituted or additional
-------------------------------
securities or other property which is by reason of any Recapitalization
or Reorganization distributed with respect to the Shares shall be
immediately delivered to the Company to be held in escrow under this
Section 5, but only to the extent the Shares are at the time subject to
the escrow requirements hereunder. However, all regular cash dividends
on the Shares (or other securities at the time held in escrow) shall be
paid directly to Shareholder and shall not be held in escrow.
5.3 Release/Surrender. The Shares, together with any other assets or
-----------------
securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Repurchase
Right with respect to any Unvested Shares, then the escrowed certificates for
those Unvested Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Company concurrently with the payment to
Shareholder of an amount equal to the aggregate Purchase Price for such Unvested
Shares, and Shareholder shall cease to have any further rights or claims with
respect to such Unvested Shares (or other assets or securities attributable
thereto).
(b) Should the Company elect not to exercise the
Repurchase Right with respect to any Unvested Shares held at the time in escrow
hereunder, then the escrowed certificates for those shares (together with any
other assets or securities attributable thereto) shall be immediately released
to Shareholder.
(d) As the Shares (or any other assets or securities
attributable thereto) vest in accordance with the Vesting Schedule, the
certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow upon Shareholder's request, but not
more frequently than once every three (3) months.
(e) All Shares that are vested (and any other vested
assets and securities attributable thereto) shall be released from the escrow
within thirty (30) days after Shareholder's cessation of Service (subject to any
right of first refusal outstanding as of the time of Shareholder's cessation of
Service).
6. Miscellaneous Provisions.
------------------------
6.1 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be
notified or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party
to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties.
6.2 Further Actions. The parties hereby agree to take whatever
---------------
additional actions and execute whatever additional documents they may
deem necessary or advisable in order to
5
<PAGE>
carry out or effect one or more of the obligations or restrictions
imposed on either of them or on the Shares pursuant to the provisions of
this Agreement.
6.3 Amendments and Waivers. This Agreement represents the entire
----------------------
understanding of the parties with respect to the subject matter hereof
and supersedes all previous understandings, whether written or oral.
This Agreement may only be amended with the written consent of the
Shareholder and the Company, or the successors or assigns of the
foregoing, and no oral waiver or amendment shall be effective under any
circumstances whatsoever.
6.4 Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Texas without resort to
that State's conflict-of-laws rules.
6.5 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
6.6 Successors and Assigns. The terms and provisions of this Agreement
----------------------
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and upon Shareholder, Shareholder's permitted
assigns and legal representatives, heirs and legatees of Shareholder's
estate, whether or not any such person shall have become a party to this
Agreement and have agreed in writing to join herein and be bound by the
terms hereof.
6.7 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.8 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OUTREACH COMMUNICATIONS CORPORATION
By: /s/
------------------------------------------
Title: CEO
---------------------------------------
Address: 9101 Burnet Road, Suite 207
Austin, Texas 78758
SHAREHOLDER:
/s/ Julie Fergerson
---------------------------------------------
Julie Fergerson
Address: 10314 Stubble Quail Drive
--------------------------------
Austin, TX 78758
--------------------------------
--------------------------------
7
<PAGE>
EXHIBIT I
---------
VESTING SCHEDULE
That number of the Shares shall be vested as of the date of execution hereof
as is indicated below. The remaining Shares shall be unvested as of the date of
execution hereof and shall be subject to repurchase by the Company at the
Purchase Price (the "Unvested Shares"). Shareholder shall acquire a vested
interest in and the Company's Repurchase Right will lapse with respect to the
total number of Unvested Shares as of the date of this Agreement on the
following basis:
Shareholder: Julie Fergerson
Total Number of Shares: 649,759
Number of Shares Vested
as of Date of this Agreement: 216,586
Total Unvested Shares: 433,173
Vesting Schedule: Total Unvested Shares shall vest (and the
Company's Repurchase Right shall lapse) on
the basis of one forty-second (1/42) per
month on the 15th day of each month, with
vesting to begin as of September 15, 1997 and
to continue until March 15, 2001.
<PAGE>
EXHIBIT II
----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED [Name] hereby sells, assigns and transfers unto Outreach
Communications Corporation (the "Company") __________________________
(______________) shares of the Common Stock of the Company standing in his/her
name in the books of the Company represented by Certificate Number(s)
_____________ herewith and does hereby irrevocably constitute and appoint
_____________________ its attorney-in-fact to transfer such stock on the books
of the Company with full power of substitution in the premises.
Dated: _______________
-------------------------------------
This Assignment Separate from Certificate was executed in conjunction with the
terms of the Repurchase Agreement by and between the above assignor and Outreach
Communications Corporation dated September __, 1997.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
Agreement shall mean this Stock Repurchase Agreement.
- ---------
Board shall mean the Company's Board of Directors.
- -----
Code shall mean the Internal Revenue Code of 1986, as amended.
- ----
Common Stock shall mean the Company's common stock.
- ------------
Change in Control shall mean:
- -----------------
a) The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more
than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were
not stockholders of the Company immediately prior to such merger,
consolidation or other reorganization; or
b) The sale, transfer or other disposition of all or substantially all
of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the company's securities immediately before such transaction.
Company shall mean Outreach Communications Corporation., a Delaware corporation.
- -------
1933 Act shall mean the Securities Act of 1933, as amended.
- --------
Purchase Price shall mean $.01 per share.
- --------------
Recapitalization shall mean any stock split, stock dividend, recapitalization,
- ----------------
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock as a class without the Company's receipt of
consideration.
Reorganization shall mean any of the following transactions:
- --------------
(a) a merger or consolidation in which the Company is not the surviving
entity,
(b) a sale, transfer or other disposition of all or substantially all of
the Company's assets,
2
<PAGE>
(c) a reverse merger in which the Company is the surviving entity but in
which the Company's outstanding voting securities are transferred in
whole or in part to a person or persons different from the persons
holding those securities immediately prior to the merger, or
(d) any transaction effected primarily to change the state in which the
Company is incorporated or to create a holding company structure.
SEC shall mean the Securities and Exchange Commission.
- ---
Service shall mean the provision of services to the Company (or any Parent or
- -------
Subsidiary) by a person in his or her capacity as an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, as a non-employee member of the Board
of Directors or as a consultant.
Shares shall mean 649,759 shares of the Common Stock owned by Shareholder.
- ------
3
<PAGE>
EXHIBIT 10.12.1
FIRST AMENDMENT
OF
REPURCHASE AGREEMENT
--------------------
THIS FIRST AMENDMENT OF REPURCHASE AGREEMENT (this "Amendment") is entered
into effective as of March 26, 1999, by and between ClearCommerce Corporation
(f/k/a Outreach Communications Corporation), a Delaware corporation (the
"Corporation"), and Julie Fergerson ("Julie Fergerson").
RECITALS
--------
WHEREAS, the Corporation and Julie Fergerson entered into that certain
Repurchase Agreement, dated September 15, 1997 (the "Repurchase Agreement"),
providing for, among other things, certain vesting provisions with respect to
the Corporation's Common Stock owned by Julie Fergerson; and
WHEREAS, the parties to the Repurchase Agreement desire to amend certain
provisions of the Repurchase Agreement to provide for twelve (12) months
accelerated vesting and to amend the definition of "Change in Control" as set
forth herein.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the
Repurchase Agreement as follows:
1. Terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Repurchase Agreement.
2. Exhibit I to the Repurchase Agreement is hereby amended to add the
---------
following at the end of the "Vesting Schedule":
----------------
"Notwithstanding the foregoing, if a Change in Control occurs, then
effective immediately prior to the closing of the Change in Control,
the vesting of Shareholder's Unvested Shares shall be deemed
accelerated by twelve (12) months."
3. A new clause (c) is hereby added to the definition of "Change in
---------
Control" in the Appendix to the Repurchase Agreement to provide as follows:
- -------
"(c) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's
-1-
<PAGE>
outstanding securities are transferred to a person or persons different
from the persons holding these securities immediately prior to such
transaction."
4. Except as herein modified and amended, all terms and conditions of the
Repurchase Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed and delivered as of
the date first written above.
CORPORATION:
-----------
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: ______________________________________
Robert Lynch, Chief Executive Officer
JULIE FERGERSON:
---------------
By: ______________________________________
Julie Fergerson
-2-
<PAGE>
EXHIBIT 10.13
STOCK SUBSCRIPTION AGREEMENT
FOR
ROBERT LYNCH
THIS STOCK SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered
into as of the 15th day of September, 1997, by and between Outreach
Communications Corporation, a Delaware corporation (the "Company"), and Robert
Lynch (the "Subscriber"). Capitalized terms used herein are defined in this
Agreement or in the Appendix attached hereto.
WHEREAS, Subscriber desires to purchase shares of the Company's Common
Stock, $0.001 par value per share (the "Common Stock");
WHEREAS, the Company desires to sell and issue shares of its Series A
Preferred Stock to certain investors (the "Investors"); and
WHEREAS, to encourage and facilitate such a Series A Preferred Stock
financing, the Subscriber has agreed to subject the shares of Common Stock
purchased by Subscriber to vesting arrangements whereby a certain fraction of
such shares shall vest according to the terms of this Agreement.
In consideration of the foregoing and the agreements set forth below, Subscriber
and the Company agree as follows:
1. Share Subscription
------------------
1.1 Share Subscription. Subscriber hereby subscribes to the following
------------------
Shares, which capital stock shall be issued pursuant to the laws of the
State of Delaware upon receipt of the consideration described below:
Class of Stock Par Value Number of Shares Consideration Received
-------------- -------- ---------------- ----------------------
Restricted Common $0.001 589,400 $5,894.00
1.2 Subscriber's Representations. Subscriber hereby agrees, represents
----------------------------
and warrants that:
(a) Subscriber is acquiring the Shares for investment and not with a
view to, or for sale in connection with, the distribution of any
such Shares;
(b) Subscriber may not sell or otherwise dispose of such Shares in
the absence of either a registration statement under the 1933 Act
or an exemption from the registration provisions of the 1933 Act;
and
1
<PAGE>
(c) Subscriber agrees to be bound by any legends that are, in the
opinion of the Company, either (i) necessary or appropriate to
comply with the provisions of any securities law deemed by the
Company to be applicable to the issuance of the Shares and are
endorsed upon the share certificates, or (ii) necessary or
appropriate to bind Subscriber to the terms of this Agreement.
1.3 No Registration of the Shares. Subscriber acknowledges that the
-----------------------------
issuance of the Shares subscribed for hereby will not be registered under
the 1933 Act and that the Shares must be held indefinitely unless they are
subsequently registered thereunder or an exemption from such registration
is available. Subscriber understands that the Company is under no
obligation to register the Shares or to comply with any exemption available
for the resale of the Shares without registration.
2. Repurchase Right
----------------
2.1 Grant. The Company is hereby granted the right (the "Repurchase
-----
Right"), exercisable at any time during the thirty (30) day period
following the date Subscriber ceases for any reason to remain in Service
(other than as a result of Subscriber's death or any disability that will
preclude Subscriber from remaining in Service for a period of at least 12
months), to repurchase at the Purchase Price any portion of the Shares in
which Subscriber is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth on Exhibit I attached hereto
---------
(such shares to be hereinafter referred to as the "Unvested Shares").
2.2 Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice to Subscriber on or prior to the expiration
of the thirty (30) day exercise period. The notice shall indicate the
number of Unvested Shares to be repurchased and the date on which the
repurchase is to be effected, such date to be not more than thirty (30)
days after the date of such notice. The certificates representing the
Unvested Shares to be repurchased shall be delivered to the Company prior
to the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Company shall
pay to Subscriber, in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the number of
shares so repurchased times the Purchase Price (appropriately adjusted for
all splits, dividends, combinations and recapitalizations).
2.3 Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Section 2.2 herein. In addition, the Repurchase Right
shall terminate and cease to be exercisable with respect (i) to any and all
Shares in which Subscriber vests in accordance Section 1.4 herein or with
the vesting schedule (the "Vesting Schedule") set forth on Exhibit I
---------
attached hereto, or (ii) any Unvested Shares owned by Subscriber if
Subscriber's cessation of Service results from Subscriber's death or any
disability that will preclude Subscriber from remaining in Service
2
<PAGE>
for a period of at least 12 months. All Shares as to which the Repurchase
Right lapses shall, however, remain subject to the Market Stand-Off
provisions as set forth herein.
2.4 Change in Control. Immediately prior to the consummation of any Change
-----------------
in Control, the Repurchase Right shall automatically lapse with respect to
all of the then Unvested Shares, provided, that the Repurchase Right shall
--------
not so lapse in the event that the acquiring entity or its parent (the
"Acquiror") in such Change in Control shall assume all of the obligations
and liabilities of the Company pursuant to this Agreement and continue to
employ Subscriber such that Subscriber shall continue to vest in the
Unvested Shares based upon his continued Service with the Acquiror.
Subscriber shall acquire a vested interest in, and the Company's Repurchase
Right will accordingly lapse with respect to, all of the Unvested Shares
upon Subscriber's Involuntary Termination from Service in connection with,
or within the twelve month period following, the Change in Control.
"Involuntary Termination" shall mean the termination of Subscriber's
Service which occurs by reason of: Subscriber's involuntary dismissal or
discharge by the Company for reasons other than Misconduct, or Subscriber's
voluntary resignation following (A) a change in his position with the
Company which materially reduces his level of responsibility, (B) a
reduction in his level of compensation (including base salary and target
bonus), (C) a relocation of Subscriber's place of employment by more than
thirty (30) miles, or (D) the inability of Subscriber to remain actively
employed due to physical or mental disability or other medical condition,
provided and only if (in the case of (A) through (C)) such change,
reduction or relocation is effected by the Company without Subscriber's
consent. "Misconduct" shall mean persistent failure of Subscriber to
perform the lawful duties and responsibilities assigned by the Acquiror
which are not cured within a reasonable time following Subscriber's receipt
of written notice of such failure from the Acquiror, the commission of any
act of fraud, embezzlement or dishonesty by Subscriber, any unauthorized
use or disclosure by such person of confidential information or trade
secrets of the Company, or any other intentional misconduct by such person
adversely affecting the business or affairs of the Company in a material
manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Company may consider as grounds for the
dismissal or discharge of any person in the Service of the Company.
2.5 Recapitalization. Any new, substituted or additional securities or
----------------
other property (including cash paid other than as a regular cash dividend),
which is by reason of any Recapitalization distributed with respect to the
Shares, shall be immediately subject to the Repurchase Right, but only to
the extent the Shares are at the time covered by such right. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of Shares subject to this Agreement and to the price per share to be
paid upon the exercise of the Repurchase Right in order to reflect the
effect of any such Recapitalization upon the Company's capital structure;
provided, however, that the aggregate Purchase Price shall remain the same.
--------
3
<PAGE>
3. Reissuance of Certificates. Upon receipt by the Company of each Certificate
--------------------------
representing the Shares, the Company shall issue a new duly executed certificate
representing the Shares that shall include each of the legends required by the
Purchase Agreement and this Agreement. Each such certificate representing
Unvested Shares shall be held in escrow in accordance with the provisions of
this Agreement.
4. Stockholder Rights. Until such time as the Company exercises the Repurchase
------------------
Right pursuant to this Agreement, Subscriber (or any successor in interest)
shall have all the rights of a stockholder (including voting, dividend and
liquidation rights) with respect to the Shares, including the Shares held in
escrow hereunder, subject, however, to the transfer restrictions set forth
herein and in any other agreements between or among the Company, the Investors
or other stockholders of the Company to which Subscriber is a party.
5. Transfer Restrictions.
----------------------
5.1 Restriction on Transfer. Subscriber shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Shares in contravention of the
Market Stand-Off under Section 5.4 or the Company's Repurchase Right under
Section 2. Such restrictions on transfer, however, shall not be applicable
---
to (i) a gratuitous transfer of the Shares made to Subscriber's spouse or
issue, including adopted children, or to a trust for the exclusive benefit
of Subscriber or Subscriber's spouse or issue, provided and only if
--------------------
Subscriber obtains the Company's prior written consent to such transfer or
(ii) a transfer of title to the Shares effected pursuant to Subscriber's
will or the laws of intestate succession.
5.2 Transferee Obligations. Each person (other than the Company) to whom
----------------------
the Shares are transferred by means of one of the permitted transfers
specified in Section 5.1 must, as a condition precedent to the validity of
such transfer, acknowledge in writing to the Company that such person is
bound by the provisions of this Agreement and that the transferred shares
are subject to (i) the Company's Repurchase Right granted hereunder and
(ii) the market stand-off provisions of Section 5.3, to the same extent
such shares would be so subject if retained by Subscriber.
Definition of Owner. For purposes of Section 5 of this Agreement, the term
-------------------
"Owner" shall include Subscriber and all subsequent holders of the Shares
who derive their chain of ownership through a permitted transfer from
Subscriber in accordance with Section 5.1.
5.3 Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, Owner shall not
sell, make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing
transactions
4
<PAGE>
with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such limitations shall be in
effect for such period of time from and after the effective date
of such registration statement as may be requested by the Company
or such underwriters; provided, however, that in no event shall
--------
such period exceed one hundred-eighty (180) days.
(b) In the event of any stock dividend, stock split, recapitalization
or other change affecting the Company's outstanding Common Stock
effected as a class without receipt of consideration, any new,
substituted or additional securities distributed with respect to
the Shares shall be immediately subject to the provisions of this
Section 5.3, to the same extent the Shares are at such time
covered by such provisions.
(c) In order to enforce the limitations of this Section 5.3, the
Company may impose stop-transfer instructions with respect to the
Shares until the end of the applicable stand-off period.
5.4 Restrictive Legends. In addition to any other legends otherwise
-------------------
required, the stock certificates for the Shares shall be endorsed with
the following restrictive legend:
"A portion of the shares represented by this certificate are
unvested and subject to certain repurchase rights granted to the
Company and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity
with the terms of a written agreement between the Company and the
registered holder of the shares (or the predecessor in interest
to the shares). A copy of such agreement is maintained at the
Company's principal corporate offices."
6. Escrow.
------
6.1 Deposit. The certificate(s) for the Shares that are subject to the
-------
Repurchase Right shall promptly be deposited in escrow with the Company to
be held in accordance with the provisions of this Section 6. Each
deposited certificate shall be accompanied by two duly-executed Assignments
Separate from Certificate in the form of Exhibit II. The deposited
----------
certificates, together with any other assets or securities from time to
time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the
certificates (or other assets and securities) are to be released or
otherwise surrendered for cancellation in accordance with Section 6.3.
Upon delivery of the certificates (or other assets and securities) to the
Company, Subscriber shall be issued a receipt acknowledging the number of
Shares (or other assets and securities) delivered in escrow.
5
<PAGE>
6.2 Recapitalization/Reorganization. Any new, substituted or additional
-------------------------------
securities or other property which is by reason of any Recapitalization or
Reorganization distributed with respect to the Shares shall be immediately
delivered to the Company to be held in escrow under this Section 6, but
only to the extent the Shares are at the time subject to the escrow
requirements hereunder. However, all regular cash dividends on the Shares
(or other securities at the time held in escrow) shall be paid directly to
Subscriber and shall not be held in escrow.
