<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 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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TALLAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 7373 06-1135395
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
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628 HEBRON AVENUE
BUILDING TWO, SUITE 502
GLASTONBURY, CT 06033
(860) 633-3693
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN M. HUGHES
CHIEF EXECUTIVE OFFICER
TALLAN, INC.
628 HEBRON AVENUE
BUILDING TWO, SUITE 502
GLASTONBURY, CT 06033
(860) 633-3693
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
LINDA DE RENZO, ESQ. TESTA, HURWITZ & THIBEAULT, JOSEPH E. MULLANEY III, ESQ. MINTZ, LEVIN, COHN,
LLP 125 HIGH STREET BOSTON, MASSACHUSETTS 02110 FERRIS, GLOVSKY AND POPEO, P.C. ONE FINANCIAL
TELEPHONE: (617) 248-7000 TELECOPY: (617) 248-7100 CENTER BOSTON, MA 02111 TELEPHONE: (617) 542-6000
TELECOPY: (617) 542-2241
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. []
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
- ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. []
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 per share......................... $74,750,000 $19,734
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act of
1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 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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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 31, 2000.
[TALLAN, INC. LOGO]
SHARES
COMMON STOCK
Tallan, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares. We
have applied to have the shares we are offering approved for quotation on the
Nasdaq National Market under the symbol "TALN". We anticipate that the initial
public offering price will be between $ and $ per share.
------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
------------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Tallan.......................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------------
ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
FIRST UNION SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3
[INSERT GRAPHICS, INSIDE COVER]
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 4
Risk Factors................................................ 8
Special Note Regarding Forward-Looking Statements; Market
Data...................................................... 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 27
Management.................................................. 38
Certain Relationships and Related Transactions.............. 46
Principal Stockholders...................................... 48
Description of Capital Stock................................ 50
Shares Eligible for Future Sale............................. 53
Underwriting................................................ 55
Legal Matters............................................... 57
Experts..................................................... 57
Where You Can Find More Information......................... 57
Index to Financial Statements............................... F-1
</TABLE>
------------------------
We have applied to register "Tallan" and the "Tallan" logo as service marks
and the name Tallan is our trade name and service mark. This prospectus also
contains other trademarks and trade names, which are the property of their
respective owners.
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SUMMARY
You should read the following summary together with the more detailed
information in this prospectus, including risk factors, regarding our company
and the common stock being sold in this offering.
OUR BUSINESS
We are an Internet professional services firm that creates
fully-integrated, technologically advanced solutions for our clients. We focus
on high-impact projects that can directly increase revenues and create operating
efficiencies for our clients. Our eBusiness solutions leverage our core
competencies in the design and implementation of high-volume transaction
processing, data warehousing and data mining systems and enable our clients to
capitalize on the opportunities presented by the rapidly growing digital
marketplace.
OUR SERVICES
We offer our clients a broad range of strategy, technology and creative
design services required to develop and deliver advanced eBusiness solutions.
Our comprehensive offering is designed either to extend or complement our
clients' existing operating models or create entirely new Internet-based
operating models. Our professionals have experience with a wide range of
technologies and vendors. However, we offer our clients a vendor-neutral
approach to ensure the design and delivery of the most appropriate solution.
Our revenues are principally derived from the design, development and
delivery of technologically advanced eBusiness solutions. We provide a
comprehensive approach to the provision of technology services that includes the
following components:
- technology benchmarking and product analysis;
- applications architecture and infrastructure;
- software development;
- technology implementation and integration; and
- technology transfer.
We deliver all of our services based on BLUEprint, our proprietary
methodology. BLUEprint assists our professionals in clarifying the business
objectives and technical requirements of each of our client engagements and
helps us deliver our solutions in a rapid timeframe which reduces our clients
time-to-market.
OUR MARKET
We believe we are well-positioned to capitalize on the significant demand
for Internet professional services that has been driven by the dramatic growth
in commerce conducted over the Internet. According to International Data
Corporation, the amount of commerce conducted over the Internet is expected to
exceed $1.3 trillion by 2003. In connection with this growth, we believe there
will be increased competition from traditional bricks-and-mortar competitors and
Internet-based competitors. As a result, companies are looking to utilize
technology to help develop and sustain a competitive advantage. However,
companies are looking to third-party providers with technical expertise to
develop and deliver complex Internet-enabling technologies. International Data
Corporation estimates that the demand for Internet professional services will
increase from $7.8 billion in 1998 to $78.5 billion in 2003.
OUR STRATEGY
Our goal is to become a leading provider of fully-integrated,
technologically-advanced Internet and eBusiness solutions to a broad range of
industry segments. To achieve this goal, we are pursuing the following
strategies:
- maintaining our focus on attracting and retaining the most highly
talented technology professionals;
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<PAGE> 6
- further developing and expanding strategic client relationships;
- leveraging and evolving our intellectual assets and technical expertise;
and
- selectively expanding our geographic presence.
OUR CLIENTS
We provide our services to a broad range of clients in traditional
industries and the rapidly evolving Internet sector and digital marketplace. Our
clients have included barnesandnoble.com, Best Buy, Capital One, ditech.com,
Ingram Micro, Pepsi, Priceline.com and Wit Capital. Our top five clients
accounted for 66.8% and 56.1% of our revenues in 1998 and 1999, respectively.
OUR CORPORATE INFORMATION
We were initially incorporated in Connecticut in 1985 under the name BDS
Business Center, Inc. We reincorporated in Delaware in August 1999. In December
1999, we changed our name to Tallan, Inc. Our executive offices are located at
628 Hebron Avenue, Building Two, Suite 502, Glastonbury, CT 06033, and our
telephone number is (860) 633-3693. Our web site is www.tallan.com. Information
contained on our web site does not constitute part of this prospectus.
5
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THE OFFERING
Common stock offered by Tallan.......... shares
Common stock to be outstanding after the
offering................................ shares
Use of proceeds......................... To redeem all outstanding shares of
our Series A redeemable preferred
stock for approximately $20.0
million and for working capital and
other general corporate purposes.
We also may use a portion of the
net proceeds for acquisitions of
complementary businesses or
technologies. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol.................................. TALN
The number of shares outstanding after this offering is based on shares
outstanding as of December 31, 1999 and excludes:
- 17,631,388 shares subject to options outstanding as of December 31, 1999
at a weighted average exercise price of $0.89 per share; and
- 10,156,000 shares reserved for issuance under our 1999 Stock Option and
Incentive Plan, our 2000 Employee Stock Purchase Plan and our 2000
Non-Employee Director Stock Option Plan.
------------------------
Except as otherwise noted, all information in this prospectus:
- reflects the redemption of all of our outstanding shares of Series A
redeemable preferred stock upon the completion of this offering;
- reflects the automatic conversion of all of our outstanding shares of
Series B convertible preferred stock into an aggregate of 3,412,970
shares of common stock upon the completion of this offering;
- reflects a 2-for-1 stock split of all of our outstanding shares of common
stock to be effected immediately prior to the effectiveness of this
offering;
- reflects the effectiveness upon the completion of this offering of our
second amended and restated certificate of incorporation, which sets the
number of authorized shares of common stock at 300,000,000 and sets the
number of authorized shares of preferred stock at 5,000,000; and
- assumes no exercise of the underwriters' over-allotment option.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Set forth below are summary statement of operations data for the years
ended December 31, 1997, 1998 and 1999, and summary balance sheet data as of
December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect the automatic conversion of all of our
outstanding shares of Series B convertible preferred stock upon
completion of this offering; and
- on a pro forma as adjusted basis to adjust the pro forma balances to
reflect the sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and the estimated offering
expenses payable by us, and the application of the net proceeds from this
offering, including the redemption of all of our outstanding shares of
Series A redeemable preferred stock for approximately $20.0 million, and
reflecting a loss on redemption of the Series A redeemable preferred
stock of approximately $9.5 million.
This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
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<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................... $13,453 $22,869 $53,940
Operating expenses......................................... 13,677 19,610 41,714
------- ------- -------
Income (loss) from operations.............................. (224) 3,259 12,226
Income (loss) before income taxes.......................... (513) 3,102 12,195
Provision (benefit) for income taxes....................... (96) 1,396 5,123
------- ------- -------
Net income (loss).......................................... (417) 1,706 7,072
------- ------- -------
Deemed preferred dividends and accretion................... -- -- (4,823)
------- ------- -------
Net income (loss) available for common shareholders........ $ (417) $ 1,706 $ 2,249
======= ======= =======
Net income (loss) per common share:
Basic.................................................... $ (0.01) $ 0.05 $ 0.07
======= ======= =======
Diluted.................................................. $ (0.01) $ 0.05 $ 0.05
======= ======= =======
Weighted average number of shares:
Basic.................................................... 32,200 31,611 32,005
======= ======= =======
Diluted.................................................. 32,200 33,505 44,621
======= ======= =======
</TABLE>
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<CAPTION>
DECEMBER 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 9,789 $ 9,789 $
Working capital............................................ 16,891 16,891
Total assets............................................... 24,151 24,151
Long-term liabilities...................................... 336 336
Mandatorily redeemable preferred stock..................... 16,663 10,479
Total stockholders' equity................................. 2,885 9,069
</TABLE>
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RISK FACTORS
You should carefully consider the following risks before making an
investment decision. Our business, results of operations and financial condition
could be adversely affected by any of the following risks. Additional risks and
uncertainties, including those that are not yet identified or that we currently
think are immaterial, may also adversely affect our business, results of
operations and financial condition. The market price of our common stock could
decline due to any of these risks, and you could lose all or part of your
investment.
RISKS RELATED TO OUR BUSINESS
BECAUSE OUR REVENUES ARE PRIMARILY PROJECT-BASED AND WE DEPEND ON A LIMITED
NUMBER OF MAJOR CLIENTS, IF WE LOSE EVEN ONE CLIENT, OUR REVENUES COULD DECREASE
SIGNIFICANTLY.
Our revenues are derived almost entirely from fees for services generated
on an engagement-by-engagement basis. These engagements vary in size and scope.
We generate much of our revenues from a limited number of major clients. As a
result, if we lose a major client or large project, or are unable to continue to
generate new engagements of similar size and scope our revenues will be
adversely affected. During 1999, our two largest clients accounted for
approximately 28% of our revenues, and our five largest clients accounted for
approximately 56% of our revenues. In 1998, our two largest clients accounted
for approximately 42% of our revenues, and our five largest clients accounted
for approximately 67% of our revenues.
In addition, a client that accounts for a significant portion of our
revenues in a particular period may not account for a similar portion of our
revenues in any other period. A client may or may not engage us for further
services once a project is completed. As a result, we cannot assure you that our
revenues will recur from period-to-period, which contributes to the
unpredictability of our revenues in any period. Our future success will depend
on our ability to generate additional projects from our existing clients and to
establish relationships with additional companies.
We charge our clients for the time, materials and expenses incurred on a
particular project. Generally, we enter into agreements with our clients on a
per project basis. A client may terminate our services under these agreements
with little or no prior notice and without penalty. In addition, in some cases,
we have performed and do perform work without formal contracts. We cannot assure
you that our clients will not terminate our agreements with them prematurely or
significantly reduce a project's scope before completion. Consequently, you
should not predict or anticipate our future revenues based on the number of
clients we currently have or the number and size of our existing projects. If
our existing agreements with clients are terminated prematurely or if we are
unable to enter into similar engagements with new clients, our business and
results of operations could be materially and adversely affected.
OUR OPERATING RESULTS MAY FLUCTUATE ON A QUARTERLY BASIS AND FAIL TO MEET THE
EXPECTATIONS OF ANALYSTS OR INVESTORS, WHICH MAY NEGATIVELY IMPACT OUR STOCK
PRICE.
Our revenues and operating results vary from quarter to quarter.
Fluctuations in our quarterly results may be caused by variations in the
following:
- number, size or scope of client engagements;
- number and size of client engagements commenced or completed during a
quarter;
- timing of employee hiring and capacity utilization rates;
- number of business days in a quarter;
- level of vacation activity by employees in a quarter;
- pricing changes in the industry; and
- general economic conditions.
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A substantial portion of our operating expenses is related to personnel
costs, marketing programs and overhead, which cannot be adjusted quickly and are
therefore relatively fixed in the short term. Our operating expense levels are
based, in significant part, on our expectations of future revenues. If actual
revenues are below our expectations, our results of operations and financial
condition would be materially and adversely affected. Also, if we fail to
collect a large account receivable, we could be subjected to significant
financial exposure.
Due to all of the foregoing factors, you should not rely on
period-to-period comparisons of our results of operations as an indication of
future performance. It is possible that in some future periods our results of
operations may be below the expectations of public market analysts and
investors. In this event, the market price of our common stock is likely to fall
and you could lose all or a part of your investment.
THE LOSS OF THE SERVICES OF OUR SENIOR MANAGEMENT AND OTHER KEY PERSONNEL COULD
IMPAIR OUR ABILITY TO SUCCESSFULLY EXECUTE OUR BUSINESS STRATEGY.
Our future success depends in large part on the continued services of a
number of our key personnel, including our Chairman and Chief Executive Officer,
John M. Hughes. The loss of the services of Mr. Hughes or any of our other key
personnel could impair our ability to successfully execute our business
strategy, because we substantially rely on their experience and management
skills. We cannot assure you that we will be able to prevent key personnel, who
may leave our employ in the future, from disclosing or using our technical
knowledge, confidential information, practices or procedures. One or more of our
key personnel might resign and join a competitor or form a competing company.
Any loss of key project managers could jeopardize the stability of our
infrastructure and our ability to provide the high service levels our customers
expect. As a result, we might lose existing or prospective clients, which could
have a material adverse effect on our business.
A FAILURE TO ATTRACT AND RETAIN QUALIFIED PROFESSIONALS COULD ADVERSELY AFFECT
OUR ABILITY TO COMPETE EFFECTIVELY.
Our business is labor intensive. Our ability to hire, train, retain and
manage highly-skilled professionals with skills related to the Internet and its
rapidly changing technologies, including project managers and technical,
recruiting, creative, consulting, marketing and sales personnel is an important
factor in our future success. There is a significant shortage of, and intense
competition for, professionals who are qualified to perform the services we
provide. This shortage is likely to continue for the foreseeable future. We must
continually recruit and retain talented professionals in order for our business
to grow. The recruitment process could consume a significant amount of
management time. In addition, our agreements with our clients generally do not
contain provisions regarding non-solicitation of our professionals. Our
professionals could leave us and work for our competitors or clients or start
their own businesses in competition with us. We cannot assure you that we will
be able to attract a sufficient number of qualified professionals or that we
will successfully train, retain and manage those that we hire. The failure to
attract and retain qualified professionals could have a material adverse effect
on our business.
WE MAY NOT BE ABLE TO MANAGE FUTURE GROWTH EFFECTIVELY, WHICH COULD HARM OUR
BUSINESS.
We have grown rapidly in recent years. Our expected future growth, through
both organic expansion of our base business and possible strategic acquisitions,
is likely to further strain our operational and financial systems and other
resources. Our software developer headcount has grown from 117 as of December
31, 1998 to 261 as of December 31, 1999. As we grow, it may be difficult to
maintain our corporate culture and any change in our corporate culture could
affect our ability to retain qualified professionals, which could in turn have
an adverse impact on our business. Furthermore, we do not believe our recent
growth rate is sustainable for the long term. To manage future growth, our
management must continue to improve our operational and financial systems and
expand, train, retain and manage our professional staff. We cannot assure you
that we will be able to manage our future growth effectively. If our systems,
procedures and controls are inadequate to support our operations, our expansion
would be halted and we could lose our opportunity to gain significant market
share. Any inability to manage our
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future growth effectively could have a material adverse effect on our business,
financial condition and results of operations.
ALTHOUGH WE HAVE BEEN IN BUSINESS SINCE 1985, OUR LIMITED OPERATING HISTORY IN
DEVELOPING AND DELIVERING EBUSINESS SOLUTIONS MAY MAKE IT DIFFICULT FOR YOU TO
EVALUATE OUR PROSPECTS FOR SUCCESS.
We commenced operations in 1985, but have only a limited operating history
developing and delivering eBusiness solutions. This may make it difficult for
you to evaluate our prospects for success. Because of this limited operating
history, our recent growth and the fact that some of our competitors have longer
operating histories developing and delivering Internet and eBusiness solutions,
we believe that the prediction of our future success is difficult. You should
evaluate our chances of financial and operational success in light of the risks,
uncertainties, expenses, delays and difficulties associated with operating a new
type of business, many of which are beyond our control. You should not rely on
our historical results of operations as indications of future performance. The
uncertainty of our future performance and the uncertainties of our operating in
a new and expanding market increase the risk that the value of your investment
could decline.
IF WE FAIL TO KEEP PACE WITH RAPID TECHNOLOGICAL ADVANCES, SHIFTING INDUSTRY
STANDARDS AND EVOLVING CLIENT REQUIREMENTS, OUR BUSINESS WILL SUFFER.
The Internet professional services market is characterized by rapidly
changing technology, evolving industry standards and changing client needs.
Accordingly, our future success will depend, in part, on our ability to meet
these challenges. Among the most important challenges facing us are the need to:
- attract and retain skilled professionals;
- effectively incorporate leading edge technologies into our eBusiness
solutions;
- continue to develop our technical expertise and our strategic design and
implementation abilities;
- influence and respond to emerging industry standards and other
technological changes;
- develop new services that meet rapidly changing customer needs; and
- advertise and market our services and enhance our brand recognition.
All of these challenges must be met in a timely and cost-effective manner.
We cannot assure you that we will succeed in effectively meeting these
challenges and our failure to do so could harm our business.
WE FACE INTENSE COMPETITION AND THE BARRIERS TO ENTRY IN OUR BUSINESS ARE
RELATIVELY LOW; ACCORDINGLY, WE MAY LOSE PROJECTS TO OUR COMPETITORS.
The market for our services is subject to increased competition from
existing players, new entrants and internal information technology groups. Many
of our competitors have certain advantages over us, including longer
relationships with client bases that are frequently larger than ours; greater
brand or name recognition; and significantly greater financial, technical and
marketing resources. As a result, our competitors may be in a position to
respond more quickly to new or emerging technologies and changes in customer
requirements and to develop and promote their services more effectively than we
do.
There are relatively low barriers to entry into our business. The market is
characterized by an increasing number of entrants that have introduced or
developed services similar to those offered by us. We believe that competition
will intensify and increase in the future. As a result, new market entrants pose
a threat to our business. We do not own any patented or other proprietary
technology that precludes or inhibits competitors from entering our markets.
Existing or future competitors may develop or offer services that are comparable
or superior to ours at a lower price, which could have a material adverse effect
on our results of operations and financial condition.
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WE HAVE AGREED IN THE PAST, AND MAY AGREE IN THE FUTURE, TO NON-COMPETITION
PROVISIONS WHICH RESTRICT US FROM PROVIDING SERVICES TO COMPETITORS OF OUR
CLIENTS.
In some instances, we agree to non-competition provisions which restrict us
from providing services to competitors of our clients. These provisions may
prevent us from pursuing or accepting engagements with new clients in some
sectors. Our inability to pursue or accept engagements with these new clients
could adversely affect our business.
IF WE ARE UNABLE TO EFFICIENTLY INTEGRATE ANY FUTURE ACQUISITIONS, OUR
MANAGEMENT AND EMPLOYEES COULD BE DISTRACTED, OUR CLIENTS MAY NOT BE SATISFIED
AND OUR BUSINESS COULD BE DISRUPTED.
We intend to consider, from time-to-time, strategic acquisitions that we
believe can complement and expand our existing business. To date, we have not
completed any acquisitions and, accordingly, have no experience with
acquisitions. Our failure to manage an acquisition successfully could have a
material adverse effect on our business. We cannot assure you that we will be
able to identify suitable acquisition opportunities, obtain any necessary
financing on acceptable terms or successfully integrate acquired personnel and
operations. In addition, as a public company, the cost of acquiring a business
may increase relative to the cost of similar acquisitions when we were a private
company. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and materially and adversely
affect our results of operations. Any future acquisitions would involve certain
other risks, including the assumption of additional liabilities, potentially
dilutive issuances of equity securities and diversion of management's attention
from other business concerns. Furthermore, we may issue equity securities or
incur debt to pay for any future acquisitions. If we issue equity securities,
your percentage ownership of our company would be reduced and such securities
may be issued with rights senior to yours.
IF THE INTERNET DOES NOT CONTINUE TO BE ACCEPTED BY THE MARKETPLACE AND GROW AND
DEVELOP AS A VIABLE BUSINESS TOOL, DEMAND FOR OUR SERVICES MAY DECLINE.
Demand and market acceptance for new services is subject to a high level of
uncertainty. The future level of demand for Internet professional services will
depend upon a number of factors, including the following:
- the growth in consumer access to, and acceptance of, the Internet;
- the adoption of Internet-based business models; and
- the development and acceptance of technologies that facilitate two-way
communication between companies and targeted audiences.
Significant issues concerning the commercial use of Internet technologies,
including security, reliability, cost, ease of use and quality of service,
remain unresolved and may inhibit the growth of eBusiness solutions that utilize
these technologies. Our future success will depend, in part, on our ability to
meet these challenges, which must be met in a timely and cost-effective manner.
We cannot assure you that we will succeed in effectively meeting these
challenges, and our failure to do so could materially and adversely affect our
business.
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. Many of these historical
predictions have overstated the growth of the Internet. These predictions should
not be relied upon as conclusive. The market for our services may not continue
to develop and our services may never be widely adopted. If the market for
Internet professional services fails to develop, or develops more slowly than
expected, or if our services do not achieve broad market acceptance, our
business would be materially and adversely affected.
Any delay or failure by us in responding quickly, cost-effectively and
efficiently to these developments could render our existing services and
methodologies obsolete and have a material adverse effect on our business. To
remain competitive, we must be able to improve our current services and develop
new services that address the increasingly sophisticated and varied needs of our
current and future clients while incorporating technological advances and
emerging industry standards and practices. We may have to incur
11
<PAGE> 13
substantial expenditures to modify or adapt our services or infrastructure to
respond to the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WHICH COULD
ADVERSELY AFFECT OUR BUSINESS.
Our future success will depend, in part, upon our intellectual property
rights and our ability to protect these rights. We do not have any patents or
patent applications pending and existing trade secret and copyright laws afford
us only limited protection. Third parties may attempt to obtain, disclose, or
use our solutions or technologies. This is particularly true in foreign
countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States. Others may independently
develop and obtain patents or copyrights for technologies that are substantially
similar or even superior to our technologies. If that happens, we may need to
license these technologies and we may not be able to obtain licenses on
reasonable terms, if at all. If we are unsuccessful in any future intellectual
property litigation we may be forced to do one or more of the following:
- cease selling or using technology or services that incorporate the
challenged intellectual property;
- obtain a license to use the relevant technology which may not be
available on reasonable terms or at all;
- reconfigure our services to avoid infringement; and
- refund payments that we have previously received.
We maintain a general policy of not requiring our non-executive employees
to sign confidentiality, proprietary information or assignment of inventions and
copyrights agreements. Accordingly, with respect to patent and patent rights, we
do not have exclusive ownership of, or a right to use, sell, license, dispose of
and bring actions for infringement of any patent or patent rights developed by
an employee who has not signed such an agreement.
Generally, we develop software applications for specific client
engagements. In many instances, we have performed services for clients without
an agreement providing for the assignment of intellectual property rights to the
client. Issues relating to ownership of and rights to use software applications
and frameworks can be complicated. We may become involved in disputes relating
to the ownership and use of intellectual property. Also, we may have to pay
monetary damages in these disputes which could adversely affect our results of
operations and financial condition.
IF SOFTWARE APPLICATIONS WE DEVELOP HAVE DEFECTS, WE COULD BE LIABLE TO CLIENTS
FOR CLAIMS WHICH COULD BE SIGNIFICANT.
We develop, implement and maintain Internet applications that are crucial
to the operation of our clients' businesses. Defects in the applications we
develop could result in:
- delayed or lost revenues;
- adverse customer reaction and negative publicity about us or our
services; or
- expensive corrections.
Any of these results could have a material adverse effect on our financial
condition. Clients who are not satisfied with our services could bring claims
against us for substantial damages.
Our agreements with clients generally do not disclaim our responsibility
for any contingent liability incurred by clients relating to our services. We
cannot assure you that any claims asserted against us will be covered by
insurance, will not exceed the level of our insurance or that the insurance we
carry will continue to be available on economically reasonable terms, if at all.
The successful assertion of one or more large claims against us that are
uninsured, exceed our insurance coverage or result in changes to our insurance
policies, including premium increases, could have a material adverse effect on
our financial condition or results of operations.
12
<PAGE> 14
THE INTERNATIONAL MARKET FOR OUR SERVICES IS UNPROVEN, AND AS A RESULT, THE
REVENUES GENERATED BY FUTURE INTERNATIONAL OPERATIONS MAY NOT BE ADEQUATE TO
OFFSET THE EXPENSE OF ESTABLISHING AND MAINTAINING THOSE OPERATIONS.
One component of our long-term strategy is to expand into international
markets. The international market for our services is unproven, and we cannot
assure you that we will be able to market, sell and deliver our services
successfully outside the United States. There are risks inherent in doing
business in international markets, including different regulatory requirements,
trade barriers, challenges in staffing and managing foreign operations, currency
risk, different technology standards, different tax structures which may
adversely impact earnings, different privacy, censorship and service provider
liability standards and regulations and foreign political and economic
instability, any of which could adversely affect the success of any
international operations we establish in the future.
WE MAY NEED ADDITIONAL FINANCING IN THE FUTURE, AND, IF WE ARE UNABLE TO OBTAIN
SUCH FINANCING ON REASONABLE TERMS, OUR ABILITY TO EFFECT OUR BUSINESS STRATEGY
COULD BE DISRUPTED.
In the future, we may not generate sufficient cash flow from operations to
pay all of our operating expenses. We anticipate that the net proceeds from the
offering, together with available funds and cash from operations, will be
sufficient to meet our working capital and capital expenditure requirements
through at least the next twelve months. However, we may need additional
financing sooner if we:
- decide to expand faster than planned;
- develop new or enhanced services or products ahead of schedule;
- need to respond to competitive pressures; or
- decide to acquire complementary businesses or products.
We may not be able to borrow money or issue equity securities to meet our
cash needs, and even if we can complete such transactions, they may not be on
terms that are favorable or even reasonable from our perspective. If we raise
additional funds through the issuance of equity or debt securities, such
securities may have rights senior to those of our stockholders and our
stockholders may experience additional dilution.
RISKS RELATED TO THE INTERNET AND EBUSINESS INDUSTRIES
OUR BUSINESS IS DEPENDENT ON THE CONTINUED USE AND GROWTH OF THE INTERNET AND
THE ADOPTION OF EBUSINESS SOLUTIONS AND IF SUCH USE, GROWTH AND ADOPTION DO NOT
CONTINUE, OUR BUSINESS WILL SUFFER.
Our market is relatively new and rapidly evolving. Our future success will
depend on the acceptance by clients of the Internet and eBusiness solutions as
an integral part of their business model. Demand for and market acceptance of
recently introduced services are each subject to a high level of uncertainty.
Our business could be adversely affected if use of the Internet does not
continue to develop, or develops more slowly than expected.
The level of demand and acceptance of Internet professional services may
not increase for a number of reasons, including:
- inadequate network infrastructure and congestion of traffic on the
Internet;
- actual or perceived lack of security of information;
- inconsistent quality of service;
- lack of availability of cost-effective, high-speed service;
- lack of access and ease of use;
- excessive governmental regulation; and
- uncertainty regarding intellectual property ownership.
13
<PAGE> 15
We cannot assure you that the Internet infrastructure will be able to
support expected growth or that the performance and reliability of the Internet
will not decline as a result of this growth. Many web sites have experienced a
variety of interruptions in their service as a result of outages and other
delays occurring throughout the Internet network infrastructure. If these
outages or delays frequently occur in the future, Internet usage could grow more
slowly than anticipated or even decline.
If acceptance and growth of the Internet as a medium for commerce and
communication does not continue, our business strategy may not be successful
because there may not be a continuing market demand for our services. The need
to securely transmit confidential information, such as credit card and other
personal information, over the Internet has been a significant barrier to
eBusiness and Internet communications. Any well-publicized compromise of
security could deter consumers and businesses from using the Internet to conduct
transactions that involve transmitting confidential information, such as
purchases of goods or services. Furthermore, computer viruses that spread over
the Internet could disable or damage the systems we develop for our clients.
Decreased Internet traffic or eBusiness sales as a result of general security
concerns or viruses could cause companies to reduce their amount of technology
spending, which could hurt our results of operations.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
IMPOSE CONSTRAINTS ON OUR GROWTH AND EXPOSE US TO UNANTICIPATED LIABILITIES.
Congress has recently passed legislation and several more bills have
recently been sponsored in both the House and Senate that are designed to
regulate certain aspects of the Internet, including on-line content, copyright
infringement, user privacy, taxation, access charges, liability for third-party
activities and jurisdiction. In addition, federal, state, local and foreign
governmental organizations are also considering other legislative and regulatory
proposals that would regulate the Internet.
The laws governing the use of the Internet, in general, remain largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. This occurrence may impose additional burdens on companies
conducting business online by limiting how information can flow over the
Internet and the type of information that can flow over the Internet. The
adoption or modification of laws or regulations relating to the Internet could
adversely affect our business. Increased regulation of the Internet may decrease
the growth in the use of the Internet, which could decrease the demand for our
services, increase our cost of doing business or otherwise harm our business.
RISKS RELATED TO THIS OFFERING
IF THE PUBLIC PERCEPTION OF THE VALUE OF OUR COMMON STOCK IS LOWER THAN THE
INITIAL PUBLIC OFFERING PRICE, THE MARKET PRICE OF OUR COMMON STOCK AFTER THIS
OFFERING MAY BE LOWER THAN THE PRICE YOU PAY.
Prior to this offering, there has been no public market for our common
stock. We, together with the representatives of the underwriters, will determine
the initial public offering price based upon a number of factors, and this price
may not be the price at which the common stock will trade after this offering.
The price of our common stock that will prevail in the market after this
offering may be lower than the price you pay. In addition, after this offering,
an active trading market in our stock might not develop or continue. We cannot
assure you of the extent to which investor interest in Tallan will lead to the
development of an active trading market or how liquid that market may become.
BECAUSE OF THE NATURE OF OUR BUSINESS, THE MARKET PRICE OF OUR COMMON STOCK IS
PARTICULARLY SUBJECT TO VOLATILITY AND COULD DROP UNEXPECTEDLY.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly Internet-related companies,
14
<PAGE> 16
have been extremely volatile, and have experienced fluctuations that have often
been unrelated or disproportionate to the operating performance of such
companies. These broad market fluctuations could adversely affect the market
price of our common stock. The market price of the common stock may fluctuate
substantially due to a variety of factors, including:
- any actual or anticipated fluctuations in our financial condition and
operating results;
- public announcements concerning us or our competitors, or the Internet
industry;
- the introduction or market acceptance of new service offerings by us or
our competitors;
- changes in industry research analysts' earnings estimates;
- changes in accounting principles;
- sales of our common stock by existing stockholders; and
- the loss of any of our key personnel.
WE COULD BECOME SUBJECT TO CLASS ACTION LITIGATION DUE TO STOCK PRICE
VOLATILITY, WHICH, IF IT OCCURS, WILL DISTRACT OUR MANAGEMENT AND COULD RESULT
IN SUBSTANTIAL COSTS AND LARGE JUDGMENTS AGAINST US.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert our management's
attention and resources, which could cause serious harm to our business.
THE SIGNIFICANT CONTROL OVER STOCKHOLDER VOTING MATTERS WHICH MAY BE EXERCISED
BY OUR EXECUTIVE OFFICERS AND AFFILIATES WILL DEPRIVE YOU OF THE ABILITY TO
INFLUENCE CORPORATE ACTIONS.
After this offering, our executive officers, directors and affiliates will
together control approximately % of our outstanding common stock. As a
result, these stockholders, acting together, will be able to exhibit significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions such as
mergers, acquisitions, consolidations and the sale of all or substantially all
of our assets. This concentration of ownership may have the effect of delaying
or preventing a change in control of Tallan could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of our sale and
might adversely affect the market price of our common stock.
FUTURE SALES OF A LARGE NUMBER OF SHARES OF OUR COMMON STOCK BY OUR STOCKHOLDERS
COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
If our stockholders sell a large number of shares of our common stock, the
market price of the common stock could decline significantly. These sales also
might make it more difficult for us to sell equity securities in the future at a
time and price that we deem appropriate. Moreover, the perception in the public
market that our stockholders might sell shares of common stock could depress the
market price of the common stock. Immediately after this offering, approximately
shares, including options to purchase shares of our common stock
which are vested, will be outstanding. Of these shares, shares
will be available for resale in the public market without restriction
immediately following this offering, of which shares are subject
to lock-up agreements restricting the sale of common stock for 180 days after
the date of this prospectus. In addition, 15,938,637 shares will be available
for resale in the public market without restriction 90 days after the date of
this prospectus, of which 14,899,975 shares are subject to lock-up agreements
restricting the sale of common stock for 180 days after the date of this
prospectus. Upon expiration of the lock-up agreements, an additional 27,952,790
shares held by existing shareholders will become eligible for resale in the
public market at various dates thereafter, subject in some cases to volume
limitations. In addition, FleetBoston Robertson Stephens Inc. may, in its sole
discretion and at any time or from time to time, without notice, release all or
any portion of the securities subject to the lock-up agreements.
15
<PAGE> 17
CERTAIN PROVISIONS OF OUR GOVERNING DOCUMENTS AND OF DELAWARE LAW COULD INHIBIT
OUR ABILITY TO SELL OUR BUSINESS, EVEN IF DOING SO WOULD BE FAVORED BY
STOCKHOLDERS SUCH AS YOU.
Following this offering, certain provisions of our certificate of
incorporation and bylaws, as well as Section 203 of the Delaware General
Corporation Law, may discourage, delay or prevent a change in control of our
company that you as a stockholder might otherwise consider favorable. These
provisions include:
- authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of shares
outstanding and thwart a hostile takeover attempt;
- implementing a classified Board of Directors;
- prohibiting cumulative voting in the election of directors, which will
allow a majority of stockholders to control the election of all
directors;
- requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
- limitations on who may call special meetings of stockholders;
- prohibiting stockholder action by written consent, which requires all
actions to be taken at a meeting of our stockholders; and
- establishing advance notice requirements for nominations of candidates
for election to the board of directors or for proposing matters that can
be acted upon at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law and our
stock incentive plans may discourage, delay or prevent a change in control of
our company.
WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS OF THIS OFFERING, AND WE MAY
SPEND THE PROCEEDS IN WAYS WITH WHICH YOU DO NOT AGREE AND IN WAYS THAT MAY
NEGATIVELY IMPACT OUR FINANCIAL CONDITION.
Our decisions regarding the use of the proceeds of this offering could have
a material adverse effect on our business. Other than approximately $20.0
million to redeem all outstanding shares of Series A redeemable preferred stock,
we have not identified specific uses for the proceeds from this offering, and we
will have broad discretion in how we use them. In addition, we are unable to
determine how much of the proceeds will be used for any identified purpose
because circumstances regarding our planned uses of the proceeds may change. You
will not have the opportunity to evaluate the economic, financial or other
information upon which we base our decisions on how to use the proceeds.
Furthermore, we may not be able to invest these funds effectively.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT.
If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution, because the price you pay will be
substantially greater than the net tangible book value per share of the shares
you acquire. This dilution is due in large part to the fact that earlier
investors in us paid substantially less than the initial public offering price
when they purchased their shares of common stock. In addition, you will
experience dilution upon the exercise of outstanding stock options to purchase
common stock.
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<PAGE> 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS; MARKET DATA
Some of the statements under "Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business," and elsewhere in this prospectus constitute forward-looking
statements. These statements relate to future events or other future financial
performance, and are identified by terminology such as "may," "will," "should,"
"expects," "scheduled," "plans," "intends," "anticipates," "believes,"
"estimates," "potential," or "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 assure you that our future results, levels
of activity, performance or goals will be achieved. We undertake no obligation
to update any of the forward-looking statements after the date of this
prospectus to conform such statements to reflect the occurrence of unanticipated
events.
This prospectus contains market data related to our business and the
Internet professional services industry. This market data includes projections
that are based on a number of assumptions. If these assumptions turn out to be
incorrect, actual results may differ from the projections based on these
assumptions. As a result, our markets may not grow at the rates projected by
these data, or at all. The failure of these markets to grow at these projected
rates could have a material adverse effect on our business, results of
operations and financial condition, and the market price of our common stock.
17
<PAGE> 19
USE OF PROCEEDS
The net proceeds we will receive from the sale of shares of common
stock offered by us are estimated to be $ ($ if the
underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and the estimated offering expenses
payable by us and assuming an initial public offering price of $ .
We expect to use the net proceeds from this offering to redeem all
outstanding shares of our Series A redeemable preferred stock for approximately
$20.0 million and for working capital and other general corporate purposes.
Other than such amount, we have not identified specific uses for such proceeds
and management will have discretion over their use and investment. A portion of
the net proceeds may be used for the acquisition of complementary businesses or
technologies. We are not currently a party to any contracts, letters of intent,
commitments or agreements and are not currently engaged in active negotiations
with respect to any such acquisitions. Pending such uses, we will invest the net
proceeds from this offering in investment grade, interest-bearing securities.
The principal purposes of this offering are:
- to redeem all outstanding shares of our Series A redeemable preferred
stock;
- to increase our equity capital;
- to create a public market for our common stock;
- to facilitate future access by us to public equity markets;
- to provide increased visibility and credibility in our marketplace; and
- to enhance our ability to use our common stock as a means of attracting
and retaining key employees.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain earnings, if any, to fund the development and growth
of our business and do not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
board of directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs,
plans for expansion and the terms of any credit facilities we may enter into in
the future.
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<PAGE> 20
CAPITALIZATION
You should read this table along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our financial statements
and related notes appearing elsewhere in this prospectus.
The following table presents our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect the automatic conversion of all of our
outstanding shares of Series B convertible preferred stock upon
completion of this offering; and
- on a pro forma as adjusted basis to adjust the pro forma balances to
reflect the sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and the estimated offering
expenses payable by us, and the application of the net proceeds from this
offering, including the redemption of all of our outstanding shares of
Series A redeemable preferred stock for approximately $20.0 million, and
reflecting a loss on redemption of the Series A redeemable preferred
stock of approximately $9.5 million.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ -----------
<S> <C> <C> <C>
Mandatorily redeemable preferred stock:
Series A redeemable preferred stock, $0.01 par value;
3,412,969 shares authorized; 3,412,969 shares issued
and outstanding, actual and pro forma; no shares
authorized, issued and outstanding, pro forma as
adjusted............................................... $ 10,479,354 $ 10,479,354 $ --
Series B convertible preferred stock, $0.01 par
value; 1,706,485 shares authorized; 1,706,485
shares issued and outstanding, actual; no shares
authorized, issued and outstanding, pro forma
and pro forma as adjusted....................... 6,183,676 -- --
Stockholders' equity(1):
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding....
Common stock, $0.01 par value, 300,000,000 shares
authorized; 38,481,110 shares issued and
32,643,136 shares outstanding, actual;
41,894,080 shares issued and 36,056,106 shares
outstanding, pro forma; shares issued,
and shares outstanding, pro forma as
adjusted........................................ 384,811 418,941
Additional paid-in capital............................. 15,846,233 21,995,779
Treasury stock at cost (5,837,974 shares).............. (17,105,264) (17,105,264)
Retained earnings...................................... 3,666,879 3,666,879
Other accumulated comprehensive income................. 92,681 92,681
------------ ------------ --------
Total stockholders' equity........................ 2,855,340 9,069,016
------------ ------------ --------
Total capitalization......................... $ 19,548,370 $ 19,548,370 $
============ ============ ========
</TABLE>
- ---------------
(1) The number of shares of common stock outstanding as of December 31, 1999
does not reflect 17,631,388 shares issuable under options outstanding as of
December 31, 1999 at a weighted average exercise price of $0.89 per share
and 10,156,000 additional shares reserved for issuance under our 1999 Stock
Option and Incentive Plan, our 2000 Employee Stock Purchase Plan and our
2000 Non-Employee Director Stock Option Plan.
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<PAGE> 21
DILUTION
Our net tangible book value per share immediately after this offering will
be substantially less than the initial public offering price because the initial
public offering price will be substantially higher than the current net tangible
book value per share. Our pro forma net tangible book value as of December 31,
1999 was $ million, or $ per share. Pro forma net tangible book value
per share represents the amount of total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding. After giving effect
to the sale by us of shares of common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and the estimated offering expenses
payable by us, the pro forma net tangible book value as of December 31, 1999
would have been $ million, or $ per share. 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 purchasing shares of common stock in this offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of
December 31, 1999................................... $
------
Increase per share attributable to this offering..... $
------
Pro forma net tangible book value per share after this
offering..............................................
Dilution per share to new investors....................
=====
</TABLE>
Assuming the exercise in full of the underwriters' over-allotment option,
our pro forma net tangible book value at December 31, 1999 would have been
approximately $ per share, representing an immediate increase in the net
tangible book value of $ per share to our existing stockholders and an
immediate decrease in net tangible book value of $ per share to new
investors purchasing shares of common stock in this offering.
The following table summarizes, on a pro forma basis as of December 31,
1999, the difference between the number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
this offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... % $ % $
New investors.............................
----------- ----- ----------- -----
Total........................... 100.0% $ 100.0%
=========== ===== =========== =====
</TABLE>
The discussion and the tables above assume no exercise of stock options
outstanding on December 31, 1999 and no issuance of shares granted or reserved
for future issuance under our equity plans. As of December 31, 1999, there were
options outstanding to purchase 17,631,388 shares of common stock at a weighted
average exercise price of $0.89 per share. To the extent that any of these
options are exercised, there will be further dilution to new investors.
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<PAGE> 22
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes included elsewhere in
this prospectus. The statement of operations information for the three-year
period ended December 31, 1999 and the balance sheet information as of December
31, 1998 and 1999 is derived from our financial statements which have been
audited by PricewaterhouseCoopers LLP, independent public accountants, and are
included elsewhere in this prospectus. The statement of operations information
for the year ended December 31, 1996 and the balance sheet information as of
December 31, 1996 is derived from our audited financial statements, which are
not included in this prospectus. The statement of operations information for the
year ended December 31, 1995, and the balance sheet information as of December
31, 1995 is unaudited and has been prepared on the same basis as our audited
financial statements included elsewhere in this prospectus. In our opinion, this
unaudited information includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such information.
The historical results should not be relied upon as necessarily indicative of
the operating results you should expect for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $ 4,236 $ 7,706 $13,453 $22,869 $53,940
Operating expenses:
Project personnel costs.......................... 2,300 4,502 8,515 13,150 30,574
General and administrative....................... 1,231 2,313 3,443 5,020 8,559
Selling and marketing............................ 372 715 909 919 1,785
Research and development......................... -- -- 623 223 --
Depreciation and amortization.................... 80 154 187 298 796
------- ------- ------- ------- -------
Income (loss) from operations...................... 253 22 (224) 3,259 12,226
Other expenses, net................................ (34) (88) (289) (157) (31)
------- ------- ------- ------- -------
Income (loss) before income taxes.................. 219 (66) (513) 3,102 12,195
Provision (benefit) for income taxes............... 94 (25) (96) 1,396 5,123
------- ------- ------- ------- -------
Net income (loss).................................. $ 125 $ (41) $ (417) $ 1,706 $ 7,072
------- ------- ------- ------- -------
Deemed preferred dividends and accretion........... -- -- -- -- (4,823)
------- ------- ------- ------- -------
Net income (loss) available for common
shareholders..................................... $ 125 $ (41) $ (417) $ 1,706 $ 2,249
======= ======= ======= ======= =======
Net income (loss) per common share:
Basic............................................ $ 0.00 $ (0.00) $ (0.01) $ 0.05 $ 0.07
======= ======= ======= ======= =======
Diluted.......................................... $ 0.00 $ (0.00) $ (0.01) $ 0.05 $ 0.05
======= ======= ======= ======= =======
Weighted average number of shares:
Basic............................................ 32,200 32,200 32,200 31,611 32,005
======= ======= ======= ======= =======
Diluted.......................................... 32,200 32,200 32,200 33,505 44,621
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 122 $ 3 $ 129 $ 39 $ 9,789
Working capital (deficit).......................... 164 (121) (550) 1,207 16,891
Total assets....................................... 1,229 1,593 3,495 4,571 24,151
Long-term liabilities.............................. 364 251 304 346 336
Mandatorily redeemable preferred stock............. -- -- -- -- 16,663
Total stockholders' equity (deficit)............... 169 129 (288) 1,684 2,885
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
our financial statements, the related notes and the other financial information
appearing elsewhere in this prospectus. In addition to historical information,
the following discussion and other parts of this prospectus contain
forward-looking information that involves risks and uncertainties. Our actual
results could differ materially from those anticipated by such forward-looking
information due to competitive factors and other factors discussed under "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
We are an Internet professional services firm that creates fully
integrated, technologically advanced eBusiness solutions for our clients. We
focus on high-impact projects that directly increase revenues or create
operating efficiencies for our clients. Our eBusiness solutions leverage our
historical core competencies in the design and implementation of high volume
transaction processing, data warehousing and data mining systems to enable our
clients to capitalize on the opportunities presented by the rapidly growing
digital marketplace.
We derive revenues from services on a time and materials basis and
recognize revenue as the services are performed. Any payments received in
advance of services performed are recorded as deferred revenue. Revenues exclude
reimbursable expenses charged to the client which are netted against operating
expenses. We expect that our revenues will be driven primarily by the number and
scope of our client engagements and by our professional services headcount. In
1999, three clients accounted for approximately 38.2% of our total revenues.
Revenues from any given client will vary from period to period; however, we
expect that significant customer concentration will continue for the foreseeable
future.
Project personnel costs consist primarily of the compensation and benefit
payments of our employees engaged in the delivery of professional services,
total expenses related to client projects and compensation and expenses related
to the training of recent hires. Our gross profit margins reflect revenues less
the project personnel expenses whether or not employee time is billed to a
client. Our margins are affected by trends in hiring and in consultant
utilization, and, as such, will vary in the future.
General and administrative expenses consist primarily of facilities costs,
compensation, benefits and travel costs of employees in our management,
recruiting, human resource, information technology, finance and administration
groups. We expect our general and administrative costs to increase in absolute
dollars as we continue to invest in our employees, increase our recruiting
efforts, expand our infrastructure, and incur other additional costs related to
the growth of our business and operations as a public company.
Selling and marketing expenses consist primarily of compensation, benefit
payments and travel expenses of employees. They also include public relations,
trade shows, promotional expenses and other expenses directly related to selling
and marketing efforts. We expect selling and marketing expenses to increase as
we expand our selling and marketing efforts to build our name recognition.
Research and development expenses have consisted primarily of compensation
and benefits of employees in our innovation groups. The innovation groups
enhanced the knowledge and expertise of the strategic consulting and technology
sectors of our business.
Our revenues and earnings may fluctuate from quarter to quarter based on
such factors within and outside of our control, including the variability in
market demand for the Internet and Internet professional services, the number
and scope of our projects, seasonal factors and the efficiency with which we
utilize our employees.
On January 31, 2000, we completed a group hire of substantially all of the
employees of Citation Systems, Inc. for a purchase price of approximately $1.1
million in cash. Additionally, options to purchase 680,000 shares of common
stock were issued to the employees of Citation in connection with their
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<PAGE> 24
employment at Tallan. The purchase price will be accounted for as an intangible
asset and will be amortized over a period of four years.
RESULTS OF OPERATIONS
The following tables set forth selected financial data for the periods
indicated. The historical results are not necessarily indicative of results to
be expected of any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues.................................................... $13,453 $22,869 $53,940
Operating expenses:
Project personnel costs................................... 8,515 13,150 30,574
General and administrative................................ 3,443 5,020 8,559
Selling and marketing..................................... 909 919 1,785
Research and development.................................. 623 223 --
Depreciation and amortization............................. 187 298 796
------- ------- -------
Income (loss) from operations............................... (224) 3,259 12,226
Other expenses, net......................................... (289) (157) (31)
------- ------- -------
Income (loss) before income taxes........................... (513) 3,102 12,195
Provision (benefit) for income taxes........................ (96) 1,396 5,123
------- ------- -------
Net income (loss)........................................... (417) 1,706 7,072
Deemed preferred dividends and accretion.................... -- -- (4,823)
------- ------- -------
Net income (loss) available for common shareholders......... $ (417) $ 1,706 $ 2,249
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Operating expenses:
Project personnel costs................................... 63.3 57.5 56.7
General and administrative................................ 25.6 22.0 15.9
Selling and marketing..................................... 6.8 4.0 3.3
Research and development.................................. 4.6 1.0 --
Depreciation and amortization............................. 1.4 1.3 1.4
------- ------- -------
Income (loss) from operations............................... (1.7) 14.2 22.7
Other expenses, net......................................... (2.1) (0.7) (0.1)
------- ------- -------
Income (loss) before income taxes........................... (3.8) 13.5 22.6
Provision (benefit) for income taxes........................ (0.7) 6.1 9.5
------- ------- -------
Net income (loss)........................................... (3.1) 7.4 13.1
Deemed preferred dividends and accretion.................... -- -- (8.9)
------- ------- -------
Net income (loss) available for common shareholders......... (3.1)% 7.4% 4.2%
======= ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Revenues. Revenues increased 135.9% from $22.9 million in 1998 to $53.9
million in 1999. This increase was due primarily to increases in both the size
and number of our client engagements and the increase in the number of project
personnel. During 1999, each of Ingram Micro, Priceline and Barnes & Noble
accounted for 15.9%, 12.0% and 10.3%, respectively, of our revenues. The number
of our billable developers increased from 117 at December 31, 1998 to 261 at
December 31, 1999.
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<PAGE> 25
Project personnel costs. Project personnel costs increased 132.5% from
$13.2 million in 1998 to $30.6 million in 1999. This increase was primarily due
to the hiring of and costs associated with additional project personnel. As a
percentage of revenues, project personnel costs decreased from 57.5% in 1998 to
56.7% in 1999. This decrease was primarily attributable to the higher revenues
generated in 1999 as compared to 1998 which helped absorb some of the fixed
costs associated with project personnel, such as training expenses.
General and administrative expenses. General and administrative expenses
increased 70.5% from $5.0 million in 1998 to $8.6 million in 1999. The increase
was primarily due to the hiring of additional recruiting and other
administrative personnel, and increases in facilities and equipment costs. As a
percentage of revenues, general and administrative expenses decreased from 22.0%
in 1998 to 15.9% in 1999. This decrease was primarily attributable to our
ability to leverage fixed costs, such as rent and insurance expenses, through
the increase in revenues generated in 1999 as compared to 1998.
Selling and marketing expenses. Selling and marketing expenses increased
94.3% from $919,000 in 1998 to $1.8 million in 1999. This increase was primarily
attributable to additional selling and marketing personnel and an increase in
public relations efforts. As a percentage of revenues, selling and marketing
expenses decreased from 4.0% in 1998 to 3.3% in 1999.
Research and development expenses. Research and development expenses
decreased 100.0% from $223,000 in 1998 to $0 in 1999. Research and development
consisted of two in-house projects that were discontinued in early 1998.
Depreciation and amortization expenses. Depreciation and amortization
expenses increased 167.1% from $298,000 in 1998 to $796,000 in 1999. This
increase was primarily attributable to purchases of additional furniture and
equipment.
Other expenses, net. Other expenses, net decreased by 80.1% from a net
expense of $157,000 in 1998 to a net expense of $31,000 in 1999. This decrease
was primarily attributable to an increase in interest income and a decrease in
interest expense related to short-term borrowings.
Income taxes. The income tax expense in 1998 was $1.4 million on pre-tax
income of $3.1 million. The income tax expense in 1999 was $5.1 million on
pre-tax income of $12.2 million. The effective tax rate was 45.0% in 1998 and
42.0% in 1999. The decrease in the effective tax rate resulted from a reduction
in state income tax as a percentage of pre-tax income.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues. Revenues increased 70.0% from $13.5 million in 1997 to $22.9
million in 1998. This increase was primarily due to an increase in the number of
project personnel and the number and size of our clients. In 1998, each of
Barnes & Noble, EMC Corporation and Best Buy, Inc. accounted for 29.9%, 12.3%
and 10.2%, respectively, of our revenues. The number of our billable developers
increased from 90 at December 31, 1997 to 117 at December 31, 1998.
Project personnel costs. Project personnel costs increased by 54.4% from
$8.5 million in 1997 to $13.2 million in 1998. This increase was primarily due
to the hiring of additional project personnel. As a percentage of revenues,
project personnel costs decreased from 63.3% in 1997 to 57.5% in 1998, primarily
attributable to the higher revenues generated in 1998 as compared to 1997. These
higher revenues helped absorb the fixed costs associated with project personnel
that include training expenses and fixed costs related to client projects.
General and administrative expenses. General and administrative expenses
increased 45.8% from $3.4 million in 1997 to $5.0 million in 1998. This increase
was primarily due to an increase in compensation and benefits paid due to the
hiring of additional recruiting and other administrative personnel, facilities
and equipment costs. As a percentage of revenues, general and administrative
expense decreased from 25.6% in 1997 to 22.0% in 1998. This decrease was
primarily attributable to our ability to
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<PAGE> 26
leverage fixed costs, such as rent and insurance expenses, through the increase
in revenues generated in 1998 as compared to 1997.
Selling and marketing expenses. Selling and marketing expenses increased
1.0% from $909,000 in 1997 to $919,000 in 1998. As a percentage of revenues,
selling and marketing expenses decreased from 6.8% in 1997 to 4.0% in 1998. This
decrease was primarily attributable to a decrease in public relations expenses,
travel expenses and general selling and marketing expenses.
Research and development expenses. Research and development expenses
decreased 64.3% from $623,000 in 1997 to $223,000 in 1998. Research and
development consisted of two in-house projects which were discontinued in early
1998.
Depreciation and amortization expenses. Depreciation and amortization
expenses increased 59.0% from $187,000 in 1997 to $298,000 in 1998. This
increase was primarily attributable to purchases of additional furniture and
equipment.
Other expenses, net. Other expenses, net decreased by 45.7% from a net
expense of $289,000 in 1997 to a net expense of $157,000 in 1998. This decrease
was primarily attributable to a decrease in interest expense related to short
term borrowings, increased interest income and decreased non-operating losses.
Income taxes. The income tax benefit was $96,000 on a pre-tax loss of
$513,000 in 1997. The income tax expense in 1998 was $1.4 million on pre-tax
income of $3.1 million. The effective tax rate was (18.8)% in 1997 and 45.0% in
1998. The increase in the effective tax rate resulted from positive net income.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations through cash flow from
operations, equity financings, bank borrowings and capital lease financing
arrangements. Our cash and cash equivalents at December 31, 1999 were $9.8
million.
Cash (used in) provided by operating activities was ($1.1) million in 1997,
$1.8 million in 1998 and $2.6 million in 1999. The decrease in the use of cash
from 1997 to 1998 was primarily due to a decrease in accounts receivable and
achieving net income of $1.7 million in 1998 as opposed to a net loss of
$417,000 in 1997. The increase in cash provided by operations from 1998 to 1999
was primarily due to increased net income and an increase in accrued expenses
and deferred revenue, offset by an increase in accounts receivable.
Cash (used in) provided by financing activities was $1.4 million in 1997,
($1.2) million in 1998 and $9.7 million in 1999. Cash flows from financing
activities in 1997 and 1998 were primarily attributable to the proceeds and
repayments on a revolving line of credit that expired in August 1999. Cash
provided by financing activities in 1999 resulted from net proceeds of $27.8
million relating to the sale of equity securities, partially offset by the
repurchase of outstanding shares of our common stock and repayment on a
revolving line of credit totaling approximately $18.0 million.
Our capital expenditures were $107,000 in 1997, $562,000 in 1998 and $2.5
million in 1999. The year-to-year increase in capital expenditures was primarily
attributed to purchases of office furniture and computer equipment. On January
31, 2000, we completed a group hire of substantially all of the employees of
Citation Systems Inc. for a purchase price of approximately $1.1 million in
cash.
We believe that our current cash and cash equivalents, together with cash
generated from operations and the net proceeds from this offering, will be
sufficient to meet our foreseeable working capital and capital expenditure
requirements for at least the next twelve months. However, there can be no
assurance that we will not require additional financings during this time frame
or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.
In addition, in the fourth quarter of 1999, we initiated a brand awareness
and name recognition marketing campaign which accounted for a significant
increase over amounts spent on marketing prior to
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that time. We also intend to expend significant amounts of capital in 2000 in
order to further increase our marketing efforts.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 100, "Restructuring and Impairment Charges." In December
1999, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements." Staff Accounting
Bulletin No. 100 expresses the views of the Securities and Exchange Commission
staff regarding the accounting for and disclosure of certain expenses not
commonly reported in connection with exit activities and business combinations.
We do not expect the provisions of Staff Accounting Bulletin No. 100 to have a
material impact on our financial statements. Staff Accounting Bulletin No. 101
expresses the views of the Securities and Exchange Commission staff in applying
generally accepted accounting principles to certain revenue recognition issues.
We do not expect the provisions of Staff Accounting Bulletin No. 101 to have a
material impact on our financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. As issued, this
statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999, with earlier application encouraged. In May 1999, the
Financial Accounting Standards Board delayed the effective date of this
statement for one year, to all fiscal quarters of all fiscal years beginning
after June 15, 2000. We do not currently, nor do we intend in the future to, use
derivative instruments and therefore do not expect that the adoption of
Statement of Accounting Standards No. 133 will have any impact on our financial
position or results of operations.
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<PAGE> 28
BUSINESS
OUR COMPANY
Tallan is an Internet professional services firm that creates
fully-integrated, technologically advanced eBusiness solutions for our clients.
We focus on high-impact projects that can directly increase revenues and create
operating efficiencies for our clients. Our eBusiness solutions leverage our
core competencies in the design and implementation of high volume transaction
processing, data warehousing and data mining systems and enable our clients to
capitalize on the opportunities presented by the rapidly growing digital
marketplace.
Intellectual capital is the foundation of our business. Therefore, we are
focused on attracting and retaining the most highly-skilled professionals in the
industry. In support of this strategy, we maintain a corporate culture focused
on the software developer and utilize a creative and competitive compensation
plan which continuously and frequently rewards our employees' efforts. Our
organizational structure is designed to give our developers a clear career path
and frequent opportunities for advancement. To retain our talented professionals
and to ensure the superiority of our solutions, we maintain a professionally
stimulating environment that challenges our professionals and compensates those
on the leading edge of developing complex technology solutions.
We partner with clients that are committed to using the Internet to enhance
their businesses. Additionally, we seek to develop long-term partnerships where
recurring revenue is generated from projects that arise as clients' strategic
use of technology evolves. We continually work to evaluate, master and
incorporate emerging technologies into our service offerings in order to deliver
the most technologically advanced solutions to our clients. Virtually all of our
solutions are delivered in an Internet, intranet or extranet environment.
Since our inception, we have focused on growing rapidly and expanding our
scope of services to provide a broader range of advanced technology solutions.
We believe we have gained considerable experience from completing significant
engagements across a wide range of industries for emerging eCommerce companies
and established companies seeking to expand or develop their Internet
operations. We will continue to focus on leading companies in various sectors to
build our expertise and to continue our efforts to become recognized as a
leading provider of eBusiness solutions.
INDUSTRY BACKGROUND
Growth of the Internet and eBusiness
The use of the Internet has grown rapidly in recent years, driven by
several key factors, including the development of easy-to-use web browsers, the
large and growing installed base of advanced personal computers, the adoption of
faster and more efficient networks, the emergence of compelling web-based
content and commerce applications and the growing sophistication of the user
base. According to International Data Corporation, a leading technology research
firm, the number of Internet users was 142.2 million worldwide at the end of
1998 and is expected to grow to 502.4 million by the end of 2003.
Companies increasingly use the Internet to enhance their existing
businesses and create ways of doing business on-line, commonly referred to as
eBusiness. For companies, the Internet has evolved from a means of delivering
online marketing brochures through a web site into a platform for the dynamic
and complex series of systems that form the core of a company's relationships
with its customers, business partners and employees. Companies are taking
advantage of the Internet's capabilities to rapidly create new communications
channels and revenue opportunities and to shorten cycle times, thereby reducing
costs and improving operating efficiencies.