6.3 Release/Surrender. The Shares, together with any other assets or
-----------------
securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Repurchase Right with
respect to any Unvested Shares, then the escrowed certificates
for those Unvested Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the
Company concurrently with the payment to Subscriber of an amount
equal to the aggregate Purchase Price for such Unvested Shares,
and Subscriber shall cease to have any further rights or claims
with respect to such Unvested Shares (or other assets or
securities attributable thereto).
(b) Should the Company elect not to exercise the Repurchase Right
with respect to any Unvested Shares held at the time in escrow
hereunder, then the escrowed certificates for those shares
(together with any other assets or securities attributable
thereto) shall be immediately released to Subscriber.
(c) As the Shares (or any other assets or securities attributable
thereto) vest in accordance with the Vesting Schedule, the
certificates for those vested shares (as well as all other vested
assets and securities) shall be released from escrow upon
Subscriber's request, but not more frequently than once every
three (3) months.
(d) All Shares that are vested (and any other vested assets and
securities attributable thereto) shall be released from the
escrow within thirty (30) days after Subscriber's cessation of
Service (subject to any right of first refusal outstanding as of
the time of Subscriber's cessation of Service).
7. Restrictions on Transfer; Right of First Refusal.
------------------------------------------------
7.1 Restrictions on Transfer of Shares. Except as otherwise provided in
----------------------------------
this Agreement, Subscriber will not sell, assign, transfer, pledge,
hypothecate, or otherwise encumber or dispose of in any way, all or any
part of or any interest in the Shares. Any sale, assignment, transfer,
pledge, hypothecation or other encumbrance or disposition of the Shares not
made in conformance with this Agreement shall be null and void, shall not
be recorded on the
6
<PAGE>
books of the Company and shall not be recognized by the
Company.
7.2 Right of First Refusal.
----------------------
(a) Transfer Notice. If at any time Subscriber proposes to transfer
---------------
any Shares to one or more third parties pursuant to an
understanding with such third parties (a "Transfer"), then
Subscriber shall give the Company written notice of the
Subscriber's intention to make the Transfer (the "Transfer
Notice"), which Transfer Notice shall include (i) a description
of the Shares to be transferred ("Offered Shares"), (ii) the
identity of the prospective transferee(s) and (iii) the
consideration and the material terms and conditions upon which
the proposed Transfer is to be made. The Transfer Notice shall
certify that Subscriber has received a firm offer from the
prospective transferee(s) and in good faith believes a binding
agreement for the Transfer is obtainable on the terms set forth
in the Transfer Notice. The Transfer Notice shall also include a
copy of any written proposal, term sheet or letter of intent or
other agreement relating to the proposed Transfer.
(b) Company's Option. The Company shall have an option for a period
----------------
of fifteen (15) business days from receipt of the Transfer Notice
to elect to purchase the Offered Shares at the same price and
subject to the same material terms and conditions as described in
the Transfer Notice. The Company may exercise such purchase
option and, thereby, purchase all (but not less than all) of the
Offered Shares by notifying the Subscriber in writing before
expiration of such fifteen (15) business day period as to the
number of such Offered Shares which it wishes to purchase. If
the Company gives Subscriber notice that it desires to purchase
such Offered Shares, then payment for the Offered Shares shall be
by check or wire transfer, against delivery of the Offered Shares
to be purchased at a place agreed upon between the parties and at
the time of the scheduled closing therefor, which shall be no
later than forty-five (45) days after the Company's receipt of
the Transfer Notice, unless the Transfer Notice contemplated a
later closing with the prospective third party transferee(s) or
unless the value of the purchase price has not yet been
established pursuant to Section 7.2(c).
(c) Valuation of Property. Should the purchase price specified in
---------------------
the Transfer Notice be payable in property other than cash or
evidences of indebtedness, the Company shall have the right to
pay the purchase price in the form of cash equal in amount to the
value of such property. If Subscriber and the Company cannot
agree on such cash value within ten (10) days after the Company's
receipt of the Transfer Notice, the valuation shall be made by an
appraiser of recognized standing selected by the Subscriber and
the Company or, if they cannot agree on an appraiser within
twenty (20) days after the
7
<PAGE>
Company's receipt of the Transfer Notice, each shall select an
appraiser of recognized standing and the two appraisers shall
designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. The cost of such
appr aisal shall be shared equally by Subscriber and the Company,
with the half of the cost borne by the Company and Subscriber. If
the time for the closing of the Company's purchase has expired
but for the determination of the value of the purchase price
offered by the prospective transferee(s), then such closing shall
be held on or prior to the fifth business day after such
valuation shall have been made pursuant to this subsection.
(d) Non-Exercise of Rights. To the extent that the Company has not
----------------------
exercised its right to purchase the Offered Shares within the
time periods specified in Section 7.2(a), Subscriber shall have a
period of thirty (30) days from the expiration of such rights in
which to sell the Offered Shares upon terms and conditions
(including the purchase price) no more favorable than those
specified in the Transfer Notice to the third-party transferee(s)
identified in the Transfer Notice. The third-party transferee(s)
shall acquire the Offered Shares free and clear of subsequent
rights of first refusal under this Agreement. In the event
Subscriber does not consummate the sale or disposition of the
Offered Shares within the thirty (30) day period from the
expiration of these rights, the Company's first refusal rights
shall continue to be applicable to any subsequent disposition of
the Offered Shares by Subscriber until such right lapses in
accordance with the terms of this Agreement.
(e) Limitations to Rights of Refusal. Notwithstanding the provisions
--------------------------------
of Section 7.1 and 7.2 of this Agreement, Subscriber may sell or
otherwise assign, with or without consideration, Shares to any
spouse or member of Subscriber's immediate family, or to a
custodian, trustee (including a trustee of a voting trust),
executor, or other fiduciary for the account of the Subscriber's
spouse or members of Subscriber's immediate family, or to a trust
for Subscriber's own self, or a charitable remainder trust,
provided that each such transferee or assignee, prior to the
completion of the sale, transfer, or assignment shall have
executed documents assuming the obligations of Subscriber under
this Agreement with respect to the transferred securities.
(f) Term. The provisions of this Section 7 shall terminate upon the
----
earlier of (i) the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Company's
Common Stock at a price per share of not less than $5.35 (as
adjusted for stock splits, reverse stock splits and the like
effected after the date of this Agreement) and an aggregate
offering price of not less than $10,000,000, and (ii) the closing
of the Company's sale of all or
8
<PAGE>
substantially all of its assets or the acquisition of the Company
by another entity by means of merger, consolidation or other
transaction or series of related transactions resulting in the
exchange of the outstanding shares of the Company's capital stock
such that the stockholders of the Company prior to such
transaction own, directly or indirectly, less than 50% of the
voting power of the surviving entity.
8. Legend. Each existing or replacement certificate for shares now owned or
------
hereafter acquired by Subscriber shall bear the following legend upon its face:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN RIGHT OF FIRST REFUSAL BY AND BETWEEN THE STOCKHOLDER AND THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST
TO THE SECRETARY OF THE CORPORATION."
9. Effect of Change in Company's Capital Structure. Appropriate adjustments
-----------------------------------------------
shall be made in the number and class of shares in the event of a stock
dividend, stock split, reverse stock split, combination, reclassification or
like change in the capital structure of the Company.
10. Miscellaneous Provisions.
------------------------
10.1 Notices. Unless otherwise provided, any notice required or permitted
-------
under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
10.2 Further Actions. The parties hereby agree to take whatever
---------------
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Shares
pursuant to the provisions of this Agreement.
10.3 Amendments and Waivers. This Agreement represents the entire
----------------------
understanding of the parties with respect to the subject matter hereof and
supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of the Subscriber
and the Company, or the successors or assigns of the foregoing, and no oral
waiver or amendment shall be effective under any circumstances whatsoever.
10.4 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance
9
<PAGE>
with, the laws of the State of Texas without resort to that
State's conflict-of-laws rules.
10.5 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.6 Successors and Assigns. The terms and provisions of this Agreement
----------------------
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and upon Subscriber, Subscriber's permitted assigns
and legal representatives, heirs and legatees of Subscriber's estate,
whether or not any such person shall have become a party to this Agreement
and have agreed in writing to join herein and be bound by the terms hereof.
10.7 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.8 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms.
10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OUTREACH COMMUNICATIONS CORPORATION
By: /s/ R. C. Estes
----------------------------------
Title: C. E. O.
-------------------------------
Address: 9101 Burnet Road, Suite 207
Austin, Texas 78758
SUBSCRIBER:
/s/ Robert Lynch
--------------------------------------
Robert Lynch
Address: 5 Ehrlich Road
------------------------------
Austin, TX 78746
------------------------------
------------------------------
II
<PAGE>
EXHIBIT I
---------
VESTING SCHEDULE
That number of the Shares shall be vested as of the date of execution
hereof as is indicated below. The remaining Shares shall be unvested as of the
date of execution hereof and shall be subject to repurchase by the Company at
the Purchase Price (the "Unvested Shares"). Subscriber shall acquire a vested
interest in and the Company's Repurchase Right will lapse with respect to the
total number of Unvested Shares as of the date of this Agreement as follows:
Subscriber: Robert Lynch
Total Number of Shares: 589,400
Number of Shares Vested
as of Date of this Agreement: None
Vesting Schedule: 25% of the Total Shares (147,350 shares) shall
vest on March 15, 1998.
The remaining Unvested Shares shall vest (and
the Company's Repurchase Right shall lapse) on
the basis of one thirty-sixth (1/36) per month
on the 15th day of each month, with vesting to
begin as of March 15, 1998, and to continue
until March 15, 2001.
I
<PAGE>
EXHIBIT II
----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED [Name] hereby sells, assigns and transfers unto
Outreach Communications Corporation (the "Company") __________________________
(______________) shares of the Common Stock of the Company standing in his/her
name in the books of the Company represented by Certificate Number(s)
_____________ herewith and does hereby irrevocably constitute and appoint
_____________________ its attorney-in-fact to transfer such stock on the books
of the Company with full power of substitution in the premises.
Dated: _______________
_______________________
This Assignment Separate from Certificate was executed in conjunction with
the terms of the Repurchase Agreement by and between the above assignor and
Outreach Communications Corporation dated September __, 1997.
1
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
Agreement shall mean this Stock Repurchase Agreement.
- ---------
Board shall mean the Company's Board of Directors.
- -----
Code shall mean the Internal Revenue Code of 1986, as amended.
- ----
Common Stock shall mean the Company's common stock.
- ------------
Change in Control shall mean:
- -----------------
a) The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or
surviving entity's securities outstanding immediately after such
merger, consolidation or other reorganization is owned by persons
who were not stockholders of the Company immediately prior to
such merger, consolidation or other reorganization; or
b) The sale, transfer or other disposition of all or substantially
all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the company's securities immediately before such transaction.
Company shall mean Outreach Communications Corporation., a Delaware corporation.
- -------
1933 Act shall mean the Securities Act of 1933, as amended.
- --------
Purchase Price shall mean $.01 per share.
- --------------
Recapitalization shall mean any stock split, stock dividend, recapitalization,
- ----------------
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock as a class without the Company's receipt of
consideration.
Reorganization shall mean any of the following transactions:
- --------------
(a) a merger or consolidation in which the Company is not the
surviving entity,
(b) a sale, transfer or other disposition of all or substantially all
of the Company's
2
<PAGE>
assets,
(c) a reverse merger in which the Company is the surviving entity but
in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons different
from the persons holding those securities immediately prior to
the merger, or
(d) any transaction effected primarily to change the state in which
the Company is incorporated or to create a holding company
structure.
SEC shall mean the Securities and Exchange Commission.
- ---
Service shall mean the provision of services to the Company (or any Parent or
- -------
Subsidiary) by a person in his or her capacity as an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, as a non-employee member of the Board
of Directors or as a consultant.
Shares shall mean 589,400 shares of the Common Stock owned by Subscriber.
- ------
3
<PAGE>
EXHIBIT 10.13.1
FIRST AMENDMENT
OF
STOCK SUBSCRIPTION AGREEMENT
----------------------------
THIS FIRST AMENDMENT OF STOCK SUBSCRIPTION AGREEMENT (this "Amendment") is
entered into effective as of March 26, 1999, by and between ClearCommerce
Corporation (f/k/a Outreach Communications Corporation), a Delaware corporation
(the "Corporation"), and Robert Lynch ("Lynch").
RECITALS
--------
WHEREAS, the Corporation and Lynch entered into that certain Stock
Subscription Agreement, dated September 15, 1997 (the "Stock Subscription
Agreement"), providing for, among other things, certain vesting provisions with
respect to the Corporation's Common Stock owned by Lynch; and
WHEREAS, the parties to the Stock Subscription Agreement desire to amend
certain provisions of the Stock Subscription Agreement to provide for
accelerated vesting and to amend the definition of "Change in Control" as set
forth herein.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the Stock
Subscription Agreement as follows:
1. Terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Stock Subscription Agreement.
2. Exhibit I to the Repurchase Agreement is hereby amended to add the
---------
following sentence at the end of the "Vesting Schedule":
----------------
"Notwithstanding the foregoing, if a Change in Control occurs, then
effective immediately prior to the closing of the Change in Control,
the vesting of Subscriber's Unvested Shares shall be deemed
accelerated by twelve (12) months."
3. A new clause (c) is hereby added to the definition of "Change in
---------
Control" in the Appendix to the Stock Subscription Agreement to provide as
- -------
follows:
"(c) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's
-1-
<PAGE>
outstanding securities are transferred to a person or persons
different from the persons holding these securities immediately prior
to such transaction."
4. Except as herein modified and amended, all terms and conditions of the
Stock Subscription Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed and delivered as of
the date first written above.
CORPORATION:
-----------
CLEARCOMMERCE CORPORATION,
a Delaware corporation
By: /s/ Michael S. Grajeda
------------------------------------------
Michael S. Grajeda, Chief Financial
Officer
LYNCH:
-----
By: /s/ Robert Lynch
------------------------------------------
Robert Lynch
-2-
<PAGE>
EXHIBIT 10.14
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I STATEMENT OF PURPOSE AND INTENTIONS
1.1 Purpose............................................................................................. 1
1.2 Intent to Quality................................................................................... 1
ARTICLE II DEFINITIONS
2.1 Anniversary Date ............................................................................. 2
2.2 Annuity Starting Date ........................................................................ 2
2.3 Beneficiary .................................................................................. 2
2.4 Code ......................................................................................... 2
2.5 Company ...................................................................................... 2
2.6 Compensation ................................................................................. 2
2.7 Date of Employment ........................................................................... 3
2.8 Date of Re-employment ........................................................................ 3
2.9 Effective Date ............................................................................... 3
2.10 Elective Compensation ........................................................................ 3
2.11 Employee ..................................................................................... 3
2.12 Employer ..................................................................................... 5
2.13 Hour of Service .............................................................................. 5
2.14 Individual Accounts .......................................................................... 6
2.15 Insurance Company ............................................................................ 6
2.16 Limitation Year .............................................................................. 6
2.17 Normal Retirement Age and Normal Retirement Date ............................................. 7
2.18 Participant .................................................................................. 7
2.19 Plan ......................................................................................... 7
2.20 Plan Administrator ........................................................................... 7
2.21 Plan Year..................................................................................... 7
2.22 Required Beginning Date ...................................................................... 7
2.23 Retirement and Retirement Date ............................................................... 7
2.24 Service ...................................................................................... 7
2.25 Total and Permanent Disability ............................................................... 7
2.26 Trustees ..................................................................................... 7
2.27 Vested Benefit ............................................................................... 7
ARTICLE III PARTICIPATION
3.1 Commencement of Participation ................................................................ 8
3.2 Minimum Participation Standards .............................................................. 8
3.3 Active Participation; Inactive Participation ................................................. 8
3.4 Cessation of Participation ................................................................... 8
3.5 Participation on Resumption of Employment .................................................... 8
ARTICLE IV CONTRIBUTIONS
4.1.1 Basic Contributions: Amount ................................................................. 9
4.1.2 Basic Contribution Accounts ................................................................. 9
4.1.3 Basic Contributions: Allocations ............................................................ 9
4.1.4 Basic Contributions: Vesting ................................................................ 9
4.2.1 Elective Contributions: Amount .............................................................. 9
4.2.2 Elective Contribution Account.:.............................................................. 12
4.2.3 Elective Contributions: Allocations ......................................................... 12
4.2.4 Elective Contributions: Vesting ............................................................. 12
4.2.5 Elective Contributions: Withdrawals ......................................................... 12
4.3.1 Rollover Contribution: Amount ............................................................... 14
4.3.2 Rollover Contribution Account ............................................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.3.3 Rollover Contributions: Allocation .......................................................... 14
4.3.4 Rollover Contributions: Vesting ............................................................. 14
4.4.1 Plan-to-Plan Transfers: Amount .............................................................. 15
4.4.2 Plan-to-Plan Transfer Account ............................................................... 15
4.4.3 Plan-to-Plan Transfer: Allocation ........................................................... 15
4.4.4 Plan-to-Plan Transfers: Vesting ............................................................. 15
ARTICLE V REQUIRED NON-DISCRIMINATION TESTING
5.1.1 Limitation on Additions ..................................................................... 16
5.1.2 Suspense Account ............................................................................ 18
5.2.1 Top-Heavy Provisions: Application ........................................................... 19
5.2.2 Top-Heavy Determination ..................................................................... 19
5.2.3 Special Rules for Top-Heavy Plans ........................................................... 21
5.3 Actual Deferral Percentage Test ............................................................. 22
ARTICLE VI ADMINISTRATION OF PLAN ASSETS
6.1.1 The Investment Fund .......................................................................... 25
6.1.2 Employee Directed Investments ................................................................ 25
6.2 Account Adjustments .......................................................................... 25
6.3 Distribution Adjustments ..................................................................... 26
6.4 Expenses...................................................................................... 26
ARTICLE VII DISTRIBUTIONS
7.1 Termination of Employment (Including Disability) Before Retirement .......................... 27
7.2 Death Benefits .............................................................................. 27
7.3 Retirement................................................................................... 29
7.4 Form of Retirement Benefit .................................................................. 29
7.5 Retirement Benefits: Election of Forms and Commencement of Payments ......................... 30
7.6 Loans to Participants ....................................................................... 33
ARTICLE VIII GENERAL PROVISONS
8.1.1 Plan Modification: Authority................................................................. 37
8.1.2 Plan Modification: Merger.................................................................... 37
8.1.3 Plan Modification: Termination.............................................................. 37
8.2.1 Duties: Plan Administrator................................................................... 37
8.2.2 Duties: Employer............................................................................. 37
8.3 Benefit Claims Procedure..................................................................... 38
8.4 Review Procedure............................................................................. 38
8.5 Qualification of the Plan and Conditions of Contributions ................................... 39
8.6 Beneficiaries................................................................................ 39
8.7 Spendthrift Clause........................................................................... 39
8.8 Annuities.................................................................................... 40
8.9 Limitations of the Employer's Liability ..................................................... 40
8.10 Non-Guarantee of Employment ................................................................. 40
8.11 Applicable Law .............................................................................. 40
ARTICLE IX DIRECT ROLLOVERS
9.1 General Rule............................................................................... 41
9.2 Definitions................................................................................ 41
</TABLE>
<PAGE>
ARTICLE I
STATEMENT OF PURPOSE AND INTENTIONS
1.1 Purpose
- --- -------
The Employer adopts this Plan as a defined contribution retirement plan of
the profit-sharing type with a cash or deferred arrangement to provide
retirement benefits and incidental benefits to certain Employees who
qualify for such benefits as more particularly provided herein.