Companies increasingly find that they can reliably and cost-effectively
manage high-volume transaction environments on a real-time basis, compile and
coordinate customer information and contacts across the enterprise, profile and
qualify customers, perform predictive selling on a real-time basis and provide
dynamic personalized content to web site users. Companies also create value by
integrating the operations and content of business partners and coordinating the
complex transactions of the supply and
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service chain. According to International Data Corporation, the amount of
commerce conducted over the Internet is expected to exceed $1.3 trillion by
2003.
Demand for eBusiness Solution Providers
While there are numerous benefits that can be gained by utilizing the
Internet, the design, development and delivery of a successful eBusiness
solution requires professionals with broad and deep technology skills. The
design of effective solutions requires careful analysis and definition of the
strategic implications of the Internet for the business. Additionally, the
development and delivery of successful eBusiness solutions requires substantial
expertise to create and integrate new business processes with existing
capabilities. There is a shortage of high quality, experienced professionals who
have the technical skills required to create comprehensive eBusiness solutions.
This shortage makes it costly and inefficient for most companies to hire, train
and retain these professionals. As a result, many companies choose to outsource
the design, development and delivery of their eBusiness solutions.
In today's competitive environment, companies seek service providers that
have expertise in three areas required to create successful eBusiness solutions:
strategy consulting, creative design and, most importantly, complex technology
services. Expertise in these disciplines is required to provide a comprehensive,
seamless eBusiness solution that effectively integrates leading-edge
technologies with user friendly interfaces. However, few Internet professional
service providers have skills and expertise in all three areas which would
enable them to integrate business strategy services, creative design services
and complex technology architecture development services.
As a result, there is significant and growing demand for Internet
professional service providers. International Data Corporation has estimated
that the market for Internet and electronic commerce services worldwide will
grow from $7.8 billion in 1998 to $78.5 billion in 2003. This rapidly increasing
demand for eBusiness solutions, combined with the inability of many existing
Internet professional service providers to deliver the technologically advanced
architectures required by clients, has created significant market opportunities
which remain largely unaddressed.
THE TALLAN SOLUTION
We provide technologically sophisticated eBusiness solutions that enable
our clients to capitalize on the significant opportunities presented as a result
of the widespread adoption of the Internet. Virtually all of our solutions
incorporate our expertise in developing and delivering the leading-edge
technologies necessary for our clients to compete in the new digital
marketplace. These technologies are essential for the design and implementation
of high volume transaction processing, data warehousing and data mining systems.
Key elements of our solution include:
- providing a comprehensive set of integrated technology, strategy and
creative design services;
- delivering rapid time-to-market eBusiness solutions that create
measurable value for our clients;
- delivering superior solutions through collaborative partnership efforts
with clients;
- utilizing our BLUEprint methodology to ensure the efficient delivery of
solutions; and
- leveraging our intellectual assets to benefit our clients' eBusiness
efforts.
Providing a Comprehensive Set of Integrated Technology, Strategy and
Creative Design Services
We provide our clients with a comprehensive set of integrated services
designed to assist them in successfully executing their Internet strategies.
While we offer the strategy and creative design services demanded by our
clients, we believe the most significant benefit of our service offering is the
technology component of our solutions. Our software engineers provide
applications development and systems integration services using leading edge
technologies, including Java, EJB, Java Server Pages, BEA WebLogic and IBM
WebSphere. The solutions we develop for our clients allow them to handle rapidly
increasing levels of transaction volumes and complex media-rich content. Our
work on these solutions
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includes developing Internet-enabled applications and databases, as well as
integrating Internet applications with existing applications and databases. We
will continue to develop our expertise in the latest technologies and adapt
these technologies for the benefit of our clients.
Delivering Rapid Time-to-Market eBusiness Solutions that Create Measurable
Value for our Clients
We provide flexible, reliable, scalable and technologically advanced
solutions that help our clients rapidly capitalize on the opportunities afforded
by the digital marketplace. The timeliness of our solutions is a critical
component of our offering, enabling our clients to minimize their time-to-market
and create value by increasing revenues and operating efficiencies. We believe
the measurable returns on investment provided by the solutions we deliver make
us the provider of choice for clients committed to participating and competing
successfully in the digital marketplace.
Delivering Superior Solutions through Collaborative Partnership Efforts
with Clients
We view our clients as partners and integral members of our development
teams. Because we believe that early feedback from clients is essential to the
design and implementation of a successful solution, our engagements are staffed
not only with our consulting professionals but also with representatives from
our clients' various business and technical functions. We believe our
collaborative, iterative approach ensures the efficient design and development
of complex eBusiness solutions and reduces miscommunications and delays. We
believe our partnership approach has led to higher levels of client satisfaction
and has resulted in increased levels of repeat business. Approximately 67% of
our revenues in 1999 were derived from clients who were also clients in 1998.
Utilizing our BLUEprint Methodology to Ensure the Efficient Delivery of
Solutions
We use BLUEprint, our proprietary methodology, to direct all phases of our
client engagements. We believe the guidelines provided by BLUEprint reflect a
best-in-class approach to deploying value-added solutions. Through BLUEprint, we
are able to deliver our solutions in rapidly sequenced stages, which
considerably shortens our clients' time-to-market. BLUEprint provides procedural
guidelines that ensure consistency in our approach and a high degree of
consistency in executing client engagements which enable us to set and meet
client expectations on-time and on-budget.
Leveraging our Intellectual Assets to Benefit our Clients' eBusiness
Efforts
We accumulate and disseminate knowledge gained from our client engagements
to ensure the continued growth and development of our core intellectual assets.
This information is tracked and stored in our corporate intranet, which serves
as a centralized, secure and easily accessible repository for our accumulated
knowledge. Our ability to reuse intellectual capital allows us to assess
engagement requirements more effectively, leverage our experience to avoid
technology pitfalls and ultimately deliver eBusiness solutions to clients in a
more rapid timeframe.
OUR STRATEGY
Our goal is to become the leading provider of fully-integrated,
technologically-advanced Internet and eBusiness solutions to a broad range of
industry segments. To achieve this goal, we are pursuing the following
strategies:
- maintaining our focus on attracting and retaining the most highly
talented technology professionals;
- further developing and expanding strategic client relationships;
- leveraging and evolving our intellectual assets and technical expertise;
and
- selectively expanding our geographic presence.
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Maintaining our Focus on Attracting and Retaining the Most Highly Talented
Technology Professionals
We believe that our greatest asset is our team of highly skilled software
developers and other technical professionals. At all levels of the organization,
we are focused on building a working environment and maintaining a culture that
allows our developers access to the most advanced technology tools available.
Additionally, our developers only work on high-impact engagements with clients
that have committed to making advanced technology solutions a significant
component of their overall corporate growth strategy. As a result, we are able
to attract what we believe to be the most highly skilled professionals available
and in turn attract top clients. Other important elements of our effort to
attract and retain top talent include an employee referral program which has
allowed us to access our employees' professional network to attract talent in a
cost-effective manner. We intend to continue to be innovative in our efforts to
attract top talent.
Further Developing and Expanding Strategic Client Relationships
We have a strong track record of delivering high quality eBusiness
solutions to our clients. We believe we are well positioned to gain additional
engagements from these clients, as well as to increase the level of referrals to
new clients. Once engaged with a client, we leverage our expertise and
technology skills to expand each relationship. As a result of our clients' high
levels of satisfaction, a significant number of our active engagements have
originated from clients for whom we have previously completed engagements. In
addition, strong relationships with current clients often result in referrals to
new clients. We intend to maintain the highest levels of satisfaction to
strengthen our client relationships.
Leveraging and Evolving our Intellectual Assets and Technical Expertise
We are committed to maintaining a leadership position in understanding and
utilizing the latest technologies and view this as a critical component of our
current and future success. As such, we will continue to devote significant
resources to ensure our developers are proficient in the latest technological
innovations. In addition, we will continue to add to enhance and utilize our
repository of accumulated knowledge to more efficiently deliver technologically
advanced eBusiness solutions.
Selectively Expanding our Geographic Presence
Many of our clients have international operations and have demand for our
services overseas. Although we are not currently in the process of establishing
new offices, we intend to open additional offices in selected geographic areas
to serve our existing clients and to expand our client base in the United States
and internationally. We believe that selective geographic expansion will enhance
our ability to service existing clients on a local basis and allow us to develop
additional client relationships.
OUR BLUEPRINT METHODOLOGY
BLUEprint, our proprietary methodology that governs our organization of
client engagements, is a time-based method for the delivery of eBusiness
solutions. BLUEprint assists us in clarifying the business objectives and
technical requirements of each of our client engagements and helps us deliver
our solutions more quickly thereby shortening our clients' time-to-market.
At the outset of our engagements we complete a thorough assessment of our
client's existing business processes and technology infrastructure. Based on
this assessment, we formulate an analysis of the requirements needed to
translate their business objectives and processes into a solution that is
significantly enabled by our advanced technology. Once we formulate a technology
requirements analysis, we design a solution that leverages our clients' existing
technology infrastructure to maximize their return on investment. We believe
that our BLUEprint methodology bridges the gap in the marketplace between
management consulting firms and technical staff augmentation services and
enables us to provide leading-edge technology solutions that advance our
clients' guiding business objectives.
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OUR SERVICE OFFERINGS
We offer our clients a broad range of strategy, technology and creative
design services required to develop and deliver advanced eBusiness solutions.
Our comprehensive offering is designed either to extend or complement our
clients' existing operating models or create entirely new Internet-based
operating models. Our professionals have experience with a wide range of
technologies and vendors. However, we offer our clients a vendor-neutral
approach to ensure the design and delivery of the most appropriate solution. The
services we offer can be utilized individually or in an integrated manner and
are summarized as follows:
Strategy Services
We work with clients to identify, evaluate and prioritize the many
strategic eBusiness alternatives available to them. Our goal is to ensure that
the highest value strategic alternative is chosen while giving consideration to
a client's existing business processes and technologies. Our delivery of
strategy services is primarily designed to ensure that our clients and
engagement teams have a clear understanding of the overall business objectives
of the technology solution that is developed.
Technology Services
Our revenues are principally derived from the design, development and
delivery of technologically advanced eBusiness solutions. Although some of our
solutions are integrated with clients' existing technology, many are implemented
independent of clients' legacy systems. We have the ability to provide a
comprehensive approach that includes the following components:
- Technology Benchmarking and Product Analysis -- assesses available
hardware and software to determine the capacity and functionality of the
many technology alternatives.
- Applications Architecture and Infrastructure -- details how the hardware
and software technologies will be delivered to create a stable, scalable
and flexible platform to meet increasing transaction volumes and support
the solution's functionality.
- Software Development -- includes the creation of the web pages,
input/output logic and database capabilities which allow our eBusiness
solutions to operate. This is the most intellectually challenging
component of our technology expertise and what we believe to be our key
competitive advantage.
- Technology Implementation and Integration -- ensures the various hardware
and software components of a solution are delivered and integrated
seamlessly.
- Technology Transfer -- ensures that knowledge transfer takes place to
allow our clients' in-house teams to support and maintain the complex
systems our engagement teams have designed.
These components of our technology services offering are used to create
primarily two types of eBusiness solutions, eCommerce-enabling systems and
business information management systems. Our eCommerce-enabling systems include
the functionality to conduct business-to-business and business-to-consumer
transactions in a secure Internet environment. Our business information
management systems include the data warehousing and mining functionality
necessary to allow our clients to successfully deliver the customer relationship
management capabilities we believe are necessary to compete in the new digital
marketplace.
Creative Design Services
We assist clients with the development of a compelling graphical user
interface for their eBusiness solutions. This service offering is critical to
the integration of an appealing front-end web site with the functional back-end
operating system and data warehouse.
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OUR CLIENTS
We performed services for the following companies in 1999:
<TABLE>
<S> <C> <C>
Ames EMC Corporation on2.com
barnesandnoble.com ETS Pepsi
Barnes & Noble fiera.com priceline.com
Best Buy Fortunecity.com Schick
Capital One Greenwood Capital Talbots
Columbia House Ingram Micro Wit Capital
CVS isolve.com (ICON)
ditech.com ONRP (Online
Retail Partners)
</TABLE>
CLIENT CASE STUDIES
The following case studies highlight representative engagements with our
clients:
PRICELINE.COM
Business Opportunity. Priceline.com, which sells airline tickets, hotel
rooms and automobiles using a "name your own price" concept, wanted to expand
into the grocery industry. In 1999, Priceline created WebHouse Club to allow
customers to name their own price for hundreds of popular grocery items on the
Internet. The goal was to design and implement the Priceline WebHouse Club web
site with a system capable of making complex decisions and performing tracking
and payment reconciliation, while remaining user-friendly.
Solution. In a period of six months, our project team designed, developed
and delivered an innovative eBusiness solution which supports the WebHouse Club.
The system consists of a customer friendly user interface coupled with a complex
search engine which automates customer service, settlement of transactions and
advanced data warehousing. To use the service, members go to www.priceline.com,
sign up for a WebHouse Club card and select two or more brands from the same
category, naming the price they wish to pay for those items. When a bid from a
WebHouse Club member is matched, the member's credit card is charged and the
member receives a credit on his or her WebHouse Club card, which can then be
used like an ATM card, to pick up the items at their choice of over 1,100
participating stores. Our team created scalable systems to support:
- applications which enhance customer service such as WebHouse Club
accounts and cards, credit card adjustments and customer information.
These applications are integrated into a central customer service center
which allows for individualized case tracking;
- custom built applications which reconcile financial transactions with
customers and retail partners and utilize interfaces with third party
credit processors;
- applications to track participation in marketing partner programs, as
well as direct links to the marketing partners themselves; and
- a comprehensive data warehouse that allows WebHouse Club to track and
quickly react to customer and market trends.
Business Value. The system we designed and built helped to launch an
entirely new line of business for Priceline. As of December 30, 1999 WebHouse
Club had sold over 2 million items in over 175 categories to over 100,000
members since launching its web site in the New York metro market in November
1999. Our scaleable and flexible system will also allow Priceline to execute its
strategy of increasing product category offerings and leveraging existing
operations to roll out the WebHouse concept nationally.
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BEST BUY
Business Opportunity. Best Buy sells consumer electronics, entertainment
products and appliances in over 350 stores nationwide. Best Buy asked us to
develop an in-store application architecture that would help them enhance and
streamline their customers' shopping experience. The goal was to make each
customer experience with Best Buy a productive and satisfying one.
Solution. Our project team designed an eBusiness solution to create an
integrated shopping experience for the customer. Our solution utilizes Internet
technologies to integrate many applications within Best Buy's existing
point-of-sale system, and facilitates the sharing of information between these
applications. Our architecture has been designed to be scalable and reliable,
while remaining easy to deploy and maintain.
Some of the highlights of this architecture are:
- a central customer database available to all applications which ensures
that the most up-to-date customer information is utilized during a
customer transaction. This database eliminates the need for the customer
to supply additional information after the first interaction with Best
Buy, thus speeding the sales process and improving the sales experience;
- an information display and interaction device that allows customers to
directly participate in the transaction by answering questions themselves
and verifying such information as name and address;
- a product recommendation and predictive selling component that reminds
associates and customers when additional products are necessary to
accompany the purchase, such as a power cord or batteries; and
- a framework for developing new applications which utilizes common
architectural components. This approach reduces the amount of time
necessary to implement new systems and increases Best Buy's ability to
react to market trends and customer needs.
The most recent application added to this architecture was released in the
fall of 1999. This application allows customers to enroll with an Internet
service provider at the point-of-sale and delivers an instant rebate toward the
purchase of a new personal computer. This design allows Best Buy to further
leverage the architecture while improving the customer experience.
Business Value. In today's retail environment, customer service and
satisfaction are key competitive differentiators. The system we designed for
Best Buy creates value by enhancing customers' shopping experience through
streamlined transactions in which customer input is a key component. The
scalability and flexibility of the system also allows Best Buy to quickly and
effectively implement new applications and react to market trends.
TALBOTS
Business Opportunity. Talbots is a leading national specialty retailer and
cataloger of women's classic apparel, shoes and accessories. Talbots operates
652 stores and circulated approximately 53 million catalogs to customers
worldwide in 1998. Talbots identified the need to enhance its existing
text-based catalog order entry and vendor replenishment systems and wanted to
establish an online retail presence. The goals of these projects were to improve
customer service and store inventory utilization while decreasing internal
training time, overhead and maintenance costs.
Solution. Our project team worked with Talbots to identify areas of
improvement and concentrated on key areas of the business to:
- implement the talbots.com eBusiness system, including the design of a
transactional database, the design and implementation of an intuitive
front-end which includes such features as product reviews and a robust
search engine; the development of real-time inventory interfaces; and the
creation of supporting administration, content management, and automated
email systems;
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<PAGE> 35
- replace the existing text-based catalog order entry system with one using
merchandise images and catalog information, real-time access to catalog
and store inventory, and administration pieces;
- develop and implement an Intranet-based replenishment system to
automatically provide just-in-time inventory to all Talbots stores;
- leverage the replenishment system for automatic allocation of inventory
and store-to-store transfers;
- design and develop a web-based quality assurance system to ensure and
enforce Talbots' high standards for quality of merchandise; and
- design a scalable infrastructure to support these critical systems.
Business Value. Our solution enabled Talbots to improve customer service
and increase the productivity of the catalog and merchandise divisions. The
online presence gives Talbots an additional sales channel which leverages
Talbot's quality, brand name and customer service. The new order entry system
provides reduced training time and increased productivity while adding new
functionality and features. The automatic replenishment, distribution, and
quality assurance of store inventory, enables streamlining of operations, by
reducing store overhead and increasing inventory turns, while at the same time
ensuring the high quality of products.
SALES AND MARKETING
Virtually our entire organization, from our senior executive management and
project managers to our dedicated sales staff, are involved in marketing our
services. We market our services through our headquarters in Glastonbury,
Connecticut and our regional sales offices in Boston, Massachusetts; Chicago,
Illinois; Long Beach, California; New York, New York; Philadelphia,
Pennsylvania; Richmond, Virginia and Stamford, Connecticut. We believe that our
regional sales approach, together with our on-site service, develops strong
relationships with our clients and allows us to cultivate brand awareness in our
regional markets. In addition to our existing offices, we plan to open
additional offices in the United States during 2000. In addition to our direct
sales efforts, we have also gained sales through relationships already
established at the senior level of client management through past engagements.
These relationships lead to two types of sales: new projects with current
clients; and new clients where we are engaged by an executive that left an
existing client and hired us to assist their new employer. Our project managers
are typically responsible for identifying and cultivating additional projects
with existing clients.
Our sales efforts are supplemented by our marketing program which is
dedicated to strengthening our reputation as a creative provider of eBusiness
solutions among prospective clients and employees. We have recently initiated a
brand awareness, logo development and name recognition campaign. We also intend
to participate in and sponsor eBusiness industry conferences and events,
implement targeted advertising programs which will include direct mailings and
signage, and contribute articles to trade publications, all with the goal of
clearly and consistently communicating our corporate positioning.
PEOPLE AND CULTURE
We believe our corporate culture is fundamental to our success. Our culture
is defined by the philosophy that the intelligence, drive and technical aptitude
of our software developers are at the core of each of our successful eBusiness
solutions. We foster an entrepreneurial spirit that inspires professionals to
incubate new ideas, create innovative solutions and provides the opportunity for
every individual to succeed. We believe the success of a project is a reflection
of the people working on it from the most recent college recruit to the most
seasoned professional.
We also have a strong belief in the value of training and development of
our professionals. Each new employee is introduced to our culture via our
orientation and training program. New employees participate in our customized
training program which covers a broad range of topics, but has a strong focus on
leading-edge technologies. We have also created a mentoring program where
experienced employees provide mentoring and training to less experienced
employees, particularly recent college graduates. In
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<PAGE> 36
addition, our experienced employees keep apprised of technological advances and
developments by constantly having exposure to and hands-on practice with
leading-edge technologies.
In order to attract and retain high quality professionals, we must
continually challenge our developers and provide an environment that fosters
these challenges, but also provide a place of creativity, reward and
opportunity. We believe that developing and maintaining this culture is critical
to becoming an employer of choice for highly skilled software developers.
RECRUITING
One of our strongest recruiting tools is our current workforce. To
encourage employees to identify prospective candidates, we offer a two-tiered
employee referral program. Employees receive a bonus for identifying a qualified
candidate and, if that candidate is hired, the referring employee gets an
additional bonus. We believe this is a successful recruiting tool, as
approximately 30% of our employees received referral bonuses in 1999. This
program empowers employees to participate in the selection of their co-workers
and is also a direct reflection of current employee satisfaction. The success of
this strategy is apparent in that, to date, we have not found it necessary to
utilize outside recruiting firms to aid in the hiring of new professionals.
In addition, we dedicate extensive resources to hiring high quality
professionals. The majority of our recruiting effort is aimed at recent college
graduates specifically from schools with strong computer science programs. In
1999, we focused on approximately twenty colleges and universities across the
United States by attending career fairs, participating in on-campus information
sessions and conducting on-campus interviews. In addition, to raise awareness of
our company at these schools, we arranged speaking engagements where our
developers discuss a range of topics relating to our business, including hot
technologies and careers at Tallan. At other schools, we applied a more passive
recruiting presence through advertising in the school's newspaper and posted
listings on the school's web site. In addition to college recruiting, we recruit
experienced professionals. Our search for these experienced professionals
includes posting and searching the Internet at locations such as
www.monsterboard.com and www.careermosaic.com.
COMPETITION
The Internet professional services industry is composed of many
participants, is highly competitive, is characterized by low barriers to entry,
and is subject to rapid technological change. We face competition from existing
players, potential new entrants and internal information systems groups. We
believe the competitive landscape is divided into the following major segments:
- Internet professional services firms, such as C-bridge, Cysive, IXL,
Proxicom, Razorfish, Sapient, Scient, Tanning Systems and Viant;
- traditional technology integrators, such as Andersen Consulting,
Cambridge Technology Partners, Cap Gemini, Deloitte Consulting Group,
EDS, KPMG and PricewaterhouseCoopers;
- traditional strategic consulting firms, such as Bain, Booz-Allen &
Hamilton, Boston Consulting Group, Diamond Technology Partners and
McKinsey & Company; and
- in-house information technology, marketing and design service departments
of potential clients.
Many of our competitors have longer operating histories, larger client
bases, longer relationships with clients, greater brand or name recognition and
significantly greater financial, technical, marketing and public relations
resources than we do. As a result, our competitors may be in a position to
respond more quickly to new or emerging technologies and changes in customer
requirements and to develop and promote their services more effectively than we
do.
We believe the principal competitive factors in our market are
technological expertise, the speed and quality of the services and eBusiness
systems delivered, project management capabilities, ability to attract and
retain qualified professionals, price and reliability of services provided,
strength of client relationships and brand recognition. We believe we compete
favorably with our competitors in each of these areas. In
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<PAGE> 37
particular, we believe that our technological expertise which has developed from
our completion of mission critical projects for our clients and is enhanced by
our internal information sharing programs and corporate culture gives us a
competitive advantage over other services providers.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our copyrights, trade secrets and other intellectual property as
important to our success. Unauthorized use of our intellectual property by third
parties may damage our brand and our reputation. We rely on trademark and
copyright law and trade secret protection to protect our intellectual property
rights. Despite these precautions, it may be possible for third parties to
obtain and use our intellectual property without our authorization. Furthermore,
the validity, enforceability and scope of protection of intellectual property in
Internet-related industries is uncertain and still evolving. The laws of some
foreign countries do not protect intellectual property to the same extent as do
the laws of the United States.
We have maintained a general policy of not requiring our non-executive
employees to sign confidentiality, proprietary information or assignment of
inventions and copyrights agreements. Accordingly, we do not have exclusive
ownership of, or a right to use, sell, license, dispose of and bring actions for
infringement of any patent or patent rights developed by an employee who has not
signed such an agreement.
Generally, we develop software applications for specific client
engagements. In many instances, we have performed services for clients without
an agreement providing for the assignment of intellectual property rights to the
client. Issues relating to ownership of and rights to use software applications
and frameworks can be complicated. We may become involved in disputes relating
to the ownership and use of such intellectual property and may have to pay
economic damages in these disputes.
We pursue the registration of our service marks in the United States. We
may not be able to secure adequate protection of our marks in the United States
and other countries. We currently have applied for service mark registrations in
the United States for the Tallan mark and the Tallan logo. Effective trademark
protection may not be available in all the countries in which we conduct
business. Policing unauthorized use of our marks is also difficult and
expensive. In addition, it is possible that our competitors have adopted or will
adopt product or service names similar to ours, thereby impeding our ability to
build brand identity and possibly leading to customer confusion.
We cannot be certain that our services and the finished products that we
deliver do not or will not infringe valid patents, copyrights, trademarks or
other intellectual property rights held by third parties. We may be subject to
legal proceedings and claims from time to time relating to the intellectual
property of others in the ordinary course of our business. We may incur
substantial expenses in defending against these third-party infringement claims,
regardless of their merit. Successful infringement claims against us may result
in substantial monetary liability or may materially disrupt the conduct of our
business.
EMPLOYEES
As of December 31, 1999, we had 305 full time employees, including:
- 261 consultants, including 40 project managers;
- 11 sales and marketing personnel;
- 9 recruiting personnel; and
- 24 executives, including finance, information services and support staff.
We believe our relationship with our employees is good. None of our
employees is represented by a union.
Our continued success will depend in large part on our ability to attract
and retain talented professionals. Competition for such personnel is intense. We
provide our employees financial incentives,
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equity participation and a creative career track for senior professionals that
includes the ability to incubate concepts, products and related start-up
businesses.
The failure to attract and retain qualified employees could have a material
adverse effect on our business, financial condition and results of operations.
FACILITIES
Our headquarters and principal administrative, finance, sales and marketing
operations are located in approximately 15,000 square feet of leased office
space in Glastonbury, Connecticut. Our lease expires in October 2004. We also
lease office space in: Boston, Massachusetts; Chicago, Illinois; Long Beach,
California; New York, New York; Philadelphia, Pennsylvania; Richmond, Virginia
and Stamford, Connecticut.
LEGAL PROCEEDINGS
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of business. We currently
are not a party to any material legal proceeding.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Our executive officers, directors and key employees and their ages as of
January 31, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John M. Hughes............................ 37 Director, Chairman and Chief Executive Officer
Robert C. Hughes.......................... 29 President and Chief Operating Officer
Peter A. Bourdon.......................... 40 Director, Chief Financial Officer, Executive Vice
President, Secretary and Treasurer
Christopher Dearing....................... 35 Vice President, Design and Development
Bruce T. Guptill.......................... 42 Vice President, Marketing
Michael A. Logan.......................... 29 Vice President, Design and Development
Thomas Longo.............................. 31 Vice President, Recruiting
Douglas Rivard............................ 32 Vice President, Design and Development
David Tanacea............................. 37 Vice President, Design and Development
R. Nelson Griebel......................... 50 Director
Morton Handel............................. 64 Director
Peter Huff................................ 30 Director
Ronald D. Jarvis.......................... 62 Director
Michael R. Lezenski....................... 52 Director
Noah Walley............................... 36 Director
</TABLE>
Mr. John M. Hughes, one of our founders, has served as Chairman of the
Board and Chief Executive Officer since 1990, and has been a Director since
1985. Prior to 1996, Mr. Hughes served as our President. He is a 1984 graduate
of Boston College with a BS in computer science.
Mr. Robert C. Hughes has served as our President and Chief Operating
Officer since 1997. From 1993 to 1997, he held various management positions in
recruiting, sales and operations at Tallan. Mr. Hughes is a 1993 graduate of the
University of Connecticut with a BA in marketing.
Mr. Peter A. Bourdon, a certified public accountant, has served as our
Executive Vice President, Chief Financial Officer and Treasurer since October
1997, a Director since January 1999 and Secretary since September 1999. From
1984 to September 1996, Mr. Bourdon was with the regional accounting firm Blum
Shapiro, most recently as a partner, and from September 1996 to October 1997, he
was a Director at Coopers & Lybrand, LLP, now PricewaterhouseCoopers LLP. While
at Coopers & Lybrand, Mr. Bourdon was a member of the entrepreneurial advisory
services group. Mr. Bourdon is a 1982 graduate of Assumption College with a BA
in accounting.
Mr. Christopher Dearing has served as a Vice President, Design and
Development since January 1999. Mr. Dearing joined us in 1991 and is one of our
original developers. He has held various positions in our organization since
1991, including developer and Project Manager.
Mr. Bruce T. Guptill has served as our Vice President, Marketing since
September 1999. Prior to joining us, he was Vice President and Research Director
at the Gartner Group from 1993 to October 1999, where he managed the eCommerce,
worldwide web and measurement market and business research services. Mr. Guptill
received a BA in mass media/applied psychology from the University of
Connecticut in 1981, and an MBA in marketing and finance from Framingham State
College in 1991.
Mr. Michael A. Logan has served as a Vice President, Design and Development
since January 1999. From 1993 to 1995, he was one of our developers and served
as a Project Manager from 1995 to 1999. Mr. Logan received a BS in computer
science from Trinity College in 1993.
Mr. Thomas Longo has served as our Vice President, Recruiting since 1996.
From 1993 to 1994, he was a Technical Recruiter at Kenda Systems and from 1994
to 1996 he was a Technical Recruiter with
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Robert Half International Consulting. Mr. Longo also founded Robert Half's
Hartford, Connecticut office during his tenure. He received his BA in psychology
from Kenyon College in 1991.
Mr. Douglas Rivard has served as a Vice President, Design and Development
since January 1999. Prior to that, he was a programmer from 1993 to 1994 and
Project Manager from 1994 to 1999. Mr. Rivard received his BS in electrical
engineering from Tufts University in 1989.
Mr. David Tanacea has served as a Vice President, Design and Development
since 1999. Prior to that, he served as a Sales Executive and a Project Manager
from 1996 to 1999. Prior to joining us, Mr. Tanacea was a Vice President,
Information Technology with Zany Brainy from January 1996 to June 1996 and a
Vice President, Development with Ann Taylor from January 1994 to January 1996.
He received an MS in computer science in 1984 from the State University of New
York.
Mr. R. Nelson Griebel has served as a Director since August 1999. Between
October of 1998 and August of 1999, he served on our advisory board. In February
1999, he became the President and Chief Operating Officer of MacDermid, Inc., a
specialty chemical company. Mr. Griebel is a twenty-two year veteran of the
financial services industry and held various management positions at BankBoston,
and its predecessor, Bank of Boston, including serving from 1993 to 1999 as the
President of Operations in Connecticut and western Massachusetts. He is a 1971
graduate of Dartmouth College with a BA in English, and received his JD from
Suffolk University Law School in 1977.
Mr. Morton Handel has served as a Director since August 1999. Between
October of 1998 and August of 1999, he served on our advisory board. He has
served as the President and Chief Executive Officer of Ranger Industries, Inc.,
the successor to Coleco Industries, Inc. since 1997, and the President of S&H
Consulting Ltd. since 1990. Prior to his tenure at S&H Consulting, Mr. Handel
served in various executive capacities at Coleco Industries, Inc. including
Chairman of the Board and Chief Executive Officer, Executive Vice President and
Chief Financial Officer. Mr. Handel presently serves as a Director and a member
of the compensation committees of CompUSA, Inc.; Chairman of the Board and a
member of the finance and compensation committees of Marvel Enterprises, Inc.;
and member of the board of directors of Concurrent Computer Corp. He is a 1956
graduate of the University of Pennsylvania.
Mr. Peter Huff has served as a Director since August 1999. Mr. Huff is
currently a General Partner of J.H. Whitney & Co. From December of 1998 to
October of 1999, he was a Vice President of J.H. Whitney & Co. From September of
1997 to November of 1998, he was a Senior Associate of J.H. Whitney & Co. Prior
to that time, he attended Stanford University Graduate School of Business from
1995 to 1997. Mr. Huff is a member of the board of directors of Fogdog Sports,
Inc. He is a graduate of Southern Methodist University with a BA in economics,
philosophy and political science and received an MBA from Stanford University
Graduate School of Business in 1997.
Mr. Ronald D. Jarvis has served as a Director since August 1999. Between
October of 1998 and August of 1999, he served on our advisory board. Mr. Jarvis
is currently principal of Jarvis Enterprises and a business consultant. From
1978 to July 1998, he was the President and Chief Executive Officer of
Security-Connecticut Life Insurance Company. From January of 1994 to July of
1997, he was also the President and Chief Executive Officer of
Security-Connecticut Corporation, a publicly-held holding company. From
September 1984 to July 1998, he was the President and Chief Financial Officer of
Lincoln Security Life Insurance Company. He has over 30 years of experience in
the financial services and insurance industries. Mr. Jarvis is a Director of St.
Francis Hospital and Medical Center in Hartford, Connecticut, a Director of
HealthChoice of Connecticut, a health maintenance organization, a Director of
St. Joseph College and Chairman of Partner's Indemnity Company Ltd. and The
Partners Interinsurance Exchange, both located in Bermuda. He is a 1965 graduate
of the University of Connecticut with a BS in business.
Mr. Michael R. Lezenski has served as a Director since August 1999. Between
October of 1998 and August of 1999, he served on our advisory board. He is
currently a principal of Strategic Technology Decisions, an information
technology consulting firm which he founded in July 1998. Mr. Lezenski has 30
years of experience working with and managing the information systems of
BankBoston and its
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predecessor, Bank of Boston. While at BankBoston, Mr. Lezenski served as, among
other positions, Chief Information Officer from 1994 to 1998, and Department
Executive for technology services and banking operations prior to that period.
He formerly served on the board of directors of Boston Equiserv, Payment
Solutions Network, Inc. and the Electronic Check Clearing House Organization,
where he also served as Chairman of the Board from 1993 to 1994. Mr. Lezenski is
a 1975 graduate of Boston University with a BS in computer science.
Mr. Noah Walley has served as a Director since August 1999. Mr. Walley is a
principal at Morgan Stanley Dean Witter Venture Partners, the venture capital
affiliate of Morgan Stanley Dean Witter & Company, where he has worked since
April 1998. From March 1996 to April 1998, he was a Vice President at Bachow &
Associates and from August 1994 to March 1996, he was a Vice President at Desai
Capital Management. From December 1990 to August 1994 he was a consultant in the
New York office of McKinsey & Company. Mr. Walley received BA and MA degrees in
history from Oxford University in 1984 and 1985, respectively, and also received
a JD from Stanford Law School in 1990.
BOARD COMPOSITION
Following this offering, our board of directors will be divided into three
staggered classes, each of whose members will serve for a three-year term. The
board will consist of three class I directors (Messrs. J. Hughes, Bourdon and
Griebel), three class II directors (Messrs. Walley, Huff and Jarvis) and two
class III directors (Messrs. Lezenski and Handel). At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose term is then expiring. The terms
of the class I directors, class II directors and class III directors will expire
upon the election and qualification of successor directors at the annual meeting
of stockholders to be held during calendar years 2000, 2001 and 2002,
respectively.
Each officer serves at the discretion of the board of directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal.
Our Chief Executive Officer, John M. Hughes, who is also a member of our
board of directors, and our President and Chief Operating Officer, Robert
Hughes, are brothers. There are no other family relationships among any of our
directors or executive officers.
BOARD COMMITTEES
The board of directors has a compensation committee composed of Messrs.
Handel, Huff and Walley, which makes recommendations concerning salaries and
incentive compensation of our management. Our compensation committee administers
and grants equity incentives to our employees under our stock option and
incentive plan. The board of directors also has an audit committee composed of
Messrs. Griebel, Jarvis and Lezenski. The audit committee is governed by a
charter which requires that each member of the committee be independent. The
charter also identifies the roles and responsibilities of the committee, which
include:
- oversight of the audit process performed by our independent auditors;
- review of the scope, and results of, the audit process;
- oversight of the integrity and accuracy of our financial reporting, both
internal and external; and
- review of our annual and interim financial statements.
DIRECTOR COMPENSATION
We do not currently compensate directors for attending meetings of the
board of directors or committee meetings of the board of directors. Directors
are reimbursed for reasonable expenses incurred in attending board meetings. We
granted options to purchase 70,000 shares of our common stock to each of Messrs.
Griebel, Handel, Jarvis and Lezenski in January 1999 at an exercise price of
$0.65 per share. In addition, our 2000 Non-Employee Director Stock Option Plan
will become effective upon the
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consummation of this offering. The plan provides for the grant of stock options
to purchase a maximum of 500,000 shares of our common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of our compensation committee are Messrs. Handel, Huff
and Walley. No executive officer has served as a director or member of the
compensation committee, or other committee serving an equivalent function, of
any entity whose executive officers served as members of the compensation
committee of our board of directors. Prior to January 2000, the full board of
directors made all decisions regarding executive officer compensation and the
granting of stock options.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
during the year ended December 31, 1999 of our Chief Executive Officer and our
two most highly compensated executive officers, other than our Chief Executive
Officer, whose salary and bonus for such fiscal year equaled or exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ------------------------------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
John M. Hughes........................... $300,000 $190,000 -- --
Chief Executive Officer
Robert C. Hughes......................... 250,000 125,000 1,050,000 --
President and Chief Operating Officer
Peter A. Bourdon......................... 250,000 125,000 1,288,000 --
Chief Financial Officer and Executive
Vice President
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information as to options granted to our
Chief Executive Officer and our two most highly compensated executive officers,
other than our Chief Executive Officer, during the year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John M. Hughes.......... -- -- -- -- -- --
Robert C. Hughes........ 1,050,000 7.5% $0.65 1/29/09 $ $
Peter A. Bourdon........ 700,000 5.0 0.65 1/29/09
</TABLE>
- ---------------
(1) Amounts that may be realized upon exercise of the options immediately before
the expiration of their term, assuming the specified compound rates of
appreciation (5% and 10%) on the market value of the common stock on the
date of option grant over the term of the options. For purposes of the
table, we have assumed that the fair market value of the common stock at the
date of grant was the assumed initial public offering price of $
per share. These numbers are calculated based on rules promulgated by the
Securities and Exchange Commission and do not reflect our estimate of future
stock price growth. Actual gains, if any, on stock option exercises and
common stock holdings are dependent on the timing of exercise and the future
performance of the common stock. There can be no assurance that the rates of
appreciation assumed in this table can be achieved or that the amounts
reflected will be received by the individuals.
41
<PAGE> 43
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to unexercised
options held as of December 31, 1999 by our Chief Executive Officer and the two
most highly compensated executive officers, other than our Chief Executive
Officer. No options were exercised during 1999 by any of these executive
officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John M. Hughes............................. -- -- -- --
Robert C. Hughes........................... 218,750 831,250 $ $
Peter A. Bourdon........................... 341,832 946,168
</TABLE>
- ---------------
(1) Calculated by determining the difference between the exercise price and the
assumed initial public offering price.
EQUITY AND CASH INCENTIVES
1998 Employee Stock Option and Performance Incentive Plan
Our 1998 Employee Stock Option and Performance Incentive Plan was adopted
by the board of directors and approved by our stockholders in March 1998. Under
the terms of the 1998 plan, we were authorized to grant awards, including:
incentive and non-qualified stock options; stock appreciation rights; outright
grants of shares of Common Stock; and tax offset payments. All employees,
officers, directors and independent contractors which we hired were eligible for
awards under the 1998 plan.
The 1998 plan is administered by our board of directors or a committee
appointed by the board of directors. Subject to the provisions of the 1998 plan,
the board of directors (or the committee) had the authority to select the
recipients of awards and determine the type of the award granted under the plan.
In general, options granted under the 1998 plan were granted with an exercise
price equal to the fair market value of the common stock on the date of grant
and vest over a three or four year period. Options held by employees who are
terminated as the result of our sale or merger, the closing of a specific
operation or the elimination of job category become fully exercisable upon the
occurrence of such event. In addition, certain options granted under the 1998
plan accelerate automatically upon a change in control.
The 1998 plan was terminated as of May 17, 1999. At that time, the number
of shares reserved for issuance under the 1998 plan was fixed at 15,344,000. As
of December 31, 1999, options to purchase a total of 15,034,388 shares of common
stock at a weighted average exercise price of $0.52 per share were outstanding
under the 1998 plan.
1999 Stock Option and Incentive Plan
Our 1999 Stock Option and Incentive Plan was adopted by our board of
directors and approved by our stockholders in May 1999. The 1999 plan provides
for the grant of stock-based awards to our employees, officers, directors,
consultants or advisors. Under the 1999 plan, we may grant options that are
intended to qualify as incentive stock options within the meaning of the
Internal Revenue Code, options not intended to qualify as incentive stock
options, restricted stock and other stock-based awards. Incentive stock options
may be granted only to our employees. In general, options granted under the 1999
plan have been granted with an exercise price equal to the fair market value of
the common stock on the date of grant and vest over a four year period. A total
of 8,456,000 shares of common stock have been reserved for issuance under the
1999 plan.
The 1999 plan is administered by our board of directors or a committee
appointed by the board of directors. Subject to the provisions of the 1999 plan,
the board of directors (or the committee) has the authority to select the
persons to whom awards are granted and determine the terms of each award,
including the number of shares of common stock subject to the awards. Payment of
the exercise price of
42
<PAGE> 44
an award may be made in cash or, if approved by the board of directors (or the
committee), shares of common stock, a combination of cash and stock, or by any
other method approved by the board of directors (or the committee). Unless
otherwise permitted by the board of directors (or the committee), awards are not
assignable or transferable except by will or the laws of descent and
distribution, and during the participant's lifetime, may be exercised only by
the participant.
The 1999 plan provides, subject to certain conditions, that upon an
acquisition intended to be accounted for as a pooling of interests, the vesting
of all awards will accelerate by a period of one year and then, so long as the
optionee remains employed by us or our successor for one year after the date of
the acquisition, the remaining awards will fully accelerate. Upon an acquisition
intended to be accounted for under the purchase method, awards may be
accelerated at the discretion of the board of directors (or the committee).
2000 Non-Employee Director Stock Option Plan
The 2000 Non-Employee Director Stock Option Plan was adopted by the board
of directors in January 2000 and approved by our stockholders in January 2000.
The director plan will take effect upon completion of this offering. The
director plan provides for the grant of options to purchase a maximum of 500,000
shares of our common stock to our non-employee directors.
The director plan will be administered by a committee appointed by the
board of directors. In the event the board of directors does not appoint such a
committee, then the board shall have all power and authority to administer the
director plan. Under the director plan, each director who is not also one of our
employees or officers and who is not a director at the time of this offering
shall be automatically granted on the date such person is first elected to the
board of directors, without any further action, an option to purchase 30,000
shares of common stock. In addition, each non-employee director who is serving
on the board of directors on the last day of February and the last day of August
during the term of the plan shall be automatically granted an option to purchase
10,000 shares of common stock. Provided that the director continues to serve as
a member of the board of directors, one-twelfth (1/12) of the shares included in
each grant will become exercisable on the last day of each month over the year
after the date of the grant. All options granted under the director plan will
have an exercise price equal to the fair market value of the common stock on the
date of grant. The term of each option will be for a period of 10 years from the
date of grant. Options may not be assigned or transferred except by will or by
the laws of descent and distribution and are exercisable to the extent vested
only while the optionee is serving as a director or within 90 days after the
optionee ceases to serve as a director (except that if a director dies or
becomes disabled while he or she is serving as a director, the option is
exercisable until the scheduled expiration date of the option). No options have
been granted to date under the director plan.
2000 Employee Stock Purchase Plan
The 2000 Employee Stock Purchase Plan was adopted by the board of directors
in January 2000 and approved by our stockholders in January 2000. The purchase
plan will take effect upon completion of this offering. The purchase plan
provides for the issuance of a maximum of 1,200,000 shares of common stock. The
purchase plan is administered by the board of directors and the compensation
committee. All employees whose customary employment is for more than 20 hours
per week and for more than five months in any calendar year and who have
completed more than 90 days of employment on or before the first day of any
six-month payment period are eligible to participate in the purchase plan.
Outside directors and employees who would own 5% or more of the total combined
voting power or value of our stock immediately after the grant may not
participate in the purchase plan.
To participate in the purchase plan, an employee must authorize us to
deduct an amount not less than one percent nor more than 10 percent of a
participant's total cash compensation from his or her pay during each six-month
payment periods. The first payment period will commence on the effective date of
this offering and end on August 31, 2000. Thereafter, the payment periods will
commence on the first day of September and March and end on the last day of the
following February and August, respectively, each
43
<PAGE> 45
year. In no case shall an employee be entitled to purchase more than 500 shares
in any one payment period. The exercise price for the option granted in each
payment period is 85% of the lesser of the average market price of the common
stock on the first or last business day of the payment period, in either event
rounded up to the nearest cent. If an employee is not a participant on the last
day of the payment period, such employee is not entitled to exercise his or her
option, and the amount of his or her accumulated payroll deductions will be
refunded.
Options granted under the purchase plan may not be transferred or assigned.
An employee's rights under the purchase plan terminate upon his or her voluntary
withdrawal from the plan at any time or upon termination of employment. No
options or shares have been granted to date under the purchase plan.
Cash Incentives
In addition to our equity compensation, we offer a cash incentive program
to our employees. The program is designed to allow management to be flexible and
creative in the ways in which bonuses are paid. The goal is to reward
performance on a frequent and continuous basis, thereby allowing employees to
realize tangible benefits for their hard work in a short period of time.
401(k) Plan
We have a 401(k) profit sharing plan, which is intended to qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code. Generally, our
employees are eligible to participate in the 401(k) plan after they have
completed six months of service.
Eligible employees electing to participate in the 401(k) plan may defer a
portion of their compensation, on a pre-tax basis, by making a contribution to
the 401(k) plan. The maximum contribution is fixed in Section 401(k) of the
Internal Revenue Code. Eligible employees who elect to participate in the 401(k)
plan begin vesting in our matching contribution after three years of service. We
match 50% of eligible employees' contributions up to a maximum of 6% of the
employee's earnings. We contributed an aggregate of $145,909 in 1997, $221,009
in 1998 and $330,237 in 1999 to the 401(k) plan.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with John M. Hughes, our Chief
Executive Officer, Robert C. Hughes, our President and Chief Operating Officer,
and Peter A. Bourdon, our Chief Financial Officer and Executive Vice President.
Mr. J. Hughes' agreement provides for an initial base salary of $300,000 and Mr.
Bourdon's and Mr. R. Hughes' agreements each provide for an initial base salary
of $250,000. Each of the employment agreements terminates as follows:
- upon the executive's death;
- upon the incapacity or disability of the executive;
- by mutual agreement between the executive and Tallan;
- by Tallan or the executive without cause upon thirty days' written
notice; or
- for cause.
Under the agreements, for cause includes:
- willful or intentional misconduct;
- dereliction of duties and responsibilities after prior written notice
which specifies the conduct will be the basis for cause if not cured
within fifteen days of the notice;
- theft, embezzlement or other felonious criminal activity; and
- the violation of the non-competition, non-solicitation, confidentiality
or assignment of inventions provisions of the agreements.
44
<PAGE> 46
Each agreement contains confidentiality and assignment of inventions
provisions, and also prohibits each executive from soliciting our employees,
clients or prospective clients for a period of one year from the date of
termination. In addition, the agreements provide that each executive may not
compete with us for a period of six months from the date of termination.
However, this non-competition is only in effect if we elect to pay a severance
payment to the executive equal to one-half that executive's salary for the
previous year, not to exceed $125,000.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our second amended and restated certificate of incorporation and amended
and restated by-laws provide that our directors and officers shall be
indemnified by us to the fullest extent permitted by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with their services for us or on our behalf.
In addition, our second amended and restated certificate of incorporation
provides that our directors will not be personally liable for monetary damages
to us for breaches of their fiduciary duty as directors, unless they violated
their duty of loyalty to us or our stockholders, acted in bad faith, knowingly
or intentionally violated the law, authorized illegal dividends or redemptions
or derived an improper personal benefit from their action as directors. We have
insurance which insures our directors and officers against certain losses and
which insures us against our obligations to indemnify our directors and
officers.
45
<PAGE> 47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PURCHASE OF SECURITIES OF CUSTOMERS
In December 1998, we purchased 1,000 investment units in Value America,
Inc., one of our clients, at a price of $100 per investment unit. Each
investment unit is comprised of ten shares of the common stock of Value America
and a warrant to purchase three shares of the common stock of Value America, at
an exercise price of $10.00 per share. We exercised the warrants in December
1999.
On March 29, 1999, we purchased 5,000 shares of the common stock of
priceline.com, one of our clients, at a price of $16.00 per share. The shares
were purchased as part of a directed share program at the time of
priceline.com's initial public offering.
On October 25, 1999, we received a warrant to purchase 666,667 shares of
Priceline WebHouse Club, Inc., one of our clients, in consideration of services
rendered valued at $400,000. The warrant is exercisable at an exercise price of
$0.60 per share and expires on October 25, 2004.
On November 16, 1999, we received 252,277 shares of common stock of Fiera,
Inc., one of our clients, in consideration of services rendered valued at
$126,139.
LOANS TO DIRECTORS
In March 1999, we provided Michael Hughes, a member of our board of
directors at that time, a loan in the principal amount of $170,000. In exchange
for the loan, Mr. M. Hughes executed a promissory note, payable to us with an
interest rate of 6% per annum. This note was paid in full in August of 1999. Mr.
M. Hughes is not presently a member of our board of directors.
In February 1999, we provided John Hughes, our Chief Executive Officer with
a loan in the principal amount of $21,684 with an interest rate of 6% per annum.
In May 1999, we provided Mr. J. Hughes with two additional loans totaling
$40,180. All loans were repaid in August 1999.
SALE OF SERIES A REDEEMABLE PREFERRED STOCK, SERIES B CONVERTIBLE PREFERRED
STOCK AND COMMON STOCK
In August 1999, we sold 3,412,969 shares of Series A redeemable preferred
stock at a purchase price of $5.86 per share, 1,706,485 shares of Series B
convertible preferred stock at a purchase price of $5.86 per share, and
6,825,938 shares of common stock at a purchase price of $0.01 per share to
venture capital investors through Robertson Stephens as placement agent. We
received approximately $30.0 million in gross proceeds from the private
placement. In connection with the financing, we paid Robertson Stephens, an
underwriter of this offering, approximately $1.8 million for their services as
placement agent. The investors have registration rights described in
"Description of Capital Stock."
Entities affiliated with Morgan Stanley Venture Partners III, L.P., a 5%
stockholder, purchased an aggregate of 1,706,485 shares of Series A redeemable
preferred stock, 853,243 shares of Series B convertible preferred stock and
3,412,970 shares of common stock for an aggregate purchase price of
approximately $15,017,000. Noah Walley, a member of our board of directors, is a
Vice President of Morgan Stanley Venture Capital III, Inc., the institutional
managing member of Morgan Stanley Venture Partners III, LLC, which is the
general partner of the Morgan Stanley funds which purchased shares in this
financing.
Affiliates of J.H. Whitney Equity Partners, LLC, a 5% stockholder,
purchased an aggregate of 1,080,773 shares of Series A redeemable preferred
stock, 540,387 shares of Series B convertible preferred stock and 2,161,546
shares of common stock for an aggregate purchase price of approximately
$9,511,000. Peter Huff, a member of our board of directors, is a managing member
of J.H. Whitney Equity Partners, LLC, which is the general partner of the J.H.
Whitney funds which purchased shares in this financing.
Regency One, LLC purchased 227,531 shares of Series A redeemable preferred
stock, 113,675 shares of Series B convertible preferred stock and 455,062 shares
of common stock for an aggregate purchase
46
<PAGE> 48
price of approximately $2,002,000. Morton Handel, a member of our board of
directors, is a managing member of Regency One, LLC.
JB Ventures, LLC purchased 63,709 Series A redeemable preferred stock,
31,854 shares of Series B convertible preferred stock and 127,418 shares of
common stock for an aggregate of approximately $560,600. Ronald Jarvis, a member
of our board of directors, is a managing member of JB Ventures, LLC.
R. Nelson Griebel and Michael Lezenski, members of our board of directors,
each purchased 2,275 shares of Series A redeemable preferred stock, 1,138 shares
of Series B convertible preferred stock and 4,550 shares of common stock for
approximately $20,000 each.
Mr. Walley and Mr. Huff were elected Directors pursuant to a Stock
Restriction Agreement entered into at the time of the financing. This agreement
will terminate upon the completion of this offering.
REPURCHASE OF COMMON STOCK
As a condition of the August 1999 financing, we used a portion of the
proceeds of the financing to repurchase an aggregate of 5,837,974 shares of our
common stock. The shares were repurchased from eleven of our existing
stockholders who elected to sell shares to us for an aggregate purchase price of
approximately $17.1 million. Of the shares purchased, the following amounts were
purchased from officers, directors and 5% stockholders:
<TABLE>
<CAPTION>
NUMBER OF SHARES APPROXIMATE AGGREGATE
NAME OF STOCKHOLDER REPURCHASED CONSIDERATION
- ------------------- ---------------- ---------------------
<S> <C> <C>
Mary Abel(1)............................................. 341,296 $1,000,000
Christopher Dearing(2)................................... 273,042 800,000
Gregory Hughes(1)(3)..................................... 1,365,188 4,000,000
Michael Hughes(1)(5)..................................... 2,005,934 5,877,400
Eugene McKeown(4)........................................ 85,326 250,000
Laurie Paternoster(1)(5)................................. 1,365,188 4,000,000
</TABLE>
- ---------------
(1) Michael Hughes, a member of the board of directors at the time of the
repurchase, is the father of John Hughes, a member of our board of directors
and our Chief Executive Officer, Robert Hughes, our President and Chief
Operating Officer, Laurie Paternoster, a member of the board of directors at
the time of the repurchase, Mary Abel, a former employee, and Gregory
Hughes.
(2) Mr. Dearing is presently a 5% stockholder and was a 5% stockholder at the
time of repurchase.
(3) Mr. G. Hughes was a 5% stockholder at the time of repurchase, but is not
presently a 5% stockholder.
(4) Mr. McKeown is the uncle of John Hughes and Robert Hughes and the
brother-in-law of Michael Hughes.
(5) Mr. M. Hughes and Ms. Paternoster were both members of the board of
directors and 5% stockholders at the time of the repurchase. Neither is
presently a member of our board of directors, but both are presently 5%
stockholders.
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<PAGE> 49
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock by:
- each person or entity who is known by us to beneficially own five percent
or more of our common stock;
- each of our Directors and named executive officers; and
- all of our Directors and executive officers as a group.
Except as indicated below, none of these persons or entities has a
relationship with us or, to our knowledge, any of the underwriters or their
respective affiliates. Unless otherwise indicated, the address of each person or
entity named in the table is c/o Tallan, Inc., 628 Hebron Avenue, Building 2,
Suite 502, Glastonbury, CT 06033, and each person or entity has sole voting
power and investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person or entity.
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. We have assumed the conversion of all
outstanding shares of our Series B convertible preferred stock and shares of
common stock underlying options that are exercisable within 60 days of January
31, 2000 are treated as outstanding and beneficially owned by the option holder
for purpose of computing the percentage ownership of that optionholder. However,
the shares underlying such options are not treated as outstanding for the
purpose of computing the percentage ownership of any other person or entity.
Percentage of beneficial ownership is based on 36,056,106 shares of common stock
outstanding as of January 31, 2000 and shares of common stock
assumed to be outstanding after completion of this offering. The percentages
contained in the "Percentage of Common Stock Beneficially Owned -- After
Offering" assume that the underwriters do not exercise their over-allotment
option to purchase up to an aggregate of additional shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
BENEFICIALLY OWNED
--------------------
SHARES BENEFICIALLY PRIOR TO AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------ ------------------- -------- --------
<S> <C> <C> <C>
Michael Hughes............................................ 5,820,066 16.1%
Morgan Stanley Venture Capital III, Inc.(1)............... 5,119,456 14.2
122 Avenue of the Americas
New York, NY 10020
Christopher Dearing....................................... 3,926,958 10.9
J.H. Whitney Equity Partners, LLC(2)...................... 3,242,320 9.0
c/o J.H. Whitney & Co.
177 Broad Street, Stamford, CT 06901
Laurie A. Paternoster..................................... 2,134,812 5.9
John M. Hughes............................................ 8,050,000 22.3
Peter A. Bourdon(3)....................................... 948,382 2.6
Robert C. Hughes(4)....................................... 984,372 2.7
R. Nelson Griebel(5)...................................... 76,826 *
Morton Handel(6).......................................... 752,592 2.1
Peter Huff(7)............................................. 3,242,320 9.0
Ronald D. Jarvis(8)....................................... 261,126 *
Michael R. Lezenski(9).................................... 76,826 *
Noah Walley(10)........................................... 5,119,456 14.2
All executive officers and directors as a group (10
persons)(11)............................................ 31,393,736 87.1
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of our common stock.
(footnotes follow on next page)
48
<PAGE> 50
(1) Includes (a) 4,490,756 shares held by Morgan Stanley Venture Partners III,
L.P., (b) 431,154 shares held by Morgan Stanley Venture Investors III, L.P.
and (c) 197,546 shares held by The Morgan Stanley Venture Partners
Entrepreneur Fund, L.P. Morgan Stanley Venture Capital III, Inc. is the
institutional managing member of Morgan Stanley Venture Partners III,
L.L.C., the general partner of each of these limited partnerships.
(2) Includes (a) 3,166,126 shares held by J.H. Whitney III, L.P. and (b) 76,194
shares held by Whitney Strategic Partners III, L.P. J.H. Whitney Equity
Partners III, LLC is the general partner of each of these limited
partnerships.
(3) Includes 581,582 shares underlying options which are exercisable within 60
days of January 31, 2000.
(4) Includes 284,372 shares underlying options which are exercisable within 60
days of January 31, 2000.
(5) Includes 70,000 shares underlying options which are exercisable within 60
days of January 31, 2000.
(6) Includes 70,000 shares underlying options which are exercisable within 60
days of January 31, 2000.
(7) Includes (a) 3,166,126 shares held by J.H. Whitney III, L.P. and (b) 76,194
shares held by Whitney Strategic Partners III, L.P. Mr. Huff is a managing
member of J.H. Whitney Equity Partners, LLC, which is the general partner
of each of these limited partnerships. Mr. Huff disclaims beneficial
ownership of these shares, except to the extent of his pecuniary interest
therein, if any.
(8) Includes (a) 70,000 shares underlying options which are exercisable within
60 days of January 31, 2000 and (b) 191,126 shares by JB Ventures, LLC. Mr.
Jarvis is a managing member of JB Ventures, LLC. Mr. Jarvis disclaims any
beneficial ownership of the shares held by JB Ventures, LLC, except to the
extent of his pecuniary interest therein, if any.
(9) Includes 70,000 shares underlying options which are exercisable within 60
days of January 31, 2000.
(10) Includes (a) 4,490,756 shares held by Morgan Stanley Venture Partners III,
L.P., (b) 431,154 shares held by Morgan Stanley Venture Investors III, L.P.
and (c) 197,546 shares held by The Morgan Stanley Venture Partners
Entrepreneur Fund , L.P. Mr. Walley is the Vice President of Morgan Stanley
Venture Capital, Inc., the institutional managing member of Morgan Stanley
Venture Partners, III, L.L.C., the general partner of each of these limited
partnerships. Mr. Walley disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest therein, if any.
(11) Includes 1,145,954 shares underlying options which are exercisable within
60 days of January 31, 2000.
49
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
After this offering, our authorized capital stock will consist of
300,000,000 shares of common stock, $0.01 par value per share, and 5,000,000
shares of preferred stock, $0.01 par value per share. Prior to this offering,
there were outstanding (1) 32,643,136 shares of common stock held by 40
stockholders of record and (2) options to purchase an aggregate of 18,322,530
shares of common stock. Upon completion of this offering, all outstanding shares
of our Series A redeemable preferred stock will be redeemed and all outstanding
shares of Series B convertible preferred stock will convert into an aggregate of
3,412,970 shares of common stock.
The following summary of certain provisions of our securities and various
provisions of our second amended and restated certificate of incorporation and
our amended and restated by-laws is not intended to be complete and is qualified
by reference to the provisions of applicable law and to our second amended and
restated certificate of incorporation and amended and restated by-laws included
as exhibits to the Registration Statement of which this prospectus is a part.
See "Where You Can Find More Information."