1.2 Intent to Qualify
- --- -----------------
It is the Employer's intent that this Plan be a qualified plan in the
meaning of sec. 401 of the Internal Revenue Code of 1986, as amended, that
any trust that may become part hereof be exempt from tax under sec. 501 (a)
of the Code, and that contributions made by the Employer be deductible
under sec. 404 of the Code. This Plan shall be interpreted, applied and
administered in a manner consistent with this intent to qualify. All
amounts contributed to, accumulated and/or held pursuant to this Plan shall
not be diverted to or used for other than the exclusive benefit of the
Participants or their beneficiaries until after such amounts have been
distributed from this Plan. In the event that the portion of this Plan
comprising the qualified cash or deferred arrangement fails to qualify
under the provision of sec. 401(k) of the Code, the Plan as a whole shall
nonetheless be interpreted so as to qualify under sec. 401 (a) of the Code.
1
<PAGE>
ARTICLE II
DEFINITIONS
For the purpose of this Plan, when the following terms appear in this Plan in
boldface type, they shall have the meanings indicated in this Article unless a
different meaning is clearly required by the context.
Whenever required by the context, masculine pronouns shall include the feminine,
and singular the plural.
2.1 Anniversary Date means each January 1.
- --- ----------------
2.2 Annuity Starting Date means the first day of the first period for which an
- --- ---------------------
amount is payable as an annuity or any other form.
2.3 Beneficiary is defined in Section 8.6, except as specifically provided to
- --- -----------
the contrary elsewhere in this Plan.
2.4 Code means the Internal Revenue Code of 1986, as amended, and all
- --- ----
regulations promulgated thereunder.
2.5 Company means CIearCommerce Corporation.
- --- -------
2.6 Compensation means wages, salary, and/or other remuneration that is
- --- ------------
receivable by an individual during a Plan Year in exchange for Service and
that is required to be reported as income on the individual's Form W-2 for
federal income tax withholding purposes under Code sec. 3401(a).
In addition, Compensation shall include the following amounts:
(a) all elective deferrals (as defined by Code sec. 402(g)(3)) made by the
Participant during the Plan Year pursuant to a salary reduction
agreement with the Employer, including those described by Section
4.2.1 of this Plan; and
(b) all Compensation accrued by the Participant during the Plan Year but
which is not then included as taxable income of the Participant
pursuant to a "cafeteria" or other such plan maintained by the
Employer according to Code sec. 125.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with sec. 401(a)(17)(B) of the Internal Revenue Code.
The cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation
limit will be multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to ' the limitation under sec. 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
2
<PAGE>
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for the prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
In applying this limit, the family aggregation rules of Code sec.
414(q)(6) shall apply, except that in applying such rules, the term
"family" shall include only the spouse of the Employee and any lineal
descendants of the Employee who have not attained age 19 before the close
of the Plan Year. In addition, if this limit applies to a family unit,
then for the purposes of this Plan, each affected family member shall be
credited with an amount of Compensation on a pro rata basis, so that such
credited amount, when compared to the adjusted compensation limit, shall
have the same direct proportion that exists in comparing that person's
actual Compensation to the sum of all that family's affected members'
Compensation.
2.7 Date of Employment means the date on which an Employee has his first Hour
- --- ------------------
of Service.
2.8 Date of Re-employment means the first date as of which an Employee has an
- --- ---------------------
Hour of Service after his most recent termination of Service.
2.9 Effective Date means February 1, 1999.
- --- --------------
2.10 Elective Compensation means that portion of a Participant's Compensation
- ---- ---------------------
that is attributable to Service performed while the Participant had in
effect an election to have Elective Contributions made on his behalf,
pursuant to Article IV:
2.11 Employee means a natural person who performs Service for the Employer in
- ---- --------
exchange for Compensation, including any Leased Employee (as described
below) but excluding any independent contractor who is not a Leased
Employee. For the purposes of this plan, Employee shall be further
described as follows.
(a) Highly Compensated Employee ("HCE") means:
---------------------------
(1) The group of HCEs includes any Employee who during the Plan
Year performs services for the Employer and who (i) is a 5-
percent owner, (ii) receives compensation for the Plan Year in
excess of the sec. 414(q)(1)(B) amount for the Plan Year, (iii)
receives compensation for the Plan Year in excess of the sec.
414(q)(1)(C) amount for the Plan Year and is a member of the
top paid group of Employees within the meaning of sec.
414(q)(4), or (iv) is an officer and receives compensation
during the Plan Year that is greater than 50 percent of the
dollar limitation in effect under sec. 415(b)(1)(A). If no
officer satisfies the compensation requirement during the Plan
Year, the highest paid officer for such year shall be treated
as an HCE.
For purposes of determining who is an HCE, compensation means
wages, salary, and/or other remuneration that is required to be
reported as income on the individual's W-2 for federal income
tax withholding purposes under Code sec. 3401(a), plus all
elective deferrals as defined in Code sec. 402(g)(3) and
benefits pursuant to a Plan under Code sec. 125 that are not
currently taxable.
(2) If an Employee is a family member of either a 5-percent owner
(whether active or former) or an HCE who is one of the 10 most
HCEs ranked on the basis of compensation paid by the Employer
during such year, then
3
<PAGE>
the family member and the 5-percent owner or top-ten HCE shall be
aggregated. In such case, the family member and 5-percent owner
or top-ten HCE shall be treated as a single Employee receiving
compensation and plan contributions or benefits equal to the sum
of the compensation and benefits of the family member and 5-
percent owner or top-ten HCE. For purposes of this Section,
family member includes the spouse, lineal ascendants and
descendants of the Employee or former Employee, and the spouses
of such lineal ascendants and descendants.
(3) The determination of who is an HCE, including the determination
of the number and identity of Employees in the top paid group,
the number of Employees treated as officers and the compensation
that is taken into account, shall be made in accordance with the
sec. 414(q) and sec. 1.414(q)-1T of the temporary Income Tax
Regulations to the extent they are not inconsistent with the
method established above.
(b) Key Employee means (solely for the purposes of Section 5.2) an
------------
Employee who, at any time during the Plan Year or four preceding Plan
Years, was:
(1) an officer of the Employer having an annual "compensation"
greater than 50% of the amount in effect under Code sec.
415(b)(1)(A) for any such Plan Year; or
(2) one of the ten Employees having annual "compensation" greater
than the limitation in effect under Code sec. 415(c)(1)(A) and
owning (or considered as owning within the meaning of Code sec.
318) the largest interest of the Employer; or
(3) a 5 percent owner of the Employer; or
(4) a 1 percent owner of the Employer having an annual "compensation"
of more than $150,000.
For the purposes of this Plan, Key Employee shall be described more
particularly by Code sec. 416(i)(1). "Compensation" is defined under
Highly Compensated Employee, above.
(c) Leased Employee means a person who is employed (either as a common law
---------------
employee or an independent contractor) by a leasing organization (but
not by the Employer) and who performs services for the Employer on a
substantially full-time basis for a period of at least one year, where
such services are of a type historically performed by Employees within
the business field of the Employer, and where such services are
provided pursuant to a contract between the leasing organization and
the Employer, EXCEPT that if such person is covered under a money
purchase pension plan maintained by the leasing organization and which
provides (1) a nonintegrated employer contribution rate of at least
71/2% of compensation for services performed prior to January 1, 1987,
and at least 10% of compensation for services performed after December
31, 1986, with compensation being determined according to Code sec.
415(c)(3), but including amounts contributed by the Employer pursuant
to a salary reduction agreement which are excludable from the
Employee's gross income under Code sec. 125, 402(e)(3, 402(h), or
403(b; (2) immediate participation; and (3) full and immediate
vesting, AND if the sum of all such persons is not more than 20% of
the Employer's "nonhighly compensated workforce" (as defined in 26 CFR
sec. 1.414(n)-2(f)(3)(ii)), then for the purposes of this Plan such
person is not a Leased Employee, and is at that time ineligible for a
benefit or any vested interest in this Plan.
4
<PAGE>
Any provisions of this Section and this Plan to the contrary
notwithstanding, the term "Leased Employee" shall be more specifically
defined by, and Leased Employees shall be treated under this Plan
consistent with, Code sec. 414(n) and 26 CFR sec. 1.414(n)-2.
2.12 Employer means the Company, and any other person or business organization
- ---- --------
which has adopted and maintains this Plan on behalf of its employees with
the consent of the Company.
In addition, to the extent required for this Plan's qualification for
special tax treatment under the Code, and to the extent otherwise required
by applicable law, Employer also means any predecessor organization which
previously maintained this Plan on behalf of its employees (but only with
regard to that period of time during which the Plan was maintained by such
organization (s)), and any employer which, together with the Employer (as
otherwise defined in this Section), is a member of a controlled group of
corporations in the meaning of Code sec. 414(b), or is a member of a group
of trades or business (whether or not incorporated) under common control
in the meaning of Code sec. 414(c), or is a member of an affiliated
service group in the meaning of Code sec. 414(m), or is otherwise required
to be aggregated by Code sec. 414(o).
2.13 Hour of Service means:
- ---- ---------------
(a) each hour for which an Employee is paid, or entitled to payment, by
the Employer for the performance of duties;
(b) each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer on account of a period of time
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence except with respect to payments made
or due under a plan maintained solely for the purpose of complying
with applicable workers' compensation or unemployment compensation or
disability insurance laws or which are solely in reimbursement to the
Employee for medical or medically-related expenses incurred by the
Employee; however, no more than 501 Hours of Service shall be credited
pursuant to this paragraph to an Employee on account of any single
continuous period during which the Employee performs no duties
(whether or not such period occurs in a single Plan Year); and
(c) each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer; however, an Hour of
Service shall not be credited under both this paragraph and paragraph
(a) or (b), above.
Hours of Service credited under paragraphs (b) and (c), above, shall be
credited in accordance with Department of Labor Regulations found at 29
CFR sec. 2530.200b-2(b). Hours of Service shall be credited to the
appropriate Plan Year in accordance with 29 CFR sec. 2530.200b-2(c).
Hours of Service included pursuant to paragraph (a) shall be determined
according to records of employment maintained by the Employer. If such
records do not provide an adequate basis for determining the actual number
of Hours of Service accrued by a particular Employee (e.g. a salaried
Employee), then Hours of Service under paragraph (a) shall be credited to
the Employee on a weekly basis and the Employee shall be credited with 45
Hours of Service for every week in which he has accrued at least one Hour
of Service as otherwise described in paragraph (a).
5
<PAGE>
Special Rule for Maternity or Paternity Absences
------------------------------------------------
If an Employee is absent from work due to
(a) the pregnancy of the Employee,
(b) the birth of a child to the Employee,
(c) the placement of a child with the Employee pursuant to the Employee's
adoption of the child, or
(d) the care of such child described in (b) or (c) above immediately
following its birth or placement,
the Employee shall nonetheless be credited with the number of Hours of
Services which normally would have been credited to the Employee but for
said absence (or, if the Plan Administrator is unable to determine said
number, with eight (8) Hours of Service for each regularly scheduled
workday the Employee is absent), to a maximum of 501 Hours of Service.
PROVIDED that this special crediting of Hours of Service occurs during
only one Plan Year, and
PROVIDED that the Plan Year in which such Hours of Service are credited in
the Plan Year in which the absence begins, unless such crediting would not
be necessary to avoid a Break in Service Year in said Plan Year, in which
case such Hours of Service shall be credited as they accrue in the Plan
Year immediately following the Plan Year in which the absence begins, and
PROVIDED that the crediting of such Hours of Service shall be solely for
the purpose of avoiding a Break in Service Year, and shall not operate to
increase any Employee's or former Employee's vested percentage or
retirement benefit, nor shall the crediting have any other operative
effect regarding this Plan, and
PROVIDED that, under rules established by the Plan Administrator, the
Employee may be required to provide to the Plan Administrator written
certification from the Employee's attending doctor or other professional
attendant at birth or representative of the relevant adoption agency to
establish that the absence from work is for the reasons referred to above.
2.14 Individual Accounts means, for any Participant, those accounts which are
- ---- -------------------
both listed below and maintained pursuant to this Plan on his behalf.
(a) Basic Contribution Account
(b) Elective Contribution Account
(c) Rollover Contribution Account
(d) Plan-to-Plan Transfer Account
2.15 Insurance Company means a legal reserve life insurance company, licensed
- ---- -----------------
to do business in the state of Texas, with which the Trustees have entered
into a contract to provide benefits under the Plan.
2.16 Limitation Year, for purposes of determining the limitation on certain
- ---- ---------------
additions to the Plan for the benefit of an Employee as described in
Section 5.1.1, means a twelve-consecutive-month period beginning on an
Anniversary Date.
6
<PAGE>
2.17 Normal Retirement Age and Normal Retirement Date are defined in Article
- ---- --------------------- ----------------------
VII under "Retirement".
2.18 Participant means an Employee or former Employee who has become a
- ---- -----------
Participant or resumed participation pursuant to Section 3.1 or 3.5 and
who has not subsequently ceased to participate as provided in Section 3.4.
A Participant may be Active or Inactive as provided in Section 3.3.
2.19 Plan means this CIearCommerce Corporation 401 (k) Plan.
- ---- ----
2.20 Plan Administrator means one or more persons appointed by the Trustees to
- ---- ------------------
control and manage the operation and administration of the Plan. The
person or persons so appointed shall constitute a named fiduciary or
fiduciaries for purposes of the Employee Retirement Income Security Act of
1974. If no Plan Administrator is appointed, then the Trustees shall be
the Plan Administrator.
2.21 Plan Year means a period of time commencing on an Anniversary Date and
- ---- ---------
ending with the day immediately preceding the next Anniversary Date.
2.22 Required Beginning Date
- ---- -----------------------
(a) The Required Beginning Date of a Participant who is not a 5% owner is
April 1 of the calendar year following the later of:
(1) the calendar year in which the Participant attained age 701/2,
or
(2) the calendar year in which the Participant retires.
(b) The Required Beginning Date of any Participant who is a 5% owner is
April 1 of the calendar year following the calendar year in which the
Participant attained age 701/2.
(c) 5% owner, for purposes of this Section, means a Participant who is a
5% owner within the meaning of Code sec. 416(i) except without regard
to whether the Plan is actually top-heavy) at any time during the
Plan Year ending with or within the calendar year in which the
Participant attains age 661/2, or any subsequent Plan Year.
2.23 Retirement and Retirement Date are defined in Article Vll under
---------- ---------------
"Retirement".
2.24 Service means employment of the Employee by the Employer for the
- ---- -------
performance of labor or duties by the Employee on behalf of the Employer
and for which the Employee is to be compensated by the Employer.
2.25 Total and Permanent Disability means a physical or mental condition that
- ---- ------------------------------
in the opinion of the Plan Administrator precludes a person from
employment for which he is qualified because of his experience, training,
and education, and that is expected to continue for not less than 12
months. The Plan Administrator's opinion regarding the degree and
permanence of the disability shall be supported by medical evidence.
2.26 Trustees means those persons or the organization with which the Employer
- ---- --------
has entered into a trust agreement to provide benefits under the Plan.
However, at any time that the Plan is not trusteed, "Trustees" shall mean
the Company.
2.27 Vested Benefit means, at any time, the sum of the Participant's vested
- ---- --------------
Individual Account balances.
7
<PAGE>
ARTICLE III
PARTICIPATION
3.1 Commencement of Participation
- --- -----------------------------
An Employee shall commence participation in the Plan on the first Entry
Date on which he meets the Plan's Minimum Participation Standards.
The Entry Dates shall be the Effective Date, and thereafter each Employee's
Date of Employment or Date of Re-employment, or the first day of each
month.
3.2 Minimum Participation Standards
- --- -------------------------------
An Employee meets the Plan's Minimum Participation Standards at any time
when he satisfies the following conditions:
(a) He is an Employee.
(b) He is at least twenty-one (21) years of age.
3.3 Active Participation: Inactive Participation
- --- --------------------------------------------
Once an Employee has commenced participation (or if he subsequently ceased
to participate, once he has resumed participation), he shall be an Active
Participant with respect to each Hour of Service accrued while he is an
Employee. At any time thereafter at which he is not an Employee, but before
his participation has ceased, he shall be an Inactive Participant.
3.4 Cessation of Participation
- --- --------------------------
A Participant shall cease to participate in this Plan (without regard to
his status, as an Employee) as of the first date on which he has most
recently terminated his employment as an Employee and also has no rights
(present or contingent) to any benefit under this Plan.
3.5 Participation on Resumption of Employment
- --- -----------------------------------------
A former Employee who participated during the period of his prior
employment shall be eligible to resume participation as of his first Hour
of Service upon resumption of employment as an Employee.
Any other former Employee shall be eligible to commence participation as of
the first Entry Date which occurs on or after the date of his resumption of
employment as an Employee.
8
<PAGE>
ARTICLE IV
CONTRIBUTIONS
4.1.1 Basic Contributions: Amount
- ----- ---------------------------
For each Plan Year, the Employer may contribute amounts to the Plan.
These amounts shall be called Basic Contributions, and shall be
determined according to the following provisions.
Basic Top-Heavy Contribution
----------------------------
If a Participant is to be credited with some additional amount
pursuant to the "top-heavy" provisions of Section 5.2 of this Plan,
such additional amount shall be contributed and credited as an
additional portion of the Basic Contribution for that Plan Year.
Any of the provisions of this Section to the contrary notwithstanding,
no amounts may be contributed to the Plan as Basic Contributions in
excess of the maximum amount that the Employer may deduct from its net
income subject to federal income taxation for the Employer's taxable
year on account of which such contributions have been made plus any
amount which may be currently contributed and "carried over" for
succeeding taxable years pursuant to Code sec. 404(a)(3)(A)(ii)
(assuming that the Employer is subject to federal income taxation),
nor shall such amounts exceed the maximum amount which may be
allocated consistently with the limitations stated in Section 5.1.1
Basic Contributions shall be allocated among the Plan's Participants
pursuant to Section 4.1.3 in a uniform and nondiscriminatory manner.
4.1.2 Basic Contribution Accounts
- ----- ---------------------------
Each Participant shall have maintained on his behalf a Basic
Contribution Account, which shall be adjusted as provided in Article
VI and which shall be closed when the Participant is entitled to no
further benefits under the terms of the Plan.