COMMON STOCK
As of January 31, 2000, there were 32,643,136 shares of common stock
outstanding held by 40 stockholders of record. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the
shares of common stock offered by us in this offering and the conversion of the
outstanding shares of convertible preferred stock into 3,412,970 shares of
common stock, there will be shares of common stock outstanding upon
the completion of this offering. In addition, as of January 31, 2000, there were
outstanding stock options to purchase 18,322,530 shares of common stock.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Directors are elected by a plurality of the votes of the shares present
in person or by proxy at the meeting and entitled to vote in such election.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the board of directors out of funds legally available
therefor, after provision has been made for any preferential dividend rights of
outstanding preferred stock. Upon our liquidation, dissolution or winding up,
the holders of common stock are entitled to receive ratably the net assets
available after the payment of all of our debts and other liabilities, and after
the satisfaction of the rights of any outstanding preferred stock. Holders of
the common stock have no preemptive, subscription, redemption or conversion
rights, nor are they entitled to the benefit of any sinking fund. The
outstanding shares of common stock are, and the shares offered by us in this
offering will be, when issued and paid for, validly issued, fully paid and non-
assessable. The rights, powers, preferences and privileges of holders of common
stock are subordinate to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which we may designate and
issue in the future.
PREFERRED STOCK
The board of directors will generally be authorized, without further
stockholder approval, to issue from time to time up to an aggregate of 5,000,000
shares of preferred stock, in one or more series. Each series of preferred stock
shall have such number of shares, designations, preferences, voting powers,
qualifications and special or relative rights or privileges as shall be
determined by the board of directors, which may include, among others, dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, conversion rights and preemptive rights.
Our stockholders have granted the board of directors authority to issue the
preferred stock and to determine the rights and preferences of the preferred
stock in order to eliminate delays associated with a stockholder vote on
specific issuances. The rights of the holders of common stock will be
subordinate to the rights of holders of any preferred stock issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power or other rights of the holders of common
stock, and could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, a majority of
50
<PAGE> 52
our outstanding voting stock. We have not, to date, issued any shares of such
preferred stock, and we have no present plans to issue any shares of preferred
stock.
REGISTRATION RIGHTS
Upon the expiration of the contractual lock-up period with the
underwriters, certain stockholders will be entitled to require us to register
under the Securities Act up to a total of 10,238,908 shares of outstanding
common stock under the terms of an investor rights agreement between us and the
rights holders. The investor rights agreement provides that if we propose to
register in a public offering, other than this offering, any of our securities
under the Securities Act at any time or times, the stockholders having
registration rights will generally be entitled to include shares of common stock
held by them in such registration. However, the managing underwriter of any
offering may exclude for marketing reasons some shares from the registration,
provided that the number of shares of common stock which the rights holders may
include cannot be reduced below 20% of the total amount of shares of common
stock being registered. Some of these stockholders also have the right to
require us, on no more than two occasions, to prepare and file a registration
statement under the Securities Act registering the shares of common stock held
by them. We are generally required to bear the expenses of shall such
registrations, except underwriting discounts and commissions. These rights
terminate on the fifth anniversary of this offering.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Upon completion of this offering, the provisions of Section 203 of the
General Corporation Law of Delaware will prohibit us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is generally defined as a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
Our amended and restated certificate of incorporation provides for the
division of the board of directors into three classes as nearly equal in size as
possible with staggered three-year terms. In addition, our amended and restated
certificate of incorporation provides that (1) directors may be removed with
cause only by the affirmative vote of the holders of a majority of the shares of
our capital stock entitled to vote and (2) directors may be removed without
cause only by the affirmative vote of the holders of 75% of the shares of our
capital stock entitled to vote. Under our amended and restated certificate of
incorporation, any vacancy on the board of directors, however occurring,
including a vacancy resulting from an enlargement of the board, may only be
filled by vote of a majority of the directors then in office. The likely effect
of the classification of the board of directors and the limitations on the
removal of directors and filling of vacancies is an increase in the time
required for the stockholders to change the composition of the board of
directors. For example, in general, at least two annual meetings of the
stockholders will be necessary for stockholders to effect a change in a majority
of the members of the board of directors.
Our amended and restated certificate of incorporation also provides that,
after the effective date of the registration statement of which this prospectus
is a part, any action required or permitted to be taken by our stockholders at
an annual meeting or special meeting of stockholders may only be taken if it is
properly brought before the meeting and may not be taken by written action in
lieu of a meeting. Our amended and restated by-laws provide that special
meetings of the stockholders may only be called by the board of directors, the
Chairman of the board of directors, the Chief Executive Officer or the
President. Our amended and restated by-laws further provide that in order for
any matter to be considered "properly brought" before a meeting, a stockholder
must comply with requirements regarding advance notice to us. The foregoing
provisions could have the effect of delaying until the next stockholders meeting
actions which are favored by the holders of a majority of our outstanding voting
securities. These provisions may also discourage another person or entity from
making a tender offer for our common stock, because such person or entity, even
if it acquired a majority of our outstanding voting securities, would only be
able to
51
<PAGE> 53
take action as a stockholder, such as electing new directors or approving a
merger, at a duly called stockholders meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. Our amended and restated certificate of
incorporation requires the affirmative vote of the holders of at least 75% of
the shares of our capital stock that are issued and outstanding and entitled to
vote to amend or repeal any of the foregoing provisions of the amended and
restated certificate of incorporation. Our amended and restated by-laws may
generally be amended or repealed by a majority vote of the board of directors
and may also be amended or repealed by the affirmative vote of the holders of at
least 75% of the shares of our capital stock that are issued and outstanding and
entitled to vote. The 75% stockholder vote would be in addition to any separate
class vote that might in the future be required in accordance with the terms of
any series of preferred stock that might be outstanding at the time any such
amendments are submitted to stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Chase Mellon
Shareholder Services, L.L.C.
52
<PAGE> 54
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock, and we make no prediction as to the effect, if any, that market sales of
shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock in the public market,
or the perception that such sales could occur, could adversely affect the market
price of the common stock and could impair our future ability to raise capital
through the sale of equity securities. See "Risk Factors."
Upon the closing of this offering, we will have an aggregate of
shares of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options. Of
the outstanding shares, all of the shares sold in this offering will be freely
tradable, except that any shares purchased by "affiliates" (as that term is
defined in Rule 144 under the Securities Act), may only be sold in compliance
with the limitations described below. The remaining 36,056,106 shares of common
stock will be deemed "restricted securities" as defined in Rule 144. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144, including Rule
144(k), or Rule 701 promulgated under the Securities Act, which rules are
summarized below. Our directors, executive officers and certain stockholders
have agreed that they will not sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock without the prior written consent of FleetBoston Robertson Stephens
Inc. for a period of 180 days from the date of this prospectus. FleetBoston
Robertson Stephens Inc. may, from time to time, release any or all of the shares
subject to the lock-up agreements. After giving effect to the lock-up agreements
described below and the provisions of Rule 144, including Rule 144(k) and Rule
701, shares will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ----
<C> <S>
0 Immediately after the date of this prospectus
1,038,662 After 90 days from the date of this
prospectus (subject, in some cases, to
volume limitations)
27,952,790 After 180 days from the date of this
prospectus (subject, in some cases, to
volume limitations)
</TABLE>
In general, under Rule 144, as currently in effect, a person or persons
whose shares are required to be aggregated, including an affiliate of ours, who
has beneficially owned shares for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock, approximately shares immediately after this
offering, or the average weekly trading volume in the common stock during the
four calendar weeks preceding the date on which notice of such sale is filed,
subject to restrictions. In addition, a person who is not deemed to have been an
affiliate at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Any of our employees or consultants who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus.
53
<PAGE> 55
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our stock plans. We
expect to file the registration statement covering shares offered pursuant to
the 1998 Employee Stock Option and Performance Incentive Plan, the 1999 Stock
Option and Incentive Plan, the 2000 Non-Employee Director Stock Option Plan and
the 2000 Employee Stock Purchase Plan within 180 days after the date of this
prospectus, permitting the resale of such shares by nonaffiliates in the public
market without restriction under the Securities Act.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except
that we may issue shares of common stock under the 1998 Employee Stock Option
and Performance Incentive Plan, and issue and grant options to purchase shares
of Common Stock under the 1999 Stock Option and Incentive Plan, the 2000
Non-Employee Director Stock Option Plan and the 2000 Employee Stock Purchase
Plan. In addition, we may issue shares of common stock in connection with any
acquisition of another company if the terms of issuance provide that such common
stock shall not be resold prior to the expiration of the 180-day period
referenced in the preceding sentence.
Upon the expiration of the contractual lock-up period with the
underwriters, certain stockholders will be entitled to require us to register
under the Securities Act up to a total of 10,238,908 shares of outstanding
common stock under the terms of an investor rights agreement between us and the
rights holders. The investor rights agreement provides that if we propose to
register in a public offering, other than this offering, any of our securities
under the Securities Act at any time or times, the stockholders having
registration rights will generally be entitled to include shares of common stock
held by them in such registration. However, the managing underwriter of any
offering may exclude for marketing reasons some of the shares from the
registration, provided that the number of shares of common stock which the
rights holders may include cannot be reduced below 20% of the total amount of
shares of common stock being registered. Some of these stockholders also have
the right to require us, on no more than two occasions, to prepare and file a
registration statement under the Securities Act registering the shares of common
stock held by them. We are generally required to bear the expenses of such
registrations, except underwriting discounts and commissions. These rights
terminate on the fifth anniversary of this offering.
54
<PAGE> 56
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and First Union Securities, Inc. have severally agreed with us,
subject to the terms and conditions of the underwriting agreement, to purchase
from us the number of shares of common stock set forth opposite their names
below. The underwriters are committed to purchase and pay for all such shares if
any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc. ........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
First Union Securities, Inc. ...............................
--------
Total.............................................
========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the initial public offering price set forth on the
cover page of this prospectus and to certain dealers at such price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After the initial public offering, the public
offering price, concession, and reallowance to dealers may be reduced by the
representatives. No reduction in this price will change the amount of proceeds
to be received by us as set forth on the cover page of this prospectus.
The underwriters have informed us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. To the extent that the underwriters exercise such option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage of additional shares that the number of shares of common stock to be
purchased by it shown in the above table represents as a percentage of the
shares offered by this prospectus. If purchased, such additional
shares will be sold by the Underwriters on the same terms as those on which the
shares are being sold. We will be obligated, under this option, to sell
shares to the extent the option is exercised. The underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
shares of common stock offered hereby.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. This information is
presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT
PER SHARE OPTION OPTION
--------- -------------- --------------
<S> <C> <C> <C>
Assumed initial public offering price................. $ $ $
Underwriting discounts and commissions................
Proceeds, before expenses, to us......................
</TABLE>
The expenses of the offering payable by us are estimated at $ .
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
Directed Share Program. At our request, the underwriters have reserved up
to five percent of the shares of common stock to be issued by us and
offered hereby for sale, at the initial public offering price, to directors,
officers, employees, business associates and persons otherwise related to us.
The number of shares of common stock available for sale to the general public
will be reduced to the extent such
55
<PAGE> 57
individuals purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered hereby.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each of our directors, executive officers and other
significant stockholders has agreed with the representatives for a period of 180
days after the date of this prospectus, not to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
shares of common stock, any options to purchase any shares of common stock, or
any securities convertible into or exchangeable for shares of common stock owned
as of the date of this prospectus or acquired directly from us by these holders
or with respect to which they have or may acquire the power of disposition,
without the prior written consent FleetBoston Robertson Stephens Inc. However,
FleetBoston Robertson Stephens Inc. may, in its sole discretion and at any time
without notice, release all or any portion of securities subject to the lock-up
agreements. There are no agreements between the representatives and any of our
stockholders providing consent by the representatives to the sale of shares
prior to the expiration of the lock-up period.
Future Sales. In addition, we have agreed that during the lock-up period
we will not, without the prior written consent of FleetBoston Robertson Stephens
Inc., subject to certain exceptions, (a) consent to the disposition of any
shares held by stockholders subject to lock-up agreements prior to the
expiration of the 180-day lock-up period or (b) issue, sell, contract to sell,
or otherwise dispose of, any shares of common stock, any options to purchase any
shares of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock, other than our sale of shares in this
offering, our issuance of common stock upon the exercise of outstanding options
and the issuance of options under existing stock option and incentive plans. In
addition, we may issue shares of common stock in connection with any acquisition
of another company if the terms of issuance provide that such common stock shall
not be resold prior to the expiration of the 180-day period.
Listing. We have applied to have our shares of common stock approved for
quotation on the Nasdaq National Market under the symbol "TALN."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus will be determined through
negotiations among us and the representatives. Among the factors to be
considered in these negotiations are prevailing market conditions, our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The underwriters have advised us that, under Regulation M
under the Exchange Act, some participants in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of our common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of common stock on behalf of the underwriters for the purpose of
fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or the purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with this offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by the underwriter or syndicate member is purchased by the
representatives of the underwriters in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representatives of the underwriters have advised us that such transactions
may be effected on the Nasdaq National Market or otherwise and, if commenced,
may be discontinued at any time.
56
<PAGE> 58
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Legal
matters in connection with this offering will be passed upon for the
underwriters by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston,
Massachusetts.
EXPERTS
The balance sheets of Tallan, Inc. as of December 31, 1998 and 1999 and the
statements of operations, changes in stockholders' equity (deficit) and cash
flows 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
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 (including its exhibits
and schedules) with the Securities and Exchange Commission under the Securities
Act with respect to our common stock to be sold in this offering. With respect
to references made in this prospectus to any contract, agreement or other
document of Tallan, such references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract, agreement or other document. You may review a copy of the
registration statement, including exhibits, at the Securities and Exchange
Commission's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC
located at Seven World Trade Center, 13th Floor, New York, New York 10048 or
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Please call 1-800-SEC-0330 for further information on the operation of the
public reference rooms. The registration statement and our other Securities and
Exchange Commission filings can also be reviewed by accessing the Securities and
Exchange Commission's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information on file at the public
reference rooms. You can also request copies of these documents, for a copying
fee, by writing to the Securities and Exchange Commission.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent auditors and to make available
to our stockholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
57
<PAGE> 59
TALLAN, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets at December 31, 1998 and 1999................ F-3
Statements of Operations for each of the three years in the
period ended December 31, 1999............................ F-4
Statement of Changes in Stockholders' Equity (Deficit) for
each of the three years in the period ended December 31,
1999...................................................... F-5
Statements of Cash Flows for each of the three years in the
period ended December 31, 1999............................ F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Tallan, Inc.
The financial statements included herein have been adjusted to reflect the
increase in the authorized number of common shares to 300,000,000, to authorize
5,000,000 shares of undesignated preferred shares, and to reflect a 2-for-1
stock split of all outstanding shares of common stock. Such events have not been
consummated at January 31, 2000. When they have been consummated, we will be in
a position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, of changes in stockholders' equity (deficit)
and of cash flows present fairly, in all material respects, the
financial position of Tallan, Inc. at December 31, 1999 and 1998, and
the results of its operations and its 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."
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
January 25, 2000
F-2
<PAGE> 61
TALLAN, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999
PRO FORMA
MANDATORILY REDEEMABLE
DECEMBER 31, PREFERRED STOCK AND
-------------------------- STOCKHOLDERS'
1998 1999 EQUITY (NOTE 2)
---------- ------------ ----------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 39,015 $ 9,788,891
Investments............................................... 100,000 302,681
Accounts receivable (net of allowance for doubtful
accounts of $100,000 and $300,000, respectively)........ 3,479,776 10,602,380
Prepaid expenses and other current assets................. 130,148 463,907
---------- ------------
Total current assets................................ 3,748,939 21,157,859
---------- ------------
Property and equipment, net (Note 4)........................ 749,211 2,332,485
Other assets................................................ 72,867 661,016
---------- ------------
Total assets........................................ $4,571,017 $ 24,151,360
========== ============
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............................................ $ 881,566 $ --
Accounts payable.......................................... 182,709 385,496
Current taxes payable..................................... 16,702 780,299
Accrued payroll........................................... 861,272 1,257,518
Deferred revenue.......................................... -- 484,608
Accrued other expenses.................................... 484,369 1,359,330
Deferred income taxes..................................... 114,910 --
---------- ------------
Total current liabilities........................... 2,541,528 4,267,251
---------- ------------
Long-term liabilities:
Deferred income taxes (Note 6)............................ 345,643 181,457
Deferred compensation..................................... -- 154,282
Commitments and contingencies (Note 5)......................
Mandatorily redeemable preferred stock (Note 8):
Series A redeemable preferred stock, $0.01 par value,
3,412,969 shares authorized; 0, 3,412,969 and 3,412,969
shares issued and outstanding, respectively............. -- 10,479,354 $ 10,479,354
============
Series B convertible preferred stock, $0.01 par value,
1,706,485 shares authorized; 0, 1,706,485 and 0 shares
issued and outstanding, respectively.................... -- 6,183,676 --
Stockholders' equity (Note 9):
Preferred stock, $0.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding............ -- -- $ --
Common stock, $0.01 par value, 300,000,000 shares
authorized; 31,640,000, 38,481,110 and 41,894,080 shares
issued; 31,640,000, 32,643,136 and 36,056,106 shares
outstanding, respectively............................... -- 384,811 418,941
Additional paid-in capital................................ 266,600 15,846,233 21,995,779
Treasury stock at cost (5,837,974 shares)................. -- (17,105,264) (17,105,264)
Retained earnings......................................... 1,417,246 3,666,879 3,666,879
Other accumulated comprehensive income.................... -- 92,681 92,681
---------- ------------ ------------
Total stockholders' equity.......................... 1,683,846 2,885,340 $ 9,069,016
---------- ------------ ============
Total liabilities, mandatorily redeemable preferred
stock and stockholders' equity.................... $4,571,017 $ 24,151,360
========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 62
TALLAN, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................ $13,453,472 $22,869,596 $53,940,686
----------- ----------- -----------
Operating expenses:
Project personnel costs........................... 8,514,755 13,150,562 30,573,791
General and administrative........................ 3,442,982 5,020,290 8,559,155
Selling and marketing............................. 909,489 918,854 1,785,313
Research and development.......................... 623,024 222,599 --
Depreciation and amortization..................... 187,415 297,952 795,772
----------- ----------- -----------
13,677,665 19,610,257 41,714,031
----------- ----------- -----------
Income (loss) from operations.................. (224,193) 3,259,339 12,226,655
----------- ----------- -----------
Other income (expense):
Interest income................................... 20 20,689 144,164
Loss on disposal of assets........................ (83,057) (19,889) (39,478)
Interest expense.................................. (205,943) (157,736) (135,920)
----------- ----------- -----------
(288,980) (156,936) (31,234)
----------- ----------- -----------
Income (loss) before provision (benefit) for
income taxes................................. (513,173) 3,102,403 12,195,421
Provision (benefit) for income taxes (Note 6)....... (96,506) 1,396,026 5,122,981
----------- ----------- -----------
Net income (loss)................................... (416,667) 1,706,377 7,072,440
Deemed preferred dividends and accretion (Note 8)... -- -- (4,822,807)
----------- ----------- -----------
Net income (loss) available for common
shareholders...................................... $ (416,667) $ 1,706,377 $ 2,249,633
=========== =========== ===========
Net income (loss) per common share:
Basic............................................. $ (0.01) $ 0.05 $ 0.07
Diluted........................................... $ (0.01) $ 0.05 $ 0.05
Weighted average number of shares:
Basic............................................. 32,200,000 31,610,850 32,005,240
Diluted........................................... 32,200,000 33,505,384 44,621,270
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 63
TALLAN, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TREASURY STOCK
CLASS B ------------------------
COMMON STOCK COMMON STOCK ADDITIONAL RETAINED
--------------------- -------------------- PAID-IN EARNINGS NUMBER
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) OF SHARES AMOUNT
---------- -------- ---------- ------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 25,200,000 $ -- 7,000,000 $ -- $ 1,000 $ 127,536 -- $ --
Net loss................. -- -- -- -- -- (416,667) -- --
---------- -------- ---------- ------- ----------- ----------- --------- ------------
Balance at December 31,
1997................... 25,200,000 -- 7,000,000 -- 1,000 (289,131) -- --
Conversion of shares..... 4,200,000 -- (7,000,000) -- -- -- -- --
Issuance of common
stock.................. 2,240,000 -- -- -- 265,600 -- -- --
Net income............... -- -- -- -- -- 1,706,377 -- --
---------- -------- ---------- ------- ----------- ----------- --------- ------------
Balance at December 31,
1998................... 31,640,000 -- -- -- 266,600 1,417,246 -- --
Exchange of shares....... -- 316,400 -- -- (316,400) -- -- --
Issuance of common
stock.................. 6,825,938 68,259.. -- -- 12,172,462 -- -- --
Purchase of treasury
shares................. -- -- -- -- -- -- 5,837,974 (17,105,264)
Exercise of options...... 15,172 152 -- -- 9,634 -- -- --
Unrealized gain (loss)... -- -- -- -- -- -- -- --
Deemed preferred
dividends and
accretion.............. -- -- -- -- 3,713,937 (4,822,807) -- --
Net income............... -- -- -- -- -- 7,072,440 -- --
---------- -------- ---------- ------- ----------- ----------- --------- ------------
Balance at December 31,
1999................... 38,481,110 $384,811 -- $ -- $15,846,233 $ 3,666,879 5,837,974 $(17,105,264)
========== ======== ========== ======= =========== =========== ========= ============
<CAPTION>
OTHER
ACCUMULATED TOTAL
COMPREHENSIVE STOCKHOLDERS'
INCOME EQUITY (DEFICIT)
------------- ----------------
<S> <C> <C>
Balance at December 31,
1996................... $ -- $ 128,536
Net loss................. -- (416,667)
------- ------------
Balance at December 31,
1997................... -- (288,131)
Conversion of shares..... -- --
Issuance of common
stock.................. -- 265,600
Net income............... -- 1,706,377
------- ------------
Balance at December 31,
1998................... -- 1,683,846
Exchange of shares....... -- --
Issuance of common
stock.................. -- 12,240,721
Purchase of treasury
shares................. -- (17,105,264)
Exercise of options...... -- 9,786
Unrealized gain (loss)... 92,681 92,681
Deemed preferred
dividends and
accretion.............. -- (1,108,870)
Net income............... -- 7,072,440
------- ------------
Balance at December 31,
1999................... $92,681 $ 2,885,340
======= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 64
TALLAN, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (416,667) $ 1,706,377 $ 7,072,440
----------- ----------- ------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 187,415 297,952 795,772
Provision for doubtful accounts......................... 100,000 -- 200,000
Loss on disposition of assets........................... 83,057 19,889 39,478
Deferred income taxes................................... (99,567) 416,000 (390,683)
Change in assets and liabilities:
Accounts receivable................................... (1,871,553) (695,987) (7,322,604)
Prepaid expenses and other assets..................... 55,605 (114,290) (118,075)
Accounts payable...................................... 246,247 (352,077) 202,787
Current taxes payable................................. -- 16,702 763,597
Other assets.......................................... (28,621) 12,187 (588,149)
Deferred revenue...................................... -- -- 484,608
Accrued expenses...................................... 622,155 (120,112) 874,961
Deferred compensation................................. 154,282
Accrued payroll....................................... -- 598,115 396,246
----------- ----------- ------------
Net cash provided by (used in) operating
activities........................................ (1,121,929) 1,784,756 2,564,660
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of assets........................................ (107,037) (562,243) (2,450,775)
Proceeds from disposal of assets.......................... -- 19,125 32,251
Purchase of investment.................................... -- (100,000) (110,000)
----------- ----------- ------------
Net cash used in investing activities............... (107,037) (643,118) (2,528,524)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) proceeds from line of credit, net............ 1,285,064 (933,538) (881,566)
Proceeds from note payable................................ -- 250,000 --
Repayment of note payable................................. -- (250,000) --
Proceeds from employee and stockholder loans.............. 188,272 -- --
Repayment of loans to employees and stockholders.......... -- (177,896) --
Deferred financing costs.................................. -- (42,563) (104,097)
Proceeds from exercise of options......................... -- -- 9,786
Proceeds from issuance of stock, net...................... -- 265,600 27,794,881
Repayment of capital lease obligations.................... (118,913) (342,933) --
Purchase of treasury stock................................ -- -- (17,105,264)
----------- ----------- ------------
Net cash provided by (used in) financing
activities........................................ 1,354,423 (1,231,330) 9,713,740
----------- ----------- ------------
Net increase (decrease) in cash............................. 125,457 (89,692) 9,749,876
Cash at beginning of year................................... 3,250 128,707 39,015
----------- ----------- ------------
Cash at end of year......................................... $ 128,707 $ 39,015 $ 9,788,891
=========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest................................................ $ 189,401 $ 171,971 $ 150,751
Income taxes............................................ 508 963,323 4,760,146
</TABLE>
Additional non-cash transactions disclosed in Note 2, 4 and 8.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 65
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
Business
Tallan, Inc. ("Tallan" or the "Company") was initially incorporated in
Connecticut in 1985 under the name BDS Business Center, Inc. ("BDS"). In August
1999, BDS completed a migratory merger to reincorporate in Delaware. In December
1999, BDS changed its name to Tallan.
Tallan is an Internet professional services firm that creates technically
advanced Internet and eBusiness solutions that improve commerce between
businesses and consumers as well as among businesses and their trading partners.
The Company focuses on providing solutions for their customers that will allow
them to maximize the opportunities presented by the Internet, particularly
projects that create new revenue opportunities. The Company's customers are
located primarily in the United States.
2. SUMMARY OF 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 the
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.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit with banks, as well as
short-term investments with original maturities of 90 days or less.
Investments
The Company's investment balance consists of equity securities and are
categorized as available-for-sale securities. Unrealized holding gains and
losses are reflected as a net amount in accumulated other comprehensive income
until realized. For the purpose of computing realized gains and losses, cost is
identified on a specific identification basis. Additionally, during 1999, the
Company received a warrant to purchase 666,667 shares of common stock of one of
its customers in exchange for services rendered to that customer. Also in 1999,
the Company received 252,227 unregistered equity securities of another customer
in exchange for services rendered to that customers. The combined carrying value
of the warrants and unregistered securities of $415,657 approximates the value
of the services performed and is included within other assets at December 31,
1999.
Property and Equipment
Property and equipment is recorded at cost, less accumulated depreciation.
Expenditures for repairs and maintenance are charged to expense as incurred
while those relating to major improvements are treated as capital additions and
depreciated over the remaining useful life of the related asset. For assets sold
or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in income
for the period.
Depreciation is computed using an accelerated method over the following
estimated useful lives:
<TABLE>
<S> <C>
Computer software........................................... 3 years
Computer equipment.......................................... 5 years
Office equipment and furniture.............................. 7 years
</TABLE>
F-7
<PAGE> 66
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
An asset and liability approach is used to recognize deferred tax assets
and liabilities for the future tax consequences of items that have already been
recognized in its financial statements and tax return. A valuation allowance is
established against net deferred tax assets if based on the weight of available
evidence, it is more likely than not that some or all of the net deferred tax
assets will not be realized.
Revenue Recognition
The Company provides services on a time and materials basis. Revenues are
recognized at agreed-upon rates as services are performed. The Company records
an allowance for doubtful accounts based on individual customer analyses. The
Company did not write-off any material accounts receivable balances during the
years ended December 31, 1997, 1998 and 1999. Deferred revenue reflects amounts
received in advance of providing services.
Project Personnel Costs
Project personnel costs consists primarily of salaries and employee
benefits for personnel dedicated to client projects, and non-reimbursed direct
expenses incurred to complete projects.
Research and Development Costs
Research and development costs are charged to expense when incurred. There
were no research and development projects ongoing during 1999.
Concentrations of Credit Risk
Concentrations of credit risk exist with respect to cash and cash
equivalents and accounts receivable. The Company maintains its cash and cash
equivalents with one financial institution. A significant portion of the
Company's receivables are attributable to a limited number of clients.
For the year ended December 31, 1997, two customers accounted for 43% and
16%, respectively, of total revenues. At December 31, 1998, two clients
accounted for 26% and 12%, respectively, of the accounts receivable balance.
Revenues for the year ended December 31, 1998 from three clients were
approximately $6.8 million, $2.8 million and $2.3 million. At December 31, 1999,
two clients accounted for 16% and 13% of the accounts receivable balance.
Revenues for the year ended December 31, 1999 from three clients were
approximately $8.6 million, $6.5 million and $5.5 million.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), effective January 1, 1998. SFAS
130 requires that items defined as comprehensive income, such as foreign
currency translation adjustments and unrealized gains (losses) on marketable
securities, be separately classified in the financial statements and that the
accumulated balance of other comprehensive income be reported separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet. Total comprehensive income is comprised of net income and other
accumulated comprehensive income disclosed in the equity section of the balance
sheet.
For the year ended December 31, 1999, total comprehensive income was
$2,342,314, which was not materially different from net income. There were no
differences between net income and comprehensive income for the years ended
December 31, 1998 and 1997.
F-8
<PAGE> 67
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Recent Accounting Pronouncements
In November 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 100, Restructuring and Impairment Charges
("SAB 100"). In December 1999, the SEC issued SAB No. 101, Revenue Recognition
in Financial Statements ("SAB 101"). SAB No. 100 expresses the views of the SEC
staff regarding the accounting for and disclosure of certain expenses not
commonly reported in connection with exit activities and business combinations.
The Company does not expect the provisions of SAB No. 100 to have a material
impact on its financial statements. SAB No. 101 expresses the views of the SEC
staff in applying generally accepted accounting principles to certain revenue
recognition issues. The Company does not expect the provisions of SAB No. 101 to
have a material impact on its financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. As issued, this
statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999, with earlier application encouraged. In May 1999, the
Financial Accounting Standards Board delayed the effective date of this
statement for one year, to all fiscal quarters of all fiscal years beginning
after June 15, 2000. The Company does not currently, nor do they intend in the
future to, use derivative instruments and therefore do not expect that the
adoption of Statement of Accounting Standards No. 133 will have any impact on
their financial position or results of operations.
Pro Forma Mandatorily Redeemable Preferred Stock and Stockholders' Equity
(unaudited)
Upon the closing of a qualified public offering, as defined, all of the
outstanding shares of the Series B Convertible Preferred Stock ("Series B
Preferred Stock") will automatically convert into 3,412,970 shares of Common
Stock (the "Common Stock"). The unaudited pro forma presentation of the December
31, 1999 mandatorily redeemable preferred stock and stockholders' equity has
been prepared assuming such conversion.
3. STOCK SPLITS
During 1998, the Company executed a 1,000-for-1 stock split of the Common
Stock with no par value. During 1999, in connection with the migratory merger
and reincorporation in Delaware, each share of no par value Common Stock
converted into seven shares of $0.01 par value per share Common Stock.
As noted in Note 13, on January 27, 2000, the Company approved a 2-for-1
stock split in the form of a stock dividend such that each outstanding share of
Common Stock received a dividend of one share of Common Stock (Note 13). The
expected date of consummation of this split is March 10, 2000.
All shares, options and par values have been restated in the financial
statements and footnotes to reflect the effects of these splits of the Company's
Common Stock.
F-9
<PAGE> 68
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Computer equipment.......................................... $ 844,554 $ 2,906,657
Computer software...................................... 139,535 271,658
Office equipment and furniture......................... 282,725 405,774
----------- -----------
1,266,814 3,584,089
Less -- accumulated depreciation and amortization...... (517,603) (1,251,604)
----------- -----------
Property and equipment, net............................ $ 749,211 $ 2,332,485
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was $187,415, $251,860 and $795,772, respectively.
In 1997, the Company acquired certain equipment through capital leases
totaling $296,175. Obligations under all capital leases were paid in full in
1998.
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space, apartments for use by employees who work
on client assignments away from their homes, equipment and vehicles under
various noncancelable operating lease agreements.
Future minimum lease payments required over the next five years under
operating lease agreements are as follows:
<TABLE>
<S> <C>
2000........................................................ $1,191,311
2001........................................................ 364,544
2002........................................................ 350,589
2003........................................................ 339,762
2004 and thereafter......................................... 311,449
----------
$2,557,655
==========
</TABLE>
Rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $670,000, $1,282,000 and $3,267,000, respectively.
F-10
<PAGE> 69
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
The income tax provision for the years ended December 31, 1999, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ---------- ----------
<S> <C> <C> <C>
Current
Federal................................................. $ -- $ 661,597 $4,151,002
State.............................................. 3,061 318,429 1,362,662
-------- ---------- ----------
Total......................................... 3,061 980,026 5,513,664
-------- ---------- ----------
Deferred
Federal............................................ (67,316) 297,053 (273,392)
State.............................................. (32,251) 118,947 (117,291)
-------- ---------- ----------
Total......................................... (99,567) 416,000 (390,683)
======== ========== ==========
Total income tax provision (benefit).......... $(96,506) $1,396,026 $5,122,981
======== ========== ==========
</TABLE>
The difference between the statutory U.S. federal income tax rate at 34%
and the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Provision (benefit) at statutory rate.................. $(174,479) $1,054,817 $4,146,443
State and city income tax, net......................... (19,265) 288,667 821,944
Other.................................................. 97,238 52,542 154,594
--------- ---------- ----------
Provision (benefit) for income taxes................... $ (96,506) $1,396,026 $5,122,981
========= ========== ==========
</TABLE>
The significant components of the Company's deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Gross deferred tax assets:
Reserves.................................................... $ 42,172 $208,213
Accrued expenses....................................... -- 64,266
Other.................................................. 5,381 --
-------- --------
47,553 272,479
-------- --------
Gross deferred tax liabilities:
Change from cash to accrual............................ 487,392 320,651
Other.................................................. 20,714 21,698
-------- --------
508,106 342,349
-------- --------
Net deferred tax liability.................................. $460,553 $ 69,870
======== ========
</TABLE>
7. DEBT
At December 31, 1998, the Company had $881,566 outstanding under a
revolving line of credit. Interest was at the bank's prime rate plus 1% (8.75%
at December 31, 1998). The line of credit was terminated during 1999.
F-11
<PAGE> 70
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. MANDATORILY REDEEMABLE PREFERRED STOCK
Pursuant to a private placement in August 1999, the Company sold (i)
3,412,969 shares of Series A Redeemable Preferred Stock ("Series A Preferred
Stock") for $5.86 per share, (ii) 1,706,485 shares of Series B Convertible
Preferred Stock ("Series B Preferred Stock") for $5.86 per share, and (iii)
6,825,938 shares of Common Stock for $.01 per share. Gross proceeds from the
private placement were approximately $30 million. The per share proceeds were
allocated to the Series A Preferred Stock, Series B Preferred Stock and the
Common Stock based on the fair value of the individual securities.
Series A Redeemable and Series B Convertible Preferred Stock
The Series A Preferred Stock may be redeemed at the option of the Company,
in whole or in part, at any time after August 20, 1999. The redemption is
mandatory (i) upon the closing of an underwritten public offering in which the
aggregate gross proceeds to the Company are at least $30 million and the pre-
public market capitalization of the Company is at least $250 million, or (ii) on
August 20, 2006. Upon redemption, the Company shall redeem all remaining shares
of the Series A Preferred Stock by paying in cash a sum equal to $5.86 per share
plus any accrued and unpaid dividends.
In the event the Series A Preferred Stock is not redeemed prior to August
20, 2005, a dividend shall be declared and paid on that date as a one-time,
cumulative dividend with respect to the Series A Preferred Stock in an amount
equivalent to the annual rate of 8% per share (as adjusted for any stock
dividends, combinations or splits with respect to these shares), as if the
dividend had begun to accrue on August 20, 1999. Beginning August 13, 2005 a
cash dividend of 8% will accrue if the Series A Preferred Stock has not been
redeemed. Management does not consider any events that would trigger a deemed
liquidation of the Series B Preferred Stock to be probable events. Management
has determined that a reliable estimate of when the circumstances that would
result in a deemed liquidation cannot be made, and therefore does not accrue for
any accretion of the difference between the carrying and redemption values.
The difference between the Series A Preferred Stock's initial assigned
carrying value of approximately $9.4 million at August 20, 1999 and the
redemption value of approximately $20.0 million at August 20, 2006, plus any
dividends, is being periodically adjusted to increase the carrying value to the
redemption value. Accretion and dividends for 1999 totaled $1,108,870 and has
been reflected as a charge to net income applicable to common shareholders.
The Series B Preferred Stock is convertible, at the option of the holder,
at any time into 3,412,970 shares of Common Stock of the Company. Each share of
the Series B Preferred Stock shall be automatically converted into shares of
Common Stock upon the earlier of (i) the closing of a qualified underwritten
public offering, as defined, or (ii) upon the approval of the holders of greater
than 50% of the then outstanding shares of Series B Preferred Stock. In the
event that the Company shall pay a dividend (other than a dividend payable
solely in shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive additional shares of Common Stock) on
Common Stock, it shall pay to the holders of shares of Series B Preferred Stock,
a dividend equal to such dividend on the Common Stock.
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, or a change in control which is deemed to be a
liquidation, the holders of the Series A and Series B Preferred Stock, shall be
entitled to receive, prior and in preference to any distribution of any assets
of the Company to the holders of Common Stock or any other class or series of
stock ranking in liquidation junior to the Series A and Series B Preferred
Stock, an amount per share equal to the sum of (i) $5.86 for each outstanding
share (as adjusted for any stock dividends, combinations or splits with respect
to the Series A and Series B Preferred Stock) and (ii) an amount equal to all
declared but unpaid dividends, plus accrued dividends, if any.
F-12
<PAGE> 71
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The holder of each share of Series B 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. The Series A Preferred Stock is non-voting except that the holders
of the Series A Preferred Stock are entitled to a class vote with the holders of
the Series B Preferred Stock with respect to certain protective provisions.
Beneficial Conversion Feature
In August 1999, the Company recorded a beneficial conversion charge
concurrent with the issuance of the Series B Preferred Stock. The beneficial
conversion feature was calculated as the difference between the assigned value
of the Series B Preferred Stock and the fair market value of the related Common
Stock as of August 20, 1999, into which the Series B Preferred Stock were
immediately convertible. Accordingly, a deemed preferred dividend of
approximately $3.7 million as of the issuance date has been recognized as a
charge to retained earnings and net income applicable to common shareholders,
and as an increase to additional paid-in capital.
9. STOCKHOLDERS' EQUITY
Common Stock
As discussed in Note 8, the Company issued 6,825,938 shares of Common Stock
at $0.01 per share, pursuant to a private placement.
On March 30, 1998, the Company's stockholders approved a resolution to
exchange all the outstanding shares of Class B non-voting common stock (the
"Class B Common Stock") for 4,200,000 shares of Class A common stock ("Class A
Common Stock"). The Class B non-voting stock was then eliminated as a class.
Also on March 30, 1998, the Company's stockholders approved a resolution to sell
up to 15 investment units. Each unit was comprised of 280,000 shares of Class A
Common Stock, at a price per Class A Common Stock of $0.12, and an option to
acquire up to an additional 140,000 shares of Class A Common Stock pursuant to
the Company's 1998 Stock Plan at an exercise price of $0.12. In April 1998,
pursuant to this resolution, the Company sold 8 units and raised $265,600 of
additional capital. In January 1999, the Class A distinction was eliminated and
all outstanding stock became known as Common Stock.
Treasury Stock Purchase
Concurrent with the August 1999 private placement described in Note 8, the
Company repurchased 5,837,974 shares of Common Stock at $2.93 per share from
various major shareholders. These shares are carried at cost within Treasury
Stock.
As more fully described in Note 13, the Company effected a stock split in
January 2000.
10. STOCK OPTION PLANS
In March 1998, the Company instituted the 1998 Employee Stock Option and
Performance Incentive Plan (the "1998 Plan"). The Company has reserved
17,500,000 shares of Common Stock for issuance under this plan, pursuant to
nonqualified and incentive stock options, stock appreciation rights and tax
offset payments, to its employees, officers, directors and consultants. In
general, options granted under the 1998 Plan were granted at fair market value
and vest ratably over a three or four year period. Options under the 1998 Plan
expire no later than ten years from the date of grant. In addition, certain
options granted under the 1998 Plan accelerate automatically upon a change in
control. The 1998 Plan was
F-13
<PAGE> 72
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
terminated in May 1999 and the number of shares of Common Stock reserved under
this plan was fixed at 15,344,000, the number of then outstanding options.
In May 1999, the Company adopted the 1999 Stock Option and Incentive Plan
(the "1999 Plan"), under which employees, officers, directors and consultants
may be granted various stock based awards. A total of 8,456,000 shares of common
stock have been reserved for issuance under this plan. Generally, options that
have been issued under this plan have been granted at an exercise price equal to
the fair market value of the common stock on the date of grant, vest over a four
year period and expire ten years from the date of grant.
In January 2000, the Company adopted the 2000 Non-Employee Director Stock
Option Plan, which provides for non-employee directors to receive options to
purchase Common Stock of the Company at an exercise price equal to the fair
market value of the Common Stock on the date of grant. The Company has reserved
a total of 500,000 shares of Common Stock for issuance under this plan. This
plan is expected to be effective upon the closing of the anticipated initial
public offering.
In January 2000, the Company adopted the 2000 Employee Stock Purchase Plan,
which permits eligible employees of the Company to purchase shares of Common
Stock pursuant to payroll deductions at a price equal to 85% of the fair market
value of the Company's stock. The Company has reserved an aggregate of 1,200,000
shares of Common Stock for issuance under this plan. This plan is expected to be
effective upon the closing of the anticipated initial public offering.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1999
---------------------------- -----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period........ -- $ -- 3,640,000 $0.12
Granted................................... 3,640,000 0.12 14,329,000 1.09
Exercised............................... -- -- (15,172) 0.65
Cancelled............................... -- -- (322,440) 0.90
--------- ----------
Outstanding at period end................. 3,640,000 0.12 17,631,388 0.89
========= ==========
Options exercisable at period end......... -- -- 3,765,690 0.48
========= ==========
Weighted average fair value of options
granted during the period............... $ 0.20 $ 0.27
--------- ----------
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ------------------------------------
NUMBER NUMBER
RANGE OF OUTSTANDING AT WEIGHTED AVERAGE WEIGHTED AVERAGE OUTSTANDING AT WEIGHTED AVERAGE
EXERCISE PRICES DECEMBER 31, 1999 REMAINING LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
--------------- ----------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$0.12 -- $0.12......... 3,640,000 8.25 $0.12 1,213,332 $0.12
0.13 -- 0.65......... 11,394,388 9.08 0.65 2,552,358 0.65
0.66 -- 2.93......... 2,471,000 9.68 2.93 -- --
2.94 -- 5.25......... 126,000 9.88 5.25 -- --
---------- ---- ----- --------- -----
17,631,388 9.00 $0.89 3,765,690 $0.48
========== ==== ===== ========= =====
</TABLE>
The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and the related Interpretations in accounting
for the plans.
F-14
<PAGE> 73
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation expense for the plans been determined based on the fair
value at the grant dates for awards under the plan consistent with the method of
SFAS 123, "Accounting for Stock-Based Compensation", the Company's pro forma net
income (loss) would have been as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Net income (loss):
As reported............................................ $(416,667) $1,706,377 $2,249,633
Pro forma......................................... (416,667) 1,680,415 1,721,971
Pro forma net earnings (loss) per share:
Basic, as reported................................ $ (0.01) $ 0.05 $ 0.07
Basic, pro forma.................................. (0.01) 0.05 0.05
Diluted, as reported.............................. (0.01) 0.05 0.05
Diluted, pro forma................................ (0.01) 0.05 0.04
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998 and 1999: dividend yield of 0%; expected
volatility of 0%; weighted average risk-free interest rate of 5.68% and 4.78% in
1998 and 1999, respectively, and expected lives of 5 years.
Compensation expense of $299,250 has been attributed to those common stock
options granted to employees during 1999, with an exercise price below estimated
fair value. This compensation expense is being recognized over the four year
vesting period and totaled $9,282 during 1999. Compensation expense of $145,000
was recognized in 1999 and was attributable to options issued to advisory board
members.
11. 401(k) PROFIT-SHARING PLAN
The Company has a defined contribution 401(k) profit sharing plan covering
substantially all employees. The Plan allows eligible employees to contribute up
to 15% of their eligible earnings, subject to a statutorily prescribed annual
limit. The Company matches 50% of eligible employees' contributions up to a
maximum of 6% of their earnings. The Company may make additional discretionary
profit sharing contributions of up to 15% of participants' compensation
annually. For the years ended December 31, 1997, 1998 and 1999, the Company
contributed $145,909, $221,009 and $330,237, respectively.
12. RELATED PARTY TRANSACTIONS
In February 1999, the Company made a $21,684 loan with interest at 6% per
annum, to its Chief Executive Officer, who is also a member of the Board of
Directors. In May 1999, the Company granted two additional loans to its Chief
Executive Officer totaling $40,180. All three loans were repaid in August 1999.
In March 1999, the Company made a $170,000 loan with interest at 6% per
annum to a different member of its Board of Directors. This loan was also repaid
in August 1999.
13. SUBSEQUENT EVENTS
On January 27, 2000, the Company increased the number of shares of common
stock authorized for issuance to an aggregate of 300,000,000, created a class of
5,000,000 authorized but undesignated shares of preferred stock and approved a
2-for-1 stock split of all outstanding shares of common stock in the form of a
stock dividend, such that each outstanding share of common stock will receive a
dividend of one share of common stock, with all of such actions being effective
upon completion of the anticipated initial public offering. All shares, options
and par values have been restated in the financial statements and footnotes to
reflect the effects of this split of the Company's common stock.
F-15
<PAGE> 74
TALLAN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On January 31, 2000, the Company completed a group hire of substantially
all of the employees of Citation Systems, Inc. for a purchase price of
approximately $1.1 million in cash. In addition, options for 680,000 shares of
common stock were issued to the employees of Citation in connection with their
employment at Tallan.
F-16
<PAGE> 75
[TALLAN LOGO]
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................ $ 19,734
NASD filing fee............................................. 30,500
Nasdaq National Market listing fee.......................... 95,000
Blue Sky fees and expenses.................................. 5,000
Transfer Agent and Registrar fees........................... 5,000
Accounting fees and expenses................................ 350,000
Legal fees and expenses..................................... 400,000
Director and officer liability insurance.................... 200,000
Printing and mailing expenses............................... 135,000
Miscellaneous............................................... 34,766
----------
Total............................................. $1,275,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and our charter and by-laws provide
for indemnification of directors and officers for liabilities and expenses that
they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, our best interests, and with respect to
any criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. Reference is made to our corporate charter filed
as Exhibit 3.3 hereto and our by-laws filed as Exhibit 3.5 hereto.
The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify our directors, officers and
controlling persons against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of underwriting agreement filed as
Exhibit 1.1 hereto.
We currently have in place and maintain a directors' and officers'
insurance policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of common
stock issued and options granted by the Registrant since January 31, 1997.
Further included is the consideration, if any, received by the Registrant for
such shares, warrants and options and information relating to the section of the
Securities Act, or rule of the Securities and Exchange Commission under which
exemption from registration was claimed.
The securities issued in the following transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set forth
in Section 4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any public offering, or
(ii) in the case of certain options to purchase shares of common stock and
shares of common stock issued upon the exercise of such options, such offers and
sales were made in reliance upon an exemption from registration under rule 701
of the Securities Act. Except as set forth below, no underwriters were involved
in the foregoing sales of securities.
II-1
<PAGE> 77
(a) Issuances of Capital Stock.
On March 30, 1998, our predecessor, a Connecticut corporation, issued (i)
3,596,000 shares of its Class A common stock pursuant to a 1,000-for-1 stock
split of all outstanding shares of its Class A common stock, and (ii) 4,200,000
shares of its Class A common stock pursuant to the conversion of all of the
outstanding shares of its Class B common stock.
On August 19, 1999, in connection with the migratory merger of our
predecessor with and into us, we issued 31,640,000 shares of common stock to the
former stockholders of our predecessor in exchange for all of the outstanding
common stock of our predecessor. At that time, we also assumed all outstanding
options to purchase shares of our predecessor's common stock.
On August 20, 1999, we issued to venture capital funds and other accredited
investors, 3,412,969 shares of Series A Redeemable Preferred Stock for an
aggregate purchase price of $19,999,998.34; 1,706,485 shares of Series B
Convertible Preferred Stock for an aggregate purchase price of $10,002,111.70
and 6,825,938 shares of common stock for an aggregate purchase price of
$68,259.38. BancBoston Robertson Stephens acted as placement agent in connection
with this transaction.
(b) Certain Grants and Exercises of Stock Options.
On March 31, 1998, our predecessor issued to employees options to purchase
an aggregate of 3,640,000 shares of common stock at an exercise price of $.12
per share. As of January 31, 2000, options to purchase 3,640,000 shares were
outstanding, of which 1,213,332 were exercisable.
On January 29, 1999, we issued to employees and members of our advisory
board options to purchase 11,704,000 shares of common stock at an exercise price
of $0.65 per share. As of January 31, 2000, options to purchase 11,392,990 were
outstanding, of which 2,805,784 were exercisable.
In August 1999, we issued to employees options to purchase 840,000 shares
of common stock at an exercise price of $2.93 per share. As of January 31, 2000,
options to purchase 840,000 shares of common stock were outstanding, none of
which were exercisable.
On September 24, 1999, we issued to employees options to purchase 1,652,000
shares of common stock at an exercise price of $2.93 per share. As of January
31, 2000, options to purchase 1,631,000 shares of common stock were outstanding,
none of which were exercisable.
In August, September and October of 1999, we issued an aggregate of 15,172
shares of common stock to five employees upon exercise of options at an exercise
price of $0.65 per share.
On November 18, 1999, we issued to employees options to purchase 133,000
shares of common stock at an exercise price of $5.25 per share. As of January
31, 2000, options to purchase 126,000 shares of common stock were outstanding,
none of which were exercisable.
On January 19, 2000, we approved for issuance to one employee an option to
purchase 12,540 shares of common stock at an exercise price of $5.25. As of
January 31, 2000, all of these options were outstanding, none of which were
exercisable.
On January 28, 2000, we approved for issuance options to purchase 680,000
shares of our common stock at an exercise price of $17.00. As of January 31,
2000, all of these options were outstanding, none of which were exercisable.
II-2
<PAGE> 78
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.3 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant, to be effective upon the
closing of this offering.
3.4 Amended By-Laws of the Registrant.
3.5 Second Amended and Restated By-Laws of the Registrant, to be
effective upon the effectiveness of this registration
statement.
4.1 Specimen certificate for shares of common stock.*
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP.*
10.1 1998 Stock Option and Performance Incentive Plan, as
amended.
10.2 1999 Stock Option and Incentive Plan.
10.3 2000 Non-Employee Director Stock Option Plan.
10.4 2000 Employee Stock Purchase Plan.
10.5 Office Lease with TR628 Hebron Limited Partnership dated
July 27, 1998.
10.6 Amendment to Lease with TR628 Hebron Limited Partnership
dated April 27, 1999.
10.7 Employment Agreement with Jack Hughes dated May 1, 1999.
10.8 Employment Agreement with Robert Hughes dated May 17, 1999.
10.9 Employment Agreement with Peter Bourdon dated May 1, 1999.
10.10 Investors' Rights Agreement dated August 20, 1999.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1).*
24.1 Power of Attorney (included on page II-6).
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the amended and restated
certificate of incorporation of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 79
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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted form the form of prospectus filed as part of this
Registration Statement in reliance upon rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 80
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 Glastonbury, Connecticut, on this
31st day of January, 2000.
TALLAN, INC.
By: /s/ JOHN M. HUGHES
------------------------------------
John M. Hughes
Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Tallan, Inc., hereby
severally constitute and appoint John M. Hughes and Peter A. Bourdon, and each
of them singly, our true and lawful attorneys with full power to them, and each
of them singly, to sign for us and in our names in the capacities indicated
below, the registration statement on Form S-1 filed herewith and any and all
pre-effective and post-effective amendments to said registration statement, and
any subsequent registration statement for the same offering which may be filed
under rule 462(b), and generally to do all such things in our names and on our
behalf in our capacities as officers and directors to enable Tallan, Inc. to
comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any of
them, to said registration statement and any and all amendments thereto or to
any subsequent registration statement for the same offering which may be filed
under rule 462(b).
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN M. HUGHES Chief Executive Officer and January 31, 2000
- --------------------------------------------------- Director
John M. Hughes
/s/ ROBERT C. HUGHES President and Chief Operating January 31, 2000
- --------------------------------------------------- Officer
Robert C. Hughes
/s/ PETER A. BOURDON Chief Financial Officer, January 31, 2000
- --------------------------------------------------- Executive Vice President,
Peter A. Bourdon Treasurer, Secretary and
Director
/s/ R. NELSON GRIEBEL Director January 31, 2000
- ---------------------------------------------------
R. Nelson Griebel
/s/ MORTON HANDEL Director January 31, 2000
- ---------------------------------------------------
Morton Handel
/s/ PETER J. HUFF Director January 31, 2000
- ---------------------------------------------------
Peter J. Huff
</TABLE>
II-5
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RONALD D. JARVIS Director January 31, 2000
- ---------------------------------------------------
Ronald D. Jarvis
/s/ MICHAEL R. LEZENSKI Director January 31, 2000
- ---------------------------------------------------
Michael R. Lezenski
/s/ NOAH WALLEY Director January 31, 2000
- ---------------------------------------------------
Noah Walley
</TABLE>
II-6
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.3 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant, to be effective upon the
closing of this offering.
3.4 Amended By-Laws of the Registrant.
3.5 Second Amended and Restated By-Laws of the Registrant, to be
effective upon the effectiveness of this registration
statement.
4.1 Specimen certificate for shares of common stock.*
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP.*
10.1 1998 Stock Option and Performance Incentive Plan, as
amended.
10.2 1999 Stock Option and Incentive Plan.
10.3 2000 Non-Employee Director Stock Option Plan.
10.4 2000 Employee Stock Purchase Plan.
10.5 Office Lease with TR628 Hebron Limited Partnership dated
July 27, 1998.
10.6 Amendment to Lease with TR628 Hebron Limited Partnership
dated April 27, 1999.
10.7 Employment Agreement with Jack Hughes dated May 1, 1999.
10.8 Employment Agreement with Robert Hughes dated May 17, 1999.
10.9 Employment Agreement with Peter Bourdon dated May 1, 1999.
10.10 Investors' Rights Agreement dated August 20, 1999.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1).*
24.1 Power of Attorney (included on page II-6).
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
II-7
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
BDS BUSINESS CENTER, INC.
* * * * * *
FIRST. The name of the corporation is BDS Business Center, Inc.
(the "Corporation").
SECOND. The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, New Castle County, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 36,000,000 shares,
consisting of 31,000,000 shares of Common Stock with a par value of one cent
($.01) per share (the "Common Stock") and 5,000,000 shares of Preferred Stock
with a par value of one cent ($.01) per share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
<PAGE> 2
-2-
A. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time
or times and for such consideration or considerations as the Corporation's Board
of Directors may determine. Each series of Preferred Stock shall be so
designated as to distinguish the shares thereof from the shares of all other
series and classes. Except as otherwise provided in this Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the Preferred Stock in one or more series, each
with such designations, preferences, voting powers (or no voting powers),
relative, participating, optional or other special rights and privileges and
such qualifications, limitations or restrictions thereof as shall be stated in
the resolution or resolutions adopted by the Board of Directors to create such
series, and a certificate of said resolution or resolutions shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may: (i) have such distinctive designation and
consist of such number of shares; (ii) be subject to redemption at such time or
times and at such price or prices; (iii) be entitled to the benefit of a
retirement or sinking fund for the redemption of such series on such terms and
in such amounts; (iv) be entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or any other series of stock; (v) be entitled to such
rights upon the voluntary or involuntary liquidation, dissolution or winding up
of the affairs, or upon any distribution of the assets of the Corporation in
preference to, or in such relation to, any other class or classes or any other
series of stock; (vi) be convertible into, or
<PAGE> 3
-3-
exchangeable for, shares of any other class or classes or any other series of
stock at such price or prices or at such rates of exchange and with such
adjustments, if any; (vii) be entitled to the benefit of such conditions,
limitations or restrictions, if any, on the creation of indebtedness, the
issuance of additional shares of such series or shares of any other series of
Preferred Stock, the amendment of this Certification of Incorporation or the
Corporation's By-Laws, the payment of dividends or the making of other
distributions on, or the purchase, redemption or other acquisition by the
Corporation of, any other class or classes or series of stock, or any other
corporate action; or (viii) be entitled to such other preferences, powers,
qualifications, rights and privileges, all as the Board of Directors may deem
advisable and as are not inconsistent with law and the provisions of this
Certificate of Incorporation.
B. COMMON STOCK
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK. All preferences,
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of any series or class of the Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or this Certificate
of Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by such stockholder of record on the books of the
Corporation for the election of directors and on all matters submitted to a vote
of stockholders of the Corporation. Except as otherwise required by the General
Corporation Law of the State of Delaware or as set forth in this Certificate of
Incorporation, any amendment or restatement thereof, or in any Certificate of
Designation filed in accordance with the General Corporation Law of the State of
Delaware with respect to the designation of any series of Preferred Stock, the
holders of
<PAGE> 4
-4-
Common Stock and Preferred Stock shall vote together as a single class on all
matters submitted to the stockholders for a vote. Furthermore, notwithstanding
the provisions of Section 242(b)(2) of General Corporation Law of the State of
Delaware, the holders of Common Stock shall vote together with the holders of
Preferred Stock as a single class with respect to any proposed amendment hereto
that would increase the number of authorized shares of Common Stock with each
share being entitled to the number of votes per share as is provided in this
Article Fourth, and the holders of Common Stock shall not be entitled to a
separate class vote with respect thereto.
3. DIVIDENDS. Subject to the preferential rights of the Preferred Stock,
if any, the holders of shares of Common Stock shall be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
the assets of the Corporation which are by law available therefor, dividends
payable either in cash, in property or in shares of capital stock.
4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of the Preferred Stock, the holders of Common Stock shall
be entitled to receive all of the remaining assets of the Corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively, unless
otherwise provided by law or this Certificate of Incorporation, any amendment or
restatement thereof, or in any Certificate of Designation filed in accordance
with the General Corporation Law of the State of Delaware with respect to the
designation of any series of Preferred Stock.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers by the
laws of the State of Delaware:
<PAGE> 5
-5-
A. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-Laws of the Corporation.
B. Elections of directors need not be by written ballot unless the By-Laws
of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the By-Laws of the Corporation may provide
or as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH. The Corporation eliminates the personal liability of each member
of its Board of Directors to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided, however, that, to
the extent provided by applicable law, the foregoing shall not eliminate the
liability of a director (i) for any breach of such director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of Title 8 of the Delaware Code or (iv) for any
transaction from which such director derived an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any director for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
EIGHTH. The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
NINTH. The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
---- ---------------
<PAGE> 6
-6-
Katherine M. Criniti Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
TENTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
<PAGE> 7
-7-
I, THE UNDERSIGNED, being the sole incorporator hereinabove named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 19th day of May, 1999.
/s/ Katherine M. Criniti
------------------------------
Katherine M. Criniti
Sole Incorporator
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BDS BUSINESS CENTER, INC.
BDS Business Center, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation of the State of Delaware
Law (the "General Corporation Law"), does hereby certify pursuant to Section 242
of the General Corporation Law:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated July 21, 1999, duly adopted a resolution proposing an
amendment to its Certificate of Incorporation of the Corporation amending
Article FOURTH as follows:
RESOLVED: That the first complete paragraph of Article FOURTH of the
Certificate of Incorporation of the Corporation be amended so that,
as amended, said paragraph shall read in its entirety as follows:
"The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 38,000,000
shares, consisting of 32,000,000 shares of Common Stock with a par
value of one cent ($.01) per share (the "Common Stock") and
6,000,000 shares of Preferred Stock with a par value of one cent
($.01) per share (the "Preferred Stock")."
SECOND: That thereafter, the sole stockholder, in accordance with Section
228 of the General Corporation Law of the State of Delaware approved the
amendment by a written consent in lieu of a special meeting.
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IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by John M. Hughes, its Chief Executive Officer, this 21st day of July,
1999.
BDS BUSINESS CENTER, INC.
By: /s/ John M. Hughes
--------------------------------------
John M. Hughes
Chief Executive Officer
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CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A REDEEMABLE PREFERRED STOCK
AND
SERIES B CONVERTIBLE PREFERRED STOCK
OF
BDS BUSINESS CENTER, INC.