4.1.3 Basic Contributions: Allocations
- ----- --------------------------------
Basic Top-Heavy Contributions: Allocations
------------------------------------------
As of the date the contribution is received by the Plan, each
Participant who is entitled to be credited with an additional amount
of Basic Contribution pursuant to Section 5.2 of this Plan shall have
such amount credited to his Basic Contribution Account.
4.1.4 Basic Contributions: Vesting
- ----- ----------------------------
At any time, each Participant's interest in his Basic Contribution
Account balance shall be fully vested in the Participant and not
subject to forfeiture prior to the withdrawal or distribution of such
balance pursuant to this Plan.
4.2.1 Elective Contributions: Amount
- ----- ------------------------------
(a) Elective Deferral
------------------
Each Participant may elect to defer his receipt of Compensation
that has not yet become available to him. For each Plan Year, the
total amount of Compensation that may be deferred may equal not
more than the maximum
9
<PAGE>
amount of his Elective Compensation for the Plan Year permissible
consistent with Section 5.1.1 and all other limiting provisions
of this Plan, the Code, and all other applicable legal limits.
A Participant may elect to defer Compensation attributable to
bonuses at a rate that differs from the rate elected for other
Compensation.
For each Plan Year, on behalf of each Participant who has made
such an elective deferral, the Employer shall contribute an
amount to the Plan equal to the amount of the Participant's
elective deferral of Compensation for the Plan Year. This
contribution shall be called an Elective Contribution.
Each Elective Contribution shall be paid to the Plan by the
Employer as soon as reasonably practicable (in no event later
than 90 days) after it is withheld by or otherwise paid to the
Employer. In addition, each Elective Contribution shall be paid
to the Plan by the Employer no later than the last day of the
twelve-month period immediately following the Plan Year with
respect to which the contribution is made.
(b) Election
--------
A Participant may elect to change the amount of his elective
deferrals, and therefore the amount of the Elective Contributions
made on his behalf, within the limits prescribed in subsection
(a) above. A Participant may also elect to cease his elective
deferrals and Elective Contributions altogether, or, having done
so, may elect to recommence them.
A Participant's election to commence elective deferrals may
become effective only as of the Participant's Date of Employment,
Date of Re-employment or the first day of any prospective month.
A Participant's election to recommence or to change the amount of
his elective deferrals may become effective only as of the first
day of any prospective calendar quarter. However, a Participant's
election to defer Compensation attributable to bonuses may take
effect prior to the date the bonus is payable.
A Participant's election to cease his elective deferrals
altogether may become effective only as of the first day of any
prospective payroll period.
Any of the provisions of this subparagraph (b) to the contrary
notwithstanding, any election described by this subparagraph (b)
regarding elective deferrals may become effective only after
written notice delivered to the Plan Administrator within a
reasonable time prior to the effective date of the election.
(c) Limit on Amount
---------------
The total sum of any Participant's elective deferrals for any
taxable year of the Participant may not exceed the limit
prescribed by IRC Reg. 1.402(g)-1(c). (Generally, for taxable
years beginning in 1999, that limit equals $10,000, except for
adjustments made to take into account elective deferrals made to
annuity contracts under Code sec. 403(b)).
For the purposes of this subsection (c), "elective deferrals" has
the meaning defined in IRC Reg. 1.402(g)-1(b), including (but not
limited to) Elective Contributions received by this Plan on the
Participant's behalf.
For any Participant, if this limit on elective deferrals is
exceeded, then the following corrective measures are permitted.
10
<PAGE>
(1) The Participant may notify the Plan Administrator of the
excess deferral, and may request that the Plan Administrator
distribute to the Participant an amount not exceeding the
lesser of:
(A) the amount of the excess deferral, plus all income
allocable to the excess deferral;
(B) the sum of all amounts deferred by the Participant and
contributed to the Plan as Elective Contributions on
behalf of the Participant with regard to the affected
taxable year, net of any allocable earnings, gains or
losses attributable to such amounts; or
(C) the balance of the Participant's Elective Contribution
Account as of the date of distribution, minus any
amounts of withholding that are legally required.
In addition, the amount that may be included in a corrective
distribution shall be reduced by any excess contributions
previously distributed to the Participant for the Plan Year
that began with or within the affected taxable year of the
Participant.
To be effective for the purposes of this Plan, the
Participant's notice and request must be in writing and
delivered to the Plan Administrator prior to the first April
15 following the close of the affected taxable year of the
Participant.
To the extent that the Participant has excess deferrals for
the taxable year calculated by taking into account only
elective deferrals under, this Plan and other plans of the
Employer, and absent actual notification by the Participant,
the Participant shall be deemed to have provided the notice
described above in this subsection.
(2) A corrective distribution of excess deferrals and allocable
income may be made during the affected taxable year of the
Participant only if all of the following conditions are
satisfied.
(A) The Participant has designated the amount of the
distribution as being attributable to an excess
deferral. (Because subsection (1) above limits the
amount of the corrective distribution to not more than
the amount of excess deferrals calculated by taking
into account only elective deferrals under this Plan
and other plans of the Employer, and absent an actual
designation by the Participant, the Participant shall
be deemed to have provided the designation described
above in this subsection.)
(B) The corrective distribution is made after the date on
which the Plan received the excess deferral.
(C) The Plan has designated the amount of the distribution
as being attributable to an excess deferral.
(3) Not later than the first April 15 following the close of the
affected taxable year of the Participant, and after receipt
of the Participant's written notice and request, the Plan
Administrator may make the appropriate corrective
distribution, consistent with the provisions of this
subparagraph (c).
11
<PAGE>
The Plan Administrator may require that before the
corrective distribution is made, the Participant must
provide to the Plan Administrator additional documentation
evidencing the Participant's representations regarding the
excess deferrals.
The income allocable to excess deferrals for the affected taxable
year of the Participant shall be determined according to the IRC
Reg. 1.402(g)-1(c)(5).
In the event of a corrective distribution of excess deferrals and
allocable income, the balance of the Participant's Elective
Contribution Account shall be reduced accordingly.
4.2.2 Elective Contribution Account
- ----- -----------------------------
On behalf of each Participant who has elected to defer some portion of
his Compensation pursuant to this Article IV, there shall be
maintained an Elective Contribution Account, which shall be adjusted
as provided in Article VI and which shall be closed when the
Participant is entitled to no further benefits under the terms of this
Plan.
4.2.3 Elective Contributions: Allocations
- ----- -----------------------------------
Any Elective Contribution received by the Plan on behalf of a
Participant shall be credited to the Elective Contribution Account of
that Participant as of the date on which the contribution was received
by the Plan.
4.2.4 Elective Contributions: Vesting
- ----- -------------------------------
The Elective Contributions received by the Plan on behalf of any
Participant shall be fully vested in such Participant and not subject
to forfeiture prior to the time they are withdrawn or distributed
pursuant to this Plan.
4.2.5 Elective Contributions: Withdrawals
- ----- -----------------------------------
(a) At any time before his Retirement Date, a Participant may apply
to withdraw an amount from his Elective Contribution Account. The
application must be in writing and received by the Plan
Administrator. If the Participant has attained age 59 1/2 or is
not an Employee as of the date of distribution, the Participant
may withdraw up to the entire balance of his Elective
Contribution Account, including interest or other earnings.
Subject to the additional restrictions of this Section, any other
Participant may withdraw an amount that does not exceed the
balance of the account attributable to Elective Contributions
made on his behalf, excluding any interest or other earnings.
(b) If the Participant is an Employee on the date as of which the
withdrawal is to be distributed, and if the Participant has not
yet attained age 59 1/2 as of the date of distribution, the Plan
Administrator may permit the distribution 'only to the extent
that the Plan Administrator reasonably believes that the
distribution is necessary to satisfy an immediate and heavy
financial need of the Participant, taking into account all
relevant facts and circumstances.
(1) Any of the following facts and circumstances shall
automatically be deemed by the Plan Administrator to
constitute an immediate and heavy financial need of the
Participant:
(A) expenses for medical care (as defined in Code sec.
213(d)) that were either previously incurred by the
Participant, the Participant's spouse, or any
dependents of the Participant (with "dependents" being
as defined by Code sec. 152) or that are necessary for
these persons to obtain such medical care;
12
<PAGE>
(B) costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage
payments);
(C) payment of tuition and related educational fees for the
next 12 months of post-secondary education for the
Participant, or the Participant's spouse, children, or
dependents (as defined in Code sec. 152);
(D) payments necessary to prevent the eviction of the
Participant from the Participant's principal residence,
or foreclosure on the mortgage on that residence; or
(E) any other facts and circumstances that the Commissioner
of the Internal Revenue Service has included through
the publication of revenue rulings, notices, or other
documents of general applicability.
A financial need shall not fail to qualify as immediate and
heavy merely because such need was reasonably foreseeable or
voluntarily incurred by the Participant.
(2) In requesting a withdrawal due to financial need, the
Participant shall specifically identify the facts and
circumstances which have caused the financial need and shall
state the amount needed to satisfy the need, which may
include amounts necessary to pay any income taxes or
penalties reasonably anticipated to result from the
distribution. The Participant shall further state that, to
the extent of the amount requested, the financial need
cannot otherwise be satisfied by:
(A) reimbursement or compensation by insurance or
otherwise;
(B) reasonable liquidation of the Participant's assets, but
only to the extent that such liquidation would not in
itself cause an immediate and heavy financial need;
(C) cessation of elective deferrals or any Participant
contributions permitted by the Plan;
(D) other distributions or nontaxable (at the time of the
loan) loans from this Plan or any other plan maintained
by the Employer or any other employer; and/or
(E) borrowing from commercial sources on reasonable
commercial terms.
For the purposes of this subsection, the Participant's
resources shall be deemed to include those assets of the
Participant's spouse arid minor children to the extent that
such assets are reasonably available to the Participant.
(3) Before the withdrawal may be permitted, the Plan
Administrator shall receive from the Participant any
documentation that the Plan Administrator requires in the
performance of his fiduciary duty to substantiate that the
withdrawal is necessary to satisfy the financial need
identified by the Participant. Under no circumstances shall
the Plan Administrator distribute more than the Plan
Administrator reasonably believes is necessary to satisfy
the financial need identified by the Participant.
13
<PAGE>
(c) The Plan Administrator shall approve or deny the Participant's
application for such a withdrawal within a reasonable amount of
time after receipt of such application. If approved, payment
shall be made by the Plan Administrator as soon as
administratively practicable, but in any event within ninety (90)
days after the Plan Administrator's receipt of the Participant's
application.
The Plan Administrator shall also issue any denial of such an
application as soon as administratively practicable. Such a
denial shall be delivered in writing and shall state specifically
the reasons for such denial.
(d) The Plan Administrator may limit the frequency of withdrawals.
Such limit shall apply uniformly to all Participants.
(e) The amount of any withdrawal from an Elective Contribution
Account pursuant to this Section shall be charged against that
Account as of the date that the withdrawal is distributed from
the Plan.
4.3.1 Rollover Contribution: Amount
- ----- -----------------------------
The Plan Administrator may accept Rollover Contributions from or on
behalf of a Participant.
As used herein, Rollover Contribution means all or a portion of an
"eligible rollover distribution" described in Code sec. 402(c), or an
amount paid or distributed out of an individual retirement account or
individual retirement annuity described in Code sec. 408(d)(3)(A)(ii).
The Plan Administrator may require such assurance and proofs of fact
from the Participant as may be necessary to determine whether an
amount the Participant desires to contribute is a Rollover
Contribution as defined herein. He may further require the Participant
to agree to indemnify the Plan for any adverse consequences which may
follow if a contribution proves not to have been a Rollover
Contribution. An Employee on whose behalf a transfer described in this
Section is made shall agree to cooperate fully with the Plan
Administrator in effecting any and all corrective measures which may
be required by an agency of the federal government to prevent the
Plan's disqualification as a result of the transfer.
4.3.2 Rollover Contribution Account
- ----- -----------------------------
For the benefit of any Participant on whose behalf the Plan has
accepted any Rollover Contribution, there shall be maintained a
Rollover Account. Rollover Accounts shall be adjusted as provided in
Article VI, and shall be closed when the balances of such accounts,
including allocable earnings, gains and losses, have been distributed
pursuant to this Plan.
4.3.3 Rollover Contributions: Allocation
- ----- ----------------------------------
Any Rollover Contribution received by the Plan pursuant to this
Article IV shall be credited as it is received to the Rollover
Account(s) of the Participant on whose behalf it was received.
4.3.4 Rollover Contributions: Vesting
- ----- -------------------------------
The Rollover Contributions received by the Plan on behalf of any
Participant shall be fully vested in such Participant and not subject
to forfeiture prior to the time they are distributed pursuant to this
Plan.
14
<PAGE>
The allocations to be reduced (and the order in which they shall
be reduced) shall be as follows:
(1) Elective Contributions
(2) Basic Contributions
The amount by which an Elective Contribution is reduced shall be
distributed to the Participant on whose behalf it was received as
soon as administratively practicable, and shall include any
earnings and gains that have been' allocated and which are
attributable to that returned amount.
The remaining surplus amounts created by the reductions described
above shall be held in a Suspense Account established and
administered pursuant to Section 5.1.2.
(d) For purposes of this Section, compensation means a Participant's
wages, salary, and/or other remuneration that is required to be
reported as income on the individual's Form W-2 for federal
income tax withholding purposes under Code sec. 3401(a).
For the purposes of this Section, the total amount of
compensation that is actually paid or made available to a
Participant within a Limitation Year shall be the amount of that
Participant's compensation taken into account regarding that
Limitation Year.
(e) Additional Limitation in the Case of Defined Benefit Plan and
-------------------------------------------------------------
Defined Contribution Plan for Same Employee:
--------------------------------------------
(1) In any case where a Participant has at any time participated
in a defined benefit plan maintained by the Employer, the
limitation imposed by this Section (without regard to this
Additional Limitation) shall be reduced to the extent
necessary to prevent the Participant's Combination Ratio
from exceeding 1.0 in any Limitation Year. A Participant's
Combination Ratio is the sum of his Defined Benefit Fraction
and his Defined Contribution Fraction.
(2) A Participant's Defined Benefit Fraction for a Limitation
Year is a fraction -
(A) the numerator of which is his projected annual benefit
(as defined in sec. 415(e) of the Code and regulations
thereunder) to which the Participant would be entitled
under the defined benefit plan as of the close of the
Limitation Year;
(B) the denominator of which is the lesser of:
(i) the product of 1.25 (or, if the Plan is top-heavy
as determined under the provisions of Section 5.2,
1.0) multiplied by the dollar limitation in effect
under sec. 415(b)(1)(A) of the Code for such
Limitation Year, or
(ii) the product of 1.4 multiplied by the amount which
may be taken into account under sec. 415(b)(1)(B)
of the Code with respect to such Participant for
such Limitation Year.
17
<PAGE>
(3) A Participant's Defined Contribution Fraction for a
Limitation Year is a fraction -
(A) the numerator of which is the sum of the Annual
Additions (as defined in this Section) to the
Participant's account for the Participant's benefit as
of the close of the Limitation Year arid for all prior
Limitation Years; and
(B) the denominator of which is the sum of the lesser of
the following amounts determined for such Limitation
Year and for each prior Limitation Year of service with
the Employer:
(i) the product of 1.25 (or, if the Plan is top-heavy
as determined under the provisions of Section 5.2,
1.0) multiplied by the dollar limitation in effect
under sec. 415(c)(1)(A) of the Code for such
Limitation Year (determined without regard to sec.
415(c)(6) of the Code), or
(ii) the product of 1.4 multiplied, by the amount which
may be taken into account under sec. 415(c)(1)(B)
of the Code (or subsection (c)(7) or (8), if
applicable) with respect to such Participant for
such Limitation Year.
(4) For purposes of this Additional Limitation, Employee
contributions to any defined benefit plan maintained by
the Employer, whether mandatory or voluntary, shall be
treated as a separate defined contribution: plan
maintained by the Employer.
(5) If an additional limitation is applicable, it shall be
imposed in this Plan before any reduction in the
limitation on benefits payable under any defined
benefit plan, unless the applicable defined benefit
plan provides expressly to the contrary.
(f) Aggregation of Plans
--------------------
For purposes of this Section, all qualified defined
contribution plans (without regard to whether a plan has
been terminated) ever maintained by the Employer will be
treated as part of this Plan, and all qualified defined
benefit plans (without regard to whether a plan has been
terminated) ever maintained by the Employer will be treated
as one defined benefit plan.
Employee contributions (whether mandatory or voluntary) to a
qualified defined benefit plan maintained by the Employer
shall be treated as a Wined contribution plan maintained by
the Employer.
Any qualified defined benefit or defined contribution plan
maintained by any member of a controlled group of
corporations or group of trades or businesses (whether or
not incorporated) under common control (within the meaning
of sec. 414(b) and (c) of the Code as modified by sec.
415(h)) of which the Employer is a member shall be treated
as a plan maintained by the Employer.
5.1.2 Suspense Account
- ----- ----------------
For any Plan Year, any surplus amounts created by reductions described
in Section 5.1.1(c) and not returned to a Participant shall be held
unallocated in a Suspense Account.
18
<PAGE>
Any provisions of this Plan to the contrary notwithstanding, any
amounts held in a Suspense Account shall be applied toward Employer
contributions and Plan expenses as such obligations accrue, with the
Employer making no further contributions to the Plan until such time
as the Suspense Account balance has been exhausted.
No amounts held in a Suspense Account may be distributed to any
Participant at any time prior to termination of the Plan. If there are
amounts held in a Suspense Account at a time when the Plan is
terminated, such amounts shall be reallocated to Participants in
proportion to their Compensation for that Plan Year but not in excess
of each Participant's Maximum Annual Addition for the Plan Year. Any
amounts that cannot be reallocated may revert to the Employer
according to Section 8.1.3.
5.2.1 Top-Heavy Provisions: Application
- ----- ----------------------------------
The provisions of Sections 5.2.1 - 5.2.3 shall become effective only
if, as of the first day of the applicable Plan Year, the Plan is top-
heavy pursuant to the Test described in Section 5.2.2.
5.2.2 Top-Heavy Determination
- ----- -----------------------
(a) Definitions
(1) Aggregation Group
-----------------
(A) Required Aggregation Group means
--------------------------
(i) each and every plan of the Employer in which a Key
Employee is a Participant during the Plan Year
containing the Determination Date or any of the
four preceding Plan Years, including any plan that
has subsequently terminated, and
(ii) each other plan of the Employer which enables any
plan described in subsection (i) above to meet the
participation or nondiscrimination requirements of
the Code, including (but not limited to) the
requirements of Code secs. 401(a)(4) and 410.
(B) Permissive Aggregation Group means a Required
----------------------------
Aggregation Group or a plan described in subsection
(A)(i) above together with any other plan of the
Employer which is not required to be included in an
Aggregation Group under subsection (A)(ii)' above but
which may be so included if such group would continue
to meet the participation and nondiscrimination
requirements of the Internal Revenue Code.
(C) Top-Heavy Group means any Required Aggregation Group
---------------
found to be top-heavy pursuant to subsection (b) of
this Section 5.2.2.
(2) Compensation means compensation as defined in Section
------------
5.1.1(d).
(3) Determination Date means
------------------
(A) in the case of the first Plan Year, the last day of
such Plan Year;
(B) in all other cases, the last day of the preceding Plan
Year.
19
<PAGE>
(4) Non-Key Employee means any Employee who is not a Key
----------------
Employee.
(5) Present Value of Accrued Benefits means, for this Plan, the
----------------------------------
sum of
(A) the account balances attributable to Basic and Elective
Contributions as of the most recent Valuation Date
occurring within a twelve-month period ending on the
Determination Date, and
(B) an adjustment for certain contributions due as of the
Determination Date, as required by Code sec. 416.
If this Plan is a member of an Aggregation Group, Present
Value of Accrued Benefits shall mean the sum of the account
balances of all Employer and non-deductible Employee
Contribution Accounts maintained for the Participant
pursuant to all defined contribution plans that belong to
the group and of which he is a member and also the sum of
the present values of the vested accrued benefits due the
Participant pursuant to all defined benefit plans that
belong to the group and of which the Participant is a
member.
(6) Valuation Date means the last date in each Plan Year on
--------------
which account balances are valued.
(b) Top-Heavy Test
The Plan (or Aggregation Group) shall be top-heavy for each Plan
Year if, as of the Determination Date, the Plan's (or Aggregation
Group's) top-heavy ratio for the Plan Year exceeds sixty percent
(60%). The top-heavy ratio is the Present Value of Accrued
Benefits of all Key Employees over the Present Value of Accrued
Benefits of all Employees, excluding former Key Employees.
Calculation of the top-heavy ratio shall be made in accordance
with sec. 416 of the Code (with specific reference to Code sec.
416(g)(3)) and shall take into account the following amounts:
(1) Present Value of Accrued Benefits as described in subsection
(a)(5) above; and
(2) The amount of all distributions to Participants or their
Beneficiaries during the Plan Year that includes the
Determination Date and also during the four preceding Plan
Years pursuant to this Plan or pursuant to a terminated plan
which if it had not been terminated would have been required
to be included in an Aggregation Group, EXCEPT
(A) any rollover to this Plan initiated by the Employee and
(B) any transfer to this Plan from a qualified plan
maintained by an unrelated employer; and
(C) any distribution which occurred after the Valuation
Date but prior to the Determination Date to the extent
that such a distribution has been included in the
calculation of the Present Value of Accrued Benefits.
However, calculation of the top-heavy ratio for any Plan Year
shall not take into account the Present Value of Accrued Benefits
or the amount of all distributions made to any individual who has
not performed services for the Employer at any time during the 5-
year period ending on such Plan Year's Determination Date.
20
<PAGE>
For, an Aggregation Group, each plan shall initially be tested
separately, and then the plans shall be aggregated by adding
together the results for each plan as of the Determination Dates
that fall within the same calendar year. If the Aggregation Group
includes two or more defined benefit plans, the same actuarial
assumptions will be specified within and used by such plans for
the purposes of this Section 5.2. Also, in such defined benefit
plans proportional subsidies shall be ignored and non-
proportional subsidies considered for the purposes of this
Section 5.2.2(b).
For a Required Aggregation Group, each Plan shall be tested by
determining the Present Value of Accrued Benefits for non-Key
Employees (1) pursuant to the method, if any, that uniformly
applies for accrual purposes under all plans maintained by the
affiliated Employers; or (2) if there is no such method, as if
such Accrued Benefits accrued not more rapidly than the slowest
accrual rate permitted under the fractional accrual rates of sec.
411(b)(1)(C) of the Code.
5.2.3 Special Rules for Too-Heavy Plans
- ----- ---------------------------------
(a) Application of Special Rules
(1) If, after application of the top-heavy test described in
Section 5.2.2(b), this Plan is found not to be top-heavy,
then the special rules set forth below shall not apply to
this Plan. In that event, the other applicable provisions in
this Plan will govern.
(2) If, after application of the top-heavy test in Section
5.2.2( b), this Plan is found to be top-heavy, then the
following special rules shall govern.
(b) Minimum Contribution
(1) For each Plan Year in which the Plan is top-heavy, each non-
Key Employee who is a Participant and who has not separated
from Service at the end of the Plan Year, including any
Participant who failed to complete 1,000 Hours of Service,
and any who did not make an Elective Contribution pursuant
to Section 4.2.1, shall accrue not less than the minimum
contribution described below.
(2) The sum of the Employer's contributions and any forfeitures
allocated to the Individual Accounts of each such
Participant for each Plan Year in which the Plan is top-
heavy must equal not less than
(A) at least three percent (3%) of each such Participant's
compensation for that Plan Year; or
(B) if the highest percentage of compensation provided on
behalf of Key Employees who are Participants for that
Plan Year is less than three percent (3%), then not
less than the same percentage of such compensation for
that Plan Year for each non-Key Employee Participant as
the largest percentage of such compensation provided on
behalf of Key Employee Participants for that Plan Year.
(3) Any provisions of subsection (2) above to the contrary
notwithstanding, for each Plan Year in which the Employer
maintains both a defined benefit plan and a defined
contribution plan and both plans are top-heavy, each non-Key
Employee who is a Participant in both such Plans shall be
credited with not less than a portion of the sum of the
Employer's contributions and forfeitures made under the
terms of this Plan for that Plan Year equal to five percent
(5%) of his compensation.
21
<PAGE>
In determining the minimum contribution or benefit that is
required for non-Key Employees by this Section, Elective
Contributions, if any, that are allocated to Key Employees shall
be taken into account. Elective Contributions made on behalf of
non-Key Employees may not be credited as part of any minimum
contribution or benefit required by this Section.
If the Employer is required to contribute an additional amount to
the Plan, on behalf of a Participant as a result of the.
operation of this Article, that amount shall be credited to a
Basic Contribution Account established and maintained on his
behalf.
5.3 Actual Deferral Percentage Test
- --- -------------------------------
(a) For each Plan Year, the Plan Administrator shall perform (or have
performed) an Actual Deferral Percentage Test in order to ensure
that the Plan's cash or deferred arrangement satisfies the
requirements of Code sec. 401(k)(3) and does not impermissibly
discriminate in favor of Participants who are Highly Compensated
Employees ("HCEs").
The Actual Deferral Percentage ("ADP") Test shall compare the ADP
of those Participants who are HCEs with the ADP of those
Participants who are not HCEs.
For any group of Participants, the group's ADP equals the average
(expressed as a percentage) of the actual deferral ratios of that
group's Participants, with each Participant's actual deferral
ratio calculated separately.
For any Plan Year, a Participant's actual deferral ratio consists
of the amount of the Participant's Elective Contribution for the
Plan Year (subject to the limitations of the following paragraph)
expressed as a percentage of his Compensation.
For purposes of this Section 5.3, in any Plan Year, the Plan
Administrator may elect to use compensation as described in
Section 5.1.1(d) or "compensation" as described in the definition
of HCE in Article 11, instead of Compensation, for every
Participant. Also, the Plan Administrator may elect to limit
Compensation (or the applicable alternative) for every
Participant to Compensation received while participating in the
Plan.
In determining a Participant's actual deferral ratio, the
Participant's Elective Contributions may be taken into account
only to the extent that they satisfy the following conditions.
(1) The Elective Contribution must be allocated to an account
maintained on behalf of the Participant as of a day within
the plan year being considered. For the purpose of this
provision, an Elective Contribution shall be considered
allocated as of a date within a plan year only if both:
(A) the allocation is not contingent. upon the
Participant's participation in a plan or performance of
service on any date subsequent to the date of
allocation; and
(B) the amount of the Elective Contribution is actually
paid to the plan pursuant to which the Elective
Contribution is made no later than the end of the
twelve-consecutive-month period immediately following
the plan year to which the contribution relates.
22
<PAGE>
(2) The Elective Contribution relates to Compensation that
either:
(A) would have been received by the Participant in the plan
year but for the Participant's election to defer that
Compensation, or
(B) is attributable to service performed by the Participant
in the plan year and, but for the Participant's
election to defer, would have been received by the
Participant within two and one-half months after the
close of the plan year.
In addition, if with reference to a Plan Year the Participant was
an HCE and also participated in more than one cash or deferred
arrangement sponsored by the Employer, then all such cash or
deferred arrangements shall be aggregated and treated as one
arrangement for the purposes of determining the Participant's
actual deferral ratio for that Plan Year. If these arrangements
have different plan years, these arrangements'. plan years that
end with or within the same calendar year shall be aggregated and
treated for ADP purposes as a single arrangement and single plan
year. However, the preceding provisions to the contrary
notwithstanding, contributions and allocations under plans
described by Code sec. 4975(e)(7) (i.e. "ESOPs") shall not be
aggregated.
(b) For each Plan Year, the ADP for the group of Eligible
Participants who are HCEs for that Plan Year shall not exceed the
greater of (1) or (2), where
(1) equals 125% of the ADP for the group of Eligible
Participants who are non-HCEs for that Plan Year; and
(2) equals the lesser of (A) and (B), where
(A) equals 200% of the ADP for the group of Eligible
Participants who are non-HCEs for that Plan Year; and
(B) equals the ADP for the group of Eligible Participants
who are non-HCEs for that Plan Year, plus 2 percentage
points (or such other amount as may be prescribed by
the Secretary of the Treasury).
For the purposes of this subsection, "Eligible Participants"
means those Participants, who during the Plan Year were eligible
to have elected to defer some portion of their Compensation for
that Plan Year so as to receive an Elective Contribution,
regardless of whether such an election was actually made.
(c) If for a Plan Year the ADP limits of subsection (b) above are
exceeded, the amount of excess contributions to be attributed to
each HCE shall be determined by the following leveling method.
The Plan Administrator shall reduce the amount of Elective
Contributions that are allocated pursuant to the Plan for that
Plan Year on behalf of the HCE with the highest actual deferral
ratio. This reduction shall be made only to the extent required
to (1) enable the Plan to meet the ADP limits, or (2) cause the
HCE's actual deferral ratio to equal the actual deferral ratio of
the HCE with the next highest actual deferral ratio, whichever
occurs first.
This process shall be repeated by the Plan Administrator until
the ADP test limits of subsection (b) above have been met.
23
<PAGE>
For each Plan Year, the amount of excess contributions, if any,
for each HCE shall equal the sum of the HCE's Elective
Contributions, minus the product of the HCE's actual deferral
ratio (determined after application of this subsection)
multiplied by the HCE's Compensation.
(d) After the close of the Plan Year to which the excess
contributions are attributable, but within twelve months after
such Plan Year's close, the Plan Administrator shall designate as
such and distribute to each HCE the amount (if any) of excess
contributions (plus any earnings, gains or losses described in
Section 6.2 attributable to such contributions) that were made on
that HCE's behalf, minus the sum of any excess deferrals
previously distributed do the HCE for the HCE's taxable year
ending with or within that Plan Year.
(e) Any of the provisions of this Section to the contrary
notwithstanding, in determining the actual deferral ratio of a
Participant who is an HCE, the family aggregation rules described
in paragraph (4) of the definition in Article II of Highly
Compensated Employee shall apply, and the actual deferral ratio
of any such family aggregate shall equal the actual deferral
ratio determined by combining the contributions received by the
Plan on behalf of and Compensation paid to all eligible family
members.
After the actual deferral ratio of such a family aggregate has
been determined, the amount of excess contributions (if any) that
were allocated on behalf of the family aggregate shall be
determined and corrected according to the "leveling" method
described in subsection (c) above. The resulting excess
contributions shall be reallocated among those family members
whose contributions were combined to determine the actual
deferral ratio of the family aggregate, with each such member
being allocated an amount of excess contribution in proportion to
the contributions of each such member that have been combined.
(f) For the purposes of satisfying the limits specified in this
Section and in Code secs. 401(a)(4), 410(b), and 401(k), two or
more cash or deferred arrangements may be aggregated, provided
that such aggregation is consistent with the provisions of IRC
Regs. 1.401 (k)-1(b)(3) and 1.401 (k)-1(g)(1)(ii); for example,
cash or deferred arrangements may be aggregated pursuant to this
subsection only if the respective plans of which they are part
have the same plan years. All elective contributions that are
made under any plan that are aggregated with this Plan for the
purposes of Code sec. 401(a)(4) or sec. 410(b) (other than sec.
410(b)(2)(A)(ii)) are to be treated as if they were made under a
single plan. In addition, if any plans are permissively
aggregated with this Plan for the purposes of Code sec. 401(k),
the aggregated plans must also satisfy Code secs. 401(a)(4) and
410(b) as though they were a single plan.
24
<PAGE>
ARTICLE VI
ADMINISTRATION OF PLAN ASSETS
6.1.1 The Investment Fund
- ----- -------------------
All funds received by the Plan pursuant to Article IV, including
amounts deposited with the Insurance Company under an annuity or
insurance contract, shall be credited to the trust fund. The trust
fund shall be of a suitable nature to hold the funds and to provide
the benefits payable under this Plan.
The Plan Administrator shall create and maintain adequate records to
disclose the interest in the trust fund of each Participant or,
where appropriate, his Beneficiary. Such records shall be in the
form of Individual Accounts, and credits and charges shall be made
to such accounts in the manner herein described. These amounts shall
be maintained for accounting purposes only and shall not represent
any segregated or identifiable portion of the trust fund.
All deposits to the trust fund shall be applied for the exclusive
benefit of Participants and their Beneficiaries, except for such
reasonable expenses as may be incurred in the establishment or
operation of the Plan and which are not otherwise paid. Except as
provided in Sections 8.1.3 and 8.5, no amounts in the trust fund nor
any earnings attributable thereto, may ever revert to the Employer
prior to full satisfaction of all liabilities under the Plan.
6.1.2 Employee Directed Investments
- ----- -----------------------------
Amounts held in the trust fund shall be allocated among a variety of
investment options made available and selected by the Trustees
pursuant to the contract with the Insurance Company. Each
Participant and Beneficiary may direct the allocation of the amounts
held in the trust fund on his behalf among these investment options.
To the extent that the Participant or Beneficiary does not direct
the investment of such amounts received on his behalf, the remainder
will automatically be allocated to and invested in one of the
investment options available under the Insurance Company contract
and pursuant to the Trustees' direction.
Each Participant and Beneficiary may elect to redirect the
investment of amounts held in the trust fund on his behalf.
Any of the above-specified directives to allocate, re-allocate,
transfer or remove funds from or among the various investment
options shall be effective for the purposes of this Plan only
prospectively after reasonable notice to the Insurance Company and
subject to any restrictions on the amount or timing of transfers to
or from particular investment options, according to the terms of the
Insurance Company contract or procedures established and uniformly
applied by the Plan Administrator.
6.2 Account Adjustments
- --- -------------------
Individual Accounts shall be valued as of the last day of each
calendar quarter and every other day on which earnings, gains, and
losses are credited. Each Active Account shall be credited with
earnings, gains, and losses according to the terms of its underlying
investments. Plan expenses described in Section 6.4 shall be
allocated at least once in every calendar quarter to Individual
Accounts existing on that allocation date. Each Individual Account
shall receive an allocation of such expenses in the same proportion
that the balance of the Individual Account bears to the sum of the
balances of all Individual Accounts. The allocation dates shall be
determined
25
<PAGE>
according to a uniform, consistent, and nondiscriminatory procedure
approved by the. Plan Administrator.
For purposes of this Section, Active Account means each Individual
Account, any Suspense Account, and each other account that can
accrue earnings, gains, and losses, such as an account used for
holding Forfeitures until they can be applied as provided in Article
IV.
6.3 Distribution Adjustments
- --- ------------------------
The amount of any distribution from an Individual Account maintained
on behalf of a Participant pursuant to the terms of this Plan shall
be charged against that Individual Account as of the date such
distribution is made.
6.4 Expenses
- --- --------
For any Plan Year, the Employer may pay the expenses of operating
and maintaining the Plan. Such payment shall be in addition to and
independent of any contributions to the Plan or assets held by the
Plan.
Absent prompt and timely payment by the Employer, the expenses of
operating and maintaining the Plan for the Plan Year shall be
allocated to Individual Accounts pursuant to Section 6.2, EXCEPT
that any expenses attributable to the single sum benefit payment fee
for a distribution other than a death, Total and Permanent
Disability or Retirement shall be directly charged against that
Participant's Individual Accounts.
26
<PAGE>
ARTICLE VII
DISTRIBUTIONS
7.1 Termination of Employment (Including Disability) Before Retirement
- --- ------------------------------------------------------------------
(a) If a Participant's employment as an Employee is terminated due
to his Total and Permanent Disability, or due to any other
reason except his death or Retirement, he may elect to receive
his Vested Benefit. To be. effective for the purposes of this
Plan, such an election must be delivered in writing to the
Plan Administrator not more than 90 days before the Annuity
Starting Date that he has selected. In the election the
Participant shall specify a form in which the Vested Benefit
is to be distributed from among the forms described in Section
7.4, and also an Annuity Starting Date (see Section 2.2),
provided that no distribution under this Section shall be made
or commence before the Participant's date of termination as
an. Employee, nor later than the date which would be the
Participant's Normal Retirement Date had he not terminated
such employment until then.
(b) In any event, the Plan Administrator (or Trustee, as
applicable) shall distribute to the Participant his entire
Vested Benefit in a lump sum as soon as administratively
practicable after the time of his termination, provided that
the Participant's Vested Benefit has not ever exceeded $5,000
as of the date of any prior distribution to the Participant or
the date the Participant terminated Service. If the
Participant's entire Vested Benefit equals zero as of the date
his Service terminates, then the Participant shall be deemed
to have received a distribution of his entire Vested Benefit
as of that date of termination.
(c) Any distribution that is made to a Participant pursuant to
this Section shall be in lieu of any and all other benefits,
present or contingent, to which the Participant may be
entitled under the terms of this Plan.
7.2 Death Benefits
- --- --------------
(a) If a Participant who is credited with a Vested Benefit dies
prior to the Annuity Starting Date of his Vested Benefit, then
the Plan shall distribute a death benefit on his behalf.
The amount of the death benefit shall be the actuarial
equivalent of his Vested Benefit (after having taken into
account any security interest in his Vested Benefit that the
Plan has as a result of any currently outstanding loan to the
Participant).
(b) If the Participant 'has a surviving spouse as of his date of
death, the death benefit shall be payable to such surviving
spouse. If the Participant has no surviving spouse, the death
benefit will be paid to the Participant's designated
Beneficiary.