The undersigned officers of BDS Business Center, Inc. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, do hereby certify that, pursuant to
authority conferred by the Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, the Board of Directors
of the Corporation adopted a resolution adopting a Certificate of Designations,
Preferences and Rights of Series A Redeemable Preferred Stock and Series B
Convertible Preferred Stock (this "Certificate of Designations") providing for
certain Designations, powers, number, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of 3,412,969 shares of Series A Redeemable Preferred
Stock, $0.01 par value per share, and 1,706,485 shares of Series B Convertible
Preferred Stock, $0.01 par value per share, which resolution is as follows:
RESOLVED: That pursuant to Article FOURTH of the Certificate of
Incorporation, as amended, of this Corporation, the Board of
Directors hereby establishes the following series of Preferred
Stock, $0.01 par value per share, of the Corporation having the
designations, powers, number, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof set forth below:
1. Designations. 3,412,969 shares of the Preferred Stock shall be
designated and known as the "Series A Redeemable Preferred Stock" (and each
holder thereof as a "Series A Redeemable Preferred Stockholder"). 1,706,485
shares of the Preferred Stock shall be designated and known as the "Series B
Convertible Preferred Stock," and together with the Series A Redeemable
Preferred Stock, the "Preferred Stock" (and each holder thereof as a "Series B
Convertible Preferred Stockholder," and together with the Series A Redeemable
Preferred Stockholders, the "Preferred Stockholders").
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2. Dividend Provisions.
(a) In the event that the Corporation shall at any time pay a
dividend (other than a dividend payable solely in 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) on the
Common Stock, it shall, at the same time, pay to the holders of shares of Series
B Convertible Preferred Stock, on a pari passu basis, a dividend equal to such
dividend on the Common Stock. Dividends shall be non-cumulative. Unless full
dividends on the Series B Convertible Preferred Stock shall have been paid or
declared and a sum sufficient for the payment thereof set apart, no dividend
whatsoever (other than a dividend payable solely 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) shall be
paid or declared, and no distribution shall be made, on any Common Stock.
(b) In the event the Series A Redeemable Preferred Stock is
not redeemed prior to August 20, 2005, a dividend shall be declared and paid on
that date as a one-time, pay-in-kind, cumulative dividend with respect to the
Series A Redeemable Preferred Stock in an amount equivalent to the annual rate
of $0.4688 per share (as adjusted for any stock dividends, combinations or
splits with respect to the Series A Redeemable Preferred Stock) (the "Dividend
Rate"), as if the dividend had begun to accrue on August 20, 1999. In addition,
at August 20, 2005, a cash dividend in an amount equivalent to the Dividend Rate
shall begin to accrue and be payable quarterly in arrears on the outstanding
shares of Series A Redeemable Preferred Stock (including for this purpose the
shares of Series A Redeemable Preferred Stock issued in respect of the one-time,
pay-in-kind dividend).
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of Series A
Redeemable Preferred Stock and Series B Convertible Preferred Stock, on a pari
passu basis, shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of Common
Stock or any other class or series of stock ranking in liquidation junior to the
Series A Redeemable Preferred Stock and Series B Convertible Preferred Stock
(such Common Stock and other stock being referred to as "Junior Stock") by
reason of their ownership thereof, an amount per share equal to the sum of (i)
$5.86 for each outstanding share of Series A Redeemable Preferred Stock and
Series B Convertible Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) and (ii) an amount equal to
all declared but unpaid dividends on such series of Preferred Stock, plus
accrued dividends, if any. If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series A Redeemable Preferred
Stock and the Series B Convertible 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 Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Redeemable Preferred Stock and Series B Convertible Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive and no liquidation payments shall be made to the holders of Junior
Stock.
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(b) After all of the distributions described in subsection (a)
above have been paid, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among the holders of Junior
Stock pro rata based on the number of shares of Common Stock held by each.
(c) (i) For purposes of this Section 3, a liquidation,
dissolution or winding up of this Corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of the Corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but excluding any merger
effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale of all or substantially all of the assets of the
Corporation; unless the Corporation's stockholders of record as constituted
immediately prior to such merger, acquisition or sale will, immediately after
such merger, acquisition or sale (by virtue of securities issued as
consideration for the Corporation's merger, acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity.
(ii) In any of such events, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value. The fair market value of any securities shall be determined
as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability:
(1) If traded on a securities exchange or
through the NASDAQ National Market, the value shall be deemed to be
the average of the closing prices of the securities on such exchange
over the thirty-day period ending three (3) days prior to the
closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the thirty-day period ending
three (3) days prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined
by the Corporation and the holders of at least a majority of the
voting power of all then outstanding shares of Series A Redeemable
Preferred Stock and Series B Convertible Preferred Stock.
(B) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount
from the market value determined as above in (A) (1), (2) or (3) to
reflect the approximate fair market value thereof, as mutually determined
by the Corporation and the holders of at least a majority of the voting
power of all then outstanding shares of Series A Redeemable Preferred
Stock and Series B Convertible Preferred Stock, voting together as a
single class.
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(iii) In the event the fair market value of such
securities has not been determined in accordance with the requirements of this
subsection 3(c) 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 3 have been complied with; or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A
Redeemable Preferred Stock and Series B Convertible 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 3(c)(iv) hereof.
(iv) The Corporation shall give each holder of record of
Series A Redeemable Preferred Stock and Series B Convertible Preferred Stock
written notice of all transactions which may be treated as a liquidation,
dissolution or winding up of the Corporation pursuant to subsection 3(c)(i) 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 3, and the 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 the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened or eliminated upon the written consent of the holders
of at least a majority of the then outstanding shares of Preferred Stock.
4. Redemption.
(a) The Corporation may redeem, in whole or in part, at any
time after August 20, 1999, out of funds legally available therefor, the Series
A Redeemable Preferred Stock (the "Series A Redemption Date"). The Corporation
shall effect such redemption by paying in cash in exchange for the shares of
Series A Redeemable Preferred Stock to be redeemed a sum equal to $5.86 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such shares), plus all declared or accumulated but unpaid dividends on such
shares plus accrued dividends, if any (the "Series A Redemption Price"). Any
redemption effected pursuant to this subsection 4(a) shall be made on a pro rata
basis among the Series A Redeemable Preferred Stockholders in proportion to the
number of shares of Series A Redeemable Preferred Stock then held by such
holders.
(b) Upon the consummation of a firm commitment underwritten
public offering ("Public Offering Redemption Date") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), in which (i) the aggregate gross proceeds (prior to deduction
of offering expenses but after deduction of underwriting discounts and
commissions) are at least $30,000,000 and (ii) the pre-public offering equity
market capitalization of the Corporation, as determined by multiplying the
number of shares of
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<PAGE> 14
Common Stock outstanding (assuming the conversion of the Series B Convertible
Preferred Stock and the exercise of all outstanding options and warrants to
purchase Common Stock) immediately prior to the public offering by the offering
price to the public (prior to deduction of offering expenses, underwriting
discounts and commissions), is at least $250,000,000 (a "Qualified Public
Offering"), the Corporation shall redeem, out of funds legally available
therefor, the Series A Redeemable Preferred Stock. The Corporation shall effect
such redemption by paying in cash in exchange for the shares of Series A
Redeemable Preferred Stock to be redeemed a sum equal to $5.86 per share (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), plus all declared, accumulated or accrued but unpaid dividends on such
shares (the "Public Offering Redemption Price"). Under this subsection 4(b), the
Corporation shall be required to redeem all of the shares of Series A Redeemable
Preferred Stock.
(c) On August 20, 2006, the Corporation shall redeem, out of
funds legally available therefor, the Series A Redeemable Preferred Stock (the
"2006 Redemption Date"). The Corporation shall effect such redemption by paying
in cash in exchange for the shares of Series A Redeemable Preferred Stock to be
redeemed a sum equal to $5.86 per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares), plus all declared,
accumulated or accrued but unpaid dividends on such shares (the "2006 Redemption
Price"). Under this subsection 4(c), the Corporation shall be required to redeem
all of the shares of Series A Redeemable Preferred Stock.
(d) As used in this subsection 4(d) and in subsection 4(e)
below, the term "Redemption Date" shall refer to either the "Series A Redemption
Date," "Public Offering Redemption Date" or "2006 Redemption Date," as
applicable, and the term "Redemption Price" shall refer to either the "Series A
Redemption Price," "Public Offering Redemption Price" or "2006 Redemption
Price," as applicable. At least fifteen (15) but no more than forty-five (45)
days prior to the 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 Series A
Redeemable Preferred Stock 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, specifying the number of shares to be redeemed from
such holder, the Redemption Date or, in the case of the Public Offering
Redemption Date, the approximate 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"). On or before the Redemption Date each holder of Series A
Redeemable Preferred Stock to be redeemed shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, against payment of the Redemption
Price of such shares 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 cancelled. 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.
(e) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares of Series A Redeemable Preferred Stock designated for
redemption in the Redemption Notice as holders of
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Series A Redeemable Preferred Stock (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, 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 the Corporation legally available for
redemption of shares of the Series A Redeemable Preferred Stock on any
Redemption Date are insufficient to redeem the total number of shares of such
Series A Redeemable Preferred Stock required to be redeemed on such date, those
funds which 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
based upon their holdings of Series A Redeemable Preferred Stock in proportion
to the preferential amount each such holder is otherwise entitled to receive.
The shares of Series A Redeemable Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series A Redeemable Preferred Stock,
such funds will immediately be used to redeem the balance of the shares which
the Corporation has become obliged to redeem on any Redemption Date but which it
has not redeemed.
5. Conversion. The holders of the Series B Convertible Preferred
Stock shall have conversion rights as follows:
(a) (i) Each share of Series B Convertible Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time into the number of fully paid and non-assessable shares of Common
Stock of the Corporation as is determined by dividing $5.86 by the Series B
Conversion Price (as hereinafter defined) in effect at the time of conversion.
The Series B Conversion Price shall initially be $5.86 per share.
(ii) Each share of Series B Convertible Preferred Stock
shall automatically be converted into the number of fully paid and
non-assessable shares of Common Stock at the then effective Series B Conversion
Price upon the earlier of (A) the closing of the Corporation's sale of shares of
Common Stock in a Qualified Public Offering, and (B) upon the approval (by vote
or written consent, as provided by law) of the holders of 50.01% of the then
outstanding shares of Series B Convertible Preferred Stock, on the date
specified by such holders.
(iii) At the time of any conversion of Series B
Convertible Preferred Stock to Common Stock, all declared but unpaid dividends
on each and all such Preferred Stock being converted shall be, at the
Corporation's option, paid in cash or converted on the Conversion Date (as
defined in subsection 5(b) below) to that number of shares of Common Stock
determined by the fair market value of the Common Stock at the time of
conversion, determined as specified in subsection 2(c)(ii).
(b) In order for a holder of Series B Convertible Preferred
Stock to convert such shares into shares of Common Stock, such holder shall
surrender the certificate or certificates representing such shares of Series B
Convertible Preferred Stock at the office of the transfer agent for the Series B
Convertible Preferred Stock, together with written notice that such holder
elects to convert all or any number of the shares of the Series B Convertible
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name
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or the names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or its
attorney duly authorized in writing. The date of receipt of such certificates
and notice by the transfer agent is referred to herein as the "Conversion Date."
The Corporation shall, as soon as practicable after the Conversion Date, issue
and deliver to such holder, or to its nominee, at such holder's address as shown
in the records of the Corporation, a certificate or certificates for the number
of whole shares of Common Stock issuable upon such conversion in accordance with
the provisions hereof, together with cash in lieu of fractional shares. If less
than all of the shares of Series B Convertible Preferred Stock represented by a
stock certificate are converted into shares of Common Stock, the Corporation
shall issue a new stock certificate in the amount of the shares not so
converted.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Convertible Preferred Stock and any fractional
share to which the holder would otherwise be entitled shall be paid in cash in
an amount equal to such fractional share multiplied by the then effective
Conversion Price.
(d) All shares of Series B Convertible Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding, and all rights with respect to such shares shall
immediately cease and terminate on the Conversion Date, except only the right of
the holders thereof to receive shares of Common Stock in exchange therefor and
the payment of any declared and unpaid dividends thereon. On the Conversion
Date, the shares of Common Stock issuable upon such conversion shall be deemed
to be outstanding, and the holder thereof shall be entitled to exercise and
enjoy all rights with respect to such shares of Common Stock. All shares of
Series B Convertible Preferred Stock tendered for conversion shall, from and
after the Conversion Date, be deemed to have been retired and canceled and shall
not be reissued as Series B Convertible Preferred Stock, and the Corporation may
thereafter take such appropriate action as may be necessary to reduce
accordingly the authorized number of shares of Series B Convertible Preferred
Stock.
(e) The initial conversion price as stated in subsection 5(a)
shall be subject to adjustment from time to time and such conversion price as
adjusted shall likewise be subject to further adjustment, all as hereinafter set
forth. The term "Series B Conversion Price" shall mean, as of any time, the
conversion price of the Series B Convertible Preferred Stock at that time, as
specified in subsection 5(a) in case no adjustment shall have been required, or
such conversion price as adjusted pursuant to this subsection 5(e), as the case
may be, and the term "Conversion Price" shall mean the Series B Conversion
Price:
(i) If at any time the Corporation shall issue any
shares of Common Stock or any Convertible Securities, Rights or Related Rights
(each as herein defined) (such Convertible Securities, Rights or Related Rights
being hereinafter referred to collectively as "Securities") without
consideration or for a consideration per share of Common Stock (the
consideration in each case to be determined in the manner provided in (ii)(E)
and (ii)(F) below) less than the Conversion Price in effect immediately prior to
the issuance of such Common Stock or Securities, then the Conversion Price in
effect immediately prior to each such issuance shall
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forthwith be reduced to a Conversion Price determined by dividing: (x) an amount
equal to the sum of (A) the total number of shares of Common Stock (including
the number of shares of Common Stock issuable upon exercise or conversion of all
Securities, including the Preferred Stock) outstanding immediately prior to such
issuance multiplied by the Conversion Price in effect immediately prior to such
issuance, plus (B) the consideration, if any, received by the Corporation by in
connection with such issuance, by (y) the total number of shares of Common Stock
(including the number of shares of Common Stock issuable upon exercise or
conversion of all outstanding Securities, including the Preferred Stock)
outstanding immediately after such issuance (including the number of shares of
Common Stock into which such newly issued Securities are then convertible or
issuable upon the exercise of Rights or Related Rights).
(ii) For the purpose of any adjustment of the Conversion
Price pursuant to this subsection 5(e), the following provisions shall be
applicable:
(A) In the case of the issuance of options or
warrants to purchase or rights to subscribe for Common Stock
(collectively, such "Rights"), the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such Rights shall be deemed to
have been issued at the time such Rights were issued, for a consideration
equal to the consideration (determined in the manner provided in (E) and
(F) below), if any, received by the Corporation upon the issuance of such
Rights, plus the minimum purchase price provided in such Rights for the
Common Stock covered thereby.
(B) In the case of the issuance of securities by
their terms convertible into or exchangeable for Common Stock
(collectively, such "Convertible Securities", or options or warrants to
purchase or rights to subscribe for securities by their terms convertible
or exchangeable for Common Stock (collectively, such "Related Rights"),
the aggregate maximum number of shares of Common Stock deliverable upon
conversion, exchange or exercise of any such Convertible Securities or
such Related Rights shall be deemed to have been issued at the time such
Convertible Securities or such Related Rights were issued and for a
consideration equal to the consideration received by the Corporation upon
issuance of such Convertible Securities or such Related Rights (excluding
any cash received on account of accrued interest or accrued dividends),
plus the additional consideration, if any, to be received by the
Corporation upon the conversion, exchange or exercise of such Convertible
Securities or Related Rights (the consideration in each case to be
determined in the manner provided in (E) and (F) below).
(C) On any change in the number of shares of
Common Stock deliverable upon the exercise of such Rights or Related
Rights or upon the conversion, exchange or exercise of such Convertible
Securities or on any change in the minimum purchase price of such Rights,
Related Rights or Convertible Securities other than any change resulting
from the antidilution provisions of such Rights, Related Rights or
Convertible Securities, the Conversion Price shall forthwith be readjusted
to such Conversion Price as would have been in effect had the adjustment
that was made upon the issuance of such Rights, Related Rights or
Convertible Securities not converted, exchanged or exercised prior to such
change been made on the basis of such change, but
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no further adjustment shall be made for the actual issuance of Common
Stock upon the exercise or conversion of any such Right, Related Right or
Convertible Security.
(D) On the expiration of any such Rights, Related
Rights or Convertible Securities, the Conversion Price shall forthwith be
readjusted to the Conversion Price as would have been obtained had the
adjustment made upon the issuance of such Rights or Related Rights or the
issuance of any such Convertible Securities been made upon the basis of
the issuance of only the number of shares of Common Stock actually issued
upon the exercise of such Rights or Related Rights or the conversion,
exchange or exercise of any such Convertible Securities, taking into
account any adjustments to the Conversion Price made after such issuances.
(E) In the case of the issuance of such Common
Stock or Securities for cash, the consideration shall be deemed to be the
amount of cash paid therefor.
(F) In the case of the issuance of such Common
Stock or Securities 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 in good faith by the Board of Directors of the
Corporation.
(G) In the event of any adjustment to the
Conversion Price resulting from the issuance of any Securities, no further
adjustment shall be made for the actual issuance of Common Stock upon the
exercise or conversion of any such Securities.
(iii) Anything to the contrary contained in this
subsection 5(e) notwithstanding, no adjustment shall be made in the Conversion
Price as a result of or pursuant to (1) the granting of any Right or Related
Right, or the issuance of Common Stock to, officers, employees or directors of,
or consultants to, the Corporation, by the Board of Directors of the Corporation
or a committee thereof pursuant to any agreement, plan or arrangement approved
by the Board of Directors of this Corporation or any corporation previously
merged into this Corporation; provided that the maximum number of shares of
Common Stock or Rights or Related Rights granted or issued may not exceed
10,150,000 shares of Common Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) in the aggregate, unless the
Board of Directors of the Company has approved grants or issuances in excess of
10,150,000 shares of Common Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares), which approval must include
the approval of each of the Directors elected by the holders of the Series B
Convertible Preferred Stock voting together as a separate class ("Employee
Reserved Shares"), (2) a dividend or distribution on the Preferred Stock, (3)
the conversion of shares of Preferred Stock, (4) subject to subsection 5(f)
below, a dividend or other distribution payable in Common Stock or Securities,
or (5) a transaction described in subsection 5(f) below.
(f) If the Corporation shall effect a subdivision of the
outstanding Common Stock, the Conversion Price then in effect immediately before
such subdivision shall be proportionately decreased so that the number of shares
of Common Stock issuable on conversion
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of each share of such series shall be increased in proportion to such increase
of the aggregate of shares of Common Stock outstanding. If the Corporation shall
combine the outstanding shares of Common Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately increased. If
the Corporation shall make or issue a dividend or other distribution payable in
securities, then and in each such event provision shall be made so that the
holders of shares of the Preferred Stock shall receive upon conversion thereof
in addition to the number of shares of Common Stock receivable thereupon, the
amount of securities that they would have received had their shares of Series B
Convertible Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter during the period from the date of such event to
and including the Conversion Date, retained such securities receivable by them
as aforesaid during such period giving effect to all adjustments called for
during such period under this subsection 5(f), with respect to the rights of the
holders of the Preferred Stock and of such securities.
(g) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 5 or
Section 3) provision shall be made so that the holders of the Series B
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series B Convertible Preferred Stock the number of shares of
stock or other securities or property of the Corporation, 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 5 with respect to the rights of
the holders of the Series B Convertible Preferred Stock after the
recapitalization to the end that the provisions of this Section 5 (including
adjustment of the Conversion Price then in effect and the number of shares
issuable upon conversion of the Series B Convertible Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(h) This Corporation will not, by amendment of its 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 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Series B
Convertible Preferred Stock under this Section 5 against impairment.
(i) Whenever the Conversion Price shall be adjusted as
provided in this Section 5, the Corporation shall forthwith file, at the office
of the transfer agent for the Series B Convertible Preferred Stock a statement,
certified by the chief financial officer of the Corporation, showing in detail
the facts requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a copy of such
statement to be sent by first class mail, postage prepaid, to each holder of
record of the Series B Convertible Preferred Stock at such holder's address as
shown in the records of the Corporation. Any notice required by the provisions
of this Section 5 to be given to the holders of shares of the Series B
Convertible Preferred Stock shall be deemed given if deposited in the United
States
10
<PAGE> 20
mail, postage prepaid, and addressed to each holder of record at the address
appearing on the books of this Corporation.
(j) The issuance of certificates for shares of Common Stock
upon conversion of the Series B Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series B Convertible
Preferred Stock which is being converted.
If a state of facts shall occur which, without being specifically
controlled by the provisions of this Section 5, would not fairly protect the
conversion rights of the holders of the Series B Convertible Preferred Stock in
accordance with the essential intent and principles of such provisions, then the
Board of Directors of the Corporation shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.
6. 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 a dividend covered by the provisions of
Section 5(f) hereof) or other distribution, any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, this Corporation shall mail to each
holder of Preferred Stock, at least 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.
7. 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 the Series B Convertible 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 the Series B Convertible 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 the Series B Convertible Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Series B Convertible
Preferred Stock, this Corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes, including, without
limitation, using its best efforts to obtain the requisite stockholder approval
of any necessary amendment to the Certificate of Incorporation.
8. Voting Rights.
(a) The holder of each share of Series B Convertible Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Series B Convertible 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
11
<PAGE> 21
Common Stock, and shall be entitled, notwithstanding any provision hereof, to
notice of any stockholders' meeting in accordance with the By-laws of this
Corporation, and, except as set forth in Section 8(b) below with respect to the
class vote of the holders of the Common Stock with respect to two directors of
the Corporation, shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after aggregating
all shares into which shares of Series B Convertible Preferred Stock held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward).
(b) The holders of the Series B Convertible Preferred Stock, voting
as a separate class, shall be entitled to elect two directors of the
Corporation, which right shall terminate upon the earlier to occur of (x) the
date on which the purchasers of the Series B Convertible Preferred Stock,
together with their respective affiliates, hold less than fifty percent (50%) of
the shares of Common Stock (including those shares of Common Stock issued or
issuable upon conversion of the Series B Convertible Preferred Stock) issued to
the purchasers of the Series B Convertible Preferred Stock under the Stock
Purchase Agreement dated on or about August 20, 1999 or (y) a merger,
acquisition or sale involving all or substantially all of the Corporation's
assets, which transaction has been approved by the Corporation's Board of
Directors, unless the Corporation's stockholders of record as constituted
immediately prior to such merger, acquisition or sale will, immediately after
such merger, acquisition or sale (by virtue of securities issued as
consideration for the Corporation's merger, acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity. The holders of the Common Stock, voting as a separate class,
shall be entitled to elect two directors of the Corporation. The holders of the
Series B Convertible Preferred Stock and Common Stock, voting together as a
single class, shall be entitled to elect any additional directors of the
Corporation. Notwithstanding the foregoing or anything else to the contrary
provided in this Certificate of Designations, if the Corporation fails or
refuses, for any reason or for no reason, to redeem on the 2006 Redemption Date
(as defined in subsection 4(c)) all of the then outstanding shares of Series A
Redeemable Preferred Stock then required to be redeemed in accordance with the
terms and provisions of Section 4, the holders of the Series A Redeemable
Preferred Stock, voting as a separate class, shall thereafter be entitled to
elect six (6) directors of the Corporation and the holders of the Common Stock,
voting as a separate class, shall thereafter be entitled to elect the remaining
directors of the Corporation. In the event that the holders of the Series A
Redeemable Preferred Stock elect six (6) directors of the Corporation as
provided above and a vacancy thereafter occurs, such vacancy shall be filled
only by the vote or written consent of the holders of the Series A Redeemable
Preferred Stock. At any meeting (or in a written consent in lieu thereof) held
for the purpose of electing directors, the presence in person or by proxy (or
the written consent) of the holders of a majority of the shares of Series B
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Series B Convertible Preferred Stock for the election of directors to be elected
solely by the holders of the Series B Convertible Preferred Stock or jointly by
the holders of the Series B Convertible Preferred Stock and the Common Stock. A
vacancy in any directorship elected solely by the holders of the Series B
Convertible Preferred Stock shall be filled only by vote or written consent of
the holders of the Series B Convertible Preferred Stock. A vacancy in any
directorship elected solely by the holders of the Common Stock shall be filled
only by vote or written consent of the holders of the Common Stock. A vacancy in
any directorship elected jointly by the holders of the Series B
12
<PAGE> 22
Convertible Preferred Stock and the Common Stock shall be filled only by vote or
written consent of the Series B Convertible Preferred Stock and the Common
Stock, voting as a single class, as provided above.
9. Protective Provisions. So long as at least 1,000,000 shares (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) of Series A Redeemable Preferred Stock and Series B Convertible
Preferred Stock initially issued remain outstanding, this Corporation shall not,
without first obtaining the approval of (by vote or written consent, as provided
by law) the holders of at least sixty-six and two-thirds percent (66.67%) of the
shares of Series A Redeemable Preferred Stock and Series B Convertible Preferred
Stock, voting together as a class:
(a) other than pursuant to subsection 9(f) below, restructure,
reclassify or otherwise modify the terms of any class or series of equity
securities or securities convertible into or exercisable for any equity
securities of the Corporation, or cause or permit any other action to be taken,
which would increase the obligations of, reduce the rights of, or otherwise
adversely affect the holders of the Series A Redeemable Preferred Stock and
Series B Convertible Preferred Stock;
(b) increase or decrease the number of authorized shares of
the Corporation's Preferred Stock (other than by conversion of the Series B
Convertible Preferred Stock as provided herein);
(c) create, reclassify, authorize or issue shares of any class
or series of equity securities or securities convertible into or exercisable for
any equity securities which shall be on a parity with or senior in any respect
including rights, preferences or privileges to the Series A Redeemable Preferred
Stock or Series B Convertible Preferred Stock;
(d) directly or indirectly redeem, repurchase, retire or
otherwise acquire any shares of equity securities of the Corporation except
pursuant to (x) this Certificate of Designations or (y) any other agreement,
approved in advance by the Board of Directors, for the repurchase of shares from
an employee or service provider upon termination of employment or services;
provided, however, that repurchases under clause (y) above in the aggregate
shall not exceed $1,000,000 except (i) with the approval of each of the
Directors elected by the holders of the Series B Convertible Preferred Stock
voting together as a separate class and (ii) the Corporation may redeem up to
$17,105,263.82 of Common Stock in accordance with the Stock Purchase Agreement
dated on or about August 20, 1999;
(e) merge or consolidate with any other entity, or permit any
other entity to consolidate or merge with or into the Corporation or effect any
other such similar transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation but excluding
any merger effected exclusively for the purpose of changing the domicile of the
Corporation) unless (1) the Corporation's stockholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Corporation's acquisition or sale or otherwise) hold at least fifty percent
(50%) of the voting power of the surviving or acquiring entity or (2) the
consideration to be received by the Preferred Stockholders in an acquisition,
sale
13
<PAGE> 23
or transfer involving substantially all of the assets of the Corporation
consists of cash or registered publicly-traded securities valued at $300,000,000
or more;
(f) amend, alter or repeal any provision of the Corporation's
Certificate of Incorporation or By-laws if such amendment, alteration or repeal
could have a material and adverse effect on the rights of the holders of the
Series A Redeemable Preferred Stock or the Series B Convertible Preferred Stock;
(g) increase the authorized number of directors of the
Corporation to more than nine;
(h) pay or declare any dividend or distribution on any shares
of the Corporation's capital stock (other than dividends of Common Stock
declared on the Common Stock to effect stock splits);
(i) voluntarily liquidate, dissolve or wind-up the
Corporation, make any filing under any state or federal bankruptcy, insolvency
or reorganization law or other law for relief from creditors or the protection
of debtors, make any assignment for the benefit of creditors or consent to the
appointment of a receiver for itself or any part of its property, or conduct any
form of recapitalization or reorganization of the Corporation; or
(j) consummate any underwritten public offering of the
Corporation's securities other than a Qualified Public Offering.
10. Protection of the Series A Redeemable Preferred Stock and Series
B Convertible Preferred Stock. So long as any shares of Series A Redeemable
Preferred Stock and Series B Convertible Preferred Stock are outstanding:
(a) The Corporation shall not, without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least sixty-six and two-thirds percent (66.67%) of the shares of Series A
Redeemable Preferred Stock, take any action which adversely affects the rights,
privileges or preferences of the Series A Redeemable Preferred Stock.
(b) The Corporation shall not, without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least sixty-six and two-thirds percent (66.67%) of the shares of Series B
Convertible Preferred Stock, take any action which adversely affects the rights,
privileges or preferences of the Series B Convertible Preferred Stock.
11. Status of Converted or Redeemed Stock. In the event any shares
of Series A Redeemable Preferred Stock or Series B Convertible Preferred Stock
shall be redeemed or converted pursuant to Section 4 or Section 5 hereof, the
shares so converted or redeemed shall be cancelled and shall not be issuable by
the Corporation. The Corporation will take such corporate action as may be
necessary to amend the Certificate of Incorporation of this Corporation to
effect the corresponding reduction in the Corporation's authorized capital
stock.
14
<PAGE> 24
IN WITNESS WHEREOF, the undersigned have executed this Certificate
of Designations, Rights and Preferences on August 18, 1999.
BDS BUSINESS CENTER, INC.
By: /s/ John M. Hughes
Name: John M. Hughes
Title: Chief Executive Officer
15
<PAGE> 25
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BDS Business Center, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"), does hereby certify as follows:
FIRST: That the Board of Directors of the Corporation, at a meeting held
on November 18, 1999, duly and validly adopted the following resolutions:
RESOLVED: That it is deemed advisable and in the best interests of
the Corporation to amend Article First of its Certificate
of Incorporation, as amended, to read in its entirety as
set forth below:
"FIRST. The name of the corporation is Tallan, Inc. (the
"Corporation")"
RESOLVED: That the proposal to amend the Certificate of Incorporation,
as set forth in the preceding resolution, be submitted to the
Stockholders of the Corporation entitled to vote thereon for
their approval in compliance with Sections 242 and 228 of the
General Corporation Law of the State of Delaware.
RESOLVED: That, subject to stockholder approval, the Corporation be
and it hereby is authorized and directed to amend its
Certificate of Incorporation as set forth in the foregoing
resolution, and that the appropriate officers of the
Corporation be and they hereby are authorized and directed
to execute and deliver any and all documents or
certificates deemed necessary to effectuate the proposed
amendment outlined above, including a Certificate of
Amendment to Certificate of Incorporation for filing with
the Delaware Secretary of State, and any filings with
governmental authorities to reflect the change of the
Corporation's name.
SECOND: That the stockholders of the Corporation duly adopted such
resolutions by written consent on or before December 7, 1999, in accordance with
the provisions of Section 228 of the General Corporation Law.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law.
<PAGE> 26
IN WITNESS WHEREOF, BDS Business Center, Inc. has caused this Certificate
of Amendment to its Certificate of Incorporation to be executed by John M.
Hughes this 7th day of December, 1999.
BDS BUSINESS CENTER, INC.
By: /s/ John M. Hughes
-----------------------------------
John M. Hughes
Chief Executive Officer
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TALLAN, INC.
--------------------------------------------
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
--------------------------------------------
Tallan, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
as follows:
1. The name of the Corporation is Tallan, Inc. The Corporation was originally
incorporated under the name BDS Business Center, Inc. The original certificate
of incorporation of the Corporation was filed with the office of the Secretary
of State of Delaware on May 19, 1999. A Certificate of Designations, Preferences
and Rights of Series A Redeemable Preferred Stock and Series B Convertible
Preferred Stock of the Corporation was filed with the office of the Secretary of
State of Delaware on August 19, 1999. An amendment to the Certificate of
Incorporation changing the name of the Corporation to Tallan, Inc. was filed
with the office of the Secretary of the State of Delaware on December 8, 1999.
2. This Amended and Restated Certificate of Incorporation was recommended to
the stockholders for approval as being advisable and in the best interests of
the Corporation by the action of the Board of Directors on January 27, 2000.
3. That in lieu of a meeting and vote of stockholders, consents in writing
have been signed by holders of outstanding stock having not less than the
minimum number of votes that is necessary to consent to this amendment and
restatement, and, if required, prompt notice of such action shall be given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
4. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation, as heretofore amended or supplemented.
The text of the Corporation's Certificate of Incorporation, as amended, is
amended and restated in its entirety as follows:
FIRST. The name of the Corporation is Tallan, Inc.
<PAGE> 2
-2-
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. 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 the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 310,119,454 shares consisting
of 300,000,000 shares of Common Stock with a par value of $.01 per share (the
"Common Stock") and 10,119,454 shares of Preferred Stock with a par value of
$.01 per share, (the "Preferred Stock"), of which 5,000,000 are undesignated,
3,412,969 shares are designated as Series A Redeemable Preferred Stock shares
and 1,706,485 shares are designated as Series B Convertible Preferred Stock.
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will entitle
the holders thereof to the same rights, powers and privileges. The rights,
powers and privileges of the holders of the Common Stock are subject to and
qualified by the rights of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. VOTING RIGHTS. Except as otherwise required by law or this Amended and
Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of stock held of record by such holder on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock shall vote together
with holders of the Preferred Stock as a single class, subject to any special or
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
<PAGE> 3
-3-
B. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
C. UNDESIGNATED PREFERRED STOCK
The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the undesignated Preferred Stock in one or more series,
each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law and the
provisions of this Amended and Restated Certificate of Incorporation.
D. SERIES A REDEEMABLE PREFERRED STOCK AND SERIES B CONVERTIBLE PREFERRED
STOCK
1. DESIGNATIONS. 3,412,969 shares of the Preferred Stock shall be
designated and known as the "Series A Redeemable Preferred Stock" (and each
holder thereof as a "Series A Redeemable Preferred Stockholder"). 1,706,485
shares of the Preferred Stock shall be designated and known as the "Series B
Convertible Preferred Stock," and together with the Series A Redeemable
Preferred Stock, the "Preferred Stock" (and each holder thereof as a "Series B
Convertible Preferred Stockholder," and together with the Series A Redeemable
Preferred Stockholders, the "Preferred Stockholders").
<PAGE> 4
-4-
2. DIVIDEND PROVISIONS.
(a) In the event that the Corporation shall at any time pay a
dividend (other than a dividend payable solely in 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) on the
Common Stock, it shall, at the same time, pay to the holders of shares of Series
B Convertible Preferred Stock, on a pari passu basis, a dividend equal to such
dividend on the Common Stock. Dividends shall be non-cumulative. Unless full
dividends on the Series B Convertible Preferred Stock shall have been paid or
declared and a sum sufficient for the payment thereof set apart, no dividend
whatsoever (other than a dividend payable solely 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) shall be
paid or declared, and no distribution shall be made, on any Common Stock.
(b) In the event the Series A Redeemable Preferred Stock is not
redeemed prior to August 20, 2005, a dividend shall be declared and paid on that
date as a one-time, pay-in-kind, cumulative dividend with respect to the Series
A Redeemable Preferred Stock in an amount equivalent to the annual rate of
$0.4688 per share (as adjusted for any stock dividends, combinations or splits
with respect to the Series A Redeemable Preferred Stock) (the "Dividend Rate"),
as if the dividend had begun to accrue on August 20, 1999. In addition, at
August 20, 2005, a cash dividend in an amount equivalent to the Dividend Rate
shall begin to accrue and be payable quarterly in arrears on the outstanding
shares of Series A Redeemable Preferred Stock (including for this purpose the
shares of Series A Redeemable Preferred Stock issued in respect of the one-time,
pay-in-kind dividend).
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, the holders of Series A
Redeemable Preferred Stock and Series B Convertible Preferred Stock, on a pari
passu basis, shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of Common
Stock or any other class or series of stock ranking in liquidation junior to the
Series A Redeemable Preferred Stock and Series B Convertible Preferred Stock
(such Common Stock and other stock being referred to as "Junior Stock") by
reason of their ownership thereof, an amount per share equal to the sum of (i)
$5.86 for each outstanding share of Series A Redeemable Preferred Stock and
Series B Convertible Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) and (ii) an amount equal to
all declared but unpaid dividends on such series of Preferred Stock, plus
accrued dividends, if any. If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series A Redeemable Preferred
Stock and the Series B Convertible 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 Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Redeemable Preferred Stock and Series B Convertible Preferred Stock in
proportion to the preferential amount each
<PAGE> 5
-5-
such holder is otherwise entitled to receive and no liquidation payments shall
be made to the holders of Junior Stock.
(b) After all of the distributions described in subsection (a) above
have been paid, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among the holders of Junior
Stock pro rata based on the number of shares of Common Stock held by each.
(c) (i) For purposes of this Section 3, a liquidation, dissolution
or winding up of this Corporation shall be deemed to be occasioned by, or to
include, (A) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but excluding any merger
effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale of all or substantially all of the assets of the
Corporation; unless the Corporation's stockholders of record as constituted
immediately prior to such merger, acquisition or sale will, immediately after
such merger, acquisition or sale (by virtue of securities issued as
consideration for the Corporation's merger, acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity.
(ii) In any of such events, if the consideration received by
the Corporation is other than cash, its value will be deemed its fair market
value. The fair market value of any securities shall be determined as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through
the NASDAQ National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange
over the thirty-day period ending three (3) days prior to the
closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty-day period ending three
(3) days prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by
the Corporation and the holders of at least a majority of the voting
power of all then outstanding shares of Series A Redeemable
Preferred Stock and Series B Convertible Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount
from the market value determined as above in (A) (1), (2) or (3) to
reflect the approximate fair market value thereof, as mutually determined
by the
<PAGE> 6
-6-
Corporation and the holders of at least a majority of the voting
power of all then outstanding shares of Series A Redeemable Preferred
Stock and Series B Convertible Preferred Stock, voting together as a
single class.
(iii) In the event the fair market value of such securities
has not been determined in accordance with the requirements of this subsection
3(C) 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 3 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A Redeemable
Preferred Stock and Series B Convertible 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 3(c)(iv) hereof.
(iv) The Corporation shall give each holder of record of
Series A Redeemable Preferred Stock and Series B Convertible Preferred Stock
written notice of all transactions which may be treated as a liquidation,
dissolution or winding up of the Corporation pursuant to subsection 3(c)(i) 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 3, and the 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 the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened or eliminated upon the written consent of the holders
of at least a majority of the then outstanding shares of Preferred Stock.
4. REDEMPTION.
(a) The Corporation may redeem, in whole or in part, at any time
after August 20, 1999, out of funds legally available therefor, the Series A
Redeemable Preferred Stock (the "Series A Redemption Date"). The Corporation
shall effect such redemption by paying in cash in exchange for the shares of
Series A Redeemable Preferred Stock to be redeemed a sum equal to $5.86 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such shares), plus all declared or accumulated but unpaid dividends on such
shares plus accrued dividends, if any (the "Series A Redemption Price"). Any
redemption effected pursuant to this subsection 4(a) shall be made on a pro rata
basis among the Series A Redeemable Preferred Stockholders in proportion to the
number of shares of Series A Redeemable Preferred Stock then held by such
holders.
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(b) Upon the consummation of a firm commitment underwritten public
offering ("Public Offering Redemption Date") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), in which (I) the aggregate gross proceeds (prior to deduction
of offering expenses but after deduction of underwriting discounts and
commissions) are at least $30,000,000 and (ii) the pre-public offering equity
market capitalization of the Corporation, as determined by multiplying the
number of shares of Common Stock outstanding (assuming the conversion of the
Series B Convertible Preferred Stock and the exercise of all outstanding options
to purchase Common Stock) immediately prior to the public offering by the
offering price to the public (prior to deduction of offering expenses,
underwriting discounts and commissions), is at least $250,000,000 (a "Qualified
Public Offering"), the Corporation shall redeem, out of funds legally available
therefor, the Series A Redeemable Preferred Stock. The Corporation shall effect
such redemption by paying in cash in exchange for the shares of Series A
Redeemable Preferred Stock to be redeemed a sum equal to $5.86 per share (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), plus all declared, accumulated or accrued but unpaid dividends on such
shares (the "Public Offering Redemption Price"). Under this subsection 4(b), the
Corporation shall be required to redeem all of the shares of Series A Redeemable
Preferred Stock.
(c) On August 20, 2006, the Corporation shall redeem, out of funds
legally available therefor, the Series A Redeemable Preferred Stock (the "2006
Redemption Date"). The Corporation shall effect such redemption by paying in
cash in exchange for the shares of Series A Redeemable Preferred Stock to be
redeemed a sum equal to $5.86 per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares), plus all declared,
accumulated or accrued but unpaid dividends on such shares (the "2006 Redemption
Price"). Under this subsection 4(c), the Corporation shall be required to redeem
all of the shares of Series A Redeemable Preferred Stock.
(d) As used in this subsection 4(d) and in subsection 4(e) below,
the term "Redemption Date" shall refer to either the "Series A Redemption Date,"
"Public Offering Redemption Date" or "2006 Redemption Date," as applicable, and
the term "Redemption Price" shall refer to either the "Series A Redemption
Price," "Public Offering Redemption Price" or "2006 Redemption Price," as
applicable. At least fifteen (15) but no more than forty-five (45) days prior to
the 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 Series A Redeemable
Preferred Stock 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, specifying the number of shares to be redeemed from such holder, the
Redemption Date or, in the case of the Public Offering Redemption Date, the
approximate 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").
On or before the Redemption Date each holder of Series A Redeemable Preferred
Stock to be redeemed shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, against payment of the Redemption Price of such shares
payable to the order of the person
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whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. 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.
(e) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the holders of
shares of Series A Redeemable Preferred Stock designated for redemption in the
Redemption Notice as holders of Series A Redeemable Preferred Stock (except the
right to receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, 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 the
Corporation legally available for redemption of shares of the Series A
Redeemable Preferred Stock on any Redemption Date are insufficient to redeem the
total number of shares of such Series A Redeemable Preferred Stock required to
be redeemed on such date, those funds which 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 based upon their holdings of Series A Redeemable
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive. The shares of Series A Redeemable Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of Series A
Redeemable Preferred Stock, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date but which it has not redeemed.
5. CONVERSION. The holders of the Series B Convertible Preferred Stock
shall have conversion rights as follows:
(a) (i) Each share of Series B Convertible Preferred Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time into the number of fully paid and non-assessable shares of Common Stock of
the Corporation as is determined by dividing $5.86 by the Series B Conversion
Price (as hereinafter defined) in effect at the time of conversion. The Series B
Conversion Price shall initially be $5.86 per share.
(ii) Each share of Series B Convertible Preferred Stock shall
automatically be converted into the number of fully paid and non-assessable
shares of Common Stock at the then effective Series B Conversion Price upon the
earlier of (A) the closing of the Corporation's sale of shares of Common Stock
in a Qualified Public Offering, and (B) upon the approval (by vote or written
consent, as provided by law) of the holders of 50.01% of the then outstanding
shares of Series B Convertible Preferred Stock, on the date specified by such
holders.
(iii) At the time of any conversion of Series B Convertible
Preferred Stock to Common Stock, all declared but unpaid dividends on each and
all such Preferred Stock being converted shall be, at the Corporation's option,
paid in cash or converted on the Conversion Date (as defined in subsection 5(b)
below) to that number of shares of Common
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Stock determined by the fair market value of the Common Stock at the time of
conversion, determined as specified in subsection 2(c)(ii).
(b) In order for a holder of Series B Convertible Preferred Stock to
convert such shares into shares of Common Stock, such holder shall surrender the
certificate or certificates representing such shares of Series B Convertible
Preferred Stock at the office of the transfer agent for the Series B Convertible
Preferred Stock, together with written notice that such holder elects to convert
all or any number of the shares of the Series B Convertible Preferred Stock
represented by such certificate or certificates. Such notice shall state such
holder's name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or its
attorney duly authorized in writing. The date of receipt of such certificates
and notice by the transfer agent is referred to herein as the "Conversion Date."
The Corporation shall, as soon as practicable after the Conversion Date, issue
and deliver to such holder, or to its nominee, at such holder's address as shown
in the records of the Corporation, a certificate or certificates for the number
of whole shares of Common Stock issuable upon such conversion in accordance with
the provisions hereof, together with cash in lieu of fractional shares. If less
than all of the shares of Series B Convertible Preferred Stock represented by a
stock certificate are converted into shares of Common Stock, the Corporation
shall issue a new stock certificate in the amount of the shares not so
converted.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Convertible Preferred Stock and any fractional
share to which the holder would otherwise be entitled shall be paid in cash in
an amount equal to such fractional share multiplied by the then effective
Conversion Price.
(d) All shares of Series B Convertible Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding, and all rights with respect to such shares shall
immediately cease and terminate on the Conversion Date, except only the right of
the holders thereof to receive shares of Common Stock in exchange therefor and
the payment of any declared and unpaid dividends thereon. On the Conversion
Date, the shares of Common Stock issuable upon such conversion shall be deemed
to be outstanding, and the holder thereof shall be entitled to exercise and
enjoy all rights with respect to such shares of Common Stock. All shares of
Series B Convertible Preferred Stock tendered for conversion shall, from and
after the Conversion Date, be deemed to have been retired and canceled and shall
not be reissued as Series B Convertible Preferred Stock, and the Corporation may
thereafter take such appropriate action as may be necessary to reduce
accordingly the authorized number of shares of Series B Convertible Preferred
Stock.
(e) The initial conversion price as stated in subsection 5(a) shall
be subject to adjustment from time to time and such conversion price as adjusted
shall likewise be subject to further adjustment, all as hereinafter set forth.
The term "Series B Conversion Price" shall mean, as of any time, the conversion
price of the Series B Convertible Preferred Stock at that
<PAGE> 10
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time, as specified in subsection 5(a) in case no adjustment shall have been
required, or such conversion price as adjusted pursuant to this subsection 5(e),
as the case may be, and the term "Conversion Price" shall mean the Series B
Conversion Price:
(i) If at any time the Corporation shall issue any shares of
Common Stock or any Convertible Securities, Rights or Related Rights (each as
herein defined) (such Convertible Securities, Rights or Related Rights being
hereinafter referred to collectively as "Securities") without consideration or
for a consideration per share of Common Stock (the consideration in each case to
be determined in the manner provided in (ii)(E) and (ii)(F) below) less than the
Conversion Price in effect immediately prior to the issuance of such Common
Stock or Securities, then the Conversion Price in effect immediately prior to
each such issuance shall forthwith be reduced to a Conversion Price determined
by dividing: (x) an amount equal to the sum of (A) the total number of shares of
Common Stock (including the number of shares of Common Stock issuable upon
exercise or conversion of all Securities, including the Preferred Stock)
outstanding immediately prior to such issuance multiplied by the Conversion
Price in effect immediately prior to such issuance, plus (B) the consideration,
if any, received by the Corporation by in connection with such issuance, by (y)
the total number of shares of Common Stock (including the number of shares of
Common Stock issuable upon exercise or conversion of all outstanding Securities,
including the Preferred Stock) outstanding immediately after such issuance
(including the number of shares of Common Stock into which such newly issued
Securities are then convertible or issuable upon the exercise of Rights or
Related Rights).
(ii) For the purpose of any adjustment of the Conversion Price
pursuant to this subsection 5(e), the following provisions shall be applicable:
(A) In the case of the issuance of options or warrants
to purchase or rights to subscribe for Common Stock (collectively, such
"Rights"), the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such Rights shall be deemed to have been
issued at the time such Rights were issued, for a consideration equal to
the consideration (determined in the manner provided in (E) and (F)
below), if any, received by the Corporation upon the issuance of such
Rights, plus the minimum purchase price provided in such Rights for the
Common Stock covered thereby.
(B) In the case of the issuance of securities by their
terms convertible into or exchangeable for Common Stock (collectively,
such "Convertible Securities", or options or warrants to purchase or
rights to subscribe for securities by their terms convertible or
exchangeable for Common Stock (collectively, such "Related Rights"), the
aggregate maximum number of shares of Common Stock deliverable upon
conversion, exchange or exercise of any such Convertible Securities or
such Related Rights shall be deemed to have been issued at the time such
Convertible Securities or such Related Rights were issued and for a
consideration equal to the consideration received by the Corporation upon
issuance of such Convertible Securities or such Related Rights (excluding
any cash received on account of accrued interest or accrued dividends),
plus the additional consideration, if any, to be received by the
Corporation upon the
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conversion, exchange or exercise of such Convertible Securities or Related
Rights (the consideration in each case to be determined in the manner
provided in (E) and (F) below).
(C) On any change in the number of shares of Common
Stock deliverable upon the exercise of such Rights or Related Rights or
upon the conversion, exchange or exercise of such Convertible Securities
or on any change in the minimum purchase price of such Rights, Related
Rights or Convertible Securities other than any change resulting from the
antidilution provisions of such Rights, Related Rights or Convertible
Securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been in effect had the adjustment that was
made upon the issuance of such Rights, Related Rights or Convertible
Securities not converted, exchanged or exercised prior to such change been
made on the basis of such change, but no further adjustment shall be made
for the actual issuance of Common Stock upon the exercise or conversion of
any such Right, Related Right or Convertible Security.
(D) On the expiration of any such Rights, Related Rights
or Convertible Securities, the Conversion Price shall forthwith be
readjusted to the Conversion Price as would have been obtained had the
adjustment made upon the issuance of such Rights or Related Rights or the
issuance of any such Convertible Securities been made upon the basis of
the issuance of only the number of shares of Common Stock actually issued
upon the exercise of such Rights or Related Rights or the conversion,
exchange or exercise of any such Convertible Securities, taking into
account any adjustments to the Conversion Price made after such issuances.
(E) In the case of the issuance of such Common Stock or
Securities for cash, the consideration shall be deemed to be the amount of
cash paid therefor.
(F) In the case of the issuance of such Common Stock or
Securities 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 in good faith by the Board of Directors of the Corporation.
(G) In the event of any adjustment to the Conversion
Price resulting from the issuance of any Securities, no further adjustment
shall be made for the actual issuance of Common Stock upon the exercise or
conversion of any such Securities.
(iii) Anything to the contrary contained in this subsection
5(e) notwithstanding, no adjustment shall be made in the Conversion Price as a
result of or pursuant to (1) the granting of any Right or Related Right, or the
issuance of Common Stock to, officers, employees or directors of, or consultants
to, the Corporation, by the Board of Directors of the Corporation or a committee
thereof pursuant to any agreement, plan or arrangement approved by the Board of
Directors of this Corporation or any corporation previously merged into this
Corporation; provided that the maximum number of shares of Common Stock or
Rights or Related Rights granted or issued may not exceed 10,150,000 shares of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such shares) in the
<PAGE> 12
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aggregate, unless the Board of Directors of the Company has approved grants or
issuances in excess of 10,150,000 shares of Common Stock (as adjusted for any
stock dividends, combinations or splits with respect to such shares), which
approval must include the approval of each of the Directors elected by the
holders of the Series B Convertible Preferred Stock voting together as a
separate class ("Employee Reserved Shares"), (2) a dividend or distribution on
the Preferred Stock, (3) the conversion of shares of Preferred Stock, (4)
subject to subsection 5(f) below, a dividend or other distribution payable in
Common Stock or Securities, or (5) a transaction described in subsection 5(f)
below.
(f) If the Corporation shall effect a subdivision of the outstanding
Common Stock, the Conversion Price then in effect immediately before such
subdivision shall be proportionately 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. If the Corporation shall combine the outstanding shares of
Common Stock, the Conversion Price then in effect immediately before the
combination shall be proportionately increased. If the Corporation shall make or
issue a dividend or other distribution payable in securities, then and in each
such event provision shall be made so that the holders of shares of the
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities that
they would have received had their shares of Series B Convertible Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter during the period from the date of such event to and including the
Conversion Date, retained such securities receivable by them as aforesaid during
such period giving effect to all adjustments called for during such period under
this subsection 5(f), with respect to the rights of the holders of the Preferred
Stock and of such securities.
(g) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 5 or
Section 3) provision shall be made so that the holders of the Series B
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series B Convertible Preferred Stock the number of shares of
stock or other securities or property of the Corporation, 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 5 with respect to the rights of
the holders of the Series B Convertible Preferred Stock after the
recapitalization to the end that the provisions of this Section 5 (including
adjustment of the Conversion Price then in effect and the number of shares
issuable upon conversion of the Series B Convertible Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(h) This Corporation will not, by amendment of its 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 5 and in the taking of all such action as may be necessary or
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appropriate in order to protect the rights of the holders of the Series B
Convertible Preferred Stock under this Section 5 against impairment.
(i) Whenever the Conversion Price shall be adjusted as provided in
this Section 5, the Corporation shall forthwith file, at the office of the
transfer agent for the Series B Convertible Preferred Stock a statement,
certified by the chief financial officer of the Corporation, showing in detail
the facts requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a copy of such
statement to be sent by first class mail, postage prepaid, to each holder of
record of the Series B Convertible Preferred Stock at such holder's address as
shown in the records of the Corporation. Any notice required by the provisions
of this Section 5 to be given to the holders of shares of the Series B
Convertible Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at the
address appearing on the books of this Corporation.
(j) The issuance of certificates for shares of Common Stock upon
conversion of the Series B Convertible Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series B Convertible
Preferred Stock which is being converted.
If a state of facts shall occur which, without being specifically
controlled by the provisions of this Section 5, would not fairly protect the
conversion rights of the holders of the Series B Convertible Preferred Stock in
accordance with the essential intent and principles of such provisions, then the
Board of Directors of the Corporation shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.
6. 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 a dividend covered by the provisions of Section 5(f)
hereof) or other distribution, any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, this Corporation shall mail to each holder of
Preferred Stock, at least 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.
7. 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 the Series B Convertible 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 the Series B Convertible Preferred
Stock; and if at any time the number of authorized but unissued shares of Common
Stock shall
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not be sufficient to effect the conversion of all then outstanding shares of the
Series B Convertible Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Series B Convertible Preferred Stock,
this Corporation will take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, using its
best efforts to obtain the requisite stockholder approval of any necessary
amendment to the Certificate of Incorporation.
8. VOTING RIGHTS.
(a) The holder of each share of Series B Convertible Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series B Convertible 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 By-laws of this Corporation, and, except as set forth in
Section 8(b) below with respect to the class vote of the holders of the Common
Stock with respect to two directors of the Corporation, shall be entitled to
vote, together with holders of Common Stock, with respect to any question upon
which holders of Common Stock have the right to vote. Fractional votes shall
not, however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Series B
Convertible Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
(b) The holders of the Series B Convertible Preferred Stock, voting
as a separate class, shall be entitled to elect two directors of the
Corporation, which right shall terminate upon the earlier to occur of (x) the
date on which the purchasers of the Series B Convertible Preferred Stock,
together with their respective affiliates, hold less than fifty percent (50%) of
the shares of Common Stock (including those shares of Common Stock issued or
issuable upon conversion of the Series B Convertible Preferred Stock) issued to
the purchasers of the Series B Convertible Preferred Stock under the Stock
Purchase Agreement dated on or about August 20, 1999 or (y) a merger,
acquisition or sale involving all or substantially all of the Corporation's
assets, which transaction has been approved by the Corporation's Board of
Directors, unless the Corporation's stockholders of record as constituted
immediately prior to such merger, acquisition or sale will, immediately after
such merger, acquisition or sale (by virtue of securities issued as
consideration for the Corporation's merger, acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity. The holders of the Common Stock, voting as a separate class,
shall be entitled to elect two directors of the Corporation. The holders of the
Series B Convertible Preferred Stock and Common Stock, voting together as a
single class, shall be entitled to elect any additional directors of the
Corporation. Notwithstanding the foregoing or anything else to the contrary
provided in this Certificate of Designations, if the Corporation fails or
refuses, for any reason or for no reason, to redeem on the 2006 Redemption Date
(as defined in subsection 4(c)) all of the then outstanding shares of Series A
Redeemable Preferred Stock then required to be redeemed in accordance with the
terms and provisions of Section 4, the holders of the Series A Redeemable
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Preferred Stock, voting as a separate class, shall thereafter be entitled to
elect six (6) directors of the Corporation and the holders of the Common Stock,
voting as a separate class, shall thereafter be entitled to elect the remaining
directors of the Corporation. In the event that the holders of the Series A
Redeemable Preferred Stock elect six (6) directors of the Corporation as
provided above and a vacancy thereafter occurs, such vacancy shall be filled
only by the vote or written consent of the holders of the Series A Redeemable
Preferred Stock. At any meeting (or in a written consent in lieu thereof) held
for the purpose of electing directors, the presence in person or by proxy (or
the written consent) of the holders of a majority of the shares of Series B
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Series B Convertible Preferred Stock for the election of directors to be elected
solely by the holders of the Series B Convertible Preferred Stock or jointly by
the holders of the Series B Convertible Preferred Stock and the Common Stock. A
vacancy in any directorship elected solely by the holders of the Series B
Convertible Preferred Stock shall be filled only by vote or written consent of
the holders of the Series B Convertible Preferred Stock. A vacancy in any
directorship elected solely by the holders of the Common Stock shall be filled
only by vote or written consent of the holders of the Common Stock. A vacancy in
any directorship elected jointly by the holders of the Series B Convertible
Preferred Stock and the Common Stock shall be filled only by vote or written
consent of the Series B Convertible Preferred Stock and the Common Stock, voting
as a single class, as provided above.
9. PROTECTIVE PROVISIONS. So long as at least 1,000,000 shares (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) of Series A Redeemable Preferred Stock and Series B Convertible
Preferred Stock initially issued remain outstanding, this Corporation shall not,
without first obtaining the approval of (by vote or written consent, as provided
by law) the holders of at least sixty-six and two-thirds percent (66.67%) of the
shares of Series A Redeemable Preferred Stock and Series B Convertible Preferred
Stock, voting together as a class:
(a) other than pursuant to subsection 9(f) below, restructure,
reclassify or otherwise modify the terms of any class or series of equity
securities or securities convertible into or exercisable for any equity
securities of the Corporation, or cause or permit any other action to be taken,
which would increase the obligations of, reduce the rights of, or otherwise
adversely affect the holders of the Series A Redeemable Preferred Stock and
Series B Convertible Preferred Stock;
(b) increase or decrease the number of authorized shares of the
Corporation's Preferred Stock (other than by conversion of the Series B
Convertible Preferred Stock as provided herein);
(c) create, reclassify, authorize or issue shares of any class or
series of equity securities or securities convertible into or exercisable for
any equity securities which shall be on a parity with or senior in any respect
including rights, preferences or privileges to the Series A Redeemable Preferred
Stock or Series B Convertible Preferred Stock;
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(d) directly or indirectly redeem, repurchase, retire or otherwise
acquire any shares of equity securities of the Corporation except pursuant to
(x) this Certificate of Designations or (y) any other agreement, approved in
advance by the Board of Directors, for the repurchase of shares from an employee
or service provider upon termination of employment or services; provided,
however, that repurchases under clause (y) above in the aggregate shall not
exceed $1,000,000 except (I) with the approval of each of the Directors elected
by the holders of the Series B Convertible Preferred Stock voting together as a
separate class and (ii) the Corporation may redeem up to $17,105,263.82 of
Common Stock in accordance with the Stock Purchase Agreement dated on or about
August 20, 1999;
(e) merge or consolidate with any other entity, or permit any other
entity to consolidate or merge with or into the Corporation or effect any other
such similar transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but excluding any merger
effected exclusively for the purpose of changing the domicile of the
Corporation) unless (1) the Corporation's stockholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Corporation's acquisition or sale or otherwise) hold at least fifty percent
(50%) of the voting power of the surviving or acquiring entity and (2) (I) the
consideration to be received by the Preferred Stockholders in an acquisition,
sale or transfer involving substantially all of the assets of the Corporation
consists of cash or registered publicly-traded securities valued at more than
$300,000,000;
(f) amend, alter or repeal any provision of the Corporation's
Certificate of Incorporation or By-laws if such amendment, alteration or repeal
could have a material and adverse effect on the rights of the holders of the
Series A Redeemable Preferred Stock or the Series B Convertible Preferred Stock;
(g) increase the authorized number of directors of the Corporation
to more than nine;
(h) pay or declare any dividend or distribution on any shares of
the Corporation's capital stock (other than dividends of Common Stock declared
on the Common Stock to effect stock splits);
(i) voluntarily liquidate, dissolve or wind-up the Corporation,
make any filing under any state or federal bankruptcy, insolvency or
reorganization law or other law for relief from creditors or the protection of
debtors, make any assignment for the benefit of creditors or consent to the
appointment of a receiver for itself or any part of its property, or conduct any
form of recapitalization or reorganization of the Corporation; or
(j) consummate any underwritten public offering of the
Corporation's securities other than a Qualified Public Offering.
10. PROTECTION OF THE SERIES A REDEEMABLE PREFERRED STOCK AND SERIES B
CONVERTIBLE PREFERRED STOCK. So long as any shares of Series A Redeemable
Preferred Stock and Series B Convertible Preferred Stock are outstanding:
<PAGE> 17
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(a) The Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least
sixty-six and two-thirds percent (66.67%) of the shares of Series A Redeemable
Preferred Stock, take any action which adversely affects the rights, privileges
or preferences of the Series A Redeemable Preferred Stock.