(c) The Participant's death benefit shall be distributed to the
surviving spouse or other designated Beneficiary in the form
of a lump sum, and the Annuity Starting Date of that benefit
shall be as soon as administratively practicable (in any
event, within one year) following the Participant's date of
death. However, if the Participant's Vested Benefit has ever
had a lump sum value of $5,000 or more as of the date of any
prior distribution to the Participant, or the Participant's
date of death, the person to whom that benefit is to be
distributed, whether surviving spouse or other designated
Beneficiary, may elect to have the death benefit distributed
in any other form of benefit described
27
<PAGE>
in Section 7.4 and not precluded thereby. To be effective for
the purposes of this Plan, such an election must be in
writing, and must be received by the Plan Administrator prior
to the death benefit's Annuity Starting Date. Given such an
election, the Annuity Starting Date for the death benefit
would then occur within 90 days after receipt of that
election.
In any event, any death benefit payable pursuant to this
Section shall commence or be distributed not later than the
time period described in (1) or (2) below, as appropriate:
(1) if payable to a surviving spouse (or child of the
Participant, as provided below), not later than December
31 of the calendar year in which the Participant would
have attained 70'/2; or
(2) if payable to any other Beneficiary, not later than the
first anniversary of the Participant's death;
PROVIDED that, if said spouse or Beneficiary cannot be located
within the applicable time period specified above, the Plan
Administrator may delay commencement or distribution of
payments for a period ending not later than the first day of
the first month beginning after the sixtieth day following the
date on which such spouse or Beneficiary has been identified
and located by the Plan Administrator and the Plan
Administrator has received any necessary documentation of
death.
A death benefit payable to any surviving child of the
Participant shall be treated as if payable to the surviving
spouse for purposes of (1) above in this subsection PROVIDED
that such benefit will become payable to the surviving spouse
as of the date such child reaches age 21 or as of such other
time as prescribed by the Secretary of the Treasury under
regulations.
If a surviving spouse is eligible to receive death benefits
under this Plan, and if that surviving spouse dies prior to
the Annuity Starting Date of those death benefits, then the
death benefits to which the deceased spouse had been entitled
shall be payable on his or her behalf within such a time-frame
as would be appropriate if the deceased spouse had been the
Participant, with the date of death of the surviving spouse
being substituted for the Participant's. However, the
exceptions provided in Code sec. 401(a)(9)(B)(iv) shall not be
available regarding any surviving spouse of the Participant's
surviving spouse.
(d) If a Participant dies after his Vested Benefit has been
distributed in the form of a lump sum, there shall be no
benefit payable from the Plan as a result of his death. If his
Vested Benefit has been distributed in the form of an annuity,
any benefit payable as a result of his death shall be
determined solely under the terms of the annuity that was
distributed, provided that the remaining portion of such
benefit, if any, shall be distributed to the beneficiary at
least as rapidly as provided in the terms of said annuity but
in any event consistent with Code sec. 401(a)(9)(B).
If a Participant dies while receiving the Payments from
Account described in Section 7.4 before his entire Vested
Benefit has been distributed, his surviving spouse or
Beneficiary may elect in writing to the Plan Administrator to
receive the previously undistributed portion of such Vested
Benefit in the form of a lump sum; in any event, the remaining
portion of such benefit, if any, shall be distributed at least
as rapidly as under the terms of said Payments from Account in
effect for the Participant at death.
28
<PAGE>
7.3 Retirement
- --- ----------
A Participant, regardless of his status as an Employee, shall have
attained Retirement Age when he has attained age 65, which shall be
his Normal Retirement Age.
A Participant who has attained Retirement Age may retire by
designating in writing to the Plan Administrator a Retirement Date,
which shall be his Retirement benefit's Annuity Starting Date, and
which may be the first day of any month after he has attained
Normal Retirement Age, but not later than the latest date permitted
by the provisions of Section 7.5 regarding Commencement of
Payments. This latter date shall be the Retirement Date of any
Participant who has not, prior thereto, designated a Retirement
Date.
If the date on which the Participant attains Normal Retirement Age
is the first day of a month, that date shall be his Normal
Retirement Date. Otherwise, the Participant's Normal Retirement
Date shall be the first day of the first month following his
attainment of Normal Retirement Age.
Upon Retirement, a Participant shall commence to receive his Vested
Benefit as provided in Section 7.5.
7.4 Form of Retirement Benefit
- --- --------------------------
(a) Unless a lump sum distribution is required by Section 7.1
(b) or 7.2(c) or unless an optional form of benefit has
been selected pursuant to subsection (b) below, the
Retirement benefit payable to a Participant at the time of
his Retirement shall be the actuarial value of his Vested
Benefit distributed in the form of a Lump Sum, which is a
single payment in an amount equal to the Participant's
Vested Benefit.
(b) A Participant may elect to waive receipt of his Retirement
benefit in the form of a Lump Sum, and instead to receive
his Retirement benefit in one of the following forms.
(1) Annuity for a Period Certain - monthly income
payable for a certain period elected by the
Participant of not more than 240 months. If the
Participant dies after his Retirement Date, or if
the Participant's surviving spouse (or, if none,
his Beneficiary) dies after commencement of
payments, but before the end of the certain period,
payments will commence or be continued for the
remainder of the certain period to the
Participant's surviving spouse or, if the
Participant was unmarried, his Beneficiary (or, if
the annuity is distributed pursuant to Section 7.2,
to a beneficiary designated by. the Participant's
surviving spouse or Beneficiary, as applicable,)
PROVIDED, however, that the certain period elected
shall not extend beyond (1) the life expectancy of
the Participant, (2) the life expectancies of the
Participant and his surviving spouse or designated
Beneficiary, as applicable, (3) if payable pursuant
to Section 7.2, the life expectancy of the
surviving spouse or designated Beneficiary, as
applicable, or (4) 60 months, if by operation of
Section 8.6 the Participant's Beneficiary is his
estate.
However, this optional form may be elected only if
the amount of monthly benefit payable to the
Participant would exceed 50% of the amount he would
receive in the form of a straight life annuity.
(2) Partial Distributions - payments in an amount
specified by the Participant, except that the
amount of each distribution may not be less than
$1,000.
29
<PAGE>
(c) Solely for the purposes of distributing to a Participant
his Vested Benefit where such distribution has not
occurred prior to his Required Beginning Date (see Section
7.5(d)(2) below), the Participant may elect to receive the
distribution to commence as of his Required Beginning Date
in the form of Payments from Account, rather than in one
of the forms of Retirement benefit payable already
provided by this Article VII.
Payments from Account shall mean periodic payments in an
amount specified by the Participant or his Beneficiary
continuing until such time as the Participant's Vested
Benefit (adjusted for subsequent Net Adjustments) is
exhausted, PROVIDED however that the period over which
said payments are to be made shall not extent beyond (1)
the life expectancy of the Participant, (2) the life
expectancies of the Participant and his surviving spouse
or other designated Beneficiary, (3) if payable pursuant
to Section 7.2, the life expectancy of the surviving
spouse or other designated Beneficiary, or (4) 60 months,
if by operation of Section 8.6 the Participant's
Beneficiary is his estate.
7.5 Retirement Benefits: Election of Forms and Commencement of Payments
- --- -------------------------------------------------------------------
(a) Applicability of this Section
-----------------------------
In the case of a Participant who will receive a
distribution pursuant to Section 7.1 due to his
termination of employment before his attainment of
Retirement Age, the form of the distribution and the time
of commencement of payments will be as provided in that
Section. The form and time of commencement of death
benefits payable to Beneficiaries shall be governed
according to Section 7.2. The form and time of
commencement of any other benefits payable pursuant to
this Plan will be determined according to this Section and
Section 7.4.
In any event, all distributions required under this
Section shall be determined and made in accordance with
the Income Tax Regulations under Code sec. 401(a)(9),
including the minimum distribution incidental benefit
requirement of sec. 1.401(a)(9)-2 of the regulations.
(b) Commencement of Payments
------------------------
(1) Unless a Participant otherwise elects in a writing
received by the Plan Administrator prior to the
Participant's Annuity Starting Date, payment of the
Participant's Vested Benefit shall begin not later
than the 60th day after the close of the Plan Year
in which occurs the latest of:
(A) the Participant's attainment of Normal
Retirement Age;
(B) the 10th anniversary of the date on which
the Participant commenced participation in
this Plan; or
(C) the Participant's termination of employment
as an Employee,
provided that if the Participant has failed to
provide the Plan Administrator with sufficient
information as to age and marital status or any
other relevant information, so that the amounts of
payment may not be determined, or if the
Participant cannot be located, then the Plan
Administrator may delay commencement of payments
for not more than 60 days after the earliest date
on which the amount and form of payment may be
determined under the terms of this Plan, or the
Participant is located.
30
<PAGE>
The amount of payment in the event of such a delay
shall be retroactive to the Participant's
Retirement Date.
Notwithstanding any provisions of this paragraph
(1) to the contrary, the failure of a Participant
and the Participant's spouse to consent to the
distribution of a benefit while that benefit is
immediately distributable pursuant to this Section
shall be deemed to be an election to defer
commencement of payment of that benefit.
(2) Any provisions of this Plan to the contrary
notwithstanding, the entire vested interest of the
Participant in benefits under this Plan: .
(A) will be distributed to the Participant not
later than the. Participant's Required
Beginning Date, or
(B) will be distributed, beginning not later
than the Participant's -Required Beginning
Date, over the life of the Participant or
over the lives of the Participant and a
designated beneficiary (or over a period not
extending beyond the life expectancy of the
Participant or the life expectancy of the
Participant and a designated beneficiary).
For the purpose of determining the amount to be
distributed as of the Participant's Required
Beginning Date, his Vested Benefit shall be valued
as of December 31 of the calendar year immediately
preceding his Required Beginning Date.
The Participant may elect for these required
distributions to be paid in any of the forms of
benefit described in Section 7.4, subject to any
spousal consent requirements that may apply
pursuant to this Plan. Absent such an election,
these distributions automatically shall be payable
in the form described in Section 7.4(a).
(3) If a Participant's interest is to be distributed in
a form other than a Lump Sum, the following minimum
distribution rules shall apply on or after the
Participant's Required Beginning Date.
(A) If the Participant's benefit is to be
distributed over (1) a period not extending
beyond the life expectancy of the
Participant or the joint life and last
survivor expectancy of the Participant and
the Participant's Beneficiary, or (2) a
period not extending beyond the life
expectancy of the Beneficiary, then the
amount required to be distributed for each
calendar year, beginning with distributions
for the first distribution calendar year,
must at least equal the .quotient obtained
by dividing the Participant's benefit by the
applicable life expectancy.
(B) For calendar years beginning before January
1, 1989, if the Participant's spouse (if
any) is not the Beneficiary, the method of
distribution selected must assure that at
least 50% of the present value of the amount
available for distribution is paid within
the life expectancy of the Participant.
(C) For calendar years beginning after December
31, 1988, the amount to be distributed each
year, beginning with distributions for the
first distribution calendar year, shall not
be less than the quotient obtained by
dividing the Participant's benefit by the
lesser of (1) the applicable life
expectancy, or (2) if the Participant's
spouse (if any) is not the Beneficiary, the
applicable divisor determined
31
<PAGE>
from the table set forth in 4&A-4 of sec.
1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the
Participant shall be distributed using the
applicable life expectancy referenced in
subsection (3)(A) above as the relevant
divisor without regard to Regulations sec.
1.401(a)(9)-2.
(D) The minimum distribution required for the
Participant's first distribution calendar
year must be made on or before the
Participant's Required Beginning Date. The
minimum distribution for other calendar
years, including the minimum distribution
for the distribution calendar year in which
the Participant's Required Beginning Date
occurs, must be made on or before .December
31 of that distribution calendar year.
If the Participant's benefit is distributed in the
form of an annuity purchased from an Insurance
Company, any such distribution shall be made in
accordance with the requirements of Code sec.
401(a)(9) and the regulations promulgated
thereunder.
(4) Any additional amounts of Vested Benefit accrued by
the Participant after his Required Beginning Date
shall be distributed annually in the form of a lump
sum consistent with the requirements of Code sec.
401(a)(9) and applicable regulations.
(5) Once distributions have begun to a 5% owner under
this subsection, they must continue to be
distributed even if the Participant ceases to be a
5% owner in a subsequent year.
(6) For the purposes of this subsection, "applicable
life expectancy" means the life expectance (or
joint and last survivor expectancy) calculated
using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or
designated beneficiary's) birthday in the
applicable calendar year reduced by one for each
calendar year which has elapsed since the date the
life expectancy was first calculated.
If the life expectancy is being recalculated, the
applicable life expectancy shall be the life
expectancy as so recalculated.
The applicable calendar year shall be the first
distribution calendar year, and if the life
expectancy is being recalculated, each such
succeeding calendar year.
If annuity payments commence before the Required
Beginning Date, the applicable calendar year is the
year such payments commence. If the distribution is
in the form of an immediate annuity purchased after
the Participant's death with the Participant's
remaining Vested Benefit, the applicable calendar
year is the year of purchase.
(7) Unless otherwise elected by the Participant (or
spouse, as applicable) by the time distributions
are required to begin, life expectancies shall be
recalculated annually. If such an election has been
made by the Participant (or spouse, as applicable),
it shall be irrevocable as to the Participant (or
spouse) and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may
not be recalculated.
32
<PAGE>
7.6 Loans to Participants
- --- ---------------------
Each Employee and former Employee who is a party in interest, within
the meaning of Section 3(14) of the Employee Retirement Income Security
Act of 1974, as amended, may apply to obtain loans from the Plan
according to the procedures, and limits described below.
(a) Any application for a loan may only be made in writing, and
will become effective only upon receipt by the Plan
Administrator. The principal amount of the loan requested may
not be less than one thousand dollars ($1,000.,00). Only one
loan shall be outstanding at any time.
(b) The Plan Administrator may choose to grant or deny the
request in a reasonably equivalent and nondiscriminatory
manner, consistent with the requirements of sec. 401 (and all
other relevant provisions) of the Internal Revenue Code, as
amended. However, under no circumstances shall a loan be made
by this Plan to any person who is or is deemed to be (or has
as a member of his immediate family) an "owner-employee" (as
defined in Code sec. 4975(d)) or a "shareholder-employee" of
an S Corporation (as defined in Code secs. 4975(d) and
1379(d)).
(c) If the request is granted and an amount is loaned to the
Employee or former Employee as described above (hereinafter
"the Borrower"), the resulting liability of the Borrower for
repayment of the loan to the Plan shall', be accounted through
the establishment of a Segregated Investment Fund !into which
the principal amount of the loan shall be entered as of the
date on which the amount of the loan is provided to the
Borrower.
Any such loan shall be treated as a directed investment by the
Borrower of Plan assets separate and apart from the Investment
Fund of the Insurance Company or any other assets of the Plan.
As such, any earnings, gains or losses attributable to the
loan shall be credited only to the Segregated Investment Fund
representing that loan, and shall in turn be allocated solely
to the Borrower's Individual Accounts.
(d) Each loan shall bear interest at a reasonable fixed rate
established by the Plan Administrator with reference to the
economic conditions and interest rates being charged by local
financial institutions for similar loans with similar
collateral as of the time when the loan request is being
processed. In addition, the Plan Administrator may require the
Borrower to pay any administrative fees that are deemed to be
necessary to establish or maintain the Segregated Investment
Fund, provided that all such fees or fee schedules shall! Be
disclosed to the Borrower at the time the loan is made and
again prior to ,any modification of such fees or schedules by
the Plan Administrator (which nay be enacted by the Plan
Administrator at any time that the Plan Administrator
determines that such modification is appropriate, in the
exercise of his or fiduciary duty), and further provided that
the ability to obtain loans from the Plan shall remain
available to all Borrowers on a reasonably equivalent basis.
Loans shall not be made available to HCEs in an amount greater
than the amount made available to non-HCEs; however, maximum
loan amounts may vary directly according to the size of each
Participant's vested accrued benefit under this Plan:
Each amount received in repayment of the loan shall be
credited to the Borrower's Segregated Investment Fund as of
the day on which it was received by the Plan Administrator,
after its having first been reduced by any administrative fees
charged by the Plan Administrator pursuant to the preceding
paragraph.
33
<PAGE>
(e) Each loan shall be evidenced by a negotiable promissory note
signed by the Borrower within 90 days before the loan is made,
and secured by a potion of the Borrower's Vested Benefit, with
such portion equal to the amount that is loaned to the Borrower
at the time of the loan's origination. The note shall state that
in the event of the Borrower's default on the loan, the Borrower
agrees to be bound by the provisions of this Plan, and
particularly by this Section.
The Plan Administrator, in the exercise of his sole discretion,
may require that additional security or documentation be provided
by the Borrower.
(f) Immediately after the origination of any Plan loan to the
Borrower, the total amount of the outstanding balances of all
loans made to the Borrower from this Plan may not exceed the
lesser of:
(1) 50% of the present value of the Borrower's vested interest
in amounts held under the Plan on the Borrower's behalf
(determined immediately after the loan's origination); or
(2) $50,000, reduced by the excess (if any) of:
(A) the highest outstanding balance of all loans to the
Borrower, under all qualified retirement plans
maintained by the Employer, during the one-year period
ending on the day before the date as of which the most
recent loan was made, over
(B) the outstanding balance of all loans to the Borrower,
under all qualified retirement plans maintained by the
Employer, on the date as of which the most recent loan
was made.
For the purposes of this subsection (f), "Employer" shall be as
defined in Article II, and in addition shall mean any other
employers which when taken together with the Employer(s)
sponsoring this Plan are treated as a single employer under sec.
414(b), (c) or (m) of the Internal Revenue Code, as amended.
For the purposes of this subsection (f), simplified employee
pension plans shall not be regarded as qualified retirement
plans.
(g) Each loan shall be subject to substantially level amortization
with payments at least quarterly.
(h) Each loan shall be distributed (if at all) as soon as reasonably
practicable, but in any event not later than 90 days after the
date on which the Plan Administrator receives the prescribed loan
request.
(i) Whenever possible, loans shall be repaid to the Plan through
periodic payroll deductions from the Borrower's Compensation (if
any).
(j) With the consent of the Plan Administrator, the Borrower may at
any time prepay an amount against the outstanding balance of the
loan; however, unless the entire outstanding balance is prepaid,
repayment installments must continue to be made periodically
according to the pre-arranged repayment schedule.
(k) At any time before it has been completely repaid (including
principal and interest), a loan under this Plan shall be in
default as of the earlier of:
34
<PAGE>
(1) the date an Employee (other than an Employee who is a party
in interest within the meaning of Section 3(14) of the
Employee Retirement Income Security Act of 1974, as amended)
terminates Service;
(2) the day immediately following the date on which any periodic
installment payment required under the Promissory Note is
not received by the holder of the Note when due;
(3) the date as of which any amount becomes distributable to a
Borrower from the Plan, including for example the Borrower's
date of Retirement, but only to the extent that such
distribution would result in the' loan balance equaling more
than the Borrower's vested interest in the Plan's assets
after such distribution; or
(4) the fifth anniversary of the date on which the amount of the
loan was paid from the Plan to the Borrower, EXCEPT, that
loan proceeds used to acquire any dwelling unit which within
a reasonable time is to be" used (determined at the time the
loan is made) as the principal residence of the Participant
shall be in default not later than the tenth anniversary Of
the date on which the amount of the loan was paid from the
Plan to the Borrower.
(l) a default occurs due to an Employee's termination of Service, the
entire loan balance including accrued interest shall be due upon
such termination of Service. If the Plan Administrator as holder
of the Promissory Note Determines that a loan under this Plan is
in default, then at the option of the Plan Administrator, the
Borrower may be given a reasonable amount of tine (in any event
not exceeding 60 days) to cure the default by repaying all
amounts that have become due as of that date.
If the default results from a distribution of excess elective
deferrals (pursuant to Code sec. 402(g)(2)), excess contributions
(pursuant to Code sec. 401(k)(8)), or excess aggregate
contributions (pursuant to Code sec. 401(m)(6)), if any, then the
Borrower may cure the default by repaying to the Plan an amount
sufficient to reduce the outstanding balance of the loan to an
amount equal to not more than the Borrower's vested interest in
Plan assets remaining after such distribution.
(m) If there is security for the loan available in addition to or
instead of the Borrower's vested interest in Plan assets, then
upon default, the holder of the Promissory Note may (but is not
required to) look to that other security for liquidation and
repayment of the loan.
(n) To the extent that a default of a loan is not cured or is not
repaid through security other than the Borrower's vested interest
in the Plan's assets, then the Plan Administrator shall reduce
the Borrower's vested interest in the Plan's assets. The amount
of such reduction shall equal the outstanding balance of the
loan, including any interest that has accrued as of that date of
determination, except that if the default has resulted from a
distribution of, Plan assets that has been made to bring the Plan
into compliance with any of the nondiscrimination limits and
tests of the Code (as specified e.g. in Code secs. 401(k),
401(m), or 415), then the amount of the reduction shall equal
only that amount which is necessary to cure the default by
reducing the outstanding balance of the loan to an amount equal
to the Borrower's vested interest in the Plan's assets as of that
date of determination and after the distribution has been made.
35
<PAGE>
Any reduction in a Borrower's vested interest in Plan assets
accomplished pursuant to this paragraph shall immediately result
in a corresponding reduction and offset of the outstanding
balance of the loan as of that date of determination.
However, under any circumstances, a Borrower's vested interest in
the Plan's assets may not be reduced pursuant to this subsection
(n) sooner or to a greater extent than such amounts become
distributable consistent with the provisions of Code sec. 401(k),
all other relevant Code sections, and regulations promulgated
thereunder.
(o) In the event that a loan from this Plan to a Borrower is treated
as a distribution under Code sec. 72, and/or under applicable
Department of Labor regulations, the Borrower's obligation to
repay the loan shall remain unchanged by such distribution
treatment.
(p) When the Borrower is no longer indebted under the Promissory Note
(e.g. due to the complete repayment of the loan, or due to
recovery of the loan's security upon default), the Borrower's
Segregated Investment Fund shall then be closed.
36
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.1.1 Plan Modification: Authority
- ----- ----------------------------
The Company reserves the right to amend, modify, or terminate the Plan
at any, time, provided that no amendment or modification shall act to
reduce the balances of the Individual Accounts of any Participant
accrued to the time of such amendment or modification.
8.1.2 Plan Modification: Merger
- ----- -------------------------
No merger, consolidation, or transfer of the assets or liabilities of
this Plan with or to any other qualified plan shall be undertaken
unless, after such merger, consolidation, or transfer, each
Participant would, if the Plan then terminated, receive a benefit not
less than the benefit he would have received had the Plan terminated
immediately prior to such merger, consolidation, or transfer.
8.1.3 Plan Modification: Termination
- ----- ------------------------------
Upon termination or partial termination of this Plan, or the complete
discontinuance of contributions by the Employer (as defined in IRC
Reg. 1.401-6(c) and 1.411 (d)-2(d)), the rights of each affected
Participant to benefits accrued to the date of termination or partial
termination, or the complete cessation of contributions by the
Employer,' shall be fully vested to the extent funded. Distributions
due to termination shall be made in a form provided for in this Plan
and shall meet any applicable requirements of Code sec. 401(a)(11),
411, and 417. However, Elective Contributions shall be distributed
because of Plan termination only if the Employer does not establish or
maintain a successor plan within the meaning of IRC Reg. 1.401(k)-
(1)(d)(3) or because of other events described in IRC Reg. 1.401 (k)-
(1)(d)(1)(iii), (iv), and (v).
If, after the allocation of the Plan's assets pursuant to the Plan's
termination, all liabilities of the Plan have been satisfied in full
and there remain surplus Plan assets not necessary to satisfy the
liabilities of the Plan, such surplus shall revert to the Employer,
consistent with the provisions of the termination amendment of this
Plan.
8.2.1 Duties: Plan Administrator
- ----- --------------------------
The Plan Administrator has the discretionary authority to control and
manage the operation and administration of the Plan, including the
specific duties outlined below. The Plan Administrator in his sole
discretion shall make such rules, regulations, interpretations, and
computations and shall take such other actions to administer the Plan
as he may deem appropriate. Such rules, regulations, computations, and
other actions shall be conclusive and binding upon all persons.
Duties of the Plan Administrator include, but are not limited to,
determination of benefits and eligibility to participate, payment of
funds to the Insurance Company or Trustee, authorization of benefit
payments and payment of any expenses incurred in the administration of
the Plan. The Plan Administrator may employ such consultants and
advisors as he deems necessary or desirable for carrying out his
duties under the Plan.
8.2.2 Duties: Employer
- ----- ----------------
Duties of the Employer include, but are not limited to, payment of
funds too the Insurance Company or Trustee, in addition to payment of
any expenses incurred in the administration of the Plan. The Employer
shall indemnify and hold harmless any
37
<PAGE>
fiduciary who is an employee of the Employer from any and all claims,
loss, damages, expense (including counsel fees), and liability
(including amounts paid in settlement with the Employer's written
consent) arising from any act or omission of the fiduciary, except
when the same is judicially determined to be done due to the gross
negligence or willful misconduct of the fiduciary.
8.3 Benefit Claims Procedure
- --- ------------------------
Any Participant in this Plan, or his Beneficiary, may make a claim for
benefits due to him under this Plan by delivering a written
application to the Plan Administrator. If a claim is wholly or
partially denied, notice of the decision shall be furnished to the
claimant by the Plan Administrator within 90 days after receipt of the
claim by the Plan Administrator unless special circumstances require
an extension of time for processing the claim. If an extension of time
is required the Plan Administrator shall furnish the claimant with
written notice of that fact, including the reason why an extension is
required and an estimated date upon which a final decision is
expected, which shall be not later than 180 days after the claim was
made. In that event, if the claim is denied in whole or part, written
notice of denial shall be given as soon as practicable, but not later
than 180 days after the claim was made.
A notice of denial of a claim shall state:
(a) the specific reason or, reasons for the denial;
(b) reference to the specific Plan provisions upon which the denial
was based; and
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why
such additional material or information is required.
If this notice is not furnished with the time period provided in this
Section, the claim shall be deemed wholly denied.
8.4 Review Procedure
- --- ----------------
In the event that a claim is denied under this Plan, the claimant or
his authorized representative may apply in writing to the Plan
Administrator within 60 days of receiving notice of the denial or, if
no written notice of denial is received within the 180-day period
prescribed in Section 8.3, within 60 days after the expiration of said
180-day period, asking that the denial be reviewed. This time limit
may be extended by the Plan Administrator if an extension appears to
be reasonable in view of the nature of the claim and the pertinent
circumstances. Upon receipt of such application, the Plan
Administrator shall afford the claimant an opportunity to review
pertinent documents and to submit issues and comments in writing. A
decision on review shall be rendered by the Plan Administrator not
later than 60 days after the claimant's application for review unless
an extension of time for processing is required, in which case a
decision will be made. If an extension of time is required, the Plan
Administrator shall give the claimant written notice of that fact
before the extension period begins. A decision on review shall be in
writing and shall include specific reasons for the decision and
specific references to the Plan provisions on which the decision is
based.
If the claimant has not received written decision on review within 60
days after the request for review was received, or within 120 days if
an extension of time was required, the claim will be considered wholly
denied on review.
38
<PAGE>
8.5 Qualification of the Plan and Conditions of Contributions
- --- ---------------------------------------------------------
This Plan, together with any insurance or annuity contracts or trust
agreement used in conjunction with it, is intended to meet the
requirements of the Internal Revenue Service for approval as a tax-
exempt plan or trust under sec. 401 of the Code. Any amendments which
may be necessary to meet these requirements shall be made retroactive
to the date upon which the Plan failed to meet these requirements.
This Plan is adopted with the intent and on the conditions that the
Internal Revenue Service shall by ruling or determination letter
establish that the Plan is "qualified" within the meaning of sec. 401
of the Code, that any trust which is part of this Plan at its adoption
is exempt from taxation pursuant to sec. 501 of the Code and that
contributions to the Plan by the Employer are deductible pursuant to
sec. 404 of the. Code. If any of these conditions are determined
initially by the Internal Revenue Service not to be the case, all
contributions to this Plan made prior to such determination by the
Internal Revenue Service shall be returned to the person or persons
who made them within one year after the date of denial of
qualification of the Plan and the Plan shall terminate unless the
Employer amends the Plan to meet these conditions and such amendment
is determined by the Internal Revenue Service to meet these
conditions, PROVIDED that the application for such determination was
made by the time prescribed by law for filing the Employer's return
for the taxable year in which the Plan was adopted, or such later date
as the Secretary of the Treasury may prescribe.
Contributions to this Plan are made with the intent and on the
condition that such contributions are deductible under sec. 404 of the
Code. If any contribution by the Employer is disallowed as a deduction
by the Internal Revenue Service then, to the extent the deduction is
disallowed, the contribution shall be refunded to the Employer within
one year after the disallowance of the deduction. If any contribution
by the Employer is made by a mistake of fact, such contribution shall
be refunded to the Employer within one year after the payment of the
contribution.
If a refund occurs pursuant to this Section, the amount which shall be
returned to the Employer shall be the excess of the amount which was
contributed over the amount (1) which was deductible, or (2) which
would have been contributed absent the mistake of fact (as the case
may be), without any earnings but net of any losses attributable to
such excess.
8.6 Beneficiaries
- --- -------------
Any payments due under the Plan to a Participant's Beneficiary shall
be paid according to the Beneficiary designation last filed in writing
with the Plan Administrator by the Participant. If no such designation
is made, payments shall be made in the following order of priority:
(a) to the surviving spouse of the Participant;
(b) if no spouse survives the Participant, then to the children of
the Participant in equal shares, with a share by right of
representation to the then surviving children of any deceased
child; or
(c) if neither a spouse, children nor grandchildren survive the
Participant, then to the Participant's estate.
8.7 Spendthrift Clause
- --- ------------------
(a) General Rule
------------
Subject to the exception specified in subsection (b) below,
benefits payable under this Plan shall not be subject in any
manner to anticipation, alienation,
39
<PAGE>
sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution, or levy of any kind, either voluntary or
involuntary, including any such liability which is for alimony or
other payments for the support of a spouse or former spouse, or
for any other relative of the Employee, prior to actually being
received by the person entitled to the benefit under the terms of
the Plan except as provided below, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to benefits payable hereunder
shall be void; also, the Plan shall not in any manner be liable
for; not subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits
hereunder.
(b) Exception
---------
The provisions of subsection (a) above to the contrary shall not
withstand a right to a benefit payable under this Plan that has
been created, assigned or recognized pursuant to a "qualified
domestic relations order", as defined in Code sec. 414(p).
Administration of the Plan with respect to qualified domestic
relations orders shall at all times be consistent with Code sec.
414, regulations promulgated thereunder, and any other provisions
of state and federal law that may be applicable. Payment of a
benefit to an alternate payee pursuant to a qualified domestic
relations order may be made prior to the time such payment could
be made to the Participant, provided that such payment is
consistent with the provisions of this Plan in all respects
except for the time of payment.
8.8 Annuities
- --- ---------
Any provisions of this Plan to the contrary notwithstanding.
(a) any annuity contract distributed from this Plan shall contain
express provisions sufficient to make such contract
nontransferable; and
(b) the terms of any annuity contract purchased and distributed by
the Plan to a Participant or Participant's spouse shall comply
and be consistent with the requirements of this Plan.
8.9 Limitations of the Employer's Liability
- --- ---------------------------------------
To the extent permitted by law, the liability of the Employer with
respect to any and all obligations arising from or in any way
connected with this Plan shall be limited to amounts already
contributed.
8.10 Non-Guarantee of Employment
- ---- ---------------------------
This Plan shall not be considered to constitute a contract of
employment and nothing contained in the Plan shall give any Employee
the right to be retained in employment, nor shall anything contained
in the Plan interfere with the Employer's right to discharge or retire
any Employee at any time. Participation in the Plan shall not give any
Employee any right or claim in any benefits except as specifically
provided in this Plan.
8.11 Applicable Law
- ---- --------------
The provisions of this Plan shall be governed, construed, and
administered in accordance with federal law, and to the extent that
state law is not preempted by federal law, the law of the state of
Texas.
40
<PAGE>
ARTICLE IX
DIRECT ROLLOVERS
9.1 General Rule
- --- ------------
This Article applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article, a
distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover
9.2 Definitions
- --- -----------
(a) Eligible rollover distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is require under
sec. 401(a)(9) of the Code; and the portion of any distribution
that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to
employer securities).
(b) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in sec. 408(a) of the
Code, an individual retirement annuity described in sec. 408(b)
of the Code, an annuity plan described in sec. 403(a) of the
Code, or a qualified trust described in sec. 401(a) of the Code,
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in sec. 414(p) of the Code,
are distributees with regard to the interest of the spouse or
former spouse.
(d) Direct rollover: A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
41
<PAGE>
EXHIBIT 10.15
CLEARCOMMERCE CORPORATION
COMMON STOCK PURCHASE AGREEMENT
MARCH 6, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock............................................... 1
1.1 Sale and Issuance of Common Stock.................................. 1
1.2 Closing; Closing Dates; Delivery................................... 1
2. Representations and Warranties of the Company............................ 1
2.1 Organization, Good Standing and Qualification...................... 2
2.2 Capitalization and Voting Rights................................... 2
2.3 Subsidiaries....................................................... 3
2.4 Authorization...................................................... 3
2.5 Valid Issuance of Common Stock..................................... 3
2.6 Governmental Consents.............................................. 3
2.7 Offering........................................................... 4
2.8 Litigation......................................................... 4
2.9 Employee Agreements................................................ 4
2.10 Patents and Trademarks............................................. 4
2.11 Compliance with Other Instruments.................................. 5
2.12 Agreements; Action................................................. 5
2.13 Related-Party Transactions......................................... 6
2.14 Permits............................................................ 6
2.15 Environmental and Safety Laws...................................... 7
2.16 Disclosure......................................................... 7
2.17 Registration Rights................................................ 7
2.18 Corporate Documents................................................ 7
2.19 Title to Property and Assets....................................... 7
2.20 Financial Statements............................................... 7
2.21 Changes............................................................ 8
2.22 Tax Returns, Payments and Elections................................ 8
2.23 Insurance.......................................................... 8
2.24 Minute Books....................................................... 8
2.25 Employee Matters................................................... 8
2.26 Brokers............................................................ 9
3. Representations and Warranties of the Investors.......................... 9
3.1 Authorization...................................................... 9
3.2 Purchase Entirely for Own Account.................................. 9
3.3 Disclosure of Information.......................................... 9
3.4 Investment Experience.............................................. 9
3.5 Accredited Investor................................................10
3.6 Restricted Securities..............................................10
3.7 Further Limitations on Disposition.................................10
3.8 Legends............................................................11
4. Conditions of Investors' Obligations at Closing..........................11
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
4.1 Representations and Warranties.....................................11
4.2 Performance........................................................11
4.3 Compliance Certificate.............................................11
4.4 Qualifications.....................................................12
4.5 Proceedings and Documents..........................................12
4.6 Investor Rights Agreement..........................................12
5. Conditions of the Company's Obligations at Closing.......................12
5.1 Representations and Warranties.....................................12
5.2 Payment of Purchase Price..........................................12
5.3 Qualifications.....................................................12
5.4 Lockup.............................................................13
6. Post-Closing Covenants...................................................13
6.1 Use of Proceeds....................................................13
7. Miscellaneous............................................................13
7.1 Survival of Warranties.............................................13
7.2 Successors and Assigns.............................................13
7.3 Governing Law......................................................13
7.4 Counterparts.......................................................13
7.5 Titles and Subtitles...............................................13
7.6 Notices............................................................14
7.7 Finder's Fee.......................................................14
7.8 Expenses...........................................................14
7.9 Amendments and Waivers.............................................14
7.10 Severability.......................................................14
7.11 Aggregation of Stock...............................................15
7.12 Entire Agreement...................................................15
EXHIBIT A - Schedule of Investors
EXHIBIT B - Schedule of Exceptions
EXHIBIT C - Addendum to Investor Rights Agreement
EXHIBIT D - Lockup Agreement
-ii-
<PAGE>
CLEARCOMMERCE CORPORATION
COMMON STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of March 6, 2000, by and among
ClearCommerce Corporation, a Delaware corporation (the "Company"), and the
investors, severally and not jointly, listed on Exhibit A hereto, each of which
---------
is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Common Stock.
---------------------------------
(a) On or prior to the Closing, the Company shall have authorized the
sale and issuance to the Investors of the Common Stock (the "Securities").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing, that number of
shares of the Company's Common Stock set forth opposite such Investor's name on
Exhibit A hereto for the IPO Price as defined in Exhibit A.
- --------- ---------
1.2 Closing; Closing Dates; Delivery.
--------------------------------
(a) Closing. The closing of the purchase and sale of the Common
-------
Stock (the "Closing") and shall take place at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 8911 Capital of Texas Highway,
Suite 3350, Austin, Texas. The Closing will take place at 8:00 a.m. central time
on the date of the closing of a Qualified IPO (as defined below); provided that
the Closing may occur at such other time and place as the Company and Investors
acquiring in the aggregate more than half the shares of Common Stock sold
pursuant hereto mutually agree upon orally or in writing. If the Closing has not
occurred on or prior to September 1, 2000, this Agreement shall terminate and
the parties hereto shall be free from their respective obligations hereunder.
(b) Delivery. At each Closing, the Company shall deliver to each
--------
Investor a certificate representing the Common Stock that such Investor is
purchasing against payment of the purchase price therefor by check, wire
transfer, cancellation of indebtedness, or any combination thereof.
2. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to each Investor that, except as
set forth on Exhibit B (the "Schedule of Exceptions") furnished to each
---------
Investor, specifically identifying the relevant subparagraph hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:
<PAGE>
2.1 Organization, Good Standing and Qualification.
---------------------------------------------
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as now conducted and as proposed to
be conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights.