(b) The Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least
sixty-six and two-thirds percent (66.67%) of the shares of Series B Convertible
Preferred Stock, take any action which adversely affects the rights, privileges
or preferences of the Series B Convertible Preferred Stock.
11. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares of
Series A Redeemable Preferred Stock or Series B Convertible Preferred Stock
shall be redeemed or converted pursuant to Section 4 or Section 5 hereof, the
shares so converted or redeemed shall be cancelled and shall not be issuable by
the Corporation. The Corporation will take such corporate action as may be
necessary to amend the Certificate of Incorporation of this Corporation to
effect the corresponding reduction in the Corporation's authorized capital
stock.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the by-laws of the Corporation, subject to any limitation
thereof contained in the by-laws. The stockholders shall also have the power to
adopt, amend or repeal the by-laws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Amended and Restated Certificate of
Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, amend
or repeal any provision of the by-laws of the Corporation.
3. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time only by the
Chief Executive Officer, the President, the Chairman of the Board of Directors
(if any) or a majority of the Board of Directors. Business transacted at any
special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
<PAGE> 18
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5. The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH.
1. NUMBER OF DIRECTORS. The number of directors which shall constitute the
whole Board of Directors shall be determined only by resolution of a majority of
the Board of Directors, but in no event shall the number of directors be less
than three. The number of directors may be decreased at any time and from time
to time by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or expiration of
the term of one or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on such
election. Directors need not be stockholders of the Corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot except as and to the extent provided in the by-laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the first annual meeting of
stockholders held after January 1, 2000 (the "Initial Annual Meeting"); each
initial director in Class II shall serve for a term ending on the date of the
first annual meeting of stockholders after the Initial Annual Meeting (the
"Second Annual Meeting"); and each initial director in Class III shall serve for
a term ending on the date of the first annual meeting of stockholders after the
Second Annual Meeting.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
no one class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, though less than a quorum. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
director.
<PAGE> 19
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6. TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
7. VACANCIES. Unless and until filled by the stockholders, any vacancy in
the Board of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board of Directors, may be filled only by vote of a majority
of the directors then in office, even if less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office, if applicable, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
8. QUORUM. A majority of the total number of the whole Board of Directors
shall constitute a quorum at all meetings of the Board of Directors. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified; provided, however, that in no case shall less than one-third (1/3)
of the number so fixed constitute a quorum. In the absence of a quorum at any
such meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
9. ACTION AT MEETING. At any meeting of the Board of Directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law or the
Corporation's by-laws.
10. REMOVAL. Any one or more or all of the directors may be removed (i)
with cause only by the holders of a majority of the shares then entitled to vote
at an election of directors or (ii) without cause only by the holders of at
least seventy-five percent (75%) of the shares then entitled to vote at an
election of directors.
11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the by-laws of the Corporation.
12. RIGHTS OF PREFERRED STOCK. The provisions of this Article are subject
to the rights of the holders of any series of Preferred Stock from time to time
outstanding.
EIGHTH. No director (including any advisory director) of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director notwithstanding any provision
of law imposing such liability; provided, however, that, to the extent provided
by applicable law, this provision shall not eliminate the liability of a
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General
<PAGE> 20
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Corporation Law of the State of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit. No amendment to or repeal of
this provision shall apply to or have any effect on the liability or alleged
liability of any director for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price
for the capital stock of the Corporation over a period of years, the
estimated price that might be achieved in a negotiated sale of the
Corporation as a whole or in part or through orderly liquidation, the
premiums over market price for the securities of other corporations in
similar transactions, current political, economic and other factors bearing
on securities prices and the Corporation's financial condition and future
prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
TENTH.
1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify each person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees),
<PAGE> 21
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judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful. Notwithstanding anything to the contrary
in this Article, except as set forth in Section 6 below, the Corporation shall
not indemnify an Indemnitee seeking indemnification in connection with a
proceeding (or part thereof) initiated by the Indemnitee unless the initiation
thereof was approved by the Board of Directors of the Corporation.
2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall deem proper.
3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests
<PAGE> 22
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of the Corporation, and (v) with respect to any criminal proceeding, an
adjudication that the Indemnitee had reasonable cause to believe his conduct was
unlawful, the Indemnitee shall be considered for the purpose hereof to have been
wholly successful with respect thereto.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below, in
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter, provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking may be accepted without reference to the financial ability of
such person to make such repayment.
6. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of
<PAGE> 23
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expenses. Any such indemnification or advancement of expenses shall be made
promptly, and in any event within 60 days after receipt by the Corporation of
the written request of the Indemnitee, unless with respect to requests under
Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence,
within such 60-day period that the Indemnitee did not meet the applicable
standard of conduct set forth in Section 1 or 2, as the case may be. Such
determination shall be made in each instance by (a) a majority vote of the
directors of the Corporation who are not at that time parties to the action,
suit or proceeding in question ("disinterested directors"), even though less
than a quorum, (b) by a committee of disinterested directors designated by a
majority vote of disinterested directors, even though less than a quorum, (c) if
there are no such disinterested directors, or if such disinterested directors so
direct, by independent legal counsel (who may be regular legal counsel to the
corporation) in a written opinion, (d) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors,
voting as a single class, which quorum shall consist of stockholders who are not
at that time parties to the action, suit or proceeding in question, or (e) a
court of competent jurisdiction.
7. REMEDIES. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. OTHER RIGHTS. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee.
<PAGE> 24
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Nothing contained in this Article shall be deemed to prohibit, and the
Corporation is specifically authorized to enter into, agreements with officers
and directors providing indemnification rights and procedures different from
those set forth in this Article. In addition, the Corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to other employees or agents of the Corporation or other persons serving
the Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this Article.
10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. INSURANCE. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of the State of Delaware.
12. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by an applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. SUBSEQUENT LEGISLATION. If the General Corporation Law of the State of
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as so amended.
<PAGE> 25
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ELEVENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner prescribed by the laws of the State of Delaware and all rights
conferred upon stockholders are granted subject to this reservation, provided,
however, that in addition to any vote of the holders of any class or series of
stock of the Corporation required by law, this Amended and Restated Certificate
of Incorporation or a Certificate of Designation with respect to a series of
Preferred Stock, the affirmative vote of the holders of shares of voting stock
of the Corporation representing at least seventy-five percent (75%) of the
voting power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to (i) reduce or eliminate the
number of authorized shares of Common Stock or the number of authorized shares
of Preferred Stock set forth in Article FOURTH or (ii) amend or repeal, or adopt
any provision inconsistent with, Parts A and B of Article FOURTH and Articles
FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH and this Article ELEVENTH of this
Amended and Restated Certificate of Incorporation.
[Signature Page Immediately Follows]
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Amended and Restated Certificate of
Incorporation are true under the penalties of perjury this ____ day of _______,
2000.
By: ______________________________
Name: John M. Hughes
Title:Chief Executive Officer
[SEAL]
Attest:
By: ______________________________
Linda DeRenzo
Assistant Secretary
<PAGE> 1
Exhibit 3.3
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TALLAN, INC.
--------------------------------------------
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
--------------------------------------------
Tallan, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
as follows:
1. The name of the Corporation is Tallan, Inc. The Corporation was
originally incorporated under the name BDS Business Center, Inc. The original
certificate of incorporation of the Corporation was filed with the office of the
Secretary of State of Delaware on May 19, 1999. A Certificate of Designations,
Preferences and Rights of Series A Redeemable Preferred Stock and Series B
Convertible Preferred Stock of the Corporation was filed with the office of the
Secretary of State of Delaware on August 19, 1999. An amendment to the
Certificate of Incorporation changing the name of the Corporation to Tallan,
Inc. was filed with the office of the Secretary of the State of Delaware on
December 8, 1999. An Amended and Restated Certificate of Incorporation was filed
with the office of the Secretary of State of Delaware on January 27, 2000.
2. This Second Amended and Restated Certificate of Incorporation was
recommended to the stockholders for approval as being advisable and in the best
interests of the Corporation by the action of the Board of Directors on January
27, 2000.
3. That in lieu of a meeting and vote of stockholders, consents in
writing have been signed by holders of outstanding stock having not less than
the minimum number of votes that is necessary to consent to this amendment and
restatement, and, if required, prompt notice of such action shall be given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
4. This Second Amended and Restated Certificate of Incorporation
restates and integrates and further amends the Amended and Restated Certificate
of Incorporation, as heretofore amended or supplemented.
The text of the Corporation's Certificate of Incorporation, as amended
and restated, is amended and restated in its entirety as follows:
FIRST. The name of the Corporation is Tallan, Inc.
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SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. 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 the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 305,000,000 shares,
consisting of 300,000,000 shares of Common Stock with a par value of $.01 per
share (the "Common Stock") and 5,000,000 shares of Preferred Stock with a par
value of $.01 per share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. VOTING RIGHTS. Except as otherwise required by law or this Second
Amended and Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held of record by such
holder on the books of the Corporation for the election of directors and on all
matters submitted to a vote of stockholders of the Corporation. Except as
otherwise required by law or provided herein, holders of Common Stock shall vote
together with holders of the Preferred Stock as a single class, subject to any
special or preferential voting rights of any then outstanding Preferred Stock.
There shall be no cumulative voting.
<PAGE> 3
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B. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Second Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law and the
provisions of this Second Amended and Restated Certificate of Incorporation.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the by-laws of the Corporation, subject to any limitation
thereof contained in the by-laws. The stockholders shall also have the power to
adopt, amend or repeal the by-laws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Second Amended and Restated Certificate
<PAGE> 4
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of Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, amend
or repeal any provision of the by-laws of the Corporation.
3. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time only by
the Chief Executive Officer, the President, the Chairman of the Board of
Directors (if any) or a majority of the Board of Directors. Business transacted
at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
5. The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH.
1. NUMBER OF DIRECTORS. The number of directors which shall constitute
the whole Board of Directors shall be determined only by resolution of a
majority of the Board of Directors, but in no event shall the number of
directors be less than three. The number of directors may be decreased at any
time and from time to time by a majority of the directors then in office, but
only to eliminate vacancies existing by reason of the death, resignation,
removal or expiration of the term of one or more directors. The directors shall
be elected at the annual meeting of stockholders by such stockholders as have
the right to vote on such election. Directors need not be stockholders of the
Corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot except as and to the extent provided in the by-laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the first annual meeting of
stockholders held after January 1, 2000 (the "Initial Annual Meeting"); each
initial director in Class II shall serve for a term ending on the date of the
first annual meeting of stockholders held after the Initial Annual Meeting (the
"Second Annual Meeting"); and each initial director in Class III shall serve for
a term ending on the date of the first annual meeting of stockholders held after
the Second Annual Meeting.
<PAGE> 5
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5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
no one class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, though less than a quorum. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
director.
6. TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
7. VACANCIES. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board of Directors, may be filled only by vote of a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall be elected
for the unexpired term of his or her predecessor in office, if applicable, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
8. QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
9. ACTION AT MEETING. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law or the
Corporation's by-laws.
10. REMOVAL. Any one or more or all of the directors may be removed (i)
with cause only by the holders of a majority of the shares then entitled to vote
at an election of directors or (ii) without cause only by the holders of at
least seventy-five percent (75%) of the shares then entitled to vote at an
election of directors.
<PAGE> 6
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11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the by-laws of the Corporation.
12. RIGHTS OF PREFERRED STOCK. The provisions of this Article are
subject to the rights of the holders of any series of Preferred Stock from time
to time outstanding.
EIGHTH. No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state
laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price
for the capital stock of the Corporation over a period of years, the
estimated price that might be achieved in a negotiated sale of the
Corporation as a whole or in part or through orderly liquidation, the
premiums over market price for the securities of other corporations in
similar transactions, current political, economic and other factors
bearing on securities prices and the Corporation's financial condition and
future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
<PAGE> 7
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In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
TENTH.
1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify each person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the
<PAGE> 8
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adjudication of such liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
(including attorneys' fees) which the Court of Chancery of Delaware or such
other court shall deem proper.
3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purpose hereof to have been wholly successful with respect
thereto.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this
<PAGE> 9
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Article, any expenses (including attorneys' fees) incurred by an Indemnitee in
defending a civil or criminal action, suit, proceeding or investigation or any
appeal therefrom shall be paid by the Corporation in advance of the final
disposition of such matter, provided, however, that the payment of such expenses
incurred by an Indemnitee in advance of the final disposition of such matter
shall be made only upon receipt of an undertaking by or on behalf of the
Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the indemnitee is not entitled to be indemnified
by the Corporation as authorized in this Article. Such undertaking may be
accepted without reference to the financial ability of such person to make such
repayment.
6. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made in
each instance by (a) a majority vote of the directors of the Corporation who are
not at that time parties to the action, suit or proceeding in question
("disinterested directors"), even though less than a quorum, (b) by a committee
of disinterested directors designated by a majority vote of disinterested
directors, even though less than a quorum, (c) if there are no such
disinterested directors, or if such disinterested directors so direct, by
independent legal counsel (who may be regular legal counsel to the corporation)
in a written opinion, (d) a majority vote of a quorum of the outstanding shares
of stock of all classes entitled to vote for directors, voting as a single
class, which quorum shall consist of stockholders who are not at that time
parties to the action, suit or proceeding in question, or (e) a court of
competent jurisdiction.
7. REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
<PAGE> 10
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8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. OTHER RIGHTS. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. INSURANCE. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
<PAGE> 11
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13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by an applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. SUBSEQUENT LEGISLATION. If the General Corporation Law of the State
of Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as so amended.
ELEVENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Second Amended and Restated Certificate of
Incorporation in the manner prescribed by the laws of the State of Delaware and
all rights conferred upon stockholders are granted subject to this reservation,
provided, however, that in addition to any vote of the holders of any class or
series of stock of the Corporation required by law, this Second Amended and
Restated Certificate of Incorporation or a Certificate of Designation with
respect to a series of Preferred Stock, the affirmative vote of the holders of
shares of voting stock of the Corporation representing at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to (i) reduce or
eliminate the number of authorized shares of Common Stock or the number of
authorized shares of Preferred Stock set forth in Article FOURTH or (ii) amend
or repeal, or adopt any provision inconsistent with, Parts A and B of Article
FOURTH and Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH and this Article
ELEVENTH of this Second Amended and Restated Certificate of Incorporation.
[Signature Page Immediately Follows]
<PAGE> 12
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Second Amended and Restated Certificate
of Incorporation are true under the penalties of perjury this ____ day of ______
______,2000.
By: ______________________________
Name: John M. Hughes
Title: Chief Executive Officer
[SEAL]
Attest:
By: ______________________________
Linda DeRenzo
Assistant Secretary
<PAGE> 1
Exhibit 3.4
BDS BUSINESS CENTER, INC.
(a Delaware corporation)
AMENDED BYLAWS
Dated: August 20, 1999
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE I ............................................................... 1
MEETINGS OF STOCKHOLDERS ................................................ 1
Section 1. Place of Meetings ......................................... 1
Section 2. Annual Meeting ............................................ 1
Section 3. Special Meetings .......................................... 1
Section 4. Notice of Meetings ........................................ 1
Section 5. Voting List ............................................... 1
Section 6. Quorum .................................................... 2
Section 7. Adjournments .............................................. 2
Section 8. Action at Meetings ........................................ 2
Section 9. Voting and Proxies ........................................ 2
Section 10. Action Without Meeting ................................... 3
ARTICLE II .............................................................. 3
DIRECTORS ............................................................... 3
Section 1. Number, Election, Tenure and Qualification ................ 3
Section 2. Enlargement ............................................... 3
Section 3. Vacancies ................................................. 3
Section 4. Resignation and Removal ................................... 4
Section 5. General Powers ............................................ 4
Section 6. Chairman of the Board ..................................... 4
Section 7. Place of Meetings ......................................... 4
Section 8. Regular Meetings .......................................... 4
Section 9. Special Meetings .......................................... 4
Section 10. Quorum, Action at Meeting, Adjournments .................. 4
Section 11. Action by Consent ........................................ 5
Section 12. Telephonic Meetings ...................................... 5
Section 13. Committees ............................................... 5
Section 14. Compensation ............................................. 6
ARTICLE III ............................................................. 6
OFFICERS ................................................................ 6
Section 1. Enumeration ............................................... 6
Section 2. Election .................................................. 6
Section 3. Tenure .................................................... 6
Section 4. President ................................................. 6
Section 5. Vice-Presidents ........................................... 7
Section 6. Secretary ................................................. 7
Section 7. Assistant Secretaries ..................................... 7
Section 8. Treasurer ................................................. 8
Section 9. Assistant Treasurers ...................................... 8
Section 10. Bond ..................................................... 8
ARTICLE IV .............................................................. 8
NOTICES ................................................................. 8
Section 1. Delivery .................................................. 8
Section 2. Waiver of Notice .......................................... 9
ARTICLE V ............................................................... 9
INDEMNIFICATION ......................................................... 9
Section 1. Actions other than by or in the Right of the Corporation .. 9
Section 2. Actions by or in the Right of the Corporation ............. 9
Section 3. Success on the Merits ..................................... 10
</TABLE>
(i)
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<TABLE>
<S> <C>
Section 4. Specific Authorization .................................... 10
Section 5. Advance Payment ........................................... 10
Section 6. Non-Exclusivity ........................................... 10
Section 7. Insurance ................................................. 10
Section 8. Continuation of Indemnification and Advancement of Expenses 10
Section 9. Severability .............................................. 11
Section 10. Intent of Article ........................................ 11
ARTICLE VI .............................................................. 11
CAPITAL STOCK ........................................................... 11
Section 1. Certificates of Stock ..................................... 11
Section 2. Lost Certificates ......................................... 11
Section 3. Transfer of Stock ......................................... 11
Section 4. Record Date ............................................... 12
Section 5. Registered Stockholders ................................... 12
ARTICLE VII ............................................................. 12
CERTAIN TRANSACTIONS .................................................... 12
Section 1. Transactions with Interested Parties ...................... 13
Section 2. Quorum .................................................... 13
ARTICLE VIII ............................................................ 13
GENERAL PROVISIONS ...................................................... 13
Section 1. Dividends ................................................. 13
Section 2. Reserves .................................................. 13
Section 3. Checks .................................................... 13
Section 4. Fiscal Year ............................................... 14
Section 5. Seal ...................................................... 14
ARTICLE IX .............................................................. 14
AMENDMENTS .............................................................. 14
Addendum
Register of Amendments to the Bylaws
</TABLE>
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* * * * *
BDS BUSINESS CENTER, INC.
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders shall be
held at such place within or without the State of Delaware as may be fixed from
time to time by the Board of Directors or the Chief Executive Officer, or if not
so designated, at the registered office of the Corporation.
Section 2. Annual Meeting. Unless directors are elected by written
consent in lieu of an annual meeting as permitted by law and these Bylaws, an
annual meeting of stockholders shall be held at such date and time as shall be
designated from time to time by the Board of Directors or the Chief Executive
Officer. At the meeting the stockholders shall elect by a plurality vote a board
of directors and shall transact such other business as may be properly brought
before the meeting. If no annual meeting is held in accordance with the
foregoing provisions, the Board of Directors shall cause the meeting to be held
as soon thereafter as convenient, which meeting shall be designated a special
meeting in lieu of annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, may, unless otherwise prescribed by statute or by the
certificate of incorporation, be called by the Board of Directors or the Chief
Executive Officer and shall be called by the Chief Executive Officer or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at any special meeting shall be limited to matters relating
to the purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, annual or special, stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) or more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 5. Voting List. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of
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each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city or town where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority in amount of the entire
capital stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute, the certificate of incorporation or these Bylaws. Where a separate vote
by a class or classes is required, one-third of the outstanding shares of such
class or classes, present in person or represented by proxy, shall constitute a
quorum entitled to take action with respect to that vote on that matter. If no
quorum shall be present or represented at any meeting of stockholders, such
meeting may be adjourned in accordance with Section 7 hereof, until a quorum
shall be present or represented.
Section 7. Adjournments. Any meeting of stockholders may be adjourned
from time to time to any other time and to any other place at which a meeting of
stockholders may be held under these Bylaws, which time and place shall be
announced at the meeting, by a majority of the stockholders present in person or
represented by proxy at the meeting and entitled to vote (whether or not a
quorum is present), or, if no stockholder is present or represented by proxy, by
any officer entitled to preside at or to act as Secretary of such meeting,
without notice other than announcement at the meeting. At such adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting, provided that a quorum either was present at the original
meeting or is present at the adjourned meeting. If the adjournment is for more
than thirty (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 originally entitled to vote at the meeting.
Section 8. Action at Meetings. When a quorum is present at any meeting,
the affirmative vote of the holders of a majority in amount of the entire
capital stock present in person or represented by proxy, entitled to vote and
voting on the matter (or where a separate vote by a class or classes is
required, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting) shall decide
any matter (other than the election of Directors) brought before such meeting,
unless the matter is one upon which by express provision of law, the certificate
of incorporation or these Bylaws, a different vote is required, in which case
such express provision shall govern and control the decision of such matter. The
stock of holders who abstain from voting on any matter shall be deemed not to
have been voted on such matter. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting,
entitled to vote and voting on the election of Directors.
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Section 9. Voting and Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each stockholder entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 10. Action Without Meeting. Any action required to be taken at
any annual or special meeting of stockholders, or any action which may be taken
at any annual or special meeting of such 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: (1) signed and dated by
the holders 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 all shares entitled to vote thereon were present and voted, and (2)
delivered to the Corporation within sixty (60) days of the earliest dated
consent by delivery to its registered office in the State of Delaware (in which
case delivery shall be by hand or by first class mail), 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. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing, and such notice shall be given within five (5) business days of the
taking of such action.
ARTICLE II
DIRECTORS
Section 1. Number, Election, Tenure and Qualification. The number of
Directors which shall constitute the whole board shall be not less than one and
no more than nine. Further, the number of Directors shall be determined by
resolution of the Board of Directors or by the stockholders at the annual
meeting or at any special meeting of stockholders. The directors shall be
elected at the annual meeting or at any special meeting of stockholders, or by
written consent in lieu of an annual or special meeting of the stockholders
(provided, however, that if such consent is less than unanimous, such action by
written consent may be in lieu of holding an annual meeting only if all of the
directorships to which directors could be elected at an annual meeting held at
the effective time of such action are vacant and are filled by such action),
except as provided in Section 3 of this Article, and each director elected shall
hold office until his successor is elected and qualified, unless sooner
displaced. Directors need not be stockholders.
Section 2. Enlargement. The number of the Board of Directors may be
increased at any time by vote of a majority of the Directors then in office.
Section 3. Vacancies. 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
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in office, though less than a quorum, or by a sole remaining director, and the
Directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no Directors in office, then an election of Directors may be held in
the manner provided by statute. In the event of a vacancy in the Board of
Directors, the remaining Directors, except as otherwise provided by law or these
Bylaws, may exercise the powers of the full board until the vacancy is filled.
Section 4. Resignation and Removal. Any director may resign at any time
upon written notice to the Corporation at its principal place of business or to
the Chief Executive Officer or Secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares of the entire capital stock then entitled to vote at an election of
Directors, unless otherwise specified by law or the certificate of
incorporation.
Section 5. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
Section 6. Chairman of the Board. If the Board of Directors appoints a
chairman of the board, he shall, when present, preside at all meetings of the
stockholders and the Board of Directors. He shall perform such duties and
possess such powers as are customarily vested in the office of the chairman of
the board or as may be vested in him by the Board of Directors.
Section 7. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board; provided that any director who is absent when
such a determination is made shall be given prompt notice of such determination.
A regular meeting of the Board of Directors may be held without notice
immediately after and at the same place as the annual meeting of stockholders.
Section 9. Special Meetings. Special meetings of the board may be
called by the Chief Executive Officer, Secretary, or on the written request of
two (2) or more Directors, or by one director in the event that there is only
one director in office. One (1) day's notice to each director, either delivered
personally or by telegram, cable, telecopy, electronic mail (including via the
Internet), commercial delivery service, telex or any similar means sent to his
business or home address, or three (3) days' notice by written notice deposited
in the mail, shall be given to each director by the Secretary or by the officer
or one of the Directors calling the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the purposes of the meeting.
<PAGE> 8
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Section 10. Quorum, Action at Meeting, Adjournments. At all meetings of
the board a majority of Directors then in office, but in no event less than one
third of the entire board, shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. For purposes of this section, the term "entire board" shall mean
the number of Directors last fixed by the stockholders or Directors, as the case
may be, in accordance with law and these Bylaws; provided, however, that if less
than all the number so fixed of Directors were elected, the "entire board" shall
mean the greatest number of Directors so elected to hold office at any one time
pursuant to such authorization. If a quorum shall not be present at any meeting
of the Board of Directors, a majority of the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 11. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee. Even if a director is
interested in any transaction involving such director, a consent signed by all
of the directors then in office shall be sufficient to effect any action
otherwise permitted to be taken at any meeting of the Board of Directors,
subject to the satisfaction of the requirements contained in Article VII,
Section 1.
Section 12. Telephonic Meetings. Unless otherwise restricted by the
certificate of incorporation or these Bylaws, members of the Board of Directors
or of any committee thereof may participate in a meeting of the Board of
Directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 13. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation. The board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to (a) adopting, amending or repealing the
Bylaws of the Corporation or any of them, or (b) approving or adopting, or
recommending to the stockholders any action or matter expressly required by law
to be submitted to stockholders for approval. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and make such reports to the Board of Directors as the Board of
Directors may request.
<PAGE> 9
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Except as the Board of Directors may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
Directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the conduct of
its business by the Board of Directors.
Section 14. Compensation. Unless otherwise restricted by the
certificate of incorporation or these Bylaws, the Board of Directors shall have
the authority to fix from time to time the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and the performance of their responsibilities as
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors and/or a stated salary as director. No such payment shall
preclude any director from serving the Corporation or its parent or subsidiary
corporations in any other capacity and receiving compensation therefor. The
Board of Directors may also allow compensation for members of special or
standing committees for service on such committees.
ARTICLE III
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, a Chief Executive Officer, a
Secretary and a Treasurer and such other officers with such titles, terms of
office and duties as the Board of Directors may from time to time determine,
including a chairman of the board, one or more Vice-Presidents, and one or more
Assistant Secretaries and assistant Treasurers. If authorized by resolution of
the Board of Directors, the Chief Executive Officer may be empowered to appoint
from time to time Assistant Secretaries and assistant Treasurers. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these Bylaws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a President, a Chief Executive
Officer, a Secretary and a Treasurer. Other officers may be appointed by the
Board of Directors at such meeting, at any other meeting, or by written consent.
An officer may hold multiple titles.
Section 3. Tenure. The officers of the Corporation shall hold office
until their successors are chosen and qualify, unless a different term is
specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal. Any officer elected or appointed by the Board of
Directors or by the Chief Executive Officer may be removed at any time, with or
without cause, by the affirmative vote of a majority of the Board of Directors
or a committee duly authorized to do so, except that any officer appointed by
the Chief Executive Officer may also be removed at any time, with or without
cause, by the Chief Executive Officer. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors, at its discretion. Any
officer may resign by delivering his written resignation to the Corporation at
its principal place of business or to the Chief Executive Officer, the President
or the Secretary.
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Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 4. President. The President shall be the Chief Operating
Officer of the Corporation. He shall also be the Chief Executive Officer unless
the Board of Directors otherwise provides. If no Chief Executive Officer shall
have been appointed by the Board of Directors, all references herein to the
"Chief Executive Officer" shall be to the President. The Chief Executive Officer
and President shall, unless the Board of Directors provides otherwise in a
specific instance or generally, preside at all meetings of the stockholders and
the Board of Directors, have general and active management of the business of
the Corporation and see that all orders and resolutions of the Board of
Directors are carried into effect. The Chief Executive Officer and President
shall execute bonds, mortgages, and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.
Section 5. Vice-Presidents. In the absence of the Chief Executive
Officer or President or in the event of his or her inability or refusal to act,
the Vice-President, or if there be more than one Vice-President, the
Vice-Presidents in the order designated by the Board of Directors or the Chief
Executive Officer (or in the absence of any designation, then in the order
determined by their tenure in office) shall perform the duties of the Chief
Executive Officer or President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. The Vice-Presidents
shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the President may from time to time
prescribe.
Section 6. Secretary. The Secretary shall have such powers and perform
such duties as are incident to the office of Secretary. The Secretary shall
maintain a stock ledger and prepare lists of stockholders and their addresses as
required and shall be the custodian of corporate records. The Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be from time to time prescribed by the Board of Directors or Chief
Executive Officer, under whose supervision the Secretary shall be. The Secretary
shall have custody of the corporate seal of the Corporation and the Secretary,
or an assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
Section 7. Assistant Secretaries. The assistant Secretary, or if there
be more than one, the assistant secretaries in the order determined by the Board
of Directors, the Chief Executive Officer or the Secretary (or if there be no
such determination, then in the order
<PAGE> 11
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determined by their tenure in office), shall, in the absence of the Secretary or
in the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors, the Chief Executive Officer or
the Secretary may from time to time prescribe. In the absence of the Secretary
or any assistant Secretary at any meeting of stockholders or Directors, the
person presiding at the meeting shall designate a temporary or acting Secretary
to keep a record of the meeting.
Section 8. Treasurer. The Treasurer shall perform such duties and shall
have such powers as may be assigned to him or her by the Board of Directors or
the Chief Executive Officer or President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
Treasurer. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer and the Board of Directors, when the Chief Executive
Officer or Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
Section 9. Assistant Treasurers. The assistant Treasurer, or if there
shall be more than one, the assistant Treasurers in the order determined by the
Board of Directors, the Chief Executive Officer or the Treasurer (or if there be
no such determination, then in the order determined by their tenure in office),
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the Treasurer may from time to time
prescribe.
Section 10. Bond. If required by the Board of Directors, any officer
shall give the Corporation a bond in such sum and with such surety or sureties
and upon such terms and conditions as shall be satisfactory to the Board of
Directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the Corporation.
ARTICLE IV
NOTICES
Section 1. Delivery. Whenever, under the provisions of law, or of the
certificate of incorporation or these Bylaws, written notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such
<PAGE> 12
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notice shall be deemed to be given at the time when the same shall be deposited
in the United States mail. Unless written notice by mail is required by law,
written notice may also be given by telegram, cable, telecopy, electronic mail,
commercial delivery service, telex or similar means, addressed to such director
or stockholder at his address as it appears on the records of the corporation,
in which case such notice shall be deemed to be given when delivered into the
control of the persons charged with effecting such transmission, the
transmission charge to be paid by the Corporation or the person sending such
notice and not by the addressee. Oral notice or other in-hand delivery (in
person or by telephone) shall be deemed given at the time it is actually given.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of law or of the certificate of incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. Actions other than by or in the Right of the Corporation.
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in
<PAGE> 13
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connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
Section 3. Success on the Merits. To the extent that any person
described in Section 1 or 2 of this Article V has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1
or 2 of this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections. Such determination shall be made (1) by the Board of Directors by
a majority vote of Directors who were not parties to such action, suit or
proceeding (even though less than a quorum), or (2) if there are no
disinterested Directors or if a majority of disinterested Directors so directs,
by independent legal counsel (who may be regular legal counsel to the
Corporation) in a written opinion, or (3) by the stockholders of the
Corporation.
Section 5. Advance Payment. Expenses incurred in defending a pending or
threatened civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of any person
described in said Section to repay such amount if it shall ultimately be
determined that he or she is not entitled to indemnification by the Corporation
as authorized in this Article V.
Section 6. Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this Article
V shall not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. Insurance. The Board of Directors may authorize, by a vote
of the majority of the full board, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
<PAGE> 14
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against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article V.
Section 8. Continuation of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article V shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9. Severability. If any word, clause or provision of this
Article V or any award made hereunder shall for any reason be determined to be
invalid, the provisions hereof shall not otherwise be affected thereby but shall
remain in full force and effect.
Section 10. Intent of Article. The intent of this Article V is to
provide for indemnification and advancement of expenses to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware. To the
extent that such Section or any successor section may be amended or supplemented
from time to time, this Article V shall be amended automatically and construed
so as to permit indemnification and advancement of expenses to the fullest
extent from time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman or vice-chairman of the Board of Directors,
or the Chief Executive Officer, President or a Vice-President and the Treasurer
or an assistant Treasurer, or the Secretary or an assistant Secretary of the
Corporation, certifying the number of shares owned by such holder in the
Corporation. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
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. Certificates may be
issued for partly paid shares and in such case upon the face or back of the
certificates issued to represent any such partly paid shares, the total amount
of the consideration to be paid therefor, and the amount paid thereon shall be
specified.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen 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, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same in
such manner as it shall require and/or to give the
<PAGE> 15
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Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed or the issuance of such new certificate.
Section 3. Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and proper evidence of compliance with other conditions to rightful
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which shall not be more than sixty days
nor less then ten days before the date of such meeting. 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.
If no record date is fixed, 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 before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. 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 shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which 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 is fixed, 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 statute,
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 as provided
in Section 10 of Article I. If no record date is fixed and prior action by the
Board of Directors is required, 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 date on which the Board of Directors adopts the
resolution taking such prior action. In order that the Corporation may determine
the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to exercise
any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted, and which shall be not more than sixty days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
Section 5. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its
<PAGE> 16
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books as the owner of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties. No contract or
transaction between the Corporation and one or more of its Directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its Directors or
officers are Directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Quorum. Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
<PAGE> 17
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, if any, may be declared by the Board of Directors at any regular or
special meeting or by written consent, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the provisions
of the certificate of incorporation.
Section 2. Reserves. The Directors may set apart out of any funds of
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.
Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 5. Seal. The Board of Directors may, by resolution, adopt a
corporate seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the Board
of Directors.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors provided,
however, that in the case of a regular or special meeting of stockholders,
notice of such alteration, amendment, repeal or adoption of new Bylaws be
contained in the notice of such meeting.
<PAGE> 18
Register of Amendments to the Bylaws
<TABLE>
<CAPTION>
Date Section Affected Change
- ---- ---------------- ------
<S> <C> <C>
August 18, 1999 Article II, Section 1 First sentence amended so that Board of
Directors may be no more than nine
August 18, 1999 Article VI, Section 1 First sentence amended to allow Chief
Executive Officer to sign certificates.
</TABLE>
<PAGE> 1
EXHIBIT 3.5
SECOND AMENDED AND RESTATED
BY-LAWS
OF
TALLAN, INC.
Effective as of __________________
<PAGE> 2
BY-LAWS
TABLE OF CONTENTS
Page
----
ARTICLE 1 - Stockholders................................................. 1
1.1 Place of Meetings............................................... 1
1.2 Annual Meeting.................................................. 1
1.3 Special Meetings................................................ 1
1.4 Notice of Meetings.............................................. 1
1.5 Voting List..................................................... 1
1.6 Quorum.......................................................... 2
1.7 Adjournments.................................................... 2
1.8 Voting and Proxies.............................................. 2
1.9 Action at Meeting............................................... 3
1.10 Introduction of Business at Meetings............................ 3
1.11 Action without Meeting.......................................... 6
ARTICLE 2 - Directors.................................................... 6
2.1 General Powers.................................................. 6
2.2 Number; Election and Qualification.............................. 7
2.3 Classes of Directors............................................ 7
2.4 Terms in Office................................................. 7
2.5 Allocation of Directors Among Classes in the Event of Increases
or Decreases in the Number of Directors ........................ 7
2.6 Tenure.......................................................... 8
2.7 Vacancies....................................................... 8
2.8 Resignation..................................................... 8
2.9 Regular Meetings................................................ 8
2.10 Special Meetings................................................ 8
2.11 Notice of Special Meetings...................................... 8
2.12 Meetings by Telephone Conference Calls.......................... 9
2.13 Quorum.......................................................... 9
2.14 Action at Meeting............................................... 9
2.15 Action by Written Consent....................................... 9
2.16 Removal......................................................... 9
2.17 Committees...................................................... 9
2.18 Compensation of Directors....................................... 10
2.19 Amendments to Article........................................... 10
<PAGE> 3
-ii-
ARTICLE 3 - Officers..................................................... 10
3.1 Enumeration..................................................... 10
3.2 Election........................................................ 10
3.3 Qualification................................................... 10
3.4 Tenure.......................................................... 10
3.5 Resignation and Removal......................................... 11
3.6 Vacancies....................................................... 11
3.7 Chairman of the Board and Vice-Chairman of the Board............ 11
3.8 President....................................................... 11
3.9 Vice Presidents................................................. 11
3.10 Secretary and Assistant Secretaries............................. 12
3.11 Treasurer and Assistant Treasurers.............................. 12
3.12 Salaries........................................................ 13
3.13 Action with Respect to Securities of Other Corporations......... 13
ARTICLE 4 - Capital Stock................................................ 13
4.1 Issuance of Stock............................................... 13
4.2 Certificates of Stock........................................... 13
4.3 Transfers....................................................... 13
4.4 Lost, Stolen or Destroyed Certificates.......................... 14
4.5 Record Date..................................................... 14
ARTICLE 5 - General Provisions........................................... 14
5.1 Fiscal Year..................................................... 14
5.2 Corporate Seal.................................................. 14
5.3 Notices......................................................... 14
5.4 Waiver of Notice................................................ 15
5.5 Evidence of Authority........................................... 15
5.6 Facsimile Signatures............................................ 15
5.7 Reliance upon Books, Reports and Records........................ 15
5.8 Time Periods.................................................... 15
5.9 Certificate of Incorporation.................................... 15
5.10 Transactions with Interested Parties............................ 15
5.11 Severability.................................................... 16
5.12 Pronouns........................................................ 16
ARTICLE 6 - Amendments................................................... 16
6.1 By the Board of Directors....................................... 16
6.2 By the Stockholders............................................. 17
<PAGE> 4
SECOND AMENDED AND RESTATED
BY-LAWS
OF
TALLAN, INC. (the "Corporation")
ARTICLE 1 - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Chairman of the Board (if any), the board of directors of
the Corporation (the "Board of Directors") or the President or, if not so
designated, at the registered office of the Corporation.
1.2 ANNUAL MEETING. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Chairman
of the Board (if any), Board of Directors, the Chief Executive Officer or the
President (which date shall not be a legal holiday in the place where the
meeting is to be held) at the time and place to be fixed by the Chairman of the
Board, the Board of Directors, the Chief Executive Officer or the President and
stated in the notice of the meeting.
1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called at
any time by the Chairman of the Board (if any), a majority of the Board of
Directors, the Chief Executive Officer or the President and shall be held at
such place, on such date and at such time as shall be fixed by the Board of
Directors or the person calling the meeting. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his or her address as it appears
on the records of the Corporation.
1.5 VOTING LIST. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the
<PAGE> 5
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meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time of
the meeting, and may be inspected by any stockholder who is present. This list
shall presumptively determine the identity of the stockholders entitled to vote
at the meeting and the number of shares held by each of them.
1.6 QUORUM. Except as otherwise provided by law, the Corporation's
Certificate of Incorporation, as such may be amended from time to time, or these
Second Amended and Restated By-Laws, as such may be amended from time to time
(the "Restated By-Laws"), the holders of a majority of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. Shares held by brokers which such brokers are
prohibited from voting (pursuant to their discretionary authority on behalf of
beneficial owners of such shares who have not submitted a proxy with respect to
such shares) on some or all of the matters before the stockholders, but which
shares would otherwise be entitled to vote at the meeting ("Broker Non-Votes")
shall be counted, for the purpose of determining the presence or absence of a
quorum, both (a) toward the total voting power of the shares of capital stock of
the Corporation and (b) as being represented by proxy. If a quorum has been
established for the purpose of conducting the meeting, a quorum shall be deemed
to be present for the purpose of all votes to be conducted at such meeting,
provided that where a separate vote by a class or classes, or series thereof, is
required, a majority of the voting power of the shares of such class or classes,
or series, present in person or represented by proxy shall constitute a quorum
entitled to take action with respect to that vote on that matter. If a quorum
shall fail to attend any meeting, the chairman of the meeting or the holders of
a majority of the voting power of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these Restated By-Laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting.
1.8 VOTING AND PROXIES. At any meeting of the stockholders, each
stockholder shall have one vote for each share of stock entitled to vote at such
meeting held of record by such stockholder and a proportionate vote for each
fractional share so held, unless otherwise provided in the Certificate of
Incorporation. Each stockholder of record entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting (to the extent not otherwise prohibited by the Certificate of
Incorporation or these By-laws), may
<PAGE> 6
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vote or express such consent or dissent in person or may authorize another
person or persons to vote or act for such stockholder by written proxy executed
by such stockholder or his or her authorized agent or by a transmission
permitted by law and delivered to the Secretary of the Corporation. No such
proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this Section 1.8 may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or reproduction shall be a complete reproduction of
the entire original writing or transmission.
In the election of directors, voting shall be by written ballot, and
for any other action, voting need not be by ballot.
The Corporation may, and to the extent required by law or the
Certificate of Incorporation, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
such meeting may, and to the extent required by law or the Certificate of
Incorporation, shall, appoint one or more inspectors to act at such meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
1.9 ACTION AT MEETING. When a quorum is present at any meeting of
stockholders, the holders of a majority of the stock present or represented and
voting on a matter (or if there are two or more classes of stock entitled to
vote as separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on such
matter) shall decide any matter to be voted upon by the stockholders at such
meeting (other than the election of directors), except when a different vote is
required by express provision of law, the Certificate of Incorporation or these
Restated By-Laws. Any election of directors by the stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at such election, except as otherwise provided by the Certificate of
Incorporation. For the purposes of this paragraph, Broker Non-Votes represented
at the meeting but not permitted to vote on a particular matter shall not be
counted, with respect to the vote on such matter, in the number of (a) votes
cast, (b) votes cast affirmatively, or (c) votes cast negatively.
1.10 INTRODUCTION OF BUSINESS AT MEETINGS.
A. ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board
of Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a)
pursuant to the Corporation's notice of meeting, (b) by or at the
direction of the Board of Directors or (c) by any stockholder of
the
<PAGE> 7
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Corporation who was a stockholder of record at the time of giving
of notice provided for in this Section 1.10, who is entitled to
vote at the meeting and who complies with the notice procedures
set forth in this Section 1.10.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(1) of this Section 1.10, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely,
a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the
close of business on the one hundred twentieth (120th) day nor
earlier than the close of business on the one hundred fiftieth
(150th) day prior to the first anniversary of the date of the
proxy statement delivered to stockholders in connection with the
preceding year's annual meeting; provided, however, that if either
(i) the date of the annual meeting is more than thirty (30) days
before or more than sixty (60) days after such an anniversary date
or (ii) no proxy statement was delivered to stockholders in
connection with the preceding year's annual meeting, notice by the
stockholder to be timely must be so delivered not earlier than the
close of business on the ninetieth (90th) day prior to such annual
meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such annual meeting or the close
of business on the tenth (10th) day following the day on which
public announcement of the date of such meeting is first made by
the Corporation. Such stockholder's notice shall set forth (a) as
to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected); (b) as to any
other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at
the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (i) the name and address of such stockholder,
as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of capital stock of
the Corporation that are owned beneficially and held of record by
such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence
of paragraph (A)(2) of this Section 1.10 to the contrary, in the
event that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting (or, if the
<PAGE> 8
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annual meeting is held more than thirty (30) days before or sixty
(60) days after such anniversary date, at least seventy (70) days
prior to such annual meeting), a stockholder's notice required by
this Section 1.10 shall also be considered timely, but only with
respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the
principal executive office of the Corporation not later than the
close of business on the tenth (10th) day following the day on
which such public announcement is first made by the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall
be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the Corporation's
notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the
Board of Directors or (b) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by any
stockholder of the Corporation who is a stockholder of record at
the time of giving of notice of the special meeting, who shall be
entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 1.10. If the Corporation
calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be),
for election to such position(s) as specified in the Corporation's
notice of meeting, if the stockholder's notice required by
paragraph (A)(2) of this Section 1.10 shall be delivered to the
Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth (90th) day prior to such special
meeting nor later than the later of (x) the close of business on
the sixtieth (60th) day prior to such special meeting or (y) the
close of business on the tenth (10th) day following the day on
which public announcement is first made of the date of such
special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
C. GENERAL.
(1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 1.10 shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this Section 1.10. Except as otherwise provided by law, the
Certificate of Incorporation or these Restated By-Laws, the
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before
the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 1.10 and,
if any proposed nomination or business is not in compliance
herewith, to declare that such defective proposal or nomination
shall be disregarded.
<PAGE> 9
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(2) For purposes of this Section 1.10, "public
announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 1.10, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing
in this Section 1.10 shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) of the holders of any series of Preferred
Stock to elect directors under specified circumstances.
1.11 ACTION WITHOUT MEETING. Stockholders of the Corporation may not
take any action by written consent in lieu of a meeting. Notwithstanding any
other provision of law, the Certificate of Incorporation or these Restated
By-Laws, and notwithstanding the fact that a lesser percentage may be specified
by law, the affirmative vote of the holders of at least seventy-five percent
(75%) of the votes which all the stockholders would be entitled to cast at any
annual election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Section 1.11.
ARTICLE 2 - DIRECTORS
2.1 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the Corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law or the
Certificate of Incorporation, may exercise the powers of the full Board of
Directors until the vacancy is filled. Without limiting the foregoing, the Board
of Directors may:
(a) declare dividends from time to time in accordance with law;
(b) purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(c) authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, to borrow funds and guarantee
obligations, and to do all things necessary in connection therewith;
(d) remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
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(e) confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(f) adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees, consultants
and agents of the Corporation and its subsidiaries as it may determine;
(g) adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees, consultants and agents
of the Corporation and its subsidiaries as it may determine; and
(h) adopt from time to time regulations, not inconsistent herewith, for
the management of the Corporation's business and affairs.
2.2 NUMBER; ELECTION AND QUALIFICATION. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The number of directors may only be increased by a majority of
directors then in the office. The directors shall be elected at the annual
meeting of stockholders (or, if so determined by the Board of Directors pursuant
to Section 10 hereof, at a special meeting of stockholders), by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the Corporation.
2.3 CLASSES OF DIRECTORS. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class.
2.4 TERMS IN OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the first annual meeting of
stockholders held after January 1, 2000 (the "Initial Annual Meeting"); each
initial director in Class II shall serve for a term ending on the date of the
first annual meeting of stockholders held after the Initial Annual Meeting (the
"Second Annual Meeting"); and each initial director in Class III shall serve for
a term ending on the date of the first annual meeting of stockholders held after
the Second Annual Meeting.
2.5 ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among
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the three classes of directors, subject to the second sentence of Section 2.3.
To the extent possible, consistent with the foregoing rule, any newly created
directorships shall be added to those classes whose terms of office are to
expire at the earliest dates following such allocation, unless otherwise
provided for from time to time by resolution adopted by a majority of the
directors then in office, although less than a quorum. No decrease in the number
of directors constituting the whole Board of Directors shall shorten the term of
an incumbent Director.
2.6 TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
2.7 VACANCIES. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement thereof, may be filled by vote of a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office, if any, and a director
chosen to fill a position resulting from an increase in the number of directors
shall hold office until the next election of directors of the class for which
such director was chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
2.8 RESIGNATION. Any director may resign by delivering his or her
written resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
2.9 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination.
2.10 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board (if any), the Chief Executive
Officer, the President, two or more directors, or by one director in the event
that there is only a single director in office.
2.11 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or
delivering written notice by facsimile transmission or by hand, to his or her
last known business or home address at least 48 hours in advance of the meeting,
or (iii) by mailing written notice to his or her last known business or home
address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.
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2.12 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall be deemed to constitute presence in person at such meeting.
2.13 QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the total number of the whole Board of Directors constitute a quorum.
In the absence of a quorum at any such meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be present.
2.14 ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Restated By-Laws.
2.15 ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee of the Board
of Directors may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent to such action in writing,
and the written consents are filed with the minutes of proceedings of the Board
of Directors or committee.
2.16 REMOVAL. Unless otherwise provided in the Certificate of
Incorporation, any one or more or all of the directors may be removed (i) with
cause only by the holders of a majority of the shares then entitled to vote at
an election of directors or (ii) without cause only by the holders of at least
seventy-five percent (75%) of the shares then entitled to vote at an election of
directors.
2.17 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members of such committee present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at such meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except
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as the Board of Directors may otherwise determine or as provided herein, any
committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Restated By-Laws
for the Board of Directors. Adequate provisions shall be made for notice to
members of all meeting of committees. One-third (1/3) of the members of any
committee shall constitute a quorum unless the committee shall consist of one
(1) or two (2) members, in which event one (1) member shall constitute a quorum;
and all matters shall be determined by a majority vote of the members present.
Action may be taken by any committee without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of such committee.
2.18 COMPENSATION OF DIRECTORS. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
2.19 AMENDMENTS TO ARTICLE. Notwithstanding any other provisions of
law, the Certificate of Incorporation or these Restated By-Laws, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of a least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast at any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article 2.
ARTICLE 3 - OFFICERS
3.1 ENUMERATION. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including, but not limited to,
a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice
Presidents, Assistant Treasurers and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.
3.2 ELECTION. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Chief Executive
Officer, except that the Directors shall have the power to rescind any such
appointment by a vote of a majority of the Directors then in office.
3.3 QUALIFICATION. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Restated By-Laws, each officer shall hold office until
his or her successor is elected
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and qualified, unless a different term is specified in the vote choosing or
appointing such officer, or until his or her earlier death, resignation or
removal.
3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his
or her written resignation to the Chairman of the Board (if any), to the Board
of Directors at a meeting thereof, to the Corporation at its principal office or
to the President or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his or her resignation or removal, or any right to
damages on account of such removal, whether his or her compensation be by the
month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Corporation.
3.6 VACANCIES. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his or her successor is elected and qualified, or
until his or her earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. The Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and stockholders at which he or she is present and shall perform such duties and
possess such powers as are designated by the Board of Directors. If the Board of
Directors appoints a Vice-Chairman of the Board, he or she shall, in the absence
or disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be designated by the Board of
Directors.
3.8 PRESIDENT. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
Corporation. Unless otherwise provided by the Board of Directors, and provided
that there is no Chairman of the Board or that the Chairman and Vice-Chairman,
if any, are not available, the President shall preside at all meetings of the
stockholders, and, if a director, at all meetings of the Board of Directors.
Unless the Board of Directors has designated another officer as the Chief
Executive Officer, the President shall be the Chief Executive Officer of the
Corporation. The President shall perform such other duties and shall have such
other powers as the Board of Directors may from time to time prescribe. The
President shall have the power to enter into contracts and otherwise bind the
Corporation in matters arising in the ordinary course of the Corporation's
business.
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event
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of the absence, inability or refusal to act of the President, the Vice President
(or if there shall be more than one, the Vice Presidents in the order determined
by the Board of Directors) shall perform the duties of the President and, when
so performing, shall have all the powers of and be subject to all the
restrictions upon the President. The Board of Directors may assign to any Vice
President the title of Executive Vice President, Senior Vice President or any
other title selected by the Board of Directors. Unless otherwise determined by
the Board of Directors, any Vice President shall have the power to enter into
contracts and otherwise bind the Corporation in matters arising in the ordinary
course of the Corporation's business.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected in accordance with these Restated
By-Laws, to disburse such funds as ordered by the Board of Directors, to make
proper accounts for such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the Corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
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3.12 SALARIES. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
3.13 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless
otherwise directed by the Board of Directors, the President or any officer of
the Corporation authorized by the President shall have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE 4 - CAPITAL STOCK
4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any issued, authorized capital stock of the
Corporation held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 CERTIFICATES OF STOCK. Every holder of stock of the Corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by such stockholder in the Corporation. Each such certificate shall be
signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman,
if any, of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation. Any or all of the signatures on such certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Restated By-Laws, applicable securities laws or any agreement among any number
of shareholders or among such holders and the Corporation shall have
conspicuously noted on the face or back of such certificate either the full text
of such restriction or a statement of the existence of such restriction.
4.3 TRANSFERS. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
representing such shares, properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these Restated By-Laws, the Corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote
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with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the Corporation in accordance with the requirements of these Restated
By-Laws.
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
President may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving of such indemnity as the
President may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 RECORD DATE. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or, to the extent permitted by the
Certificate of Incorporation and these By-laws, to express consent (or dissent)
to corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action. Such record date shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any other action
to which such record date relates.
If no record date is fixed, 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 before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting (to the
extent permitted by the Certificate of Incorporation and these By-laws) when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. 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 to such purpose.
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.
ARTICLE 5 - GENERAL PROVISIONS
5.1 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
5.2 CORPORATE SEAL. The corporate seal shall be in such form as shall
be approved by the Board of Directors.
5.3 NOTICES. Except as otherwise specifically provided herein or
required by law or the Certificate of Incorporation, all notices required to be
given to any stockholder, director,
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officer, employee or agent of the Corporation shall be in writing and may in
every instance be effectively given by hand delivery to the recipient thereof,
by depositing such notice in the mails, postage paid, or by sending such notice
by prepaid telegram or facsimile transmission. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address as the same appears on the books of the Corporation. The
time when such notice is received shall be deemed to be the time of the giving
of the notice.
5.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these Restated By-Laws,
a waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, facsimile
transmission or any other available method, whether before, at or after the time
stated in such waiver, or the appearance of such person or persons at such
meeting in person or by proxy, shall be deemed equivalent to such notice.
5.5 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Corporation shall, as to all persons who rely on the certificate in good faith,
be conclusive evidence of such action.
5.6 FACSIMILE SIGNATURES. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Restated
By-Laws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors or a committee
thereof.
5.7 RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
5.8 TIME PERIODS. In applying any provision of these Restated By-Laws
that requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded, and the day of the event shall be included.
5.9 CERTIFICATE OF INCORPORATION. All references in these Restated
By-Laws to the Certificate of Incorporation shall be deemed to refer to the
Amended and Restated Certificate of Incorporation of the Corporation, as amended
and in effect from time to time.
5.10 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of the
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directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because such
director or officer is present at or participates in the meeting of the Board of
Directors or a committee of the Board of Directors which authorizes the contract
or transaction or solely because his, her or their votes are counted for such
purpose, if:
(1) The material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.11 SEVERABILITY. Any determination that any provision of these
Restated By-Laws is for any reason inapplicable, illegal or ineffective shall
not affect or invalidate any other provision of these Restated By-Laws.
5.12 PRONOUNS. All pronouns used in these Restated By-Laws shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the persons or persons so designated may require.
ARTICLE 6 - AMENDMENTS
6.1 BY THE BOARD OF DIRECTORS. Except as is otherwise set forth in
these Restated By-Laws, these Restated By-Laws may be altered, amended or
repealed, or new by-laws may be adopted, by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
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6.2 BY THE STOCKHOLDERS. Except as otherwise set forth in these
Restated By-Laws, these Restated By-Laws may be altered, amended or repealed or
new by-laws may be adopted by the affirmative vote of the holders of
seventy-five percent (75%) of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote at any regular meeting of
stockholders, or at any special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such special meeting.
<PAGE> 1
EXHIBIT 10.1
BDS BUSINESS CENTER, INC.
STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
ARTICLE 1.
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE. BDS Business Center, Inc., a
Connecticut corporation ("BDS" or the "Corporation"), hereby establishes a stock
incentive plan to be known as the "BDS Business Center, Inc. Stock Option and
Performance Incentive Plan" (the "Plan"). The Plan shall become effective as of
March 30, 1998, subject to the approval of the Corporation's stockholders. In
the event that such stockholder approval is not obtained, any awards made
hereunder shall be cancelled and all rights with respect to such awards shall
thereupon cease. Upon approval by the Board of Directors of the Corporation (the
"Board") awards may be made as provided herein.
1.2 PURPOSE. The purpose of the Plan is to encourage and enable
selected employees, officers, directors and independent contractors
(subject to such requirements as may be prescribed by the Committee) of
the Corporation and its subsidiaries to acquire a proprietary interest in the
Corporation through the ownership of the Corporation's common stock, without
par value $1.65 per share ("Common Stock"), and other rights with respect
to the Common Stock. Such ownership will provide such persons with a more
direct stake in the future welfare of the Corporation and encourage them to
exert their best efforts for the Corporation and its subsidiaries. It is also
expected that the Plan will encourage qualified persons to seek and accept
employment with or provide services to the Corporation and its subsidiaries.
ARTICLE 2.
AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted in any one or
all of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) non-qualified stock options
("Non-Qualified Stock Options")(unless otherwise indicated, references in the
Plan to "Options" shall include both Incentive Stock Options and Non-qualified
Stock Options); (iii) stock appreciation rights ("Stock Appreciation Rights"),
as described in Article 6 hereof, which may be awarded either in tandem with
Options ("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock which are
restricted as provided in Article 9 hereof ("Restricted Shares"); (v) units
representing shares of Common Stock, as described in Article 10 hereof
("Performance Shares"); (vi) units which do not represent shares of Common Stock
but which may be paid in the form
<PAGE> 2
of Common Stock, as described in Article 11 hereof ("Performance Units"); (vii)
shares of Common Stock that are not subject to any conditions to vesting
("Unrestricted Shares"); and (viii) tax offset payments ("Tax Offset Payments"),
as described in Article 13 hereof.
2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 600,000 subject to adjustment
pursuant to Article 14 hereof. In addition, Tax Offset Payments which may be
awarded under the Plan will not exceed the number of shares available for
issuance under the Plan. Shares of Common Stock issued pursuant to the Plan may
be either authorized but unissued shares or issued shares reacquired by the
Corporation. In the event that prior to the end of the period during which
Options may be granted under the Plan, any Option or any Nontandem Stock
Appreciation Rights under the Plan expires unexercised or is terminated,
surrendered or cancelled (other than in connection with the exercise of Stock
Appreciation Rights) without being exercised in whole or in part for any reason,
or any Restricted Shares, Performance Shares or Performance Units are forfeited,
or if such awards are settled in cash in lieu of shares of Common Stock, then
such shares or units shall be available for subsequent awards under the Plan,
upon such terms as the Committee may determine.
ARTICLE 3.
ADMINISTRATION
3.1 Committee. Awards shall be determined, and the Plan may be administered
either by the Board, or by the Committee as appointed from time to time by the
Board, which Committee shall consist of no less than two (2) members of the
Board. Except as permitted by Rule 16b-3 of the Securities Exchange Act of 1934
as amended (the "Act"), and by Section 162(m) of the Code (or Regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock, stock options, stock
appreciation rights or any other equity security or derivative security of the
Corporation or any of its affiliates pursuant to the Plan or any other plan of
the Corporation or its affiliates either while serving on the Committee or
during the one year period prior to being appointed to the Committee; (ii) is an
employee or former employee of the Corporation; or (iii) receives remuneration
from the Corporation, either directly or indirectly, in any capacity other than
as a director.
3.2 Powers of Committee. Subject to the express provisions of the Plan, the
Board or the Committee shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock covered by each Option,
the term of each Option, the number of shares of Common Stock to be covered by
each Option and any performance objectives or vesting standards applicable to
each Option; (ii) to designate Options as Incentive Stock Options or
Non-qualified Stock Options and to determine which Options, if any, shall be
accompanied by Tandem Stock Appreciation
<PAGE> 3
Rights, (iii) to grant Tandem Stock Appreciation Rights and Nontandem Stock
Appreciation Rights and to determine the terms and conditions of such rights;
(iv) to grant Restricted Shares and to determine the term of the restricted
period and other conditions and restrictions applicable to such shares; (v) to
grant Performance Shares and Performance Units and to determine the performance
objectives, performance periods and other conditions applicable to such shares
or units; (vi) to grant Unrestricted Shares; (vii) to determine the amount of,
and to make, Tax Offset Payments; and (viii) to determine the persons to whom,
and the time or times at which, Options, Stock Appreciation Rights, Restricted
Shares, Performance Shares, Performance Units and Unrestricted Shares shall be
granted.
3.3 Delegation. The Board or the Committee may delegate to one or
more of its members or to any other person or persons such ministerial duties
as it may deem advisable; provided, however, that the Committee may not
delegate any of its responsibilities hereunder if such delegation would cause
the Plan to fail to comply with the "disinterested administration" rules under
Section 16 of the Act. The Committee may also employ attorneys, consultants,
accountants or other professional advisors and shall be entitled to rely upon
the advice, opinions or valuations of any such advisors.
3.4 Interpretations. The Board or the Committee shall have sole
discretionary authority to interpret the terms of the Plan, to adopt and revise
rules, regulations and policies to administer the Plan and to make any other
factual determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.
3.5 Liability; Indemnification. No member of the Board or the
Committee, nor any person to whom ministerial duties have been delegated, shall
be personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified and protected by the Corporation with respect to any
liability he or she may incur with respect to any such action, interpretation
or determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Certificate of Incorporation and Bylaws, as
amended from time to time, or under any agreement between any such member and
the Corporation.
ARTICLE 4.
ELIGIBILITY
Awards may be made to all employees, officers, directors and
independent contractors of the Corporation or any of its subsidiaries (subject
to such requirements as may be prescribed by the Committee). Awards may be made
to an officer, director or independent contractor of the Corporation, whether
or not such person is also an
<PAGE> 4
employee of the Corporation, provided that no award may be granted to a
director who is a member of the Committee. In determining the persons to whom
awards shall be granted and the number of shares to be covered by each award,
the Committee shall take into account the nature of the services rendered by
such persons, their present and potential contributions to the success of the
Corporation and its subsidiaries and such other factors as the Committee in its
sole discretion shall deem relevant.
As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 40% or more of the economic interests. Notwithstanding
the foregoing, only employees of the Corporation and any present or future
corporation which is or may be a "subsidiary corporation" of the Corporation
(as such term is defined in Section 424(f) of the Code) shall be eligible to
receive Incentive Stock Options.
ARTICLE 5.
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock Option.
In connection with any grant of Options, the Committee shall designate in the
written agreement required pursuant to Article 16 hereof whether the Options
granted shall be Incentive Stock Options or Non-qualified Stock Options, or in
the case both are granted, the number of shares of each.
5.3 Option Price. The purchase price per share under each Incentive Stock
Option shall be the Market Price (as hereinafter defined) of the Common Stock
on the date the Incentive Stock Option is granted. The purchase price per share
under each Non-qualified Stock Option shall be specified by the Committee. In
no case, however, shall the purchase price per share of either an Incentive
Stock Option or Non-qualified Stock Option be less than the par value of the
Common Stock ($.01). Notwithstanding the foregoing, to the extent required by
the Code, the purchase price per share under each Non-qualified Stock Option
granted to an employee who is treated as a "covered employee" (as defined in
Section 162(m)(3) of the Code) on the date such Non-Qualified Option is
exercised shall not be less than 100% of the Market Price of the Common Stock
on the date of grant. In the case of an Incentive Stock Option granted to an
employee owning (actually or constructively under Section 424(d) of the Code),
more than 10% of the total combined voting power of all classes of stock of the
Corporation or of a subsidiary (a "10% Stockholder"), the option price shall
not be less than 110% of the Market Price of the Common Stock on the date of
grant.
<PAGE> 5
The "Market Price" of the Common Stock on any day shall be determined as
follows: (i) if the Common Stock is listed on a national securities exchange or
quoted through the NASDAQ National Market System, the Market Price on any day
shall be the average of the high and low reported Consolidated Trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the Consolidated Trading listing for such day;
(ii) if the Common Stock is quoted on the NASDAQ inter-dealer quotation system,
the Market Price on any day shall be the average of the representative bid and
asked prices at the close of business for such day; (iii) if the Common Stock
is not listed on a national stock exchange or quoted on NASDAQ, the Market
Price on any day shall be the average of the high bid and low asked prices
reported by the National Quotation Bureau, ("NQB") Inc. for such day; or (iv)
if the Common Stock is not reported on by the NQB, the fair market value
thereof on such date as determined in good faith by the Corporation's Board of
Directors. In no event shall the Market Price of a share of Common Stock
subject to an Incentive Stock Option be less than the fair market value as
determined for purposes of Section 422(b)(4) of the Code.
The Option price so determined shall also be applicable in connection with
the exercise of any Tandem Stock Appreciation Rights granted with respect to
such Option.
5.4 Limitation on Amount of Incentive Stock Options. In the case of
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any
subsidiary) shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan
is approved by stockholders of the Corporation.
5.6 Exercise and Payment. Options may be exercised in whole or in part.
Common Stock purchased upon the exercise of Options shall be paid for in full
at the time of purchase. Such payment shall be made in cash or, in the
discretion of the Committee, through delivery of shares of Common Stock or
surrender of Options (or a portion of an Option) held by the optionee (provided
that the then-Market Price of Common Stock exceeds the exercise price of such
Options) or a combination of the foregoing, to the extent permitted in
accordance with procedures to be established by the Committee. Any shares of
Common Stock so delivered shall be valued at their Market Price on the date of
exercise. Any Option (or portion of an Option) so surrendered shall be valued
at the product of (a) the difference between (i) the Market Price of one (1)
share of Common Stock on the date of exercise and (ii) the exercise price under
such Option, multiplied by (b) the number of shares of Common Stock covered by
<PAGE> 6
such Option (or the portion of such Option which is surrendered). Upon receipt
of notice of exercise and payment in accordance with procedures to be
established by the Committee, the Corporation or its agent shall deliver to the
person exercising the Option (or his or her designee) a certificate for such
shares.
5.7 Term. The term of each Option granted hereunder shall be
determined by the Committee; provided, however, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.
5.8 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable
upon exercise thereof until the date on which a recipient shall have exercised
his or her Option in accordance herewith. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.
5.9 General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of
any Option, require the person to whom the Option is to be granted to enter into
an agreement with the Corporation stating that as a condition precedent to each
exercise of the Option, in whole or in part, such person shall if then required
by the Corporation represent to the Corporation in writing that such exercise
is for investment only and not with a view to distribution, and also setting
forth such other terms and conditions as the Board or the Committee may
prescribe.
5.10 Cancellation of Stock Appreciation Rights. Upon exercise of all
or a portion of an Option, the related Tandem Stock Appreciation Rights shall
be cancelled with respect to an equal number of shares of Common Stock as are
issuable upon exercise of such Option.
<PAGE> 7
ARTICLE 6.
STOCK APPRECIATION RIGHTS
6.1 Grants of Stock Appreciation Rights. Tandem Stock Appreciation
Rights may be awarded by the Committee in connection with any Option granted
under the Plan, either at the time the Option is granted or thereafter at any
time prior to the exercise, termination or expiration of the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. At
the time of grant of Nontandem Stock Appreciation Rights, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 6.4 below. The base price of any Nontandem Stock
Appreciation Rights shall be not less than 100% of the Market Price of a share
of Common Stock on the date of grant. Stock Appreciation Rights shall be
subject to such terms and conditions not inconsistent with the other provisions
of the Plan as the Committee shall determine.
6.2 Limitations on Exercise. Tandem Stock Appreciation Rights shall
be exercisable only to the extent that the related Option is exercisable and
shall be exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be cancelled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of Tandem Stock Appreciation Rights shall not be
available for subsequent awards under the Plan. Nontandem Stock Appreciation
Rights shall be exercisable during such period as the Committee shall determine.
6.3 Surrender or Exchange of Tandem Stock Appreciation Rights.
Tandem Stock Appreciation Rights shall entitle the recipient to surrender to
the Corporation unexercised the related Option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of shares of
Common Stock having an aggregate Market Price equal to (A) the excess of (i) the
Market Price of one (1) share of Common Stock as of the date the Tandem Stock
Appreciation Rights are exercised over (ii) the option price per share
specified in such Option, multiplied by (B) the number of shares of Common Stock
subject to the Option, or portion thereof, which is surrendered. Cash shall be
delivered in lieu of any fractional shares.
6.4 Exercise of Nontandem Stock Appreciation Rights. The exercise of
Nontandem Stock Appreciation Rights shall entitle the recipient to receive from
the Corporation that number of shares of Common Stock having an aggregate
Market Price equal to (A) the excess of (i) the Market Price of one (1) share
of Common Stock as of the date on which the Nontandem Stock Appreciation Rights
are exercised over (ii) the base price of the shares covered by the Nontandem
Stock Appreciation Rights, multiplied by (B) the number of shares of Common
<PAGE> 8
Stock covered by the Nontandem Stock Appreciation Rights, or the portion
thereof being exercised. Cash shall be delivered in lieu of any fractional
shares.
6.5 Settlement of Stock Appreciation Rights. As soon as is reasonably
practicable after the exercise of any Stock Appreciation Rights, the Corporation
shall (i) issue, in the name of the recipient, stock certificates representing
the total number of full shares of Common Stock to which the recipient is
entitled pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to
the Market Price, as of the date of exercise, of any resulting fractional
shares, and (ii) if the Committee causes the Corporation to elect to settle all
or part of its obligations arising out of the exercise of the Stock
Appreciation Rights in cash pursuant to Section 6.6 hereof, deliver to the
recipient an amount in cash equal to the Market Price, as of the date of
exercise, of the shares of Common Stock it would otherwise be obligated to
deliver.
6.6 Cash Settlement. The Committee, in its discretion, may cause the
Corporation to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver
in an amount equal to the Market Price of such shares on the date of exercise.
ARTICLE 7.
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option or Stock Appreciation Rights shall be subject to execution, attachment
or similar process. Any attempted assignment, transfer, pledge, hypothecation
or other disposition of an Option or Stock Appreciation Rights not specifically
permitted herein shall be null and void and without effect. An Option or Stock
Appreciation Rights granted to an individual may be exercised by the recipient
only during his or her lifetime, or following his or her death pursuant to
Section 8.4 hereof.
Notwithstanding anything to the contrary in the preceding paragraph, the
Committee may, in its sole discretion, cause the written agreement relating to
any Non-qualified Stock Options or Stock Appreciation Rights granted hereunder
to provide that the recipient of such Non-qualified Stock Options or Stock
Appreciation Rights may transfer any of such Non-qualified Stock Options or
Stock Appreciation Rights other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the
Act, or would cause any recipient of awards hereunder to fail to be entitled to
the benefits Rule 16b-3 or other exemptive rules under Section 16 of the Act or
be subject to liability thereunder.
ARTICLE 8.
EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT
<PAGE> 9
DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT
8.1 General Rule. Except as expressly determined by the Committee in its
sole discretion, no Option or Stock Appreciation Rights shall be exercisable
after three months following the recipient's termination of employment with or,
in the case of a nonemployee recipient, cessation of providing services to the
Corporation or a subsidiary, unless such termination or cessation occurs by
reason of (i) a Relocation Event (as defined in Section 8.2), (ii) Retirement
(as defined in Section 8.3), (iii) death, or (iv) a Special Event (as defined
in Section 8.5), provided that, in the case of a Special Event, the Committee
shall have modified such Option or Stock Appreciation Rights to remain
exercisable as provided in Section 8.5.
Options and Stock Appreciation Rights shall not be affected by any change
of duties so long as the recipient continues to be employed by or provide
services to either the Corporation or a subsidiary. The Committee may, in its
sole discretion, cause any Option or Stock Appreciation Rights to be forfeited
upon an award recipient's termination of employment or other arrangement for
the provision of services if the recipient was terminated for one (or more) of
the following reasons: (i) the conviction of, or plea of guilty or nolo
contendere to, the commission of a felony, (ii) the commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the recipient
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary, (iv) any breach
of the recipient's fiduciary duties to the Corporation, or (v) a serious
violation by the recipient of a Corporation policy. It shall be within the sole
discretion of the Committee to determine whether the recipient's termination
was for one of the foregoing reasons, and the decision of the Committee shall
be final and conclusive.
8.2 Relocation Event. Options and Stock Appreciation Rights granted to a
recipient shall remain outstanding after termination of such recipient's
employment with or, in the case of a nonemployee recipient, cessation of
providing services to the Corporation or a subsidiary, if such termination or
cessation solely occurs by reason of a "Relocation Event," which shall be
deemed to occur if (i) a husband and wife are both current employees, officers,
directors or independent contractors of or to the Corporation, (ii) the
Corporation transfers one spouse to a new location, (iii) the Corporation is
unable to offer the other spouse a position that is substantially comparable to
his or her current position, and (iv) as a result, the other spouse's
employment with or other arrangement for the provision of services to the
Corporation is terminated and the other spouse, as recipient, holds outstanding
Options or Stock Appreciation Rights.
In case of a Relocation Event, the Options or Stock Appreciation Rights
held by a terminated recipient shall be exercisable for a period equal to the
lesser of (i) the period such Options or Stock Appreciation Rights would be
exercisable absent such termination, and (ii) the period such Options or Stock
Appreciation Rights would be exercisable if granted to the spouse continuing as
an employee, officer, director or independent contractor of the Corporation on
the date originally granted to the terminated spouse.
<PAGE> 10
8.3 Disability or Retirement. Except as expressly provided otherwise in the
written agreement relating to any Option or Stock Appreciation Rights granted
under the Plan, in the event of the Disability or Retirement of an employee,
officer or director who is the recipient of Options or Stock Appreciation
Rights, the Options or Stock Appreciation Rights which are held by such
recipient on the date of such Disability or Retirement, whether or not otherwise
exercisable on such date, shall be exercisable at any time until the expiration
date of the Options or Stock Appreciation Rights; provided, however, that any
Incentive Stock Option of such recipient shall no longer be treated as an
Incentive Stock Option unless exercised within three (3) months of the date of
such Disability or Retirement (or within one (1) year in the case of an employee
who is "disabled" within the meaning of Section 22(e)(3) of the Code).
"Disability" shall mean any termination of employment with or, in the case
of a nonemployee officer or director, status as an officer or director of the
Corporation or a subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion. "Retirement" shall mean a
termination of employment with or, in the case of a nonemployee officer or
director, status as an officer or director of the Corporation or a subsidiary
either (i) on a voluntary basis by a recipient who is at least 60 years of age
and has at least 15 years of service with the Corporation or a subsidiary or
(ii) otherwise with the written consent of the Committee in its sole discretion.
The decision of the Committee shall be final and conclusive.
8.4 Death. Except as expressly provided otherwise in the written agreement
relating to any Option or Stock Appreciation Rights granted under the Plan, in
the event of the death of a recipient of Options or Stock Appreciation Rights
while an employee, officer or director of the Corporation or any subsidiary,
Options or Stock Appreciation Rights which are held by such recipient at the
date of death, whether or not otherwise exercisable on the date of death, shall
be exercisable by the beneficiary designated by such recipient for such purpose
(the "Designated Beneficiary") or if no Designated Beneficiary shall be
appointed or if the Designated Beneficiary shall predecease such recipient, by
such recipient's personal representatives, heirs or legatees at any time within
three (3) years from the date of death (subject to the limitation in Section 5.7
hereon, at which time such Options or Stock Appreciation Rights shall terminate;
provided, however, that any Incentive Stock Option of such recipient shall no
longer be treated as an Incentive Stock Option unless exercised within three (3)
months of the date of the recipient's death.
In the event of the death of a recipient of Options or Stock Appreciation
Rights following a termination of employment or, in the case of a nonemployee
officer or director, status as an officer or director due to Retirement,
Disability or a Special Event (as defined in Section 8.5 hereof), if such death
occurs before the Options or Stock Appreciation Rights are exercised, the
Options or Stock Appreciation Rights which are held by such recipient on the
date of termination shall be exercisable by such recipient's Designated
Beneficiary, or if no Designated Beneficiary shall be appointed or if the
Designated Beneficiary shall predecease such recipient, by such recipient's
personal representatives, heirs or legatees to the same extent such Options or
Stock Appreciation Rights were exercisable by the recipient following such
termination of employment.
<PAGE> 11
8.5 Special Event. In the case of a Special Event, any Options or Stock
Appreciation Rights held by a recipient whose relationship with the Company will
be terminated as a result of the Special Event, shall accelerate and become
fully-exercisable upon the occurrence of the Special Event.
A "Special Event" shall mean (i) the entry into by the Corporation of a
definitive agreement for the sale or merger of the Corporation, or the sale or
other disposition of a subsidiary or division of the Corporation; (ii) the
closing or discontinuation of a specific operation of the Corporation or any
subsidiary; (iii) the elimination of job categories; or (iv) a limited program
of terminations in connection with a personnel reorganization or restructuring
of the Corporation or any subsidiary of the Corporation scheduled to be
completed on a date certain, provided, however, that only those recipients who
meet the terms and conditions as established by the Board or the Committee in
its discretion shall be eligible to receive accelerated vesting of Options and
Stock Appreciation Rights.
8.6 Leave of Absence. In the case of an employee, officer or director on
an approved leave of absence, the Options and Stock Appreciation Rights of such
person shall not be affected unless such leave is longer than 13 weeks. The date
of exercisability of any Options or Stock Appreciation Rights of an employee,
officer or director which are unexercisable at the beginning of an approved
leave of absence lasting longer than 13 weeks shall be postponed for a period
equal to the length of such leave of absence. Notwithstanding the foregoing,
the Committee may, in its sole discretion, waive in writing any such
postponement of the date of exercisability of any Options or Stock Appreciation
Rights due to a leave of absence.
ARTICLE 9.
RESTRICTED SHARES
9.1 Grant of Restricted Shares. The Committee may from time to time cause
the Corporation to grant Restricted Shares under the Plan to employees,
officers, directors or independent contractors of the Corporation, subject to
such restrictions, conditions and other terms as the Committee may determine.
9.2 Restrictions. At the time a grant of Restricted Shares is made, the
Committee shall establish a period of time (the "Restricted Period") applicable
to such Restricted Shares. Each grant of Restricted Shares may be subject to a
different Restricted Period. The Committee may, in its sole discretion, at the
time a grant is made, prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or
individual performance objectives, which shall be applicable to all or any
portion of the Restricted Shares. The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any other
restrictions applicable to all or a portion of such Restricted Shares. None of
the Restricted Shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Committee with respect
to such Restricted Shares.
<PAGE> 12
9.3 RESTRICTED STOCK CERTIFICATES. The Corporation shall issue, in the
name of each person to whom Restricted Shares have been granted, stock
certificates representing the total number of Restricted Shares granted to the
recipient, as soon as reasonably practicable after the grant. The Corporation,
at the direction of the Committee, shall hold such certificates, properly
endorsed for transfer, for the recipient's benefit until such time as the
Restricted Shares are forfeited to the Corporation, or the restrictions lapse.
9.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES. Holders of Restricted
Shares shall not have the right to vote such shares, or the right to receive any
cash dividends with respect to such shares, except as such rights are
specifically granted by the Committee. All distributions, if any, received by a
recipient with respect to Restricted Shares as a result of any stock split,
stock distribution, a combination of shares, or other similar transaction shall
be subject to the restrictions of this Article 9.
9.5 FORFEITURE. Any Restricted Shares granted pursuant to the Plan
shall be forfeited if the recipient terminates employment with or, in the case
of a nonemployee recipient, the cessation of providing services to the
Corporation or its subsidiaries prior to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon such forfeiture, the Restricted Shares that are
forfeited shall be retained in the treasury of the Corporation and available for
subsequent awards under the Plan, unless the Committee directs that such
Restricted Shares be cancelled upon forfeiture. If the recipient's employment or
other arrangement for the provision of services terminates as a result of
Disability, Retirement or death, or a Relocation Event or Special Event, all
Restricted Shares of such recipient shall be forfeited, unless the Committee, in
its sole discretion, shall determine otherwise.
9.6 DELIVERY OF RESTRICTED SHARES. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions prescribed
by the Committee, the restrictions applicable to the Restricted Shares shall
lapse and a stock certificate for the number of Restricted Shares with respect
to which the restrictions have lapsed shall be delivered, free of all such
restrictions, to the recipient or the recipient's beneficiary or estate, as the
case may be.
ARTICLE 10.
PERFORMANCE SHARES
10.1 AWARD OF PERFORMANCE SHARES. For each Performance Period (as
defined in Section 10.2), Performance Shares may be granted under the Plan to
such employees, officers, directors and independent contractors of the
Corporation and its subsidiaries as the Committee shall determine in its sole
discretion. Each Performance Share shall be deemed to be equivalent to one (1)
share of Common Stock. Performance Shares granted to such a recipient shall be
credited to an account (a "Performance Share Account") established and
maintained for such recipient.
10.2 PERFORMANCE PERIOD. "Performance Period" shall mean such period of
time as shall be determined by the Committee in its sole discretion. Different
Performance Periods may be
<PAGE> 13
established for different recipients receiving Performance Shares. Performance
Periods may run consecutively or concurrently.
10.3 RIGHT TO PAYMENT OF PERFORMANCE SHARES. With respect to each
award of Performance Shares under the Plan, the Committee shall specify
performance objectives (the "Performance Objectives") which must be satisfied
in order for the recipient to vest in the Performance Shares which have been
awarded to such recipient for the Performance Period. If the Performance
Objectives established for a recipient for the Performance Period are partially
but not fully met, the Committee may, nonetheless, in its sole discretion,
determine that all or a portion of the Performance Shares have vested. If the
Performance Objectives for a Performance Period are exceeded, the Committee
may, in its sole discretion, grant additional, fully vested Performance Shares
to the recipient. The Committee may also determine, in its sole discretion,
that Performance Shares awarded to a recipient shall become partially or fully
vested upon the recipient's Disability, Retirement or death, or upon a
Relocation Event or Special Event, or upon the termination of the recipient's
employment or other arrangement for the provision of services to the
Corporation prior to the end of the Performance Period.
10.4 PAYMENT FOR PERFORMANCE SHARES. As soon as practicable following
the end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 10.3). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Shares shall be granted to the
recipient pursuant to Section 10.3. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the recipient an amount with respect
to each vested Performance Share equal to the Market Price of a share of Common
Stock on such payment date or, if the Committee shall so specify at the time of
grant, an amount equal to (i) the Market Price of a share of Common Stock on the
payment date less (ii) the Market Price of a share of Common Stock on the date
of grant of the Performance Share. Payment shall be made entirely in cash,
entirely in Common Stock (including Restricted Shares) or in such combination of
cash and Common Stock as the Committee shall determine in its sole discretion.
10.5 VOTING AND DIVIDEND RIGHTS. Except as provided in Article 14
hereof, no recipient of Performance Shares shall be entitled to any voting
rights, to receive any cash dividends, or to have such recipient's Performance
Share Account credited or increased as a result of any cash dividends or other
distribution with respect to Common Stock. Notwithstanding the foregoing,
within sixty (60) days from the date of payment of a cash dividend by the
Corporation on its shares of Common Stock, the Committee, in its sole
discretion, may credit a recipient's Performance Share Account with additional
Performance Shares having an aggregate Market Price equal to the cash dividend
per share paid on the Common Stock multiplied by the number of Performance
Shares credited to such recipient's account at the time the cash dividend was
declared.
ARTICLE 11.
<PAGE> 14
PERFORMANCE UNITS
11.1 Award of Performance Units. For each Performance Period (as defined
in Section 10.2), Performance Units may be granted under the Plan to such
employees, officers, directors and independent contractors of the Corporation
and its subsidiaries as the Committee shall determine in its sole discretion.
The award agreement covering such Performance Units shall specify a value for
each Performance Unit or shall set forth a formula for determining the value of
each Performance Unit at the time of payment (the "Ending Value"). If necessary
to make the calculation of the amount to be paid to the recipient pursuant to
Section 11.3, the Committee shall also state in the award agreement the initial
value of each Performance Unit (the "Initial Value"). Performance Units granted
to a recipient shall be credited to an account (a "Performance Unit Account")
established and maintained for such recipient.
11.2 Right to Payment of Performance Units. With respect to each award
of Performance Units under the Plan, the Committee shall specify Performance
Objectives which must be satisfied in order for the recipient to vest in the
Performance Units which have been awarded to such recipient for the Performance
Period. If the Performance Objectives established for a recipient for the
Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the recipient. The Committee may,
in its sole discretion, adjust the Performance Objectives or the Initial Value
or Ending Value of any Performance Units to reflect extraordinary events, such
as stock splits, recapitalizations, mergers, combinations, divestitures,
spin-offs and the like. The Committee may also determine, in its sole
discretion, that Performance Units awarded to a recipient shall become partially
or fully vested upon the recipient's termination of employment or other
arrangement for the provision of services to the Corporation due to Disability,
Retirement, death or otherwise, or upon a Relocation Event or Special Event.
11.3 Payment for Performance Units. As soon as practicable following the
end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 11.2). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Units shall be granted to the recipient
pursuant to Section 11.2. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the recipient an amount with respect
to each vested Performance Unit equal to the Ending Value of the Performance
Unit or, if the Committee shall so specify at the time of grant, an amount equal
to (i) the Ending Value of the Performance Unit less (ii) the Initial Value of
the Performance Unit. Payment shall be made entirely in cash, entirely in Common
Stock (including Restricted Shares) or in such combination of cash and Common
Stock as the Committee shall determine in its sole discretion.
<PAGE> 15
ARTICLE 12.
UNRESTRICTED SHARES
12.1 Award of Unrestricted Shares. The Committee may cause the
Corporation to grant Unrestricted Shares to employees, officers, directors or
independent contractors of the Corporation at such time or times, in such
amounts and for such reasons as the Committee, in its sole discretion, shall
determine. No payment shall be required for Unrestricted Shares.
12.2 Delivery of Unrestricted Shares. The Corporation shall issue, in
the name of each person to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to the
recipient, and shall deliver such certificates to the recipient as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
ARTICLE 13.
TAX OFFSET PAYMENTS
The Committee shall have the authority at the time of any award under
the Plan or anytime thereafter to make Tax Offset Payments, in cash or
Unrestricted Shares, to assist recipients in paying income taxes incurred as a
result of their participation in the Plan. The Tax Offset Payments shall be
determined by multiplying a percentage established by the Committee by all or a
portion (as the Committee shall determine) of the taxable income recognized by a
recipient upon (i) the exercise of Non-qualified Stock Options or Stock
Appreciation Rights, (ii) the disposition of shares received upon exercise of
Incentive Stock Options, (iii) the lapse of restrictions on Restricted Shares,
(iv) the award of Unrestricted Shares, or (v) payments for Performance Shares or
Performance Units. The percentage shall be established, from time to time, by
the Committee at that rate which the Committee, in its sole discretion,
determines to be appropriate and in the best interests of the Corporation to
assist recipients in paying income taxes incurred as a result of the events
described in the preceding sentence.
ARTICLE 14.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may: (i)
at any time, make or provide for such adjustments to the Plan or to the number
and class of shares available thereunder or (ii) at the time of grant of any
Options, Stock Appreciation Rights, Restricted Shares or Performance Shares,
provide for such adjustments to such Options, Stock Appreciation Rights,
Restricted Shares or Performance Shares, in each case, as the Committee shall
deem appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, spin-offs, reorganizations, liquidations and the like.
<PAGE> 16
ARTICLE 15.
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to persons eligible to receive awards under the Plan, or (iii)
materially modify the requirements as to eligibility for participation in the
Plan, shall be subject to the approval of the Corporation's stockholders, except
that any such increase or modification that may result from adjustments
authorized by Article 14 hereof shall not require such stockholder approval. If
the Plan is terminated, the terms of the Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such termination. No
suspension, termination, modification or amendment of the Plan may, without the
consent of the recipient to whom an award shall theretofore have been granted,
adversely affect the rights of such recipient under such award.
ARTICLE 16.
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted Shares,
Performance Shares, Performance Units, Unrestricted Shares and Tax Offset
Payments shall be evidenced by a written agreement containing such restrictions,
terms and conditions, if any, as the Committee may require. In the event of any
conflict between a written agreement and the Plan, the terms of the Plan shall
govern.
ARTICLE 17.
MISCELLANEOUS PROVISIONS
17.1 TAX WITHHOLDING. The Corporation shall have the right to require
recipients or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan, including Tax
Offset Payments, amounts sufficient to satisfy all withholding tax requirements.
Whenever payments under the Plan are to be made to a recipient in cash, such
payments shall be net of any amounts sufficient to satisfy all Federal, state
and local withholding tax requirements. The Committee may, in its sole
discretion, permit a recipient to satisfy his or her tax withholding obligation
either by (i) surrendering shares of Common Stock owned by the recipient or (ii)
having the Corporation withhold from shares of Common Stock otherwise
<PAGE> 17
deliverable to the employee. Shares surrendered or withheld shall be valued at
their Market Price as of the date on which income is required to be recognized
for income tax purposes.
17.2 Compliance With Section 16(b). In the case of recipients of awards
under the Plan who are or may be subject to Section 16 of the Act, it is the
intent of the Corporation that the Plan and any award granted hereunder satisfy
and be interpreted in a manner that satisfies the applicable requirements of
Rule 16b-3, so that such persons will be entitled to the benefits of Rule 16b-3
or other exemptive rules under Section 16 of the Act and will not be subjected
to liability thereunder. If any provision of the Plan or any award would
otherwise conflict with the intent expressed herein, that provision, to the
extent possible, shall be interpreted and deemed amended so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provision shall be deemed void as applicable to recipients who are
or may be subject to Section 16 of the Act.
17.3 Successors. The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, at its discretion prior to the consummation of the
transaction and subject to Article 15 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.
17.4 General Creditor Status. Recipients of awards under the Plan shall
have no right, title, or interest whatsoever in or to any investments which the
Corporation may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation and any recipient of an award under the
Plan or any beneficiary or legal representative of such a recipient. To the
extent that any person acquires a right to receive payments from the Corporation
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Corporation. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan.
17.5 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 16 hereof, nor the grant of any
award, shall confer upon any person any right to continue in the employ of or be
retained in any capacity by the Corporation or a subsidiary or to be entitled to
any remuneration or benefits not set forth in the Plan or such written agreement
or interfere with or limit the right of the Corporation or a subsidiary to
modify the terms of or terminate at any time such person's employment or other
arrangement for the provision of services to the Corporation.
17.6 Notices. Notices required or permitted to be made under the Plan shall
be sufficiently made if personally delivered to a recipient of an award under
the Plan or sent by
<PAGE> 18
regular mail addressed (a) to the recipient at the recipient's address as set
forth in the books and records of the Corporation or its subsidiaries, or (b) to
the Corporation or the Committee at the principal office of the Corporation
clearly marked "Attention: Stock Option Committee."
17.7 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
17.8 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Connecticut.
<PAGE> 19
AMENDMENTS TO THE BDS BUSINESS CENTER, INC.
STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
The BDS Business Center, Inc. Stock Option and Performance Incentive Plan
is hereby amended effective December 1, 1998 as follows:
1. SECTION 1.2 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
SECTION 1.2 IS SUBSTITUTED THEREFORE:
"1.2 Purpose. The purpose of the plan is to encourage and enable selected
employees, officers, directors and independent contractors (subject to such
requirements as may be prescribed by the Board of Directors or Committee)
of the Corporation and its subsidiaries to acquire a proprietary interest
in the Corporation through the ownership of the Corporation's common stock,
without par value ("Common Stock"), and other rights with respect to the
Common Stock. Such ownership will provide such persons with a more direct
stake in the future welfare of the Corporation and encourage them to exert
their best efforts for the Corporation and its subsidiaries. It is also
expected that the Plan will encourage qualified persons to seek and accept
employment with or provide services to the Corporation and its
subsidiaries."
2. SECTION 2.2 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
SECTION 2.2 IS SUBSTITUTED THEREFORE:
"2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 1,250,000 subject to
adjustment pursuant to Article 14 hereof. In addition, Tax Offset Payments
which may be awarded under the Plan will not exceed the number of shares
available for the issuance under the Plan. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Corporation. In the event that prior to the end of
the period during which Options may be granted under the Plan, any Option
or any Nontandem Stock Appreciation Rights under the Plan expires
unexercised or is terminated surrendered or cancelled (other than in
connection with the exercise of Stock Appreciation Rights) without being
exercised in whole or in part for any reason, or any Restricted Shares,
Performance Shares or Performance Units are forfeited, or if such awards
are settled in cash in lieu of share of Common Stock, then such shares or
units shall be available for subsequent awards under the Plan, upon such
terms as the Board or the Committee may determine."
3. SECTION 3.1 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
SECTION 3.1 IS SUBSTITUTED THEREFORE:
"3.1 Committee. Awards shall be determined, and the Plan may be
administered either by the Board, or by the Committee as appointed from
time to time by the Board, which Committee shall consist of no less than
two (2) members of the Board. Any references hereafter to the Committee
shall apply to the Board if no Committee has been appointed by the Board.
<PAGE> 20
4. SECTION 5.3 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
SECTION 5.3 IS SUBSTITUTED THEREFORE:
"5.3 OPTION PRICE. The purchase price per share under each incentive Stock
Option shall be the Market Price (as hereinafter defined) of the Common
Stock on the date the Incentive Stock Option is granted. The purchase
price per share under each Non-qualified Stock Option shall be specified by
the Committee. In no case, however, shall the purchase price per share of
either an Incentive Stock Option or Non-qualified Stock Option be less than
($.01). Notwithstanding the foregoing, to the extent required by the Code,
the purchase price per share under each Non-qualified Stock Option granted
to an employee who is treated as a "covered employee" (as defined in
Section 162(m)(3) of the Code) on the date such Non-Qualified Option is
exercised shall not be less than 100% of the Market Price of the Common
Stock on the date of the grant. In the case of an Incentive Stock Option
granted to an employee owning (actually or constructively under Section
424(d) of the Code), more than 10% of the total combined voting power of
all classes of stock of the Corporation or of a subsidiary (a "10%
Stockholder"), the option price shall not be less than 110% of the Market
Price of the Common Stock on the date of grant.
The "Market Price" of the Common Stock on any day shall be determined as
follows: (i) if the Common Stock is listed on a national securities
exchange or quoted through the NASDAQ National Market System, the Market
Price on any day shall be the average of the high and the low reported
Consolidated Trading sales prices, or if no such sale is made on such day,
the average of the closing bid and the asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is
quoted on the NASDAQ inter-dealer quotation system, the Market Price on any
day shall be the of the representative bid and asked prices at the close of
the business for such day; (iii) if the Common Stock is not listed on a
national stock exchange or quoted on NASDAQ, the Market Price on any day
shall be the average of the high bid and low asked prices reported by the
National Quotation Bureau, ("NQB") Inc. for such day; or (iv) if the Common
Stock is not reported on by the NQB, the fair market value thereof on such
date as determined in good faith by the Corporation's Board of Directors.
In no event shall the Market Price of a share of Common Stock subject to an
Incentive Stock Option be less than the fair market value as determined for
the purposes of Section 422(b)(4) of the Code.
The Option price so determined shall also be applicable in connection with
the exercise of any Tandem Stock Appreciation Rights granted with respect
to such option."
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<PAGE> 1
EXHIBIT 10.2
BDS BUSINESS CENTER, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
1. Purpose and Eligibility
The purpose of this 1999 Stock Option and Incentive Plan (the "Plan")
of BDS Business Center, Inc. (the "Company") is to provide stock options and
other equity interests in the Company (each an "Award") to employees, officers,
directors, consultants and advisors of the Company and its Subsidiaries, all of
whom are eligible to receive Awards under the Plan. Any person to whom an Award
has been granted under the Plan is called a "Participant". Additional
definitions are contained in Section 8.
2. Administration
a. Administration by Board of Directors. The Plan will be administered
by the Board of Directors of the Company (the "Board"). The Board, in its sole
discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan and to interpret and correct the
provisions of the Plan and any Award. All decisions by the Board shall be final
and binding on all interested persons. Neither the Company nor any member of the
Board shall be liable for any action or determination relating to the Plan.
b. Appointment of Committees. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean such Committee or the Board.
c. Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.
3. Stock Available for Awards
a. Number of Shares. Subject to adjustment under Section 3(c), the
aggregate number of shares of Common Stock of the Company (the "Common Stock")
that may be issued pursuant to the Plan is 354,000 shares. If any Award expires,
or is terminated, surrendered or forfeited, in whole or in part, the unissued
Common Stock covered by such Award shall again be available for the grant of
Awards under the Plan. If shares of Common Stock issued pursuant to the Plan are
repurchased by, or are surrendered or forfeited to, the Company at no more than
cost, such shares of Common Stock shall again be available for the grant of
Awards under the Plan; provided, however, that the cumulative number of such
shares that may be so reissued
<PAGE> 2
under the Plan will not exceed 354,000 shares. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
b. Per-Participant Limit. Subject to adjustment under Section 3(c), no
Participant may be granted Awards during any one fiscal year to purchase more
than 300,000 shares of Common Stock.
c. Adjustment to Common Stock. In the event of any stock split, stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off, split-up,
or other similar change in capitalization or event, (i) the number and class of
securities available for Awards under the Plan and the per-Participant share
limit, (ii) the number and class of securities, vesting schedule and exercise
price per share subject to each outstanding Option, (iii) the repurchase price
per security subject to repurchase, and (iv) the terms of each other outstanding
stock-based Award shall be adjusted by the Company (or substituted Awards may be
made) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is appropriate. If Section 7(e)(i) applies for any
event, this Section 3(c) shall not be applicable.
4. Stock Options
a. General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state
securities laws, as it considers advisable.
b. Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall be granted only to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Board and the Company shall have no liability if an Option
or any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a "Nonstatutory Stock Option".
c. Exercise Price. The Board shall establish the exercise price (or
determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify it in the applicable option agreement.
d. Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
e. Exercise of Option. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 4(f) for the number of shares for
which the Option is exercised.
- 2 -
<PAGE> 3
f. Payment Upon Exercise. Common Stock purchased upon the exercise of
an Option shall be paid for by one or any combination of the following forms of
payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable
option agreement, and only if the Common Stock is then publicly traded, delivery
of an irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the Participant
valued at fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement), (y) delivery of a promissory note
of the Participant to the Company (and delivery to the Company by the
Participant of a check in an amount equal to the par value of the shares
purchased), or (z) payment of such other lawful consideration as the Board may
determine.
5. Restricted Stock
a. Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award").
b. Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or, if the Participant has died, to the
beneficiary designated by a Participant, in a manner determined by the Board, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
6. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including, without limitation, the
- 3 -
<PAGE> 4
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights,
phantom stock awards or stock units.
7. General Provisions Applicable to Awards
a. Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
b. Documentation. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine or as executed by
an officer of the Company pursuant to authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in the
Plan provided that such terms and conditions do not contravene the provisions of
the Plan.
c. Board Discretion. The terms of each type of Award need not be
identical, and the Board need not treat Participants uniformly.
d. Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.
e. Acquisition of the Company
(i) Consequences of an Acquisition.
(A) Acquisition Intended to be Accounted for as a
Pooling-of-Interests. Upon the consummation of an Acquisition intended to be
accounted for as a pooling of interests: (x) all outstanding Awards shall remain
the obligation of the Company or be assumed by the surviving or acquiring
entity, and there shall be automatically substituted for the shares of Common
Stock then subject to such Awards the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition and (y)
the vesting provisions of all Awards shall become accelerated by a period of one
year. In addition to the foregoing, on the first yearly anniversary of the
consummation of the Acquisition, with respect to Participants who remain
employees of the Company or the surviving or acquiring entity immediately
following the consummation of the Acquisition and who continuously remain as
such through first anniversary of the consummation of the Acquisition, on such
first anniversary date: (1) all Options then outstanding shall become
immediately exercisable in full and will terminate, to the extent unexercised,
on their scheduled expiration date, and if the shares of
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<PAGE> 5
Common Stock subject to such Options are subject to repurchase provisions then
such repurchase restrictions shall immediately lapse; (2) all Restricted Stock
Awards then outstanding shall become free of all repurchase provisions; and (3)
all other stock-based Awards shall become exercisable, realizable or vested in
full, or shall be free of all repurchase provisions, as the case may be. In the
event that any such Participant who remains an employee of the Company or the
acquiring or surviving entity immediately following the consummation of the
Acquisition is terminated without "cause" (as defined in the applicable option
agreement) or terminates his or her own employment "for good reason" (as defined
in the applicable option agreement) prior to the first anniversary of the
consummation of the Acquisition, then the foregoing clauses (1) through (3)
shall be deemed to be immediately applicable to such employee on such
termination date.
(B) Acquisition Intended to be Accounted for under the Purchase
Method. Unless otherwise expressly provided in the applicable Option or Award,
upon the occurrence of an Acquisition intended to be accounted for under the
purchase method, the Board or the board of directors of the surviving or
acquiring entity (as used in this Section 7(e)(i)(B), also the "Board"), shall,
as to outstanding Awards (on the same basis or on different bases, as the Board
shall specify), make appropriate provision for the continuation of such Awards
by the Company or the assumption of such Awards by the surviving or acquiring
entity and by substituting on an equitable basis for the shares then subject to
such Awards either (a) the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition, (b) shares of stock
of the surviving or acquiring corporation or (c) such other securities as the
Board deems appropriate, the fair market value of which (as determined by the
Board in its sole discretion) shall not materially differ from the fair market
value of the shares of Common Stock subject to such Awards immediately preceding
the Acquisition. In addition to or in lieu of the foregoing, with respect to
outstanding Options, the Board may, upon written notice to the affected
optionees, provide that one or more Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition, within a
specified number of days of the date of such notice, at the end of which period
such Options shall terminate; or terminate one or more Options in exchange for a
cash payment equal to the excess of the fair market value (as determined by the
Board in its sole discretion) of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of the Acquisition)
over the exercise price thereof.
(C) Acquisition Defined. An "Acquisition" shall mean: (x) any
merger or consolidation after which the voting securities of the Company
outstanding immediately prior thereto represent (either by remaining outstanding
or by being converted into voting securities of the surviving or acquiring
entity) less than 50% of the combined voting power of the voting securities of
the Company or such surviving or acquiring entity outstanding immediately after
such event; or (y) any sale of all or substantially all of the assets or capital
stock of the Company (other than in a spin-off or similar transaction) or (z)
any other acquisition of the business of the Company, as determined by the
Board.
(ii) Assumption of Options Upon Certain Events. In connection with a
merger or consolidation of an entity with the Company or the acquisition by the
Company of property or
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<PAGE> 6
stock of an entity, the Board may grant Awards under the Plan in substitution
for stock and stock-based awards issued by such entity or an affiliate thereof.
The substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances.
(iii) Pooling-of Interests-Accounting. If the Company proposes to
engage in an Acquisition intended to be accounted for as a pooling-of-interests,
and in the event that the provisions of this Plan or of any Award hereunder, or
any actions of the Board taken in connection with such Acquisition, are
determined by the Company's or the acquiring company's independent public
accountants to cause such Acquisition to fail to be accounted for as a
pooling-of-interests, then such provisions or actions shall be amended or
rescinded by the Board, without the consent of any Participant, to be consistent
with pooling-of-interests accounting treatment for such Acquisition.
(iv) Parachute Awards. Notwithstanding the provisions of Section
7(e)(i)(A), if, in connection with an Acquisition described therein, a tax under
Section 4999 of the Code would be imposed on the Participant (after taking into
account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the
Code), then the number of Awards which shall become exercisable, realizable or
vested as provided in such section shall be reduced (or delayed), to the minimum
extent necessary, so that no such tax would be imposed on the Participant (the
Awards not becoming so accelerated, realizable or vested, the "Parachute
Awards"); provided, however, that if the "aggregate present value" of the
Parachute Awards would exceed the tax that, but for this sentence, would be
imposed on the Participant under Section 4999 of the Code in connection with the
Acquisition, then the Awards shall become immediately exercisable, realizable
and vested without regard to the provisions of this sentence. For purposes of
the preceding sentence, the "aggregate present value" of an Award shall be
calculated on an after-tax basis (other than taxes imposed by Section 4999 of
the Code) and shall be based on economic principles rather than the principles
set forth under Section 280G of the Code and the regulations promulgated
thereunder. All determinations required to be made under this Section 7(e)(iv)
shall be made by the Company.
f. Withholding. Each Participant shall pay to the Company, or make
provisions satisfactory to the Company for payment of, any taxes required by law
to be withheld in connection with Awards to such Participant no later than the
date of the event creating the tax liability. The Board may allow Participants
to satisfy such tax obligations in whole or in part by transferring shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their fair market value (as determined by the Board or as
determined pursuant to the applicable option agreement). The Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to a Participant.
g. Amendment of Awards. The Board may amend, modify or terminate any
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that, except as otherwise provided in Section 7(e)(iii), the
Participant's consent to such action shall be required unless the Board
determines
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<PAGE> 7
that the action, taking into account any related action, would not materially
and adversely affect the Participant.
h. Conditions on Delivery of Stock. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
i. Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of some or all restrictions, or that any other
stock-based Awards may become exercisable in full or in part or free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be, despite the fact that the foregoing actions may (i) cause the
application of Sections 280G and 4999 of the Code if a change in control of the
Company occurs, or (ii) disqualify all or part of the Option as an Incentive
Stock Option.
8. Miscellaneous
a. Definitions.
(i) "Company," for purposes of eligibility under the Plan, shall
include any present or future subsidiary corporations of BDS Business Center,
Inc., as defined in Section 424(f) of the Code (a "Subsidiary"), and any present
or future parent corporation of BDS Business Center, Inc., as defined in Section
424(e) of the Code. For purposes of Awards other than Incentive Stock Options,
the term "Company" shall include any other business venture in which the Company
has a direct or indirect significant interest, as determined by the Board in its
sole discretion.
(ii) "Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(iii) "employee" for purposes of eligibility under the Plan shall
include a person to whom an offer of employment has been extended by the
Company.
b. No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan.
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<PAGE> 8
c. No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder thereof.
d. Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Awards previously granted may extend beyond that date.
e. Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time.
f. Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors on
May 17, 1999
Approved by the stockholders on
August 10, 1999
- 8 -
<PAGE> 1
Exhibit 10.3
TALLAN, INC.
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the 2000
Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is intended
to promote the interests of Tallan, Inc. (hereinafter, the "Company") by
providing an inducement to obtain and retain the services of qualified persons
who are not employees or officers of the Company to serve as members of its
Board of Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") for which options may be
granted under this Plan shall not exceed 500,000 shares, subject to adjustment
in accordance with paragraph 10 of this Plan. Shares subject to this Plan are
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any options granted under this Plan are
surrendered before exercise or lapse without exercise, in whole or in part, the
shares reserved therefor shall continue to be available under this Plan.
3. Administration. This Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.
4. Automatic Grant of Options. Subject to the availability of shares under
this Plan, (a) each person who is or becomes a member of the Board and who is
not an employee or officer of the Company (a "Non-Employee Director") shall be
automatically granted on the date such person is first elected to the Board,
without further action by the Board, an option to purchase 30,000 shares of
the Common Stock, and (b) each person who is a Non-Employee Director on the last
day of February and the last day of August during the term of this Plan shall be
automatically granted on each such date an option to purchase 10,000 shares
of the Common Stock. The options to be granted under this paragraph 4 shall be
the only options ever to be granted at any time to such member under this Plan.
The number of shares covered by options granted under this
<PAGE> 2
paragraph 4 shall be subject to adjustment in accordance with the provisions of
paragraph 10 of this Plan. Notwithstanding anything to the contrary set forth
herein, if this Plan is not approved by a majority of the Company's stockholders
present, or represented, and voting at a meeting of the Stockholders or
consenting via written consent in lieu of a meeting on such matter, then the
Plan and the options granted pursuant to this Section 4 shall terminate and
become void, and no further options shall be granted under this Plan.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of this Plan. For
purposes of this Plan, if, at the time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market List. However, if the Common Stock is not publicly traded at the
time an option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of paragraph 8 of this Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
7. (a) Vesting of Shares and Non-Transferability of Options. Options
granted under this Plan shall not be exercisable until they become vested.
Options granted under this Plan shall vest in the optionee and thus become
exercisable, in accordance with the following schedule, provided that the
optionee has continuously served as a member of the Board through such vesting
date:
2
<PAGE> 3
<TABLE>
<CAPTION>
Portion of Option
Shares for which
Option Will be Exercisable Date of Vesting
- -------------------------- ---------------
<S> <C>
1/12th Last date of each month
over the year after the date
of the grant
</TABLE>
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) Non-transferability. Any option granted pursuant to this Plan
shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event an optionee ceases to be a member of the Board
for any reason other than death or permanent disability, any then unexercised
portion of options granted to such optionee shall, to the extent not then
vested, immediately terminate and become void; any portion of an option which is
then vested but has not been exercised at the time the optionee so ceases to be
a member of the Board may be exercised, to the extent it is then vested, by the
optionee within 90 days of the date the optionee ceased to be a member of the
Board; and all options shall terminate after such 90 days have expired.
(b) In the event that an optionee ceases to be a member of the
Board by reason of his or her death or permanent disability, any option granted
to such optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) until the scheduled expiration date of the option.
9. Exercise of Option. Subject to the terms and conditions of this Plan
and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person addressed to Tallan, Inc., 628 Hebron Avenue,
Building 2, Suite 502, Glastonbury, CT 06033, at its principal executive
offices, stating the number of shares with respect to which the option is being
exercised, accompanied by payment in full for such shares. Payment may be (a) in
United States dollars in cash or by check, (b) in whole or in part in shares of
the Common Stock of the Company already owned by the person or persons
exercising the option or shares subject to the option being exercised
3
<PAGE> 4
(subject to such restrictions and guidelines as the Board may adopt from time to
time), valued at fair market value determined in accordance with the provisions
of paragraph 5 or (c) consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise. There shall be no
such exercise at any one time as to fewer than one hundred (100) shares or all
of the remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Events. Upon the
occurrence of any of the following events, an optionee's rights with respect to
options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of
shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
(b) Recapitalization Adjustments. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all
or substantially all of the Company's assets or otherwise, each option
granted under this plan which is outstanding but unvested as of the
effective date of such event shall become exercisable in full three (3)
business days prior to the effective date of such event. In the event of a
reorganization, recapitalization, merger, consolidation, or any other
change in the corporate structure or shares of the Company, to the extent
permitted by Rule 16b-3 under the Securities Exchange Act of 1934,
adjustments in the number and kind of shares authorized by this Plan and
in the number and kind of shares covered by, and in the option price of
outstanding options under this Plan necessary to maintain the
proportionate interest of the optionee and preserve, without exceeding,
the value of such option, shall be made. Notwithstanding the foregoing, no
such adjustment shall be made which would, within the meaning of any
applicable provisions of the Internal Revenue Code of 1986, as amended,
4
<PAGE> 5
constitute a modification, extension or renewal of any Option or a grant
of additional benefits to the holder of an Option.
(c) Issuances of Securities. 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 options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the
Company.
(d) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in paragraphs 2
and 4 of this Plan that are subject to options which previously have been
or subsequently may be granted under this Plan shall also be appropriately
adjusted to reflect such events. The Board shall determine the specific
adjustments to be made under this paragraph 10 and its determination shall
be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the provisions of
paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(i) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively
registered under applicable Federal and state securities laws as now in
force or hereafter amended; or
(ii) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and
state securities laws as now in force or hereafter amended; and the
Company has complied with all applicable laws and regulations with respect
thereto, including without limitation all regulations required by any
stock exchange upon which the Company's outstanding Common Stock is then
listed.
12. Legend on Certificates. The certificates representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
13. Representation of Optionee. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933).
5
<PAGE> 6
14. Option Agreement. Each option granted under the provisions of this
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with this Plan as may be determined by the officer
executing it.
15. Termination and Amendment of Plan. Options may no longer be granted
under this Plan after January 27, 2010, and this Plan shall terminate when all
options granted or to be granted hereunder are no longer outstanding. The Board
may at any time terminate this Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
without approval of the stockholders, (a) increase the maximum number of shares
for which options may be granted under this Plan (except by adjustment pursuant
to Section 10), (b) materially modify the requirements as to eligibility to
participate in this Plan or (c) materially increase benefits accruing to option
holders under this Plan. Termination or any modification or amendment of this
Plan shall not, without consent of a participant, affect his or her rights under
an option previously granted to him or her.
16. Withholding of Income Taxes. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay withholding taxes in respect of amounts considered
to be compensation includible in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934
(or any successor or amended provision thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of this Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
18. Governing Law. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
Date Approved by Board of Directors of the Company: January 27, 2000
Date Approved by Stockholders of the Company:
6
<PAGE> 1
Exhibit 10.4
TALLAN, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
This 2000 Employee Stock Purchase Plan (the "Plan") is intended to
encourage stock ownership by all eligible employees of Tallan, Inc. (the
"Company"), a Delaware corporation, and its participating subsidiaries (as
defined in Article 17) so that they may share in the growth of the Company by
acquiring or increasing their proprietary interest in the Company. The Plan is
designed to encourage eligible employees to remain in the employ of the Company
and its participating subsidiaries. The Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
The Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Committee may select one of its members as Chairman, and
shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all power and
authority to administer the Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors.
<PAGE> 2
-2-
ARTICLE 3 - ELIGIBLE EMPLOYEES.
All employees of the Company or any of its participating subsidiaries
shall be eligible to receive options under the Plan to purchase common stock of
the Company, and all eligible employees shall have the same rights and
privileges hereunder. Persons who are eligible employees on the first business
day of any Payment Period (as defined in Article 5) shall receive their options
as of such day. Persons who become eligible employees after any date on which
options are granted under the Plan shall be granted options on the first day of
the next succeeding Payment Period on which options are granted to eligible
employees under the Plan. In no event, however, may an employee be granted an
option if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company or of any parent
corporation or subsidiary corporation, as the terms "parent corporation" and
"subsidiary corporation" are defined in Section 424(e) and (f) of the Code. For
purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply, and stock which the employee may
purchase under outstanding options shall be treated as stock owned by the
employee.
For the purposes of this Article 3, the term "employee" shall mean an
employee whose customary employment is more than twenty (20) hours per week and
for more than five (5) months in any calendar year.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
The stock subject to the options under the Plan shall be shares of the
Company's authorized but unissued common stock, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares which may be
issued pursuant to the Plan is 1,200,000, subject to adjustment as provided in
Article 12. If any option granted under the Plan shall expire or terminate for
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part, the unpurchased shares subject thereto
shall again be available under the Plan.
ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS.
Payment Periods during which payroll deductions will be accumulated under
the Plan shall consist of the six-month periods from September 1 to the last day
of February and from March 1 to August 31 of each calendar year, beginning with
the first Payment Period. The first Payment Period under the Plan shall commence
on the effective date of an initial public offering of Common Stock of the
Company (the "Effective Date") and shall end on the following August
<PAGE> 3
-3-
31st. Payroll deductions made from bonus and commission payments will be deemed
accumulated under the Plan during the Payment Period during which such payments
are made. All other payroll deductions will be deemed accumulated under the Plan
during the Payment Period during which the regular payroll period to which it
relates ends.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, a maximum of 500 shares, on condition that such
employee remains eligible to participate in the Plan throughout the remainder of
such Payment Period. The participant shall be entitled to exercise the option so
granted only to the extent of the participant's accumulated payroll deductions
on the last day of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the participant to
purchase more than 500 shares except for the 500 share limitation, the excess of
the amount of the accumulated payroll deductions over the aggregate purchase
price of the 500 shares shall be promptly refunded to the participant by the
Company, without interest. The Option Price per share for each Payment Period
shall be the lesser of (i) 85% of the average market price of the Common Stock
on the first business day of the Payment Period and (ii) 85% of the average
market price of the Common Stock on the last business day of the Payment Period,
in either event rounded up to avoid fractions of a dollar other than 1/4, 1/2
and 3/4. The foregoing limitation on the number of shares subject to option and
the Option Price shall be subject to adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date
means (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the average of the closing bid and asked prices
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market; or (iv) if the Common Stock is not publicly traded, the fair
market value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
For purposes of the Plan, the term "business day" means a day on which
there is trading on the Nasdaq National Market or the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or
legal holiday in the State of Connecticut.
<PAGE> 4
-4-
No employee shall be granted an option which permits the employee's right
to purchase stock under the Plan, and under all other Section 423(b) employee
stock purchase plans of the Company and any parent or subsidiary corporations,
to accrue at a rate which exceeds $25,000 of fair market value of such stock
(determined on the date or dates that options on such stock were granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the Code. If the participant's accumulated payroll deductions on the last day
of the Payment Period would otherwise enable the participant to purchase Common
Stock in excess of the Section 423(b)(8) limitation described in this paragraph,
the excess of the amount of the accumulated payroll deductions over the
aggregate purchase price of the shares actually purchased shall be promptly
refunded to the participant by the Company, without interest.
ARTICLE 6 - EXERCISE OF OPTION.
Each eligible employee who continues to be a participant in the Plan on
the last day of a Payment Period shall be deemed to have exercised his or her
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
the participant's accumulated payroll deductions on such date will pay for at
the Option Price, subject to the 500 share limit of the option and the Section
423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, the he or she shall not be
entitled to exercise his or her option. Only full shares of Common Stock may be
purchased under the Plan. Unused payroll deductions remaining in a participant's
account at the end of a Payment Period by reason of the inability to purchase a
fractional share shall be carried forward to the next Payment Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
An employee may elect to enter the Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the
employee's pay;
B. Authorizing the purchase of stock for the employee in each
Payment Period in accordance with the terms of the Plan; and
C. Specifying the exact name or names in which stock purchased for
the employee is to be issued as provided under Article 11 hereof.
<PAGE> 5
-5-
Such authorization must be received by the Company at least ten days before the
first day of the next succeeding Payment Period and shall take effect only if
the employee is an eligible employee on the first business day of such Payment
Period.
Unless a participant files a new authorization or withdraws from the Plan,
the deductions and purchases under the authorization the participant has on file
under the Plan will continue from one Payment Period to succeeding Payment
Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these amounts.
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
An employee may authorize payroll deductions in an amount (expressed as a
whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation, including base pay or salary and any
overtime, bonuses or commissions.
ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from the Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
A participant may withdraw from the Plan (in whole but not in part) at any
time prior to the last day of a Payment Period by delivering a withdrawal notice
to the Company.
To re-enter the Plan, an employee who has previously withdrawn must file a
new authorization at least ten days before the first day of the next Payment
Period in which he or she wishes to participate. The employee's re-entry into
the Plan becomes effective at the beginning of such Payment Period, provided
that he or she is an eligible employee on the first business day of the Payment
Period.
ARTICLE 11 - ISSUANCE OF STOCK.
Certificates for stock issued to participants shall be delivered as soon
as practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
<PAGE> 6
-6-
ARTICLE 12 - ADJUSTMENTS.
Upon the happening of any of the following described events, a
participant's rights under options granted under the Plan shall be adjusted as
hereinafter provided:
A. In the event that the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if,
upon a reorganization, split-up, liquidation, recapitalization or the like
of the Company, the shares of Common Stock shall be exchanged for other
securities of the Company, each participant shall be entitled, subject to
the conditions herein stated, to purchase such number of shares of Common
Stock or amount of other securities of the Company as were exchangeable
for the number of shares of Common Stock that such participant would have
been entitled to purchase except for such action, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or exchange; and
B. In the event the Company shall issue any of its shares as a
stock dividend upon or with respect to the shares of stock of the class
which shall at the time be subject to option hereunder, each participant
upon exercising such an option shall be entitled to receive (for the
purchase price paid upon such exercise) the shares as to which the
participant is exercising his or her option and, in addition thereto (at
no additional cost), such number of shares of the class or classes in
which such stock dividend or dividends were declared or paid, and such
amount of cash in lieu of fractional shares, as is equal to the number of
shares thereof and the amount of cash in lieu of fractional shares,
respectively, which the participant would have received if the participant
had been the holder of the shares as to which the participant is
exercising his or her option at all times between the date of the granting
of such option and the date of its exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares set forth in Article 4 hereof which are subject to options
which have been or may be granted under the Plan and the limitations set forth
in the second paragraph of Article 5 shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above. Notwithstanding the
foregoing, any adjustments made pursuant to paragraphs A or B shall be made only
after the Committee, based on advice of counsel for the Company, determines
whether such adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines that such
adjustments would constitute a modification, it may refrain from making such
adjustments.
If the Company is to be consolidated with or acquired by another entity in
a merger, a sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the
<PAGE> 7
-7-
obligations of the Company hereunder (the "Successor Board") shall, with respect
to options then outstanding under the Plan, either (i) make appropriate
provision for the continuation of such options by arranging for the substitution
on an equitable basis for the shares then subject to such options either (a) the
consideration payable with respect to the outstanding shares of the Common Stock
in connection with the Acquisition, (b) shares of stock of the successor
corporation, or a parent or subsidiary of such corporation, or (c) such other
securities as the Successor Board deems appropriate, the fair market value of
which shall not materially exceed the fair market value of the shares of Common
Stock subject to such options immediately preceding the Acquisition; or (ii)
terminate each participant's options in exchange for a cash payment equal to the
excess of (a) the fair market value on the date of the Acquisition, of the
number of shares of Common Stock that the participant's accumulated payroll
deductions as of the date of the Acquisition could purchase, at an option price
determined with reference only to the first business day of the applicable
Payment Period and subject to the 500 share limit, Code Section 423(b)(8) and
fractional-share limitations on the amount of stock a participant would be
entitled to purchase, over (b) the result of multiplying such number of shares
by such option price.