--------------------------------
(a) At the Closing, the authorized capital of the Company will
consist of:
(i) Preferred Stock. 12,647,830 shares of preferred stock,
---------------
par value $0.001 (the "Preferred Stock"), of which (i) three million one hundred
forty-seven thousand eight hundred thirty (3,147,830) shares have been
designated Series A Preferred Stock (the "Series A Preferred Stock"), all of
which shares of Series A Preferred Stock are issued and outstanding; (ii) four
million nine hundred thousand (4,900,000) shares have been designated Series B
Preferred Stock (the "Series B Preferred Stock"), of which four million seven
hundred six thousand one hundred ninety-six (4,706,196) shares are outstanding;
and (iii) 4,600,000 shares have been designated Series C Preferred Stock, four
million two hundred forty three thousand two hundred sixty-seven (4,243,267) of
which are outstanding prior to the Closing.
(ii) Common Stock. 20,000,000 shares of common stock, par
------------
value $0.001 ("Common Stock"), of which 3,925,762 shares are issued and
outstanding.
(b) INTENTIONALLY OMITTED.
(c) The outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Common Stock are all duly and validly authorized and issued,
fully paid and nonassessable, and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Act") and any relevant state securities laws, or pursuant to valid
exemptions therefrom.
(d) Except for (A) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock and Series C Preferred Stock, (B)
the rights provided in Section 3.4 of that certain Third Amended and Restated
Investors' Rights Agreement dated December 31, 1999 (the "Investor Rights
Agreement"), (C) currently outstanding warrants to purchase six hundred eighty
thousand one hundred eighty-three (680,183) shares of Common Stock, (D)
currently outstanding or committed options to purchase one million two hundred
ninety-eight thousand nine hundred fourteen (1,298,914) shares of Common Stock
granted to employees and other service providers pursuant to the Company's 1997
Stock Option Plan (the "Option Plan"), (E) currently outstanding warrants to
purchase one hundred thirty thousand two hundred thirty-five (130,235) shares of
the Company's Series B Preferred Stock, and (F) the rights granted under the
Addendum to Third Amended and Restated Investors' Rights Agreement (the
"Addendum"), there are
-2-
<PAGE>
not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. In addition to the aforementioned
options, the Company has reserved an additional 1,347,964 shares of its Common
Stock for purchase upon exercise of options to be granted in the future under
the Option Plan. Other than as set forth in Section 3.6 of the Investor Rights
Agreement, the Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
2.3 Subsidiaries.
------------
The Company does not presently own or control, directly or indirectly, any
interest in any other corporation, association, or other business entity. The
Company is not a participant in any joint venture, partnership, or similar
arrangement.
2.4 Authorization.
-------------
All corporate action on the part of the Company, its officers, directors
and stockholders necessary for the authorization, execution and delivery of this
Agreement and the Addendum, the performance of all obligations of the Company
hereunder and thereunder, and the authorization, issuance, sale and delivery of
the Common Stock being sold hereunder has been taken or will be taken prior to
the Closing, and this Agreement and the Addendum, constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies
2.5 Valid Issuance of Common Stock.
------------------------------
The Common Stock that is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Lockup Agreement (as defined
below) and the Investor Rights Agreement and under applicable state and federal
securities laws.
2.6 Governmental Consents.
---------------------
Other than filings which are required pursuant to federal or state
securities laws, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement.
-3-
<PAGE>
2.7 Offering.
--------
Subject in part to the truth and accuracy of each Investor's
representations set forth in Section 3 of this Agreement, the offer, sale and
issuance of the Common Stock as contemplated by this Agreement are exempt from
the registration requirements of the Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
2.8 Litigation.
----------
There is no material action, suit, proceeding or investigation pending or,
to the Company's knowledge, threatened against the Company that questions the
validity of this Agreement, or the Addendum or the right of the Company to enter
into such agreements, or to consummate the transactions contemplated hereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened (or any basis therefor known to the
Company) involving (a) the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers or (b) negotiations by the
Company with potential investors in the Company. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or material investigation by the Company currently pending or that
the Company intends to initiate.
2.9 Employee Agreements.
-------------------
Each employee, officer and consultant of the Company has executed a
Proprietary Information and Invention Assignment Agreement. The Company is not
aware that any of its employees, officers or consultants is in violation thereof
that could reasonably be expected to have a material adverse effect on the
Company.
2.10 Patents and Trademarks.
----------------------
The Company has sufficient title, right to use and ownership of all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted and as presently proposed to be conducted, to the Company's knowledge,
without any conflict with or infringement of the rights of others. The Schedule
of Exceptions contains a complete list of patents and pending patent
applications of the Company. Except for licenses of "prepackaged" software, and
licenses of the Company's software in the ordinary course of business (those of
which that are material are listed on the Schedule of Exceptions), there are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets,
-4-
<PAGE>
licenses, information, proprietary rights and processes of any other person or
entity. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as currently proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or that would conflict with the Company's business
as currently proposed to be conducted. Neither the execution nor delivery of
this Agreement, nor the carrying on of the Company's business by the employees
of the Company, will, to the Company's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary in the
conduct of its business to utilize any inventions of any of its employees made
prior to their employment by the Company.
2.11 Compliance with Other Instruments.
---------------------------------
The Company is not in violation or default of any provision of its
Certificate of Incorporation, as amended, or Bylaws, or of any instrument or
contract to which it is a party or by which it is bound, or, to its knowledge,
of any provision of any judgment, order, writ or decree or any federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement and the Addendum, and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a material default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.12 Agreements; Action
------------------
Except for agreements explicitly contemplated hereby, since December 31,
1999:
(a) There are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, stockholders,
affiliates, or any affiliate thereof.
(b) Other than contracts entered into in the ordinary course of
business, there are no agreements, understandings, instruments, contracts,
proposed transactions, or, to its knowledge, judgments, orders, writs or
decrees, to which the Company is a party or by which it is bound that may
involve (i) obligations (contingent or otherwise) of, or payments to the Company
in excess of, $25,000, or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services, or (iv) indemnification by the Company with
respect to infringements of proprietary rights.
-5-
<PAGE>
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or Series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $10,000 or, in the case of
indebtedness and/or liabilities individually less than $10,000, in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Amended
Certificate or Bylaws that materially adversely affects its business as now
conducted or as currently proposed to be conducted, its properties or its
financial condition.
2.13 Related-Party Transactions.
--------------------------
No employee, officer, director or stockholder of the Company or member of
his or her immediate family is indebted to the Company, nor is the Company
indebted (or committed to make loans or extend or guarantee credit) to any of
them. To the Company's knowledge, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers,
directors or stockholders of the Company and members of their immediate families
may own stock in publicly traded companies that may compete with the Company.
No member of the immediate family of any officer or director of the Company is
directly or indirectly interested in any material contract with the Company
except as set forth in the Addendum.
2.14 Permits.
-------
The Company has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company. The Company is
not in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
-6-
<PAGE>
2.15 Environmental and Safety Laws. To its knowledge, the Company is not in
-----------------------------
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety which could have a material
adverse effect on the Company, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation
2.16 Disclosure.
----------
The Company has fully provided each Investor with all the information
pertaining to the Company that such Investor has requested for deciding whether
to purchase the Common Stock neither this Agreement, nor any other statements or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact concerning the Company or omits to state a
material fact concerning the Company necessary to make the statements herein or
therein not misleading.
2.17 Registration Rights.
-------------------
Except as provided in the Addendum, the Company has not granted or agreed
to grant any registration rights, including piggyback rights, to any person or
entity.
2.18 Corporate Documents.
-------------------
The Amended Certificate and Bylaws of the Company are, or will be at the
Closing, in the form previously provided to special counsel for the Investors.
2.19 Title to Property and Assets.
----------------------------
The Company owns its property and assets free and clear of all mortgages,
liens, loans and encumbrances, except such encumbrances and liens that arise in
the ordinary course of business and do not materially impair the Company's
ownership or use of such property or assets. With respect to the property and
assets it leases, the Company is in material compliance with such leases and, to
its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.20 Financial Statements.
--------------------
The Company has delivered to each Investor its audited financial statements
(balance sheet and statement of operations) as of and for the year ended
December 31, 1999 (the "Financial Statements"). The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise (individually or in the aggregate), other than (i) obligations and
liabilities incurred in the ordinary course of business subsequent to December
31, 1999 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not materially adverse to the financial
condition or operating results of the Company.
-7-
<PAGE>
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation.
2.21 Changes.
-------
Since December 31, 1999, no event or condition of any type has materially
and adversely affected the business, properties, prospects or financial
condition of the Company.
2.22 Tax Returns, Payments and Elections
-----------------------------------.
The Company has filed all tax returns and reports (including information
returns and reports) as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith that are listed in
the Schedule of Exceptions. The provision for taxes of the Company as shown in
the Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "Code"), to be treated after December 31, 1996 as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material effect on
the Company, its financial condition, its business as presently conducted or
proposed to be conducted or any of its properties or material assets.
2.23 Insurance.
---------
The Company has in full force and effect fire and casualty insurance
policies, with extended coverage, in customary amounts (subject to reasonable
deductibles) and which the Company believes is sufficient for its business as
conducted and as currently proposed to be conducted.
2.24 Minute Books.
------------
The copy of the minute books of the Company provided to the Investors
contain minutes of all meetings of directors and stockholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
2.25 Employee Matters.
----------------
The Company is not aware that any officer or key employee, or that any
group of key employees, currently intends to terminate their employment with the
Company. Except to the extent provided by law, the employment of each officer
and employee of the Company is terminable at the will of the Company.
-8-
<PAGE>
2.26 Brokers.
-------
The Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement. The Company may be obligated to pay an advisor fee, and the Company
hereby indemnifies the Investors as to such fee.
3. Representations and Warranties of the Investors.
-----------------------------------------------
Each Investor hereby represents and warrants that:
3.1 Authorization.
-------------
Such Investor has full power and authority to enter into this Agreement and
the Addendum, and each such agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account.
---------------------------------
This Agreement is made with such Investor in reliance upon such Investor's
representation to the Company, which by such Investor's execution of this
Agreement such Investor hereby confirms, that, except as set forth herein, the
Common Stock to be received by such Investor will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that, except as set forth herein, such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
3.3 Disclosure of Information.
-------------------------
Such Investor believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Common Stock.
Such Investor further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Common Stock and the business, properties, prospects and
financial condition of the Company. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon.
3.4 Investment Experience.
---------------------
Such Investor is experienced in evaluating and investing in private
placement transactions of securities of companies in a similar stage of
development and acknowledges that it is able to fend for
-9-
<PAGE>
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Common Stock. If other than an
individual, Investor also represents it has not been organized for the purpose
of acquiring the Common Stock.
3.5 Accredited Investor.
-------------------
Such Investor is an "accredited investor" within the meaning of paragraph
(a)(3), (7) or(8) Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Restricted Securities.
---------------------
Such Investor understands that the Securities it is purchasing are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act only in certain
limited circumstances. In this connection, such Investor represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition.
----------------------------------
Without in any way limiting the representations set forth above, such
Investor further agrees not to make any disposition of all or any portion of the
Securities unless and until the transferee has agreed in writing for the benefit
of the Company to be bound by this Section 3 and the Investor Rights Agreement;
provided that this Section and such agreement will not be necessary if:
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the Act.
(c) Notwithstanding the provisions of Paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by an Investor that is a partnership or trust to a partner a
beneficiary of such partnership or trust or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner a beneficiary to his or her spouse or to the siblings, lineal
descendants or ancestors of such partner a beneficiary or his or her spouse, if
the transferee agrees in writing to be subject to the terms hereof to the same
extent as if he or she were an original Investor hereunder.
-10-
<PAGE>
3.8 Legends.
-------
It is understood that the certificates evidencing the Securities may bear
one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES ACT. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, ASSIGNED, TRANSFERRED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by state securities laws or any other
applicable jurisdiction.
(c) Any legend required by the Investor Rights Agreement.
4. Conditions of Investors' Obligations at Closing.
-----------------------------------------------
The obligations of each Investor under subsection 1.1(c) of this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent thereto:
4.1 Representations and Warranties.
------------------------------
The representations and warranties of the Company contained in Section 2
shall be true in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of such Closing.
4.2 Performance.
-----------
The Company shall have performed and complied in all material respects with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate.
----------------------
The President of the Company shall deliver to each Investor at the Closing
a certificate stating that the conditions specified in Sections 4.1 and 4.2 have
been fulfilled and stating that there shall have been no material adverse change
in the business, affairs, prospects, operations, properties, assets or condition
of the Company since the date of the Financial Statements.
-11-
<PAGE>
4.4 Qualifications.
--------------
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
4.5 Proceedings and Documents.
-------------------------
All corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to Investors' special counsel, and
they shall have received all such counterpart original and certified or other
copies of such documents as they may reasonably request. This may include,
without limitation, good standing certificates and certification by the
Company's Secretary regarding the Company's Amended Certificate and Bylaws and
Board of Director and stockholder resolutions relating to this transaction.
4.6 Investor Rights Agreement.
-------------------------
The Company, the Consenting Holders and each Investor shall have entered
into the Addendum in the form attached hereto as Exhibit C providing the
---------
Investor with "piggyback" registration rights on parity with the existing
holders of registration rights.
5. Conditions of the Company's Obligations at Closing.
--------------------------------------------------
The obligations of the Company to each Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by that Investor:
5.1 Representations and Warranties.
------------------------------
The representations and warranties of the Investors contained in Section 3
shall be true in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the Closing.
5.2 Payment of Purchase Price.
-------------------------
Each Investor shall have delivered the purchase price specified in Section
1.1 (c).
5.3 Qualifications.
--------------
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
-12-
<PAGE>
5.4 Lockup.
------
Each Investor shall have executed and delivered to the Company the form of
Lockup Agreement attached hereto as Exhibit D.
---------
6. Post-Closing Covenants.
----------------------
6.1 Use of Proceeds.
---------------
The Company agrees to use the investment proceeds from each Investor for
working capital purposes or to otherwise finance the anticipated growth of the
Company.
7. Miscellaneous.
-------------
7.1 Survival of Warranties.
----------------------
The warranties, representations and covenants of the Company and Investors
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing for a period of one year and shall in
no way be affected by any investigation of the subject matter thereof made by or
on behalf of the Investors or the Company.
7.2 Successors and Assigns.
----------------------
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any Securities).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
7.3 Governing Law.
-------------
This Agreement shall be governed by and construed under the laws of the
State of Texas without giving effect to any choice of law or conflict of law
provision.
7.4 Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
7.5 Titles and Subtitles.
--------------------
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
-13-
<PAGE>
7.6 Notices.
-------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given if
received, upon receipt, and otherwise upon personal delivery to the party to be
notified, or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
7.7 Finder's Fee.
------------
Each Investor agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which such Investor or any of its officers, partners, employees,
or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8 Expenses.
--------
Irrespective of whether the Closing is effected, the parties shall pay all
costs and expenses that they incur with respect to the negotiation, execution,
delivery and performance of this Agreement. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.9 Amendments and Waivers.
----------------------
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of a two-thirds of the Common Stock issuable or issued
upon conversion of the Common Stock. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
7.10 Severability.
------------
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision was so
excluded and shall be enforceable in accordance with its terms.
-14-
<PAGE>
7.11 Aggregation of Stock.
--------------------
All shares of the Common Stock held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
7.12 Entire Agreement.
----------------
This Agreement and the documents referred to herein constitute the entire
agreement among the parties and no party shall be liable or bound to any other
party in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
[Remainder of page intentionally left blank]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
CLEARCOMMERCE CORPORATION
By: /s/ MICHAEL S. GRAJEDA
---------------------------------------------
Michael S. Grajeda, Chief Financial Officer
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
COMMON STOCK PURCHASE AGREEMENT
<PAGE>
INVESTORS:
CARDSERVICE INTERNATIONAL, INC.,
a California corporation
By: /s/ CAESAR BERGER
----------------------------------------
Name: /s/ Caesar Berger
----------------------------------------
Title: Senior Vice President
----------------------------------------
THE BURTZLOFF FAMILY TRUST
By: /s/ CHARLES BURTZLOFF, TRUSTEE
-------------------------------------------
Charles Burtzloff, Trustee
SIGNATURE PAGE TO CLEARCOMMERCE CORPORATION
COMMON STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
---------
Schedule of Investors
---------------------
Number of Shares Purchase Price
Investor Purchased of Shares
- -------- --------- ----------
Cardservice International, Inc., (1) (2)
A California corporation
Burtzloff Family Trust,
Charles Burtzloff-Trustee (1) (2)
(1) The Investors shall purchase an aggregate number of shares of Common Stock
of the Company (the "Securities") equal to the lesser of (i) 10% of the total
number of shares of Common Stock to be sold by the Company in its initial firm
commitment underwriting pursuant to a registration statement filed with the
Securities and Exchange Commission resulting in gross proceeds of at least $10
million and with a per share price of at least $17.67 (the "Qualified IPO") or
(ii) that number of shares of Common Stock which can be purchased at the IPO
Price for a total of $6,000,000. The shares shall be allocated among the
Investors at the Closing in such manner as shall be determined by the Investors
in their discretion; provided, however, that the Investors hereby agree, subject
to the terms of this Agreement, to purchase all of the Securities.
(2) The price per share of Common Stock of the Company in the Qualified IPO to
the public (the "IPO Price").
To: Cardservice International, Inc.
26775 Malibu Hills Rd.
Argoura Hills, CA 91301
Attn.: Donald Hedlund
With copies to:
Burtzloff Family Trust
- -----------------------------------
c/o Charles Burtzloff
- -----------------------------------
Cardservice International
- ----------------------------------
26775 Malibu Hills Rd.
- -----------------------------------
Argoura Hills, CA 91301
- -----------------------------------
<PAGE>
EXHIBIT B
---------
<PAGE>
EXHIBIT C
---------
<PAGE>
EXHIBIT D
---------
<PAGE>
EXHIBIT 21.1
ClearCommerce Europe Limited.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated February 25, 2000, except as to Note 15 which is as of March
6, 2000, relating to the financial statements and financial statement schedule
of ClearCommerce Corporation, which appear in such Registration Statement. We
also consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Austin, Texas
March 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,915
<SECURITIES> 0
<RECEIVABLES> 4,510
<ALLOWANCES> 212
<INVENTORY> 0
<CURRENT-ASSETS> 21,680
<PP&E> 2,583
<DEPRECIATION> (585)
<TOTAL-ASSETS> 23,678
<CURRENT-LIABILITIES> 8,948
<BONDS> 0
66,066
0
<COMMON> 4
<OTHER-SE> (52,323)
<TOTAL-LIABILITY-AND-EQUITY> 23,678
<SALES> 5,282
<TOTAL-REVENUES> 5,282
<CGS> 1,999
<TOTAL-COSTS> 17,421
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 489
<INCOME-PRETAX> (14,627)
<INCOME-TAX> (14,627)
<INCOME-CONTINUING> (14,627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,627)
<EPS-BASIC> (23.78)
<EPS-DILUTED> (23.78)
</TABLE>