The Committee or Successor Board shall determine the adjustments to be
made under this Article 12, and its determination shall be conclusive.
ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
An option granted under the Plan may not be transferred or assigned and
may be exercised only by the participant.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under the Plan shall
immediately terminate, and the Company shall promptly refund, without interest,
the entire balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant's right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days. If a participant's payroll deductions are
interrupted by any legal process, a withdrawal notice will be considered as
having been received from the participant on the day the interruption occurs.
ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
Unless terminated sooner as provided below, the Plan shall terminate on
January 27, 2009. The Plan may be terminated at any time by the Company's Board
of Directors but
<PAGE> 8
-8-
such termination shall not affect options then outstanding under the Plan. It
will terminate in any case when all or substantially all of the unissued shares
of stock reserved for the purposes of the Plan have been purchased. If at any
time shares of stock reserved for the purpose of the Plan remain available for
purchase but not in sufficient number to satisfy all then unfilled purchase
requirements, the available shares shall be apportioned among participants in
proportion to the amount of payroll deductions accumulated on behalf of each
participant that would otherwise be used to purchase stock, and the Plan shall
terminate. Upon such termination or any other termination of the Plan, all
payroll deductions not used to purchase stock will be refunded, without
interest.
The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under the Plan; (ii) change the class of employees eligible to receive
options under the Plan, if such action would be treated as the adoption of a new
plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under
the Securities Exchange Act of 1934 to become inapplicable to the Plan.
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
The Plan is intended to provide shares of Common Stock for investment and
not for resale. The Company does not, however, intend to restrict or influence
any employee in the conduct of his or her own affairs. An employee may,
therefore, sell stock purchased under the Plan at any time the employee chooses,
subject to compliance with any applicable federal or state securities laws and
subject to any restrictions imposed under Article 21 to ensure that tax
withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY
MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan. The Board of Directors shall have the power to make
such designation before or after the Plan is approved by the stockholders.
ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.
Neither the granting of an option to an employee nor the deductions from
his or her pay shall constitute such employee a stockholder of the shares
covered by an option until such shares have been actually purchased by the
employee.
<PAGE> 9
-9-
ARTICLE 19 - APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to options granted under the Plan will be used for general corporate
purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
By electing to participate in the Plan, each participant agrees to notify
the Company in writing immediately after the participant transfers Common Stock
acquired under the Plan, if such transfer occurs within two years after the
first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
By electing to participate in the Plan, each participant acknowledges that
the Company and its participating subsidiaries are required to withhold taxes
with respect to the amounts deducted from the participant's compensation and
accumulated for the benefit of the participant under the Plan, and each
participant agrees that the Company and its participating subsidiaries may
deduct additional amounts from the participant's compensation, when amounts are
added to the participant's account, used to purchase Common Stock or refunded,
in order to satisfy such withholding obligations. Each participant further
acknowledges that when Common Stock is purchased under the Plan the Company and
its participating subsidiaries may be required to withhold taxes with respect to
all or a portion of the difference between the fair market value of the Common
Stock purchased and its purchase price, and each participant agrees that such
taxes may be withheld from compensation otherwise payable to such participant.
It is intended that tax withholding will be accomplished in such a manner that
the full amount of payroll deductions elected by the participant under Article 7
will be used to purchase Common Stock. However, if amounts sufficient to satisfy
applicable tax withholding obligations have not been withheld from compensation
otherwise payable to any participant, then, notwithstanding any other provision
of the Plan, the Company may withhold such taxes from the participant's
accumulated payroll deductions and apply the net amount to the purchase of
Common Stock, unless the participant pays to the Company, prior to the exercise
date, an amount sufficient to satisfy such withholding obligations. Each
participant further acknowledges that the Company and its participating
subsidiaries may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees that the Company or any
participating subsidiary may take whatever action it considers appropriate to
satisfy such withholding requirements, including deducting from compensation
otherwise
<PAGE> 10
-10-
payable to such participant an amount sufficient to satisfy such withholding
requirements or conditioning any disposition of Common Stock by the participant
upon the payment to the Company or such subsidiary of an amount sufficient to
satisfy such withholding requirements.
ARTICLE 22 - GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver shares of Common Stock under
the Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
identify shares of Common Stock issued under the Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
The validity and construction of the Plan shall be governed by the laws of
Delaware, without giving effect to the principles of conflicts of law thereof.
ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.
The Plan was adopted by the Board of Directors on January 27, 2000 and was
approved by the stockholders of the Company on [_____ ___, 2000].
<PAGE> 1
Exhibit 10.5
OFFICE LEASE
GLASTONBURY CORPORATE CENTER
BETWEEN
TR 628 HEBRON LIMITED PARTNERSHIP
LANDLORD,
AND
BDS BUSINESS CENTER, INC.
TENANT
DATED: _____________________, 1998
<PAGE> 2
GLASTONBURY CORPORATE CENTER
OFFICE LEASE
TABLE OF CONTENTS
PAGE
----
1. Basic Terms ......................................... 1
2. Lease of Premises and Term .......................... 2
3. Rent ................................................ 2
4. Base Rent Adjustment ................................ 2
5. Service ............................................. 7
6. Condition of Premises ............................... 9
7. Inability to Deliver Possession ..................... 9
8. Care and Maintenance ................................ 10
9. Alterations ......................................... 10
10. Access to Premises .................................. 12
11. Insurance ........................................... 13
12. Subrogation ......................................... 14
13. Untenantability ..................................... 14
14. Eminent Domain ...................................... 15
15. Waiver of Claims and Indemnity ...................... 16
16. Assignment/Subletting ............................... 17
17. Subordination ....................................... 19
18. Certain Rights Reserved to Landlord ................. 20
19. Holding Over ........................................ 22
i
<PAGE> 3
PAGE
----
20. Default and Landlord's Remedies ............................. 22
21. Surrender of Possession ..................................... 26
22. ............................................................ 27
23. Covenant Against Liens ...................................... 27
24. Tenant's Payments Upon Execution ............................ 27
25. Rules and Regulations ....................................... 28
26. Miscellaneous ............................................... 31
27. Quiet Enjoyment ............................................. 35
28. Hazardous Substances ........................................ 35
29. ADA ......................................................... 37
30. Waiver of Rights ............................................ 38
31. Termination of Existing Lease ............................... 39
32. Option to Extend ............................................ 39
33. Construction Office Space ................................... 41
34. Satellite Dish .............................................. 41
ii
<PAGE> 4
GLASTONBURY CORPORATE CENTER
OFFICE LEASE
THIS LEASE, made and entered into in Glastonbury, Connecticut as of this
______ day of __________________, 1998, by and between TR 628 HEBRON LIMITED
PARTNERSHIP ("Landlord"), and BDS BUSINESS CENTER, INC. ("Tenant");
WITNESSETH:
1. BASIC TERMS. This Section 1 contains the basic terms of the Lease
between Landlord and Tenant. All other provisions of this Lease are to be read
in accordance with the provisions herein contained.
A. Agent Lincoln Property Company
B. Agent's Address 1530 Wilson Boulevard, Suite 220
Arlington, Virginia 22001
C. Building Building (2) 628 Hebron
Glastonbury, Connecticut 06033
D. Commencement Date The earlier of (i) the date Tenant
begins its business operations in the
Premises or (ii) forty-five (45) days
following the date the landlord
substantially completes the Landlord's
Work described on Exhibit D and delivers
possession of the Premises to the
Tenant.
E. Brokers CB Commercial and Kuzmark-Williams, LLC
F. Monthly Base Rental $15,167, subject to adjustment per
Exhibit B
G. Letter of Credit $100,000 in the form of a letter of
credit
H. Tenant's Proportion 9.17% (14,208/155,000)
I. Term 6 years, 4 months
J. Termination Date The sixth (6th) anniversary of the
Commencement Date plus four (4) months.
K. Total Base Rent $1,834,217.28
L. Use General office use only.
<PAGE> 5
2. LEASE OF PREMISES AND TERM. Landlord hereby leases to Tenant, and
Tenant accepts the premises ("Premises"), having an address of 628 Hebron
Avenue, Suite 502, Town of Glastonbury, County of Hartford, State of
Connecticut, being described in the plan attached hereto as Exhibit "A" in the
Building for the Term commencing on the Commencement Date and ending on the
Termination Date unless sooner terminated as provided herein, to be occupied and
used by Tenant for the Use and no other purpose, subject to the agreements
herein contained. Within thirty (30) days after the Commencement Date (as
defined in 1D above), Landlord and Tenant agree to sign an agreement entitled
"Notice of Lease" in the form set forth in Exhibit C, reciting the Commencement
and Termination Dates of the initial Lease Term. This Notice of Lease shall be
conclusive as to the terms stated therein and may be recorded by Tenant, at
Tenant's sole cost and expense, on the land records of the Town of Glastonbury.
Tenant hereby agrees to execute a release and/or termination in recordable form
of the Notice of Lease upon the expiration or early termination of this Lease.
3. RENT. Tenant shall pay as rent hereunder the Total Base Rent plus the
Rent Adjustments, as hereinafter defined, plus all other sums herein required to
be paid to Landlord (collectively, the "Rent"), to Agent at Agent's Address or
to such other person or at such other place as Landlord may from time to time
direct in writing. Tenant shall pay to Landlord the Total Base Rent in equal
monthly installments in the amount of the Monthly Base Rental, in advance on or
before the first day of each month of the Term, and at the same rate for
fractions of a month if the Term shall begin on any day except the first day of
a calendar month or shall end on any day except the last day of a calendar
month. The Monthly Base Rental set forth in Section 1F hereof represents the
Monthly Base Rental for the first year of the Term commencing on the
Commencement Date. The Monthly Base Rental shall increase as shown on Exhibit B.
The payment of Rent hereunder is independent of each and every other covenant
and agreement contained herein. All Rent shall be paid without any notice,
set-off or deduction whatsoever.
If Landlord has not received Tenant's Rental payment by the fifth (5th) day
of the month the unpaid Rent shall bear interest at the rate set forth in
Section 26F hereof from the date due until paid.
4. BASE RENT ADJUSTMENT. In addition to the Total Base Rent, Tenant shall
pay, as part of Rent, the Rent Adjustments described in this Section 4 without
set-off or deduction.
A. For the purposes of this Lease:
(i) The term "Calendar Year" shall mean each calendar year or a
portion thereof during the Term.
(ii) The term "Expenses" shall mean and include all reasonable
expenses paid or incurred by Landlord or its employees,
agents or advisors for managing, owning, maintaining,
operating, insuring or repairing the Building, the land
under the Building, appurtenances and personal property used
in conjunction therewith (hereinafter collectively referred
to as the "Project") during each Calendar Year.
2
<PAGE> 6
Expenses shall not include costs of alterations of the
premises of tenants of the Building, interest and principal
payments on mortgages, ground rental payments, real estate
brokerage and leasing commissions, advertising or
promotional expenditures, any expense for which Landlord is
reimbursed by another party or by any insurance company, the
cost of any services furnished to any other tenant in the
Building which Landlord does not generally make available to
all tenants in the Building, costs incurred as a result of a
violation by Landlord of any lease for the Building, costs
and disbursements, including attorney's fees, incurred in
connection with negotiations or disputes with tenants or
other occupants of the Building or associated with the
enforcement of any leases, costs incurred by Landlord in
renovating, decorating, painting or otherwise improving
vacant space or space for tenants other than Tenant, or
costs incurred by Landlord regarding compliance with
Environmental Laws (as defined in Section 28) or ADA (as
defined in Section 29). Notwithstanding any of the
foregoing, the cost of any capital improvements to the
Building which are intended to reduce Expenses or which are
required under any governmental laws, regulations or
ordinances which were not applicable to the Building or not
in effect at the time the Building was constructed shall be
included in Expenses provided, however, Landlord agrees that
only the amortized portion of the cost of such capital
improvement will be included in Expenses each year and
Landlord shall amortize such costs over the useful life of
such improvements. If the Building is not fully occupied
during all or a portion of any Calendar Year, then Landlord
may elect to make an appropriate adjustment of the Expenses
for such year employing sound accounting and management
principles to determine the amount of Expenses that would
have been paid or incurred by Landlord had the Building been
ninety-five percent (95%) occupied and the amount so
determined shall be the amount of Expenses attributable to
such Calendar Year. If any Project expense, though paid in
one Calendar Year, relates to more than one Calendar Year,
at the option of Landlord, such expenses may be
proportionately allocated among such related Calendar Years.
(iii) The term "Rent Adjustments" shall mean all amounts owed by
Tenant as additional rent as defined in Subparagraph 4B
hereof.
3
<PAGE> 7
(iv) The term "Rent Adjustment Deposit" shall mean an amount
equal to the estimate of Rent Adjustments due for any
Calendar Year after 1998 as reasonably estimated by Landlord
from time to time during the Term. The Rent Adjustment
Deposit shall be payable by Tenant in equal monthly
installments in the same manner as and contemporaneously
with the pay merit of Total Base Rent on the first day of
each month of the Term beginning January 1, 1999.
(v) The term "Taxes" shall mean real estate taxes, assessments,
sewer rents, rates and charges, transit taxes, taxes based
upon the receipt of rent, and any other federal, state or
local governmental charge, general, special, ordinary or
extraordinary (but not including general income or franchise
taxes or any other taxes imposed upon or measured by income
or profits, unless the same shall be imposed in lieu of
Taxes as herein defined or unless same shall be specifically
imposed upon income derived from rents), which may now or
hereafter be levied or assessed against the Project or any
portion thereof which are payable in any Calendar Year
during the Term. In case of special taxes or assessments
which may be payable in installments, only the amount of
each installment and interest thereon required to be paid
during a calendar year shall be included in Taxes for that
year. Taxes shall also include any personal property taxes
(attributable to the year in which paid) imposed upon the
furniture, fixtures, machinery, equipment, apparatus,
systems and appurtenances used in connection with the
operation of the Building. In the event the Project is not
assessed as fully improved for any year, then Taxes shall be
adjusted to the taxes which would have been payable in such
Calendar Year if the assessment had been made on a fully
improved basis, based on Landlord's adjustment of the
"Taxes" for such year, employing sound management
principles. Taxes also include Landlord's reasonable costs
and expenses (including reasonable attorneys' fees) in
contesting or attempting to reduce any Taxes. Taxes shall be
reduced by any recovery or refund received of Taxes
previously paid by Landlord, provided such refund relates to
Taxes paid during the Term. Notwithstanding anything set
forth above to the contrary, if at any time the method of
taxation then prevailing shall be altered so that any new or
additional tax, assessment, levy, imposition or charge or
any part thereof shall be imposed upon Landlord in place of
or partly in place of any Taxes or contemplated increase
therein, or in addition to Taxes, and shall be measured by
or be based in whole or in part upon the Project, the rents
or other income therefrom or any leases of any pan thereof,
then all such new taxes, assessments, levies, impositions
4
<PAGE> 8
or charges or part thereof, to the extent that they are so
measured or based, shall be included in Taxes.
(vi) The term "Base Year Expenses" shall mean Expenses applicable
during the 1998 Calendar Year. If the Landlord elects to
"Gross-Up" expenses for any Calendar Year as provided in
Section 4(A)(ii) above, and if the Building is not fully
occupied during the 1998 Calendar Year, then Landlord shall
make an appropriate adjustment of the Expenses for the 1998
Calendar Year employing sound accounting and management
principles to determine the amount of Expenses that would
have been paid or incurred by Landlord had the Building been
ninety-five percent (95%) occupied and the amount so
determined shall be the amount of Expenses attributable to
the 1998 Calendar Year. Tenant shall not be entitled to any
credit or rebate in the event Expenses in any one (1) year
are lower than the Base Year Expenses.
(vii) The term "Base Year Taxes" shall mean Taxes payable during
the 1998 Calendar Year. Tenant shall not be entitled to any
credit or rebate in the event Taxes in any one (1) year are
lower than Base Year Taxes.
B. The amount of Rent Adjustment shall be calculated as follows:
(i) Tenant shall pay to Landlord, during each Calendar Year (or
fraction thereof), Tenant's Proportion of the amount by
which the Expenses for each such Calendar Year exceed Base
Year Expenses.
(ii) Tenant shall pay to Landlord, during each Calendar Year (or
fraction thereof), Tenant's Proportion of the amount by
which the Taxes for each such Calendar Year exceed Base Year
Taxes. The amount of Taxes attributable to a Calendar Year
shall be the amount payable during any such Calendar Year,
even though the assessment for such Taxes may be for a
different Calendar Year.
C. Landlord shall provide Tenant with the amount of the Rent
Adjustment Deposit for the 1999 Calendar Year on or before
January 1, 1999 and Tenant shall thereon pay same to Landlord in
equal monthly installments commencing on January 1, 1999.
D. Landlord shall use reasonable efforts to deliver to Tenant a
statement ("Adjustment Statement"), within one hundred and eighty
(180) days after the expiration of each Calendar Year, showing in
reasonable detail the following:
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(i) Expenses and Taxes for the Calendar Year last ended;
(ii) The amount of Rent Adjustments due Landlord for the Calendar
Year last ended, less credits for Base Year Expenses, Base
Year Taxes and Rent Adjustment Deposits paid, if any; and
(iii) The Rent Adjustment Deposit due in the current Calendar
Year.
E. Within thirty (30) days after Tenant's receipt of each Adjustment
Statement, Tenant shall pay to Landlord;
(i) The amount of Rent Adjustments shown on said statement to be
due Landlord for the Calendar Year last ended, if any; plus
(ii) The amount which, when added to the Rent Adjustment Deposit
theretofore paid in the current Calendar Year, would provide
that Landlord has then received such portion of the Rent
Adjustment Deposit as would have theretofore been paid to
Landlord had Tenant paid on a monthly basis one-twelfth
(1/12) of the Rent Adjustment Deposit for the current
Calendar Year.
Commencing on the first day of the first month after Tenant's receipt of
each Adjustment Statement, and on the first day of each month thereafter
until Tenant receives a more current Adjustment Statement, Tenant shall pay
to Landlord one-twelfth (1/12) of the Rent Adjustment Deposit shown on said
statement. During the last complete Calendar Year of the Term, Landlord may
include in the Rent Adjustment Deposit its estimate of the Rent Adjustment
which may not be finally determined until after the expiration of the Term.
In no event will the Landlord's failure to deliver the Adjustment Statement
to Tenant within the one hundred and eighty (180) day time period relieve
Tenant of its obligation to pay the Rent Adjustments specified above.
Tenant's obligation to pay the Rent Adjustments shall survive the
expiration or sooner termination of the Term.
F. Tenant's payment of the Rent Adjustment Deposit for each Calendar
Year shall be credited against the Rent Adjustments for such Calendar Year.
All Rent Adjustment Deposits may be co-mingled and no interest shall be
paid to Tenant thereon. If the Rent Adjustment Deposit paid by Tenant for
any Calendar Year exceeds the Rent Adjustments for such Calendar Year, then
Landlord shall give a credit to Tenant in an amount equal to such excess
against the Rent Adjustments due for the next succeeding Calendar Year,
except that if any such excess relates to the last Calendar Year of the
Term, then Landlord shall refund such excess to Tenant within sixty (60)
days following the Landlord's determination of the amount of the excess
payment by Tenant, provided that all of the following have first occurred:
(i) The Term has expired or otherwise been terminated;
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(ii) Tenant has vacated the Premises and removed all of its
property and improvements therefrom in accordance with this
Lease;
(iii) Tenant has surrendered the Premises to Landlord in accordance
with this Lease; and
(iv) Tenant has paid all Total Base Rent and Rent Adjustments due
under this Lease and has fully performed and observed each
and every covenant and condition of this Lease required to be
performed or observed by Tenant.
G. Tenant or its representative shall have the right to examine
Landlord's books and records with respect to the items in the Adjustment
Statement during normal business hours at any time within one (1) year following
the furnishing by Landlord to Tenant of such Adjustment Statement. Unless Tenant
shall take written exception to any item within such six (6) month period after
the furnishing of the foregoing statement, such statement shall be considered as
final and accepted by Tenant. Any amount due to Landlord as shown on any such
statement, whether or not written exception is taken thereto, shall be paid by
Tenant within thirty (30) days after Landlord shall have submitted the
statement, without prejudice to any such written exception.
H. If the Commencement Date is on any day other than the first day of
January, or if the Termination Date is on any day other than the last day of
December, any Rent Adjustments due Landlord shall be prorated on a per diem
basis.
5. SERVICE.
A. Landlord shall furnish:
(i) Heating and air cooling when necessary to provide a
temperature condition for comfortable occupancy daily, in
season, 8:00 a.m. to 6:00 p.m. Monday through Friday and on
Saturdays 8:00 a.m. to 1:00 p.m., Sunday and holidays
excepted. Wherever heat generating machines or equipment are
used by Tenant in the Premises which materially affect the
temperature otherwise maintained by the air-cooling system,
Landlord reserves the right to install supplementary
air-conditioning units in the Premises and the expense of
furnishing such units and installation thereof shall be paid
by Tenant. The expense resulting from the operation and
maintenance of the supplementary air conditioning system shall
be paid by Tenant to Landlord as Additional Rent at rates
fixed by Landlord. Tenant shall pay, as Additional Rent, by
monthly invoice for after-hours HVAC service, a charge of $20
per hour for each hour during which such service is provided.
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(ii) Cold water in common with other tenants from Town of
Glastonbury mains for drinking, kitchen, lavatory and toilet
purposes drawn through fixtures installed by Landlord, or by
Tenant with Landlord's prior written consent, and warm water
for lavatory purposes from the regular supply of the Building.
Tenant shall pay Landlord at rates fixed by Landlord for water
furnished for any other purposes, and Landlord may install a
water meter at Tenant's sole cost to measure such usage.
Tenant shall not waste or permit the waste of water.
(iii) Customary janitor service and cleaning in and about the
Premises Saturdays, Sundays and holidays excepted. Tenant
shall not provide any janitor services or cleaning without
Landlord's written consent, which consent shall not be
unreasonably withheld, and then only subject to supervision of
Landlord and at Tenant's sole responsibility.
(iv) Passenger elevator service in common with Landlord and other
tenants, daily from 8:00 A.M. to 6:00 P.M. Monday through
Friday (Saturdays 8:00 A.M. to 1:00 P.M.), Sunday and holidays
excepted, and daily freight elevator service in common with
Landlord and other tenants at reasonable hours to be
determined by Landlord, Saturdays, Sundays and holidays
excepted. Landlord shall provide limited passenger elevator
service daily at all times during which such normal passenger
service is not furnished. Operatorless automatic elevator
service shall be deemed "elevator service" within the meaning
of this paragraph.
Landlord hereby agrees to use reasonable efforts to maintain the
Building and the Property in good order and repair reasonable wear and tear
excepted.
B. All electricity, telecommunication, signal and other similar
services used in the Premises shall be supplied by utility companies
serving the Building through a separate meter and the cost of said service
is included in the Tenant's Monthly Base Rental payment. Landlord shall
not in any way be liable or responsible to Tenant for any loss, damage or
expense which Tenant may sustain or incur if either the quantity or
character of such service is changed or is no longer available or suitable
for Tenant's requirements. If such service be discontinued, such
discontinuance shall not in any way affect this Lease or the liability of
Tenant hereunder or cause a diminution of Base Rent or Rent Adjustments
and the same shall not be deemed to be a lessening or diminution of
services within the meaning of any law, rule or regulation now or
hereafter enacted, promulgated or issued. Tenant shall receive such
service directly from the utility companies and Landlord hereby permits
its wires and conduits, to the extent available, suitable and safely
capable, to be used for such purposes. Landlord agrees to use
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reasonable efforts to restore the services to the Premises as soon as
reasonably possible provided, that, the restoration of the service is
under the sole control of Landlord and that no third party is involved in
restoring service to the Premises in any way. If a third party is involved
in the restoration of the service, Landlord agrees to use reasonable
efforts to encourage the third party to restore the service in a timely
manner. For purposes of this Section, the term "reasonable efforts" shall
not include the payment of money or the filing of any law suit.
C. Landlord does not warrant that any of the services above
mentioned will be free from interruption caused by war, insurrection,
civil commotion, riots, acts of God or the enemy, governmental action,
repairs, renewals, improvements, alterations, strikes, lockouts,
picketing, whether legal or illegal, accidents, inability of Landlord to
obtain fuel, energy or supplies or any other cause or causes beyond the
reasonable control of Landlord. No such interruption of service shall be
deemed an eviction (or a constructive eviction) or disturbance of Tenant's
use and possession of the Premises or any part thereof, or render Landlord
liable to Tenant for damages, by abatement of Rent or otherwise, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Tenant hereby waives and releases all claims against Landlord for damages
from interruption or stoppage of service. Tenant agrees to cooperate fully
with Landlord, at all times, in abiding by all regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of all utilities and services reasonably necessary for the
operation of the Project and the Building.
6. CONDITION OF PREMISES. Except for (i) the work to be completed by
Landlord as provided in Exhibit D "Landlord's Work" attached hereto and
incorporated herein by reference; (ii) heating air-conditioning, and electrical
facilities provided by Landlord to service the Premises; (iii) Landlord
obtaining a certificate of occupancy and delivering a copy thereof to Tenant;
and (iv) hidden and latent defects which are discovered by Tenant within the
initial six (6) months of the Term and reported to Landlord in writing within
such six (6) month period, Tenant's taking possession of the Premises, shall be
deemed to be Tenant's acceptance of the Premises, "As-Is, .... Where-Is," in the
order and condition as then exists. No promise of Landlord to alter, remodel,
decorate, clean or improve the Premises or the Building and no representation
respecting the condition of the Premises or the Building have been made by
Landlord to Tenant, unless the same is contained herein.
7. INABILITY TO DELIVER POSSESSION. If Landlord shall be unable to give
possession of the Premises on the Commencement Date for any reason other than as
a result of any act or omission on the part of Tenant, the Rent reserved and
covenanted to be paid herein shall not commence until the Premises are available
for occupancy by Tenant. No such failure to give possession on the Commencement
Date shall subject Landlord to any liability for failure to give possession nor
shall same affect the validity of this Lease or the obligation of Tenant
hereunder, nor shall the same be construed to extend the Term or Termination
Date. At the option of Landlord, to be exercised within thirty (30) days of the
delayed delivery of possession to Tenant, this Lease shall be amended so that
the Term shall be extended by the period of time possession is delayed. If the
Premises are ready for occupancy prior to the Commencement Date and Tenant
occupies the Premises prior to said date, Tenant shall pay proportionate Monthly
Base
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Rental and Rent Adjustments. The Premises shall not be deemed to be unready for
Tenant's occupancy or incomplete if only minor or insubstantial details of
construction, decoration or mechanical adjustments remain to be done in the
Premises or any part thereof, or if the delay in the availability of the
Premises for occupancy shall be due to special work, changes, alterations or
additions required or made by Tenant in the layout or finish of the Premises, or
any part thereof or shall be caused in whole or in part by Tenant through the
delay of Tenant in submitting plans, supplying information, approving plans,
specifications or estimates, giving authorizations or shall be otherwise caused
in whole or in part by delay and/or default on the part of Tenant. In the event
of any dispute as to whether the Premises are ready for Tenant's occupancy, said
dispute shall be resolved by the mutual agreement of the architects representing
the Landlord and Tenant and this decision shall be final and binding on Landlord
and Tenant. In the event the architects representing the Landlord and Tenant can
not reach an agreement, then Landlord and Tenant shall mutually select an
independent architect with no less than ten (10) years experience designing
office spaces in the Glastonbury, Connecticut metropolitan area to resolve the
dispute. The decision of the independent architect shall be final and binding on
Landlord and Tenant. The cost of hiring the independent architect shall be
divided equally among the parties.
8. CARE AND MAINTENANCE. Subject to the provisions of Sections 13 and
14 hereof, Tenant shall, at Tenant's own expense, keep the Premises in good
order, condition and repair and shall pay for the repair of any damages caused
by Tenant, its agents, contractors, employees or invitees. Tenant shall promptly
arrange with Landlord, at Tenant's sole cost and expense, for the repair of all
damage to the Premises and the replacement or repair of all damaged or broken
glass (including signs thereof), fixtures and appurtenances (including hardware,
heating, cooling, ventilating, electrical, plumbing and other mechanical
facilities in the Premises), with materials equal in quality and class to the
original materials damaged or broken, within any reasonable period of time
specified by Landlord, all repairs and replacements to be made under the
supervision and with the prior written approval of Landlord, using contractors
or persons acceptable to Landlord. If Tenant does not promptly make such
arrangements, Landlord may, but need not, make such repairs and replacements
upon three (3) days prior notice to Tenant, and one hundred ten percent (110%)
of Landlord's cost for such repairs and replacements shall be deemed Additional
Rent reserved under this Lease due and payable forthwith. Tenant shall pay
Landlord or the managing agent of the Building, as Landlord may direct, a fee
for supervision and coordination of all work performed by Tenant as well as all
costs for overtime and for any other expense incurred in the event repairs,
alterations, decorating or other work in the Premises are not made during
ordinary business hours at Tenant's request. Notwithstanding the above, the
Landlord shall not impose a supervision fee on Tenant for any work performed by
the Tenant in the Premises which will cost less than Ten Thousand Dollars
($10,000.00) to perform.
9. ALTERATIONS.
A. Tenant shall not do any painting or decorating, or erect any
partitions, make any alterations in or additions to the Premises or do any
nailing, boring or screwing into the ceilings, walls or floors, without
Landlord's prior written consent in each and every instance, which consent
will not be unreasonably withheld. Notwithstanding the above,
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Tenant shall be allowed to make alterations in or additions to the
Premises, without the prior consent of Landlord, provided said alterations
or additions do not require changes to, or in any way effect, any of the
structural elements or mechanical systems of the Building and do not cost
more than Ten Thousand and 00/100 Dollars ($10,000.00) per calendar year.
Unless otherwise agreed by landlord and Tenant in writing, all such work
shall be performed either by or under the direction of Landlord, but at
the sole cost and expense of Tenant..Landlord's decision to refuse such
consent shall be conclusive. If Landlord consents to such alterations or
additions, before commencement of the work or delivery of any materials
into the Premises or into the Building, Tenant shall furnish to Landlord
for approval: (A)plans and specifications; (B) names and addresses of
contractors; (C) copies of construction or other contracts; (D)all
necessary permits; (E) evidence reasonably satisfactory to Landlord of
Tenant's ability to pay for the cost of such alterations or additions
provided, however, Tenant shall not be required to post any bond, letter
of credit, or provide any other monetary deposit to Landlord unless the
total cost of the proposed alterations equal or exceed Twenty-Five
Thousand Dollars ($25,000.00); and (F) indemnification and insurance in
form and amount satisfactory to Landlord from all contractors performing
labor or furnishing materials, insuring against any and all claims, costs,
damages, liabilities and expenses which may arise in connection with the
alterations or additions.
B. Within thirty (30) days following the Landlord's receipt of the
plans and specifications for the proposed alterations, Landlord shall
notify the Tenant of the Landlord's approval or disapproval of said plans.
If Landlord does not communicate its approval or disapproval of said plans
to the Tenant within the thirty (30) day period the plans and
specifications shall be deemed to be approved by the Landlord. Landlord
may withhold approval of any alterations or additions if the plans and
specifications therefor are not acceptable to Landlord or Landlord's
architect or engineer (if any). In connection with any request for
approval of any alterations or additions by Tenant, Landlord may retain
the services of an outside architect and/or engineer and the reasonable
fees of such architect and/or engineer to Landlord shall be reimbursed to
Landlord by Tenant upon demand. Landlord's approval of any plans or
specifications shall not be construed to be an agreement or representation
on Landlord's part as to the adequacy or suitability of Tenant's
alterations or additions and creates no responsibility or liability on the
part of Landlord for the compliance of such plans or specifications with
statutes, laws, ordinances, orders, codes, rules and regulations of
governmental authorities.
C. In the event Landlord permits the alterations or additions to be
completed by Tenant's contractor, Landlord reserves the right to require
that Tenant terminate its contract with any such contractor in the event
said contractor is engaged in a labor dispute which disrupts said
contractor's work. Landlord shall also have the right to order any
contractor of Tenant who violates any of Landlord's requirements or
standards of work to cease work and to remove himself, his equipment and
his employees from the Building. Landlord or the managing agent of the
Building shall be entitled to charge a fee for supervision and
coordination of all such alterations which require Landlord's consent.
Tenant agrees that its contractors shall not conduct their work in such a
manner
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so as to interfere with or cause any interruption of either: (A)
Landlord's construction; (B) another tenant's occupancy or construction;
or (C) other phases of Landlord's operation of the Building.
D. Whether Tenant furnishes Landlord the foregoing or not, Tenant
hereby agrees to indemnify and hold Landlord, its trustees, partners and
their respective agents and employees harmless from any and all
liabilities of every kind and description which may arise out of or be
connected in any way with said alterations or additions. Any mechanic's
lien filed against the Premises or the Building for work claimed to have
been furnished to Tenant shall be discharged of record by Tenant within
thirty (30) days thereafter, at Tenant's sole cost and expense. Upon
completing any alterations or additions, Tenant shall furnish Landlord
with contractors' affidavits and full and final waivers of lien and
receipted bills covering all labor and materials expended and used. All
alterations and additions shall comply with all insurance requirements and
with all ordinances and regulations of any pertinent governmental
authority. All alterations and additions shall be constructed in a good
and workmanlike manner and only high grades of materials shall be used.
E. All additions, decorations, fixtures, hardware, wires, pipes,
conduit, non-trade fixtures and all improvements, temporary or permanent,
in or upon the Premises, whether placed there by Tenant or by Landlord,
shall, unless Landlord requests their removal, become Landlord's property
and shall remain upon the Premises at the termination of this Lease, by
lapse of time or otherwise, without compensation, allowance or credit to
Tenant. Landlord may, at its sole option, request Tenant, at Tenant's sole
cost and expense, to remove same and if, upon Landlord's request, Tenant
does not remove said additions, decorations, fixtures, hardware, non-trade
fixtures and improvements, Landlord may remove the same, and Tenant shall
pay the cost of such removal to Landlord upon demand. Notwithstanding the
above, Landlord agrees that the Tenant will not be required to remove any
permanent addition, fixture, improvement, etc. unless Landlord requests
the removal of such items at the time Landlord approves the installation
of said items. If Tenant is not required or fails to obtain the Landlord's
consent for the installation of any item, Landlord shall have the right to
require the Tenant to remove said item from the Premises upon notice to
Tenant delivered no later than the date this Lease terminates, by lapse of
time or otherwise.
10. ACCESS TO PREMISES. Tenant shall permit Landlord, its employees,
contractors, agents and designees to erect, use and maintain pipes, ducts,
wiring and conduits in and through the Premises and to have free access to the
Premises and any part thereof in the event of an emergency. Landlord or
Landlord's agents, employees and contractors shall have the right to enter upon
the Premises to inspect the same, to perform janitorial and cleaning services
and to make such decorations, repairs, alterations, improvements or additions to
the Premises or the Project as Landlord may deem necessary or desirable, and
Landlord shall be allowed to take all material into and upon the Premises that
may be required thereof without the same constituting an eviction of Tenant in
whole or in part, and the Rent reserved shall in no way abate (except as
provided in Sections 13 or 14 hereof) while said decorations, repairs,
alterations, improvements or additions are being made, by reason of loss or
interruption of business of Tenant, or
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otherwise. In an emergency situation, if Tenant shall not be personally present
to open and permit an entry into the Premises Landlord or Landlord's agents or
employees may enter the same by a master key, or may forcibly enter the same,
without rendering Landlord or such agents or employees liable therefor (if
during such entry Landlord or Landlord's agents or employees shall accord
reasonable care to Tenant's property), and without in any manner affecting the
obligations and covenants of this Lease. Nothing herein contained, however,
shall be deemed or construed to impose upon landlord any obligations,
responsibility or liability whatsoever for the care, supervision or repair of
the Building or any part thereof, in the exercise of any rights herein provided.
Landlord shall also have the right at any time without the same constituting an
actual or constructive eviction and without incurring any liability to Tenant
therefor, to change the arrangement and/or location of entrances or passageways,
doors and doorways, and corridors, elevators, stairs, toilets or public parts of
the Building, and to close entrances, doors, corridors, elevators or other
facilities. Landlord shall not be liable to Tenant for any expense, injury, loss
or damage resulting from work done in or upon, or the use of, any adjacent or
nearby building, land, street or alley. In connection with the Landlord's
entering the Premises to exercise any of the foregoing rights, Landlord shall
take reasonable steps to minimize any interference with Tenant's business
operations in the Premises.
11. INSURANCE. Tenant shall carry insurance during the entire Term
hereof insuring Tenant, and insuring, as additional named insureds, Landlord
(including any partners thereof), any trustee of Landlord, the managing agent
for the Project and their respective agents, partners and employees, as their
respective interests may appear, with terms, coverages and in companies
satisfactory to Landlord, and with such increases in limits as Landlord may from
time to time request, but initially Tenant shall maintain the following
coverages in the following amounts:
A. Commercial general liability insurance, including the broad or
extended liability endorsement, during the Term with terms and in
companies reasonably satisfactory to Landlord to afford protection to the
limits of not less than Two Million Dollars ($2,000,000) for combined
single limit personal injury and property damage liability per occurrence.
B. Insurance against fire, sprinkler leakage, vandalism, and the
extended coverage perils for the full insurable value on an "All Risk",
basis of all additions, improvements and alterations to the Premises, and
of all office furniture, trade fixtures, office equipment, merchandise and
all other items of Tenant's property on the Premises.
C. Business interruption insurance insuring Tenant's payment of Rent
for not less than a twelve (12) month period.
D. Workers compensation insurance in statutory amounts and employers
liability insurance in an amount not less than Five Hundred Thousand
Dollars ($500,000).
E. Tenant shall, prior to the Commencement Date and throughout the
Term not less than thirty (30) days prior to the expiration of Tenant's
policies of insurance, furnish to Landlord evidence of such coverage (on
Accord Form 27), together with copies of the
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underlying policies, which shall state that such insurance coverage may
not be changed or cancelled without at least thirty (30) days' prior
written notice to Landlord and Tenant.
Landlord agrees to keep in force and effect casualty insurance on the Building
in amounts customarily maintained for office buildings located in the
Glastonbury, Connecticut metropolitan area. The cost of said insurance shall be
included in Expenses.
12. SUBROGATION. Landlord and Tenant agree to have all fire and extended
coverage and material damage insurance which may be carried by either of them
endorsed with a clause providing that any release from liability of or waiver of
claim for recovery from the other party or any of the parties named in Paragraph
11 above entered into in writing by the insured thereunder prior to any loss or
damage shall not affect the validity of said policy or the right of the insured
to recover thereunder, and providing further that the insurer waives all rights
of subrogation which such insurer might have against the other party or any of
the parties named in Paragraph 11 above. Without limiting any release or waiver
of liability or recovery contained in any Section of this Lease but rather in
confirmation and furtherance thereof, Landlord and any trustees of landlord
waive all claims for recovery from Tenant, and Tenant waives all claims for
recovery from Landlord, any trustees of Landlord and the managing agent for the
Project and their respective agents, partners and employees, for any loss or
damage to any of its property insured under valid and collectible insurance
policies to the extent of any recovery collectible under such insurance
policies.
Notwithstanding the foregoing or anything contained in this Lease to the
contrary, any release or any waiver of claims shall not be operative, nor shall
the foregoing endorsements be required, in any case where the effect of such
release or waiver is to invalidate insurance coverage or invalidate the right of
the insured to recover thereunder or increase the cost thereof (provided that in
the case of increased cost, either party shall have the right, within ten (10)
days following written notice, to pay such increased cost, thereby keeping such
release or waiver in full force and effect).
13. UNTENANTABILITY. If all or substantially all of the Premises or in
excess of thirty percent (30%) of the Building are made untenantable by fire or
other casualty, Landlord may, at its option, elect:
A. To terminate this Lease as of the date of the fire or casualty by
notice to Tenant within sixty (60) days after that date; or
B. To repair, restore or rehabilitate the Building or the Premises
(excluding leasehold improvements, fixtures and personal property paid for
by Tenant) at Landlord's expense, in which event this Lease shall not
terminate.
If less than thirty percent (30%) of the Building or less than
substantially all of the Premises are made untenantable by fire or other
casualty, then (so long as there are more than twelve (12) months remaining in
the Term) Landlord shall proceed with reasonable promptness to repair, restore
or rehabilitate the Building and/or the Premises, as the case may be, at
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Landlord's expense. If less than thirty percent (30%) of the Building or less
than all or substantially all of the Premises are made untenantable as aforesaid
during the last year of the Term hereof, Landlord shall have the right to
terminate this Lease as of the date of such fire or other casualty by giving
written notice thereof to Tenant within sixty (60) days after the date of fire
or other casualty, in which event the Rent shall be apportioned on a per diem
basis and be paid to the date of such fire or other casualty.
If the Premises are not rebuilt and restored within one hundred eighty
(180) days after the date of the casualty, Landlord, within five (5) days of
Tenant's written demand, shall provide Tenant with Landlord's estimate of the
time period to complete the restoration of the Premises. If the Premises are not
rebuilt and restored within such one hundred eighty (180) day period and
thereafter within thirty (30) days after Tenant's demand or Landlord advises
Tenant that the Premises will not be rebuilt and restored within such one
hundred eighty (180) day period and thereafter within thirty (30) days after
receipt of the demand therefor, then either Landlord or Tenant may, within ten
(10) days after Landlord's response to Tenant or expiration of such thirty (30)
day period, terminate this Lease upon written notice to the other party. The
Lease shall terminate on the date stated in such notice of termination.
If, during the last year of the Lease Term, a casualty occurs which causes
all or substantially all of the Premises to be untenantable and as a result of
said casualty Tenant does not use any portion of the Premises, Tenant shall have
the right to terminate this Lease as of the date of such fire or other casualty
by giving written notice thereof to Landlord within thirty (30) days after the
date of fire or other casualty, in which event the Rent shall be apportioned on
a per diem basis and be paid to the date of such fire or other casualty.
Landlord shall be under no obligation to expend for repair, restoration or
rehabilitation any amounts in excess of insurance proceeds paid to Landlord in
connection with such fire or other casualty and available for such repair,
restoration or rehabilitation.
In the event the Lease is not terminated pursuant to these provisions,
Rent shall abate only with respect to any portion of the Premises rendered
untenantable on a per diem basis during the period of untenantability. In the
event of the termination of this Lease pursuant to this Section, Rent shall be
apportioned on a per diem basis and be paid to the date of the fire or other
casualty.
14. EMINENT DOMAIN.
A. If a portion of the Building or the Premises, shall be lawfully
taken or condemned for any public or quasi-public use or purpose, or
conveyed under threat of such condemnation, and as a result thereof, the
Premises cannot be used for the same purpose and with the same utility as
before such taking or conveyance, the Term shall end upon, and not before,
the date of the taking of possession by the condemning authority, and
without apportionment of the award. Tenant hereby assigns to Landlord
Tenant's interest in such award, if any. Current Rent shall be apportioned
as of the date of such termination. If any part of the Building shall be
so taken or condemned, or if the grade of any street or alley adjacent to
the Building is changed by any competent
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authority and such taking or change of grade makes it necessary or
desirable to demolish, substantially remodel, or restore the Building,
Landlord shall have the fight to cancel this Lease upon not less than
ninety (90) days' prior notice to Tenant.
B. If a portion of the Premises shall be lawfully taken or condemned
or conveyed under threat of condemnation, but thereafter the Premises can
be used by Tenant for the same purpose and with substantially the same
utility, in Tenant's reasonable business judgement, this Lease shall not
be terminated and Landlord shall repair the Premises, and this Lease shall
be amended to adjust Tenant's Proportion and Monthly Base Rental on the
basis of the number of rentable square feet remaining in the Premises.
C. No money or other consideration shall be payable by Landlord to
Tenant for any right of cancellation or temporary taking, and Tenant shall
have no right to share in the condemnation award, whether for a partial or
total taking, for loss of Tenant's leasehold or improvements, and Tenant
shall have no right to share in any judgment for damages caused by a
change of grade. Notwithstanding the above, the Tenant shall have the
right to pursue and retain a claim for moving expenses, the taking of
Tenant's trade fixtures and such other business losses as Tenant can
separately and specifically establish provided, that, any award to Tenant
shall not diminish, in any way, the award available to the Landlord or its
lender(s).
15. WAIVER OF CLAIMS AND INDEMNITY. To the extent permitted by law,
Tenant releases Landlord, its trustees, and their respective agents, employees,
mortgagees and partners (all of said parties are, for the purposes of this
Section 15 collectively referred to as "indemnitees") from, and waives all
claims for, damage to person or property sustained by Tenant or any occupant of
the Building or Premises resulting from the Building or Premises or any part of
either or any equipment or appurtenance becoming out of repair, or resulting
from any accident in or about the Building, or resulting directly or indirectly,
from any act or neglect of any tenant or occupant of the Building or of any
other person, including the indemnitees. This Paragraph 15 shall apply
especially, but not exclusively, to the flooding of basements or other
subsurface areas, and to damage caused by refrigerators, sprinkling devices,
air-conditioning apparatus, water, snow, frost, steam, excessive heat or cold,
falling plaster, broken glass, sewage, gas, odors or noise, or the bursting or
leaking of pipes, or plumbing fixtures, and shall apply equally whether any such
damage results from the act or neglect of other tenants, occupants or servants
in the Building or of any other person, and whether such damage be caused or
result from any thing or circumstance above mentioned or referred to, or any
other thing or circumstance whether of a like nature or of a wholly different
nature, except if caused by Landlord's gross negligence or willful misconduct.
If any such damage, whether to the Premises or to the Building or any part
thereof, or whether to Landlord or to other tenants in the Building, results
from any act or neglect of Tenant, its employees, agents, invitees and
customers, Tenant shall be liable therefor and Landlord may, at Landlord's
option, repair such damage and Tenant shall, upon demand by Landlord, reimburse
Landlord forthwith for the total cost of such repairs. Tenant shall not be
liable for any damage caused by its act or neglect to the extent Landlord or a
tenant has recovered the full amount of the damage from insurance and the
insurance company has waived its right of subrogation against Tenant. All
property
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belonging to Tenant or any occupant of the Premises that is in the Building or
the Premises shall be there at the risk of Tenant or other person only, and
Landlord shall not be liable for damage thereto or theft or misappropriation
thereof.
To the extent permitted by law, Tenant agrees to indemnify and save the
indemnitees harmless against any and all claims, demands, costs and expenses,
including reasonable attorney's fees for the defense thereof, arising from
Tenant's occupation of the Premises or from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of Tenant to
be performed pursuant to the terms of this Lease, or from any act or negligence
of Tenant, its agents, servants, employees or invitees, in or about the
Premises. In case of any action or proceeding brought against any indemnitees by
reason of any such claim, upon notice from Landlord, Tenant covenants to defend
such action or proceeding by counsel reasonably satisfactory to Landlord.
To the extent permitted by law, Landlord agrees to indemnify and save
Tenant harmless against any and all claims, demands, costs and expenses,
including reasonable attorney's fees for the defense thereof, arising from
Landlord's operation and maintenance of those areas of the Building which are
not leased to tenants of the Building. In case of any action or proceeding
brought against Tenant by reason of any such claim, upon notice from Tenant,
Landlord covenants to defend such action or proceeding.
16. ASSIGNMENT/SUBLETTING.
A. Tenant shall not, without Landlord's prior written consent, which
in each instance, shall not be unreasonably withheld: (i) assign,
transfer, hypothecate, mortgage, encumber, or convey or subject to or
permit to exist upon or be subjected to any lien or charge this Lease or
any interest under it; (ii) allow any transfer of, or any lien upon,
Tenant's interest in this Lease by operation of law; (iii) sublet the
Premises in whole or in part; or (iv) allow the use or occupancy of any
portion of the Premises for a use other than the Use or by anyone other
than Tenant or Tenant's employees.
Notwithstanding the foregoing, should any law governing Landlord's
consent to a sublease or assignment require Landlord to exercise reason in
the consideration of the granting or denying of consent, Landlord may take
into consideration the business reputation and credit worthiness of the
proposed subtenant or assignee; any alterations of the Premises; the
intended use of the Premises by the proposed subtenant or assignee and any
alterations to the Premises or Building which might be required as a
result of such use; the estimated pedestrian and vehicular traffic in the
Premises and to the Building which would be generated by the proposed
subtenant or assignee; and any other factors which Landlord shall deem
relevant. Provided further, however, that if Landlord does not consent to
a sublease or assignment to any subtenant or assignee which is a
governmental agency, which is a present tenant in the Building or with
whom Landlord or its agents has discussed tenancy within the Building,
same shall not be deemed to be unreasonable.
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Notwithstanding anything contained in this Section 16 to the
contrary, Tenant may, without Landlord's prior consent, assign this Lease
(i) to an entity with which Tenant is merging or consolidating, (ii) to
its parent, (iii) to any wholly-owned subsidiary corporation of Tenant,
(iv) to an affiliate of Tenant, or (v) to any entity acquiring all or
substantially all of the Tenant's assets or stock provided the following
conditions are met:
(i) Tenant is not in default of the Lease at the time of the
assignment;
(ii) Tenant shall have given Landlord thirty (30) days prior
written notice of such assignment;
(iii) The net worth of the assignee is reasonably acceptable
to the Landlord; and
(iv) The assignee furnishes to Landlord, at least thirty (30)
days prior to the effective date of said assignment, a
written instrument satisfactory to Landlord in which
assignee agrees to assume and be bound by all the
conditions, obligations and agreements contained in this
Lease.
Notwithstanding any such assignment the Tenant shall remain fully
and primarily liable for the performance of all conditions, obligations,
and agreements of Tenant under this Lease.
B. If Tenant shall, with Landlord's prior consent as herein
required, sublet the Premises, any amount received by Tenant in excess of
the Monthly Base Rental and any Additional Rent herein provided to be paid
shall be for the sole benefit of Landlord and shall be paid to Landlord
promptly when due under any such subletting as Additional Rent.
C. If Tenant is an entity whose ownership is not publicly held, and
if during the Term, the ownership of the control of Tenant changes, Tenant
shall notify Landlord of such change within five (5) days thereof, and
Landlord, at its option, may at any time thereafter terminate this Lease
by giving Tenant written notice of said termination at least sixty (60)
days prior to the date of termination stated in the notice. The term
"control" as used herein means the power to directly or indirectly direct
or cause the direction of the management or policies of Tenant. A change
or series of changes in ownership of stock which would result in direct or
indirect change in ownership by the stockholders or an affiliated group of
stockholders of less than fifty percent (50%) of the outstanding stock
shall not be considered a change of control.
D. Tenant shall, by notice in writing, advise Landlord of its
intention from, on and after a stated date (which shall not be less than
sixty (60) days after the date of the giving of Tenant's notice to
Landlord) to assign this Lease or sublet any part or all of the Premises,
and, in such event, Landlord shall have the right, to be exercised by
giving written notice to Tenant within thirty (30) days after receipt of
Tenant's notice, to
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terminate this Lease with respect to the space described in Tenant's
notice as of the date stated in Tenant's notice for the commencement of
the proposed assignment or sublease. Tenant's notice shall include the
name and address of the proposed assignee or subtenant, a true and
complete copy of the proposed assignment or sublease and sufficient
information as Landlord deems necessary to permit Landlord to determine
the financial responsibility and character of the proposed assignee or
subtenant. If Tenant's notice covers all of the Premises and if Landlord
exercises its right to terminate this Lease as to such space, then the
Term of this Lease shall expire and end on the date stated in Tenant's
notice for the commencement of the proposed assignment or sublease. If,
however, Tenant's notice covers less than all of the Premises, and if
Landlord exercises its right to terminate this Lease with respect to such
space described in Tenant's notice, then as of the date stated in Tenant's
notice for the commencement of the proposed sublease, the Monthly Base
Rental and Tenant's Proportion shall be adjusted on the basis of the
number of rentable square feet retained by Tenant, and this Lease as so
amended, shall continue thereafter in full force and effect.
E. Landlord's consent to any assignment or subletting shall not
release Tenant from liability under this Lease or permit any subsequent
prohibited act, unless specifically provided in such written consent.
Tenant agrees to pay to Landlord, on demand, all reasonable costs incurred
by Landlord in connection with any request by Tenant of Landlord in
connection with any consent to any assignment or subletting by Tenant in
addition to any fee imposed by Landlord as a condition to granting its
consent.
17. SUBORDINATION. Landlord may execute and deliver a mortgage or trust
deed in the nature of a mortgage (both sometimes hereinafter referred to as
"Mortgage") against the Building, the Project or any interest therein, including
a ground lease thereof ("Ground Lease") and sell and Leaseback the underlying
land. This Lease and the rights of Tenant hereunder shall be and are hereby made
expressly subject and subordinate at all times to any Ground Lease of the land
or the Building, or both, now or hereafter existing and all amendments, renewals
and modifications thereto and extensions thereof, and to the lien of any
Mortgage now or hereafter encumbering any portion of the Project, and to all
advances made or hereafter to be made upon the security thereof; provided that
any such subordination at all times shall be subject to the right of Tenant to
remain in possession of the Premises, under the terms of this Lease for the
Term, notwithstanding any default under the Ground Lease or Mortgage or after
termination of said Ground Lease or foreclosure of the Mortgage or any sale
pursuant thereto so long as Tenant is not in default under this Lease. Tenant
agrees to execute and deliver such instruments subordinating this Lease to any
such Ground Lease and to the lien of any such Mortgage as may be requested in
writing by Landlord from time to time; provided, however, such subordination
shall be self-operative without the execution and delivery by Tenant of such
instruments. Notwithstanding anything to the contrary contained herein, any
mortgagee under a Mortgage may, by notice in writing to Tenant, subordinate its
Mortgage to this Lease. Landlord agrees to use reasonable efforts to obtain a
nondisturbance agreement from any future mortgage lender provided, however,
Tenant shall pay any and all costs incurred by Landlord to obtain said
nondisturbance agreement.
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In the event of the cancellation or termination of any such Ground Lease
described above in accordance with its terms or by the surrender thereof,
whether voluntary, involuntary or by operation of law, or by summary
proceedings, or the foreclosure of any such Mortgage by voluntary agreement or
otherwise, or the commencement of any judicial action seeking such foreclosure,
Tenant, at the request of the then Landlord, shall attorn to and recognize such
ground lessor, mortgagee or purchaser in foreclosure as Tenant's Landlord under
this Lease. Tenant agrees to execute and deliver at any time upon request of
such ground lessor, mortgagee, purchaser, or their successors, any instrument to
further evidence such attornment.
Tenant agrees to give the holder of any Mortgage, by registered or
certified mail, a copy of any notice of default served upon Landlord by Tenant,
provided that prior to such notice Tenant has received notice (by way of service
of assignment of rents and leases, or otherwise) of the address of such
mortgagees and containing a request therefor. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then said Mortgagees shall have an additional thirty (30) days after
receipt of notice thereof within which to cure such default or, if such default
cannot be cured within that time, then such additional time as may be necessary,
if, within such thirty (30) days, any mortgagee has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings, if necessary to effect such cure).
Such period of time shall be extended by any period within which such mortgagee
is prevented from commencing or pursuing such foreclosure proceedings by reason
of Landlord's bankruptcy. Until the time allowed as aforesaid for said mortgagee
to cure such defaults has expired without cure, Tenant shall have no right to,
and shall not, terminate this Lease on account of default. This Lease may not be
modified or amended so as to reduce the Rent or shorten the Term, or so as to
adversely affect in any other respect to any material extent the rights of
Landlord, nor shall this Lease be cancelled or surrendered, without the prior
written consent, in each instance, of the ground lessor or the mortgagee.
18. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves and may
exercise the following rights without prior notice to Tenant and without
affecting Tenant's obligations hereunder:
A. To change the name or street address of the Building provided,
however, if Landlord changes the street address of the Building (excluding
any change in the street address imposed or required by any governmental
entity having jurisdiction over the property) Landlord agrees to reimburse
Tenant for the actual costs incurred by Tenant to replace its existing
letterhead, stationary and business cards but in no event, will the
Landlord's reimbursement exceed a total of Five Hundred Dollars ($500.00).
Any request for payment by Tenant, pursuant to this provision, must
include a copy of the paid invoice for which Tenant is seeking
reimbursement;
B. To install and maintain a sign or signs on the interior or
exterior of the Building;
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C. To have access for Landlord and the other tenants of the Building
to any mail chutes located on the Premises according to the rules of the
United States Postal Service;
D. To designate all sources furnishing sign painting and lettering,
ice, drinking water, towels, food, beverages, and toilet supplies, lamps
and bulbs used on the Premises;
E. To decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy if Tenant vacates the Premises;
F. To retain at all times pass keys to the Premises;
G. To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building;
H. To exhibit the Premises to others during the last twelve (12)
months of the Lease Term;
I. To close the Building after regular working hours and on the
holidays; subject, however, to Tenant's and its invitees' rights to
admittance, under such reasonable regulations as Landlord may prescribe
from time to time, which may include by way of example but not of
limitation, that persons entering or leaving the Building identify
themselves to a watchman by registration or otherwise and that said
persons establish their right to enter or leave the Building; provided,
however, Landlord shall not be liable for the failure to admit any person
to the Building;
J. To approve the weight, size and location of safes or other heavy
equipment or articles, which articles may be moved in, about or out of the
Building or Premises only at such times and in such manner as Landlord
shall direct and in all events, however, at Tenant's sole risk and
responsibility;
K. To take any and all reasonable measures, including inspections,
repairs, alterations, decorations, additions and improvements to the
Premises or to the Building and to temporarily close public entry ways or
other areas of the Building and interrupt or temporarily suspend any
services or facilities, as may be necessary or desirable for the safety,
protection or preservation of the Premises or the Building or Landlord's
interests or the interest of other tenants, or as may be necessary or
desirable in the operation of the Building. In connection with the
Landlord's entering the Premises to exercise any of the foregoing rights,
Landlord shall take reasonable steps to minimize any interference with
Tenant's business operations in the Premises.
Landlord may enter upon the Premises and may exercise any or all of the
foregoing rights reserved without being deemed guilty of an eviction or
disturbance of Tenant's use or possession and without being liable in any manner
to Tenant and without abatement of Rent or affecting any of Tenant's obligations
hereunder.
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19. HOLDING OVER. If Tenant retains possession of the Premises or any
part thereof after the termination of the Term or any extension thereof, by
lapse of time and otherwise, Tenant shall pay Landlord Monthly Base Rental at
one hundred fifty percent (150%) multiplied by the rent, payable for the month
immediately preceding said holding over (plus increases for Rent Adjustments
which Landlord may reasonably estimate), computed on a per-month basis, for each
month or part thereof (without reduction for any such partial month) that Tenant
thus remains in possession, and in addition thereto, Tenant shall pay Landlord
all damages, consequential as well as direct, sustained by reason of Tenant's
retention of possession.
20. DEFAULT AND LANDLORD'S REMEDIES.
A. Each of the following shall constitute a breach of this Lease by
Tenant: (i) failure of Tenant to pay when due any monthly Rental
installment; provided, however, that only in the case of the first two (2)
such failures during each full calendar year of the term, if such payment
is not made within five (5) days after written notice of such failure from
Landlord; (ii) failure of Tenant to pay any monetary rental obligation
other than monthly Rent within five (5) days after written notice of such
failure from Landlord; (iii) Tenant fails to observe or perform any of the
other covenants, conditions or provisions of this Lease to be observed or
performed by Tenant and fails to cure such default within thirty (30) days
after written notice thereof to Tenant; (iv) the interest of Tenant in
this Lease is levied upon under execution or other legal process; (v) a
petition is filed by or against Tenant to declare Tenant bankrupt or
seeking a plan of reorganization or arrangement under any Chapter of the
Bankruptcy Act, and said petition is not dismissed within sixty (60) days
of filing, or any amendment, replacement or substitution therefor, or to
delay payment of, reduce or modify Tenant's debts, or any petition is
filed or other action taken to reorganize or modify Tenant's capital
structure or upon the dissolution of Tenant, and said petition is not
dismissed within sixty (60) days of filing; (vi) Tenant is declared
insolvent by law or any assignment of Tenant's property is made for the
benefit of creditors; (vi) a receiver is appointed for Tenant or Tenant's
property; or (vii) Tenant abandons the Premises and ceases to pay Rent.
B. In the event of any breach of this Lease by Tenant, Landlord at
its option, without further notice or demand to Tenant, may, in addition
to all other rights and remedies provided in this Lease, at law or in
equity:
(i) Landlord may terminate this Lease by giving to Tenant
notice of Landlord's election to do so, in which event
the Term of this Lease shall end, and all right, title
and interest of Tenant hereunder shall expire, on the
date stated in such notice;
(ii) Landlord may terminate the right of Tenant to possession
of the Premises without terminating this Lease by giving
notice to Tenant that Tenant's right to possession shall
end on the date stated in such notice, whereupon the
right of
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Tenant to possession of the Premises or any part thereof
shall cease on the date stated in such notice; and
(iii) Landlord may enforce the provisions of this Lease and
may enforce and protect the rights of Landlord hereunder
by a suit or suits in equity or at law for the specific
performance of any covenant or agreement contained
herein, or for the enforcement of any other appropriate
legal or equitable remedy, including recovery of all
moneys due or to become due from Tenant under any of the
provisions of this Lease.
C. If Landlord exercises either of the remedies provided in
Sections 20.B(i) or (ii), Tenant shall surrender possession and vacate the
Premises and immediately deliver possession thereof to Landlord, and
Landlord may re-enter and take complete and peaceful possession of the
Premises in accordance with law.
D. If Landlord terminates the right of Tenant to possession of the
Premises without terminating this Lease, Landlord shall have the right to
immediate recovery of all amounts then due hereunder. Such termination of
possession shall not release Tenant, in whole or in part, from Tenant's
obligation to pay Rent hereunder for the full Term, and Landlord shall
have the right, from time to time, to recover from Tenant, and Tenant
shall remain liable for, all Total Base Rent, Rent Adjustments and any
other sums accruing as they become due under this Lease during the period
from the date of such notice of termination of possession to the stated
end of the Term. In any such case, Landlord may relet the Premises or any
part thereof for the account of Tenant for such rent, for such time (which
may be for a term extending beyond the Term of this Lease) and upon such
terms as Landlord shall determine and may collect the rents from such
reletting. Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions given by Tenant relative to such
reletting. Also, in any such case, Landlord may make reasonable repairs,
alterations and additions in or to the Premises and redecorate the same to
the extent deemed by Landlord necessary or desirable and in connection
therewith change the locks to the Premises, and Tenant upon demand shall
pay the reasonable cost of all of the foregoing together with Landlord's
reasonable expenses of reletting. The rents from any such reletting shall
be applied first to the payment of the expenses of reentry, redecoration,
repair and alterations and the expenses of reletting and second to the
payment of Rent herein provided to be paid by Tenant. Any excess or
residue shall operate only as an offsetting credit against the amount of
Rent due and owing as the same thereafter becomes due and payable
hereunder, and the use of such offsetting credit to reduce the amount of
Rent due Landlord, if any, shall not be deemed to give Tenant any fight,
title or interest in or to such excess or residue and any such excess or
residue shall belong to Landlord solely, and in no event shall Tenant be
entitled to a credit on its indebtedness to Landlord in excess of the
aggregate sum (including Total Base Rent and Rent Adjustments) which would
have been paid by Tenant for the period for which the credit to Tenant is
being determined, had no default occurred. No such reentry or
repossession, repairs, alterations and additions, or reletting shall be
construed as an eviction or ouster of Tenant or as an election on
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Landlord's part to terminate this Lease, unless a written notice of such
intention is given to Tenant, or shall operate to release Tenant in whole
or in part from any of Tenant's obligations hereunder, and Landlord, at
any time and from time to time, may sue and recover judgment for any
deficiencies remaining after the application of the proceeds of any such
reletting.
E. If this Lease is terminated by Landlord pursuant to Section
20.B(i), Landlord shall be entitled to recover from Tenant all Rent
accrued and unpaid for the period up to and including such termination
date, as well as all other additional sums payable by Tenant, or for which
Tenant is liable or for which Tenant has agreed to indemnify Landlord
under any of the provisions of this Lease, which may be then owing and
unpaid, and all costs and expenses, including court costs and attorneys'
fees incurred by Landlord in the enforcement of its rights and remedies
hereunder, and, in addition, Landlord shall be entitled to recover as
damages for loss of the bargain and not as a penalty (i) the unamortized
portion of Landlord's contribution to the cost of tenant improvements and
alterations, if any, installed by either Landlord or Tenant pursuant to
this Lease, (ii) the aggregate sum which at the time of such termination
represents the excess, if any, of the present value of the aggregate rents
which would have been payable after the termination date had this Lease
not been terminated, including, without limitation, Base Rent at the
annual rate or respective annual rates for the remainder of the Term
provided for in this Lease and the amount reasonably projected by Landlord
to represent Rent Adjustments for the remainder of the Term pursuant to
this Lease, over the then present value of the then aggregate fair rental
value of the Premises for that portion of the Term, beginning on the date
occurring six (6) months after the date on which this Lease is terminated
by Landlord through the end of the Term, such present worth to be computed
in each case on the basis of a ten percent (10%) per annum discount from
the respective dates upon which such rentals would have been payable
hereunder had this Lease not been terminated, and (iii) any damages in
addition thereto, including reasonable attorneys' fees and court costs,
which Landlord sustains as a result of the breach of any of the covenants
of this Lease other than for the payment of Rent.
F. Subject to the provisions of Section 21, all property of Tenant
removed from the Premises by Landlord pursuant to any provision of this
Lease or applicable law may be handled, removed or stored by Landlord at
the cost and expense of Tenant, and Landlord shall not be responsible in
any event for the value, preservation or safekeeping thereof. Tenant shall
pay Landlord for all expenses incurred by Landlord with respect to such
removal and storage so long as the same is in Landlord's possession or
under Landlord's control. All such property not removed from the Premises
or retaken from storage by Tenant within thirty (30) days after the end of
the Term, however terminated, at Landlord's option, shall be conclusively
deemed to have been conveyed by Tenant to Landlord as by bill of sale
without further payment or credit by Landlord to Tenant.
G. The nonprevailing party shall pay all of the prevailing party's
costs, charges and expenses, including court costs and attorneys' fees,
incurred by the prevailing party in enforcing the nonprevailing party's
obligations under this Lease. In addition, Tenant shall pay all of
Landlord's costs, charges and expenses (including costs and attorneys'
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fees incurred by Landlord) in any litigation, negotiation or transaction
in which Tenant causes Landlord, without Landlord's fault, to become
involved or concerned.
H. If Tenant is adjudged bankrupt, or a trustee in bankruptcy is
appointed for Tenant, Landlord and Tenant, to the extent permitted by law,
agree to request that the trustee in bankruptcy determine within sixty
(60) days thereafter whether to assume or to reject this Lease.
I. If the term of any lease, other than this Lease and excluding the
Tenant's right to use the Construction Office Space pursuant to Section 33
of this Lease, made by Tenant for any premises in the Building shall be
terminated or terminable after the making of this Lease because of any
default by Tenant under such other lease, such fact shall empower
Landlord, at Landlord's sole option, to terminate this Lease by notice to
Tenant.
J. Notwithstanding anything to the contrary contained in this Lease,
Landlord and Tenant shall each use commercially reasonable efforts to
mitigate any damages resulting from a default of the other party under
this Lease.
Landlord's obligation to mitigate damages after a default by Tenant
under this Lease shall be satisfied in full if Landlord undertakes to
lease the Premises to another tenant (a "Substitute Tenant") in accordance
with the following criteria:
(i) Landlord shall have no obligations to solicit or
entertain negotiations with any other prospective
tenants for the Premises until Landlord obtains full and
complete possession of the Premises including, without
limitation, the final and unappealable legal right to
relet the Premises free of any claim of Tenant;
(ii) Landlord shall not be obligated to offer the Premises to
a prospective tenant when other premises in the Building
suitable for that prospective tenant's use are
available;
(iii) Landlord shall not be obligated to lease the Premises to
a Substitute Tenant for a rental less than the current
fair market rental then prevailing for similar uses in
comparable building in the same market area as the
Building, nor shall Landlord be obligated to enter into
a new lease under other terms and conditions that are
unacceptable to Landlord under Landlord's then current
leasing policies for comparable space in the Building;
(iv) Landlord shall not be obligated to enter into a lease
with any tenant whose use would:
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(A) violate any restriction, covenant, or requirement
contained in the lease of another tenant of the
Building;
(B) adversely affect the reputation of the Building;
or
(C) be incompatible with the operation of the Building
as a first class office building;
(v) Landlord shall not be obligated to enter into a lease
with any proposed Substitute Tenant which does not have,
in landlord's reasonable opinion, sufficient financial
resources or operating experience to operate the
Premises in a first class manner; and
(vi) Landlord shall not be required to expend any amount of
money to alter, remodel, or otherwise make the Premises
suitable for use by a proposed Substitute Tenant unless:
(A) Tenant pays any such sum to Landlord in advance of
Landlord's execution of a lease which such tenant
(which payment shall not be in lieu of any damages
or other sums to which Landlord may be entitled as
a result of Tenant's default under this Lease); or
(B) Landlord, in Landlord's sole discretion,
determines that any such expenditure is
financially justified in connection with entering
into any such substitute lease.
Upon compliance with the above criteria regarding the releasing of
the Premises after a default by Tenant, Landlord shall be deemed to have
fully satisfied Landlord's obligation to mitigate damages under this Lease
and under any law or judicial ruling in effect on the date of this Lease
or at the time of Tenant's default. Tenant waives and releases, to the
fullest extent legally permissible, any right to assert in any action by
Landlord to enforce the terms of this Lease, any defense, counterclaim, or
rights of setoff or recoupment respecting the mitigation of damages by
Landlord, unless and to the extent Landlord maliciously or in bad faith
fails to act in accordance with the requirements of this Section 20.J.
Tenant's right to seek damages from Landlord as a result of a
default by Landlord under this Lease shall be conditioned on Tenant taking
all actions reasonably required, under the circumstances, to minimize any
loss or damage to Tenant's property or business, or to any of Tenant's
officers, employees, agents, invitees, or other third parties that may be
caused by any such default of Landlord.
21. SURRENDER OF POSSESSION. Upon the expiration or other termination of
the Term, Tenant shall quit and surrender to Landlord the Premises, broom clean,
in good order and
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condition, ordinary wear and tear excepted, surrender all keys to the Premises
to Landlord, and Tenant shall remove all of its property except as otherwise
specifically provided herein.
If Tenant does not remove its property of every kind and description from
the Premises prior to the end of the Term, however ended, at Landlord's option
and upon ten (10) days prior notice to Tenant, Tenant shall be conclusively
presumed to have conveyed the same to Landlord under this Lease as a bill of
sale without further payment or credit by Landlord to Tenant and Landlord may
remove the same and Tenant shall pay the cost of such removal to Landlord upon
demand. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of the Term.
22. INTENTIONALLY OMITTED.
23. COVENANT AGAINST LIENS. Tenant has no authority or power to cause or
permit any lien or encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed upon Landlord's
title or interest in the Building, the Project or Premises, and any liens and
encumbrances created by Tenant shall attach to Tenant's interest only. Tenant
covenants and agrees not to suffer or permit any lien of mechanics or
materialmen or others to be placed against the Land, Building or the Premises
with respect to work or services claimed to have been performed for or materials
claimed to have been furnished to Tenant or the Premises, and in case of any
such lien attaching, Tenant covenants and agrees to cause it to be released and
removed of record no later than thirty (30) days following notice of said lien.
24. TENANT'S PAYMENTS UPON EXECUTION.
A. As additional security for the faithful and prompt performance of
its obligation herein, Tenant has concurrently with the execution of this
Lease delivered to Agent an irrevocable unconditional standby letter of
credit (the "Letter of Credit") in the stated amount of One Hundred
Thousand Dollars ($100,000.00). The Letter of Credit shall be issued by a
financial institution and be in both form and substance acceptable to
Landlord and shall have an expiry date of December 31, 1998. If a default
shall occur, Landlord shall have the right (but not the obligation) to
redeem all or any portion of the Letter of Credit to cure such default by
notifying in writing both Tenant and the credit institution issuing the
Letter of Credit of such default following expiration of the period to
cure such default, if any. The amount of the Letter of Credit shall be
reduced on a dollar-for-dollar basis by the amount of each Monthly Base
Rental payment received by Landlord (as evidenced by delivery to Landlord
of a substitute Letter of Credit as described in the immediately
succeeding paragraph (except as to the applicable reduced stated amount))
until the amount of the Letter of Credit is reduced to zero. Within thirty
(30) days after the amount of the Letter of Credit has been reduced to
zero, Landlord shall return such Letter of Credit to Tenant. If landlord
shall sell or transfer its interest in the Building, Landlord shall have
the right to obligate Tenant to amend said Letter of Credit so that it is
payable to such purchaser or transferee, in which event Tenant shall look
solely to such purchaser or transferee for the return of the Letter of
Credit, and
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Landlord thereupon shall be released from all liability to Tenant for the
return of the Letter of Credit.
Provided Landlord receives at least thirty (30) days prior written notice
thereof, Tenant shall have the right to deliver to Landlord a letter of
credit in substitution for and in replacement of the Letter of Credit in
accordance with the immediately preceding paragraph, issued by a financial
institution and in a form and content reasonably acceptable to Landlord,
and upon receipt of such substituted letter of credit, Landlord shall
deliver the Letter of Credit to Tenant.
In the event the Letter of Credit issuer or the issuer of any substitute
letter of credit elects not to renew the Letter of Credit in accordance
with its terms, if required hereunder, Landlord shall have the fight to
draw the entire amount of the Letter of Credit no earlier than thirty (30)
days prior to the expiration or termination of the Letter of Credit. Upon
receipt of cash in the amount of such draw (the "Cash Deposit"), Landlord
shall hold, apply, reduce and otherwise exercise its rights in connection
with the Cash Deposit as security for performance by Tenant under this
Lease in the same manner as Landlord shall hold, apply, reduce and
otherwise exercise its rights in connection with the Letter of Credit
pursuant to the terms of this Section 24(A). Landlord shall hold the Cash
Deposit in the same manner as Landlord holds other cash security deposits
of tenants of the Building. Once drawn, the Letter of Credit will not be
reinstated to its original amount. Said deposit shall not be deemed an
advance payment of Rent or measure of Landlord's damages for any default
hereunder by Tenant.
B. Notwithstanding anything to the contrary herein set forth, the
Monthly Base Rental payable for the first month of the Term shall be due
and paid to Landlord concurrently with the execution hereof by Tenant.
25. RULES AND REGULATIONS. Tenant shall occupy and use the Premises
during the Term for the purpose above specified and none other and shall comply
with the following provisions:
A. Tenant will not make or permit to be made any use of the Premises
which, directly or indirectly is forbidden by public law, ordinance, or
governmental regulation or which may be dangerous to persons or property,
or which may invalidate or increase the premium cost of any policy of
insurance carried on the Building or covering its operations; Tenant shall
not do, or permit to be done, any act or thing upon the Premises which
will be in conflict with fire insurance policies covering the Building.
Tenant, at its sole cost and expense shall comply with all rules,
regulations or requirements of the local inspection and rating bureau, or
any other similar body, and shall not do or permit anything to be done
upon said Premises or bring or keep anything thereon in violation of
rules, regulations, or requirements of the Fire Department, local
inspection and rating bureau, fire insurance rating organization or other
authority having jurisdiction and then only in such quantity and manner of
storage as not to increase the rate of fire insurance applicable to the
Building;
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B. Any sign installed in the Premises or anywhere within the
Building shall be installed by Landlord at Tenant's cost and in such
manner, character and style as Landlord may approve in writing, which
approval shall not be unreasonably withheld;
C. Tenant shall not advertise the business, profession or activities
of Tenant conducted in the Building in any manner which violates the
letter or spirit of any code of ethics adopted by any recognized
association or organization pertaining to such business, profession or
activities, and shall not use the name of the Building for any purpose
other than that of business address of Tenant, and shall never use any
picture or likeness of the Building in any circulars, notices;
advertisements or correspondence without Landlord's express prior consent
in writing, which consent shall not be unreasonably withheld;
D. Tenant shall not obstruct, use for storage or use for any purpose
other than ingress and egress, the sidewalks, entrances, passages, courts,
corridors, vestibules, halls, elevators and stairways of the Building;
E. No bicycle or other vehicle and no dog, other than a seeing eye
dog, or other animal shall be brought or permitted to be in the Building
or any part thereof;
F. Tenant shall not make or permit any noise or odor that is
objectionable to other occupants of the Building to emanate from the
Premises, and shall not create or maintain a nuisance thereon, and shall
not disturb, solicit or canvass any occupant of the Building, and shall
not do any act tending to injure the reputation of the Building;
G. Tenant shall not install any musical instrument or equipment in
the Building or any antennas, aerial wires or other equipment inside or
outside the Building, without, in each and every instance, prior approval
in writing by Landlord, which approval shall not be unreasonably withheld.
The use thereof, if permitted, shall be subject to control by Landlord to
the end that others shall not be disturbed or annoyed;
H. Tenant shall not waste water by tying, wedging or otherwise
fastening open any faucet;
I. No additional locks or similar devices shall be attached to any
door or window. No keys for any door or window other than those provided
by Landlord shall be made. If more than two keys for one lock are desired
by Tenant, Landlord may provide the same upon payment by Tenant. Upon
termination of this Lease or of Tenant's possession, Tenant shall
surrender all keys of the Premises and shall make known to Landlord the
explanation of all combination locks on safes, cabinets, and vaults;
J. Tenant shall be responsible for protecting the Premises and all
of its property located therein and for the safety of all persons therein;
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K. If Tenant desires telegraphic, telephonic, communications,
burglar alarm or signal service, Landlord will, upon request, direct where
and how connections and all wiring for such service shall be introduced
and run. Without such directions, no boring, cutting or installation of
wires or cables is permitted;
L. Shades, draperies or other forms of inside window covering must
be of such shape, color and material as are approved by Landlord;
M. Tenant shall pay, as a late charge in the event any installment
of Total Base Rental, Rent Adjustments, Rent Adjustment Deposits and any
other charge owed by Tenant hereunder is not paid within five (5) days
following Landlord's late payment notice to Tenant; provided, however,
following the Landlord's second late payment notice to Tenant in any
calendar year, any future late payment by Tenant in the calendar year
shall incur the late charge from the date said payment was due, the
greater of One Hundred Dollars ($100.00) or an amount equal to five
percent (5%) of the amount due for each and every thirty (30) day period
that said amount remains unpaid (but in no event shall the amount of such
late charge exceed an amount based upon the highest legally permissible
rate chargeable at any time by Landlord under the circumstances). Should
Tenant make a partial payment of past due amounts, the amount of such
partial payment shall be applied first to reduce all accrued and unpaid
late charges, in inverse order of their maturity, and then to reduce all
other past due amounts, in inverse order of their maturity;
N. Tenant shall not overload any floor. Safes, furniture and all
large articles shall be brought through the Building and into the Premises
at such times and in such manner as Landlord shall direct and at Tenant's
sole risk and responsibility. Tenant shall list all furniture, equipment
and similar articles to be removed from the Building, and the list must be
approved, which approval will not be unreasonably withheld, at the Office
of the Building or by a designated person before building employees will
permit any article to be removed;
O. Unless Landlord gives advance written consent in each and every
instance, Tenant shall not install or operate any steam or internal
combustion engine, boiler, machinery, refrigerating or heating device or
air-conditioning apparatus in or about the Premises, or carry on any
mechanical business therein, or use the Premises for housing
accommodations or lodging or sleeping purposes, or do any cooking therein
or install or permit the installation of any vending machines, or use any
illumination other than electric light, or use or permit to be brought
into the Building any inflammable oils or fluids such as gasoline,
kerosene, naptha and benzene, or any explosive or other articles hazardous
to persons or property. The Landlord hereby acknowledges that the Tenant
shall be allowed to install a full-size refrigerator, an ice maker, a
microwave, computers and air conditioning equipment for the computers in
the Premises subject to the Landlord's approval of the Tenant's Plans for
the Premises;
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P. Tenant shall not place or allow anything to be against or near
the glass of partitions, doors or windows of the Premises which may
diminish the light in, or be unsightly from the exterior of the Building,
public halls or corridors;
Q. Tenant shall not install in the Premises any equipment which uses
a substantial amount of electricity without the advance written consent of
Landlord, which consent will not be unreasonably withheld. Tenant shall
ascertain from Landlord the maximum amount of electric current which can
safely be used in the Premises, taking into account the capability of the
electric wiring in the Building and the Premises and the needs of other
tenants in the Building and shall not use more than such safe capacity.
Landlord's consent to the installation of electric equipment shall not
relieve Tenant from the obligation not to use more electricity than such
safe capacity;
R. Tenant may not install carpet padding or carpet by means of a
mastic, glue or cement without Landlord's prior written consent. Such
installation shall be by tackless strip or double-faced tape only;
S. Tenant shall not, without Landlord's prior written consent in
each instance, do any cooking, baking, heating, preparation, serving or
selling of any food or beverages in the Premises, or permit the same to
occur, except for coffee service and microwave ovens to service Tenant.
T. If Tenant breaches any covenant or condition of this Section 25,
then in addition to all other liabilities, rights and remedies for breach
of any covenant of this Section 25, Tenant shall pay to Landlord all
damages caused by such breach and shall also pay to Landlord as Additional
Rent an amount equal to any increase in insurance premium or premiums
caused by such breach. Landlord shall have the right to make and Tenant
shall observe, such reasonable rules and regulations as Landlord or its
agent may from time to time adopt on such reasonable notice to be given as
Landlord may elect. Nothing in this Lease shall be construed to impose
upon Landlord any duty or obligation to enforce provisions of this Section
25 or any rules and regulations hereafter adopted, or the terms, covenants
or conditions of any other lease as against any other tenant, and Landlord
shall not be liable to Tenant for violation of the same by any other
tenant, its servants, employees, agents, visitors or licensees. Landlord
shall enforce all rules and regulations in a uniform manner.
26. MISCELLANEOUS.
A. No payment by Tenant or receipt by Landlord of a lesser amount
than any installment or payment of Rent due shall be deemed to be other
than a payment on account of the amount due and no endorsement or
statement on any check or any letter accompanying any check or payment of
Rent shall be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or payment of Rent or pursue any other
remedies available to Landlord. No receipt of money by landlord from
Tenant after the termination of this Lease or after the service of any
notice or after the commencement
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of any suit, or after final judgment for possession of the Premises shall
reinstate, continue or extend the term of this Lease or affect any such
notice, demand or suit.
B. No waiver of any default of Tenant hereunder shall be implied
from any omission by Landlord to take any action on account of such
default and if such default be repeated, no express waiver shall affect
any default other than the default specified in the express waiver and
that only for the time and to the extent therein stated. Receipt of Rent
by Landlord, with knowledge of any breach of this Lease by Tenant or of
any default by Tenant in the observance or performance of any of the
conditions or covenants of this Lease, shall not be deemed to be a waiver
of any provision of this Lease.
C. The words "Landlord" and "Tenant" wherever used in the Lease
shall be construed to mean plural where necessary, and the necessary
grammatical changes required to make the provisions hereof apply either to
corporations, or individuals, men or women, shall in all cases be assumed
as though in each case fully expressed. The term "Tenant" shall include
Tenant's agents, employees, contractors, officers, invitees, successors
and others using the Premises with the expressed or implied permission of
Tenant.
D. Each provision hereof shall extend to and shall, as the case may
require, bind and inure to the benefit of Landlord and Tenant and their
respective heirs, legal representative, successors and assigns in the
event this Lease has been assigned with the express written consent of
Landlord; provided, however, this provision shall not be construed to
permit any assignment or subletting by Tenant.
E. The execution of this Lease by Tenant and delivery of same to
Landlord or Agent does not constitute a reservation of or option for the
Premises or an agreement to enter into a Lease. This Lease shall become
effective only if and when Landlord executes and delivers same to Tenant;
provided, however, the execution and delivery by Tenant of this Lease to
Landlord or Agent shall constitute an irrevocable offer by Tenant to lease
the Premises on the terms and conditions herein contained, which offer may
not be withdrawn or revoked for fifteen (15) days after such execution and
delivery. If Tenant is a corporation, partnership, association or any
other entity, it shall deliver to Landlord, concurrently with the delivery
to Landlord of an executed Lease, certified resolutions of Tenant's
directors or other governing person or body authorizing execution and
delivery of this Lease and the performance by Tenant of its obligations
hereunder and the authority of the party executing the Lease as having
been duly authorized to so do.
F. All amounts (unless otherwise provided herein, and other than the
Total Base Rent and Rent Adjustments, which shall be due as hereinbefore
provided) owed by Tenant to Landlord hereunder shall be deemed Additional
Rent and be paid within thirty (30) days from the date Landlord renders
statements of account therefor. All such amounts (including Total Base
Rent and Rent Adjustments) shall bear interest from the date due until the
date paid at the rate of two percent (2%) above the prime or base rate of
interest published by The First National Bank of Chicago, Chicago,
Illinois on the date
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that any payment is due or at the maximum legal rate of interest, allowed
by law, if such maximum legal rate is applicable and lower. Whenever Rent
is referred to in this Lease, it shall include (but not by way of
exclusion) Total Base Rent, Rent Adjustments and Additional Rent.
G. All riders and exhibits attached to this Lease referred to herein
are hereby made a part of this Lease as though inserted in this Lease.
H. The headings of sections are for convenience only and do not
limit or construe the contents of the sections.
I. If Tenant shall occupy the Premises prior to the beginning of the
Term of this Lease with Landlord's consent, all of the provisions of this
Lease shall be in full force and effect as soon as Tenant occupies the
Premises.
J. Should any mortgage, leasehold or otherwise, require a
modification or modifications of this Lease, which modification or
modifications will not bring about any increased cost or expense to Tenant
or in any other way substantially change the rights and obligations of
Tenant hereunder or reconfigure or relocate the Premises, then and in such
event, Tenant agrees that this Lease may be so modified.
K. Landlord and Tenant represent that they have dealt directly with
and only with Agent and Cooperating Broker listed in Section 1 hereof, if
any, as broker in connection with this Lease and that insofar as either
Tenant or Landlord know, no other broker negotiated this Lease or is
entitled to any commission in connection herewith. Both parties indemnify
and hold the other party, its trustees, partners and agents, and their
respective agents and employees harmless from all claims of any other
broker or brokers in connection with this Lease.
L. Both parties shall at any time and from time to time upon not
less than fifteen (15) days prior written request from the other party
execute, acknowledge and deliver to the requesting party, in form
reasonably satisfactory to the requesting party and/or the requesting
party's mortgagee, a written statement certifying (if true) that Tenant
has accepted the Premises, that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), that the
requesting party is not in default hereunder, the date to which the Rent
and other charges have been paid in advance, if any, and such other
accurate certification as may reasonably be requested by the requesting
party or the requesting party's mortgagee, and agreeing to give copies of
all notices to any mortgagee of the requesting party. It is intended that
any such statement delivered pursuant to this subsection may be relied
upon by any prospective purchaser or mortgagee of the Premises and their
respective successors and assigns.
M. Landlord's title is and always shall be paramount to the title of
Tenant, and nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber such title.
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N. The laws of the State of Connecticut shall govern the validity,
performance and enforcement of this Lease and any proceedings brought to
enforce this Lease or otherwise in connection with this Lease shall be
brought within the State of Connecticut.
O. If any term, covenant or condition of this Lease or application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
term, covenant or condition to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected
thereby and each term; covenant or condition of this Lease shall be valid
and be enforced to the fullest extent permitted by law.
P. Tenant warrants and represents that it has full power and
authority to execute this Lease. In the event Tenant is a general
partnership or consists of two or more individuals, all present and future
partners or individuals, as applicable, shall be jointly and severally
liable hereunder. Landlord warrants and represents that it has full power
and authority to execute this Lease.
Q. Landlord has no obligation pursuant to this Lease except as
expressly provided for herein. Landlord's liability hereunder shall cease
upon the transfer of Landlord's interest in this Lease. Nothing in this
Lease shall restrict the right of Landlord to sell, convey or otherwise
transfer the Building or assign this Lease subject only to the rights of
Tenant under this Lease. Any such sale, conveyance or assignment shall
operate to release Landlord from liability from and after the effective
date thereof with respect to all of the covenants, terms and conditions of
this Lease, express or implied, and Tenant shall thereafter look solely to
Landlord's successor in interest in and to this Lease with respect to
liability accruing thereafter under this Lease. This Lease shall not be
affected by any such sale, conveyance or assignment and Tenant shall
attorn to Landlord's successor in interest thereunder. Tenant shall have
no obligation pursuant to this Lease except as expressly provided for
herein.
R. This Lease sets forth all the covenants, promises, agreements,
conditions and understandings between Landlord and Tenant, concerning the
Premises, and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than herein set
forth, except as herein otherwise provided; no subsequent alteration,
amendment, change or addition to this Lease shall be binding upon Landlord
or Tenant unless reduced to writing and signed by them.
S. Notices hereunder shall be in writing and shall be deemed given
when received if:
(i) served by Landlord upon Tenant by leaving a notice at
the Premises or forwarding through certified or
registered mail, postage prepaid, or by recognized
overnight carrier, to Tenant at the Premises with a copy
to Rafael Santiago, Esq. at Robinson & Cole, LLP, One
Commercial Plaza, Hartford, Connecticut 06103-3597; and
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(ii) served by Tenant upon Landlord when addressed to
Landlord and served by forwarding through certified or
registered mail, postage prepaid, or by recognized
overnight carrier, to Agent at the address set forth in
Section 1 with a copy to: Rudnick & Wolfe, 203 North
LaSalle Street, Chicago, Illinois 60601, Attn: James T.
Mayer, Esq. or to such other address and such other
parties as notified by Landlord.
T. This Lease does not grant any rights to light or air over or
about the real property of Landlord. Landlord specifically excepts and
reserves to itself the use of any roofs, the exterior portions of the
Project, all rights to the land and improvements below the improved floor
level of the Project, to the improvements and air rights above the Project
and to the improvements and air rights located outside the demising walls
of the Project and to such areas within the Project required for
installation of utility lines and other installations required to serve
any occupants of the Project and to maintain and repair same, and no
rights with respect thereto are conferred upon Tenant, unless otherwise
specifically provided herein.
U. The preparation of this Lease has been a joint effort of the
parties hereto and the resulting documents shall not, solely as a matter
of judicial construction, be construed more severely against one of the
parties than the other.
V. Tenant agrees to comply, at Tenant's sole cost and expense,
with all statutes, laws, ordinances, orders, codes, rules, regulations and
other acts having the force or effect of law, of all state, federal,
municipal and other agencies, authorities or bodies having jurisdiction
over the Premises or the Building, now or hereafter in force, relating to
the Premises, including, but not limited to, the use, condition, occupancy
or any alteration of the Premises.
W. Provided Tenant shall not be in default of the terms and
provisions of this Lease, during the Term, Landlord shall provide to
Tenant on a first-come, first-serve basis, in common with other tenants of
the Building and any other parties permitted by Landlord, fifty-six (56)
unreserved surface parking spaces and four (4) reserved parking spaces
designated as space numbers 80, 81, 82 and 83 without charge.
27. QUIET ENJOYMENT. Subject to the provisions of this Lease, Landlord
covenants that Tenant, on paying the Rent and performing the covenants of this
Lease on its part to be performed, shall and may peaceably have, hold and enjoy
the Premises for the Term.
28. HAZARDOUS SUBSTANCES. As used herein, the following terms shall have
the following meanings:
"CLAIM" shall mean and include any demand, cause of action,
proceeding or suit for any one or more of the following: (i) actual or
punitive damages, losses, injuries to person or property, damages to
natural resources, fines, penalties, interest, contribution
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or settlement, (ii) the costs of site investigations, feasibility studies,
information requests, health or risk assessments, or Response (as
hereinafter defined) actions, and (iii) enforcing insurance, contribution
or indemnification agreements.
"ENVIRONMENTAL LAW", shall mean and include all federal, state and
local statutes, ordinances, regulations and rules relating to
environmental quality, health, safety, contamination and clean-up,
including, without limitation, the Clean Air Act, 42 U.S.C. Section 7401
ET SEQ.; the Clean Water Act, 33 U.S.C. Section 1251 ET SEQ., and the
Water Quality Act of 1987; the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA"), 7 U.S.C. Section 136 ET SEQ.; the Marine
Protection, Research, and Sanctuaries Act, 33 U.S.C. Section 1401 ET SEQ.;
the National Environmental Policy Act, 42 U.S.C. Section 4321 ET SEQ.; the
Noise Control Act, 42 U.S.C. Section 4901 ET SEQ.; the Occupational
Safety and Health Act, 29 U.S.C. Section 651 ET SEQ.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 ET SEQ., as
amended by the Hazardous and Solid Waste Amendments of 1984; the Safe
Drinking Water Act, 42 U.S.C. Section X ET SEQ.; the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42
U.S.C. Section 9601 ET SEQ., as amended by the Superfund Amendments and
Reauthorization Act, the Emergency Planning and Community Right-to-Know
Act, and Radon Gas and Indoor Air Quality Research Act; the Toxic
Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the
Atomic Energy Act, 42 U.S.C. Section 2011 ET SEQ., and the Nuclear Waste
Policy Act of 1982, 42 U.S.C. Section 10101 ET SEQ.; and any environmental
protection, state superlien or environmental clean-up statutes of the
State of Connecticut, with implementing regulations and guidelines, as
amended from time to time. Environmental Laws shall also include all
state, regional, county, municipal and other local laws, regulations, and
ordinances insofar as they are equivalent or similar to the federal laws
recited above or purport to regulate Hazardous Materials (as hereinafter
defined).
"HAZARDOUS MATERIALS" shall mean and include the following,
including mixtures thereof: any hazardous substance, pollutant,
contaminant, waste, by-product or constituent regulated under CERCLA; oil
and petroleum products and natural gas, natural gas liquids, liquefied
natural gas and synthetic gas usable for fuel; pesticides regulated under
the FIFRA; asbestos and asbestos-containing materials, PCBs, and other
substances regulated under the TSCA; source material, special nuclear
material, by-product material and any other radioactive materials or
radioactive wastes, however produced, regulated under the Atomic Energy
Act or the Nuclear Waste Policy Act; chemicals subject to the OSHA Hazard
Communication Standard, 29 C.F.R. {1910.1200 ET SEQ.; and industrial
process and pollution control wastes, whether or not hazardous within the
meaning of RCRA.
"MANAGE" or "MANAGEMENT" means to generate, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or bum for
energy recovery, incinerate, accumulate speculatively, transport,
transfer, dispose of, or abandon Hazardous Materials.
36
<PAGE> 40
"RELEASE" or "RELEASED" shall mean any actual or threatened
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of Hazardous Materials
into the environment, as "environment" is defined in CERCLA.
"RESPONSE" or "RESPOND" shall mean action taken in compliance with
Environmental Laws to correct, remove, remediate, cleanup, prevent,
mitigate, monitor, evaluate, investigate, assess or abate the Release of a
Hazardous Material.
During the Term, (a) Tenant shall comply at its own cost with all
Environmental Laws; (b) Tenant shall not Manage, or authorize the Management of,
any Hazardous Materials on the Premises, including installation of any
underground storage tanks, without prior written disclosure to and approval by
Landlord; (c) Tenant shall not take any action that would subject the Premises
to permit requirements under RCRA for storage, treatment or disposal of
Hazardous Materials; (d) Tenant shall not dispose of Hazardous Materials in
dumpsters provided by Landlord for tenant use; (e) Tenant shall not discharge
Hazardous Materials into Project drains or sewers; (f) Tenant shall not cause or
allow the Release of any Hazardous Materials on, to, or from the Project; and
(g) Tenant shall arrange at its own cost for the lawful transportation and
off-site disposal of all Hazardous Materials that it generates.
During the Term, Tenant shall provide Landlord promptly with copies of all
summons, citations, directives, information inquiries or requests, notices of
potential responsibility, notices of violation or deficiency, orders or decrees,
Claims, complaints, investigations, judgments, letters, notices of environmental
liens or Response actions in progress, and other communications, written or
oral, actual or threatened, from the United States Environmental Protection
Agency, Occupational Safety and Health Administration, or other federal, state
or local agency or authority, or any other entity or individual, received by
Tenant concerning (a) any Release of a Hazardous Material on, to, or from the
Premises; (b) the imposition of any lien on the Premises; or (c) any alleged
violation of or responsibility under Environmental Laws. Landlord and landlord's
agents and employees shall have the right to enter the Premises and conduct
appropriate inspections or tests in order to determine Tenant's compliance with
Environmental Laws. Upon written request by Landlord, Tenant shall provide
Landlord with the results of appropriate reports and tests, with transportation
and disposal contracts for Hazardous Materials, with any permits issued under
Environmental Laws, and with any other applicable documents to demonstrate that
Tenant complies with all Environmental Laws relating to the Premises. If
Tenant's Management of Hazardous Materials at the Premises gives rise to
liability or to a Claim under any Environmental Law, causes a significant public
health effect or creates a nuisance, Tenant shall promptly take all applicable
action in Response. Tenant shall indemnify, defend, and hold harmless Landlord,
its partners, its lenders, any managing agents and leasing agents of the
Premises, and their respective agents, partners, officers, directors and
employees, from and against any and all Claims arising from or attributable to
any breach by Tenant of any of its warranties, representations or covenants in
this Paragraph 28. Tenant's obligations hereunder shall survive the termination
or expiration of this Lease.
29. ADA. The parties acknowledge that the Americans With Disabilities
Act of 1990 (42 U.S.C. {12101 ET SEQ.) and regulations and guidelines
promulgated thereunder, as all of the
37
<PAGE> 41
same may be amended and supplemented from time to time (collectively referred to
herein as the "ADA") establish requirements under Title III of the ADA ("Title
III") pertaining to business operations, accessibility and barrier removal, and
that such requirements may be unclear and may or may not apply to the Premises
and Building depending on, among other things: (1) whether Tenant's business
operations are deemed a "place of public accommodation" or a "commercial
facility", (2) whether compliance with such requirements is "readily achievable"
or "technically infeasible", and (3) whether a given alteration, affects a
"primary function area" or triggers so-called "path of travel" requirements. The
parties acknowledge and agree that Tenant has been provided an opportunity to
inspect the Premises and Building sufficient to determine whether or not the
Premises and Building in their current condition as of the date hereof deviate
in any manner from the ADA Accessibility Guidelines ("ADAAG") or any other
requirements under the ADA or state or local law pertaining to the accessibility
of the Premises or the Project. Tenant further acknowledges and agrees that
except as may otherwise be specifically provided below, Tenant accepts the
Premises and Building in "as-is" condition and agrees that Landlord makes no
representation or warranty as to whether the Premises or Building conform to the
requirements of the ADAAG or any other requirements under the ADA or state or
local law pertaining to the accessibility of the Premises or the Project. Tenant
has prepared or reviewed the plans and specifications for the Tenant's Work and
has independently determined that such plans and specifications are in
conformance with the ADAAG, any other requirements of the ADA, state and local
law. Tenant further acknowledges and agrees that to the extent that Landlord
prepared, reviewed or approved any of those plans and specifications, such
action shall in no event be deemed any representation or warranty that the same
comply with any requirements of the ADA or other applicable law. Notwithstanding
anything to the contrary in this Lease, the parties hereby agree to allocate
responsibility for Title III compliance as follows: (a) Landlord shall be
responsible for performing ADA Title III compliance work required in the common
areas of the Building on the floors on which the Premises are located; (b)
Tenant shall be responsible for all Title III compliance and costs in connection
with the Premises, including structural work, if any, and including any
leasehold improvements or other work to be performed in the Premises under or in
connection with this Lease; and (c) Landlord shall perform, and Tenant shall be
responsible for the cost of, any so-called Title III "path of travel"
requirements triggered by any construction activities or alterations in the
Premises. Except as set forth above with respect to Landlord's Title III
obligations, Tenant shall be solely responsible for all other requirements under
the ADA or other applicable law relating to the Tenant or any affiliates or
persons or entities related to the Tenant (collectively, "Affiliates"),
operations of the Tenant or Affiliates, or the Premises, including, without
limitation, requirements under Title I of the ADA pertaining to Tenant's
employees.
30. WAIVER OF RIGHTS. Tenant hereby waives for itself and all those
claiming under it, any rights which it may have under any present or future
constitution, statute or rule of law: (i) to redeem the Premises after
termination of Tenant's right of occupancy by order or judgment of any court or
by any legal process or writ; (ii) which exempts property from liability for
debt or for distress for rent; (iii) which entitles Tenant to notice or hearing
prior to Landlord obtaining any prejudgment remedy; in connection herewith,
Tenant waives and relinquishes all rights to notice and hearing under
Connecticut General Statutes Section 52-278a et seq.; and (iv) to a trial by
jury in any action, proceeding or counterclaim brought by either of the parties
38
<PAGE> 42
hereto against the other or any matters whatsoever arising out of or in any way
connected with this Lease.
31. TERMINATION OF EXISTING LEASE. Landlord and Tenant agree that, upon
the execution of this Lease by both Landlord and Tenant that certain lease dated
June 16, 1997 (the "Prior Lease") between Glastonbury Land Development Limited
Partnership, the predecessor-in-interest to Landlord, and Tenant (a/k/a BDS
Business Center, Inc.), shall expire as if by lapse of time and shall be of no
further force and effect; provided, however, that any obligations or
liabilities intended to survive the expiration or termination of the Prior Lease
shall remain the respective obligations or liabilities of the respective parties
to the Prior Lease.
32. OPTION TO EXTEND. Subject to the terms and provisions of this
Section 32, Tenant shall have one (1) option to extend (an "Option to Extend")
the Term with respect to the entire Leased Premises for a period of sixty (60)
months (the "Extension Period") commencing as of the day after the Termination
Date. Tenant shall exercise each Option to Extend by delivering written notice
("Tenant's Extension Notice") of such exercise to Landlord not less than six (6)
months prior to the Termination Date of the Term. Failure of Tenant to provide
such written notice within the time period set forth above shall be deemed
Tenant's waiver of its rights hereunder and shall result in Tenant losing the
right to extend pursuant to this Section 32. Upon the proper and timely exercise
of the Option to Extend, the term of this Lease with respect to the entire
Leased Premises shall be extended for sixty (60) months and all of the
covenants, conditions and provisions of this Lease shall thereupon be applicable
during the Extension Period except that the Monthly Base Rental to be paid by
Tenant to Landlord during the Extension Period shall be the then-current Market
Rental (hereinafter defined).
For the purposes of this Lease, the term "Market Rental" shall mean the
rental rate charged by Landlord to renewing/extending tenants for space of
comparable size, location and conditions in comparable property within the
Glastonbury, Connecticut submarket, current as of no earlier than fifteen (15)
months prior to the scheduled expiration of the Term of this Lease. Landlord's
determination of Market Rental shall take into account, without limitation, the
following: locations; quality; age; floor levels; common area factors; finish
allowances; rental abatements; parking charges; lease assumptions; moving
allowances; space planning allowances; refurbishment allowances; and any other
concession or inducement, expense stop, other rental adjustments; credit
standing of tenants; lease term and any other terms that would be relevant, in
Landlord's reasonable judgment, in determining the Market Rental. Within thirty
(30) days after Landlord's receipt of Tenant's Extension Notice, Landlord and
Tenant shall meet to negotiate, in good faith, the Market Rental for the
Extension Period. If Landlord and Tenant, after good faith efforts, are unable
to agree on the Market Rental, and if Landlord's determination of Market Rental
exceeds Tenant's determination of Market Rental by more than twenty-five percent
(25%), then Tenant shall have the option, by delivering notice to Landlord
within three (3) days after the earlier to occur of (a) the expiration of the
aforementioned thirty (30) day period and (b) the termination of Landlord's and
Tenant's negotiations of the Market Rental, to revoke Tenant's Extension Notice
in which event Tenant shall forfeit and have no further extension rights under
this Lease and the Term shall expire as of the Termination Date. If Tenant
elects not to revoke Tenant's Extension Notice as aforesaid, or Landlord's
39
<PAGE> 43
determination of Market Rental does not exceed Tenant's determination of Market
Rental by twenty-five percent (25%), the Market Rental shall be determined as
follows:
A. Within fifteen (15) days after the expiration of the
aforementioned thirty (30) day period, Landlord and Tenant each shall
appoint one real estate broker (individually, a "Broker", and
collectively, the "Brokers") who shall have been active over the ten (10)
year period ending on the date of such appointment in the leasing of space
in commercial properties in the Glastonbury, Connecticut submarket,
provided that such Brokers shall not have been engaged or employed by the
party appointing the same within such ten (10) year period (not including
the engagement or compensation of a Broker by Landlord in such Broker's
capacity as an outside tenant broker). Thereafter, Landlord and Tenant
each shall deliver notice of their respective determinations to each other
and the Brokers within five (5) days after the expiration of the
aforementioned fifteen (15) day period, and such determinations shall be
submitted for final determination in accordance with this Section 32. The
determination of the Brokers shall be limited solely to the issue of
whether Landlord's or Tenant's submitted determination of Market Rental
for the Extension Period is the closest to the actual Market Rental for
the Extension Period as determined by the Brokers, taking into account the
aforementioned items used in determining Market Rental.
B. The Brokers shall, within ten (10) days after the date of the
appointment of the last appointed Broker, agree upon and appoint a third
Broker who shall be qualified under the same criteria set forth above for
qualification of the initial two (2) Brokers.
C. The three (3) Brokers shall, within thirty (30) days of the
appointment of the third Broker, reach a decision as to whether the
parties shall use Landlord's or Tenant's submitted determination of Market
Rental and shall notify Landlord and Tenant thereof.
D. The decision of the majority of the three (3) Brokers shall be
binding upon Landlord and Tenant.
E. If either Landlord or Tenant fails to appoint a Broker within the
aforementioned fifteen (15) day period, then the Broker appointed by the
other party shall reach a decision, notify Landlord and Tenant thereof,
and such Broker's decision shall be binding upon Landlord and Tenant.
F. If the two (2) appointed Brokers fail to agree upon and appoint a
third Broker, or both Landlord and Tenant fail to appoint a Broker, then
the appointment of the third Broker or any Broker shall be dismissed and
the matter to be decided shall be forthwith submitted to arbitration under
the provisions of the American Arbitration Association, but subject to the
instructions set forth in this Section 32.
G. Landlord and Tenant shall each pay the cost of the Broker
appointed by it and one-half (1/2) of the cost of the third Broker.
40
<PAGE> 44
If the Extension Period shall commence prior to the final determination of
the Market Rental, Tenant shall commence paying Monthly Base Rental and
adjustments thereto, if any, utilizing the Market Rental specified by Landlord
in its notice of the Market Rental for such space or period. Following
determination of the Market Rental in accordance with this Section 32, Landlord
and Tenant, by a cash payment within thirty (30) days after the date of such
determination, shall adjust between themselves the difference, if any, between
the Base Rental and adjustments thereto (including interest on such difference
at an interest rate equal to one percent (1%) per annum above the then-current
published prime or corporate base rate charged by First National Bank of
Chicago, or its successor), if any, paid by Tenant pursuant to the foregoing
sentence and the Monthly Base Rental and adjustments thereto, if any, actually
owed by Tenant pursuant to the terms of this Lease for the period prior to such
determination.
Notwithstanding the foregoing, Tenant's right to exercise the Option to
Extend is, at Landlord's option, made expressly subject to the conditions that
(i) on the date Tenant delivers to Landlord Tenant's Extension Notice and (ii)
on the date upon which this Lease shall expire, neither this Lease nor Tenant's
right to possession of the Premises has been previously terminated and Tenant is
not in default under this Lease.
33. CONSTRUCTION OFFICE SPACE. During the period the Premises is being
constructed, Tenant shall have the right to continue to occupy the approximately
three thousand square feet (3,000 sq. ft.) of office space located on the third
floor of the Building (hereinafter referred to as "Construction Office Space").
Tenant acknowledges that it is currently using and occupying the Construction
Office Space, that it is taking the Construction Office Space in an "As Is",
"Where Is" condition, and that Landlord has made no promises to alter, remodel,
decorate, clean or improve the Construction Office Space and no representation
respecting the condition of the Construction Office Space has been made by
Landlord to the Tenant. Tenant shall not be required to pay any Rent for the
Construction Office Space. Tenant's right to use and occupy the Construction
Office Space shall terminate upon the Commencement Date of this Lease. Within
ten (10) days following the Commencement Date of this Lease, Tenant shall quit
and surrender to Landlord the Construction Office Space, broom clean, in good
order and condition, ordinary wear and tear excepted, surrender all keys to the
Construction Office Space to Landlord, and Tenant shall remove all of its
property. If Tenant does not remove its property of every kind and description
from the Construction Office Space prior to the Commencement Date of this Lease,
at Landlord's option and upon ten (10) days prior notice to Tenant, Tenant shall
be conclusively presumed to have conveyed the same to Landlord under without
further payment or credit by Landlord to Tenant and Landlord may remove the same
and Tenant shall pay the cost of such removal to Landlord upon demand. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of the Lease.
34. SATELLITE DISH. Tenant, at its sole cost and expense, shall have the
right to install a receiving and/or transmitting satellite dish on the roof of
the Building. The location of the satellite dish shall be determined by Landlord
in its reasonable discretion. Tenant shall be responsible for obtaining all the
necessary permits required for the installation and operation of the satellite
dish. In the event Tenant elects to install said satellite dish, Tenant shall be
required to use the roofing contractor selected by Landlord to patch and/or
repair any damage to the roof caused by the installation of the satellite dish.
Tenant agrees that Tenant shall be solely
41
<PAGE> 45
responsible for the repair, replacement, removal and maintenance of the
satellite dish and does hereby agree that the satellite dish shall not be
ins/ailed until Landlord has approved the size, location and manner of
installation of the satellite dish on the Building. Tenant shall remove the
satellite dish upon the expiration or earlier termination of this Lease and
shall repair any and all damage to the Building resulting from said removal.
Tenant agrees to indemnify and save the indemnitees (as defined herein) harmless
against any and all claims, demands, costs and expenses, including reasonable
attorney's fees for the defense thereof, arising from Tenant's installation,
use, repair, maintenance, replacement or removal of the satellite dish or from
any breach or default on the part of Tenant in the performance of any covenant
or agreement on the part of Tenant to be performed pursuant to the terms of this
Section 34, or from any act or negligence of Tenant, its agents, servants,
employees or invitees, with regard to the installation, use, repair,
maintenance, replacement or removal of the satellite dish. In case of any action
or proceeding brought against any indemnitees by reason of any such claim, upon
notice from Landlord, Tenant covenants to defend such action or proceeding by
counsel reasonably satisfactory to Landlord.
42
<PAGE> 46
IN WITNESS WHEREOF, this Office Lease has been duly executed by the
parties hereto, as of the day and year first above written.
LANDLORD:
TR 628 HEBRON LIMITED PARTNERSHIP, an
Illinois limited partnership
WITNESS/ATTEST
By: TR 628 Hebron Corporation, its
general partner
- ---------------------
By: /s/ William Hickey
-----------------------------------
William Hickey, President
WITNESS/ATTEST
TENANT:
/s/ Mary Abel
- ---------------------- BDS BUSINESS CENTER, INC., a
Connecticut corporation
By: /s/ Laurie Paternoster
------------------------------------
Laurie Paternoster,
Vice-President
If Tenant is a corporation, this Lease should be executed by the President or a
Vice President of Tenant. If Tenant is a partnership, all general partners
should execute this Lease. If Tenant is an individual or partnership, all
signatures should be witnessed.
43
<PAGE> 47
[MAP]
<PAGE> 48
EXHIBIT B
---------
RENT ADJUSTMENTS
The Monthly Base Rental shall be computed at the rates set forth below
with respect to each calendar month falling in whole or in part within the Term:
- --------------------------------------------------------------------------------
APPLICABLE MONTHLY
PERIOD BASE RENTAL PER SQUARE FOOT
------ ---------- ---------------
- --------------------------------------------------------------------------------
Commencement Date $15,167.04 $12.81
- 11/30/98
- --------------------------------------------------------------------------------
12/01/98 - 11/30/00 24,272.00 20.50
- --------------------------------------------------------------------------------
12/01/00 - 10/31/04 25,456.00 21.50
- --------------------------------------------------------------------------------
TOTAL BASE RENT $1,834,217.28
=============
- --------------------------------------------------------------------------------
B-1
<PAGE> 49
EXHIBIT C
---------
NOTICE OF LEASE
THIS NOTICE OF LEASE is given pursuant to Section 47-19 of the Connecticut
General Statutes, as amended, as evidence that as of the ____ day of _________,
19__, ___________________ ("Landlord"), has entered into a Lease with
____________________ ("Tenant"), as follows:
1. PARTIES: Landlord: _____________________________________________
Address: _____________________________________________
_____________________________________________
Tenant: _____________________________________________
Address: _____________________________________________
_____________________________________________
2. DATE OF EXECUTION: __________________________________________________
3. TERM: ________________ years commencing as of the _____ day of _________,
19__ and expiring on the _____________________.
4. LEASED PROPERTY: The description of the leased property is set forth in
SCHEDULE A attached hereto and made a part hereof.
5. RENEWAL OR EXTENSION RIGHTS: ____________________________________________.
6. OPTION TO PURCHASE: _____________________________________________________
7. ORIGINAL LEASE: Said Lease is on file at the office of __________________
____________________________.
IN WITNESS WHEREOF, the parties hereto have hereunto set or caused to be
set their hands and seals as of the date first above written and to a duplicate
instrument of the same tenor and date.
Signed, sealed and delivered in
the presence of: Landlord
- ----------------------------------- ------------------------------------
- -----------------------------------
Tenant:
C-1
<PAGE> 50
By:
- ---------------------------------- -----------------------------------
Its:
- ----------------------------------
STATE OF CONNECTICUT )
) SS.
COUNTY OF )
Personally appeared __________________________, signer(s) of the foregoing
instrument who acknowledge the same to be his/her/its free act and deed, before
me.
__________________________________
Notary Public
STATE OF CONNECTICUT )
) SS.
COUNTY OF )
Personally appeared _________________________, signer(s) of the foregoing
instrument who acknowledge the same to be his/her/its free act and deed, before
me.
__________________________________
Notary Public
<PAGE> 51
EXHIBIT D
---------
GONDEK CONSTRUCTION
[LOGO]
PROPOSAL PREPARED FOR H. PIERCE REALTY
FOR BUSINESS DATA SERVICES
GLASTONBURY CORPORATE CENTER
GLASTONBURY, CT 06073
May 12, 1998
Contract for BDS according to plans and specification by BKM
1.) All necessary permit fees $2,850.00
2.) Demolition: all demolition and clean up necessary $4,100.00
3.) Drywall/New walls and demising walls/all ceiling $8,100.00
drywall repairs after light relocation to match
existing ceiling. Demising walls to extend to
concrete deck to be 5/8 drywall and to
comply with Town and State fire code.
All new walls to match existing space.
4.) Acoustical Ceiling Repairs $1,200.00
All stained or damaged ceiling titles will be
replaced throughout the space
5.) New doors/frames & hardware installation $6,200.00
All doors, frames, hardware and closers to
match existing space
<PAGE> 52
Page 2
6.) Fire Protection $1,450.00
Adding sprinkler heads to comply with
state and town code.
7.) Painting $18,000.00
Wallpaper includes Board Room, Reception
Area, Waiting Area and Hallways to board room
Allowance for paper only $6.50 per roll
Allowance for paper and labor $12.00 per roll
All new drywall to receive one coat primer and
one finish coat. All existing drywall to receive
two coats of finish paint. All existing doors to
be sanded and urethaned All new doors to
be stained to match existing doors sanded
and sealed with two coats of urethane.
All new and existing doors and sidelight
steel frames to receive two coats of oil base
paint.
All drywall ceilings to be repaired and painted.
Any necessary wallpaper repair and patches
to be done with existing paper that remains
in hallway.
8.) HVAC $3,400.00
All and any necessary duct work and exhaust
and return vents. Balancing heating & cooling
system. Replacing filters and inspecting all
heating and cooling units.
9.) Electrical: $7,400.00
Relocate existing light fixtures as per plans only
<PAGE> 53
Page 3
Provide new light fixtures as per plans only
install new light fixtures as per plans and move
light switches and outlets as necessary where
new doors and sidelights are to be installed.
Install three way light switch for new computer
room door opening.
New exit signs if needed
Flourescent ballasts and bulbs will be replaced
where needed
New light switch for new front closet
All electrical demolition as required
10.) Window Blinds (repairing existing & new
installation) Allowance $2,000.00
11.) Millwork NONE
12.) Plumbing Work NONE
13.) Daily cleaning and cleaning of existing $3,000.00
wall surfaces
14.) Dumpster Fee $2,750.00
15.) Final Clean Up $2,300.00
Project Manager $7,719.00
Gondek Construction Fee 10% $7,046.90
<PAGE> 54
Page 4
Tax $ 3,512.48
TOTAL DUE GONDEK CONSTRUCTION: $81,028.38
FLOOR COVERING TO BE DONE BY OTHERS
<PAGE> 55
GONDEK CONSTRUCTION
[LOGO]
Page 5
Additional Pricing for BDS Addendum to original
Additional work ordered by BDS in addition to original proposed plans revised
by Jacqueline Cortez from BKM.
Repair Kitchen Cabinets with existing laminate, if available, alternate choice
to be selected by BDS and/or BKM: $975.00
Install five 16 in. x 86 in. sidelights with steel frame and safety glass match
existing offices: $3,750.00
Install one new door and light combo to match existing offices: $850.00
Install new closet door in reception area to match existing office
area: $650.00
Necessary electrical furniture feeds and whips and miscellaneous demolition as
indicated on BKM plan: $10,600.00
Glass wall, brass trim and doors matching entry glass in room abutting
reception area and accounting office: $14,500.00
Glass matching MCI office with doors ($13,800.00) NIIT
Miscellaneous Repairs: $1,500.00
Sub Total: $32,825.00
10% Contracting Fee: $3,282.50
Total: $36,107.50
<PAGE> 56
All items on this page 6 are to be paid for by Tenant.
GONDEK CONSTRUCTION
[LOGO]
Page 6
Additional pricing for BDS Adendum Two to original
Additional work ordered by BDS in addition to original proposal plans revised
by Jacqueline Cortez from BKM.
Large rear closet shelving:
Four rows of 12 in. gray laminated shelves with steel standards and
brackets. $1,062.00
Alternative price for 15 in. shelving add $135.00.
Small front closet shelving:
Three rows of 12 in. gray laminated shelves with steel standards and
brackets. $724.54
Alternative price for 15 in. shelving add $100.00.
One door sidelight combination $1,150.00
Install one 16 in. x 86 in. sidelight - alternative choice: $750.00
Sub Total: $2,936.54
10% Contractors Fee: $293.65
Tax: $193.81
Total: $3,424.00
<PAGE> 57
CUSHMAN & WAKEFIELD OF CONNECTICUT, INC. CUSHMAN & WAKEFIELD(R)
One Commercial Plaza
280 Trumbull Street Improving your place
Hartford, CT 06103 in the world.
Tel: (860) 249-0900
Fax: (860) 522-3941
September 9, 1998
CERTIFIED MAIL. #Z 511 168 462 - Return Receipt Requested
---------------------------------------------------------
Ms. Laurie Paternoster
Vice President
BDS Business Center, Inc.
628 Hebron Avenue
Glastonbury, CT 06033
Re: Glastonbury Corporate Center
Glastonbury, Connecticut
Dear Ms. Paternoster:
As you know, on July 27, 1998, your Glastonbury office opened its new
quarters at Glastonbury Corporate Center located at 628 Hebron Avenue. On
behalf of the owner, TR 628 Hebron Limited Partnership, we would like to
welcome you to your new offices in the building.
We are in receipt of the executed Exhibit C, "Notice of Lease", of the
lease agreement between TR 628 Hebron Limited Partnership and BDS Business
Center, Inc. However, the document we received does not set forth exact
dates for lease commencement and expiration. Therefore, in order to
finalize the lease agreement, we are sending this letter as confirmation
that the term of the lease commenced on July 27, 1998 and shall end at
midnight on November 26, 2004. This letter will become part of the lease
agreement and these dates will be considered legally binding unless we
receive an objection from you, in writing, within seven (7) days of
receipt of this letter.
Pro-rated monthly base rent is due in the amount of $2,446.30 for July
1998. Beginning August 1, 1998, monthly base rent of $15,167.04 is due by
the first of each month. Please instruct your accounting department to
send monthly rent checks to the following address:
TR 628 Hebron Limited Partnership
c/o Cushman & Wakefield
P.O. Box 30412
Hartford, CT 06150-0412
Please instruct your insurance agent to issue a certificate of insurance
in compliance with the dollar amounts stipulated in your lease and with
the Landlord and managing agent named as additional insureds. All the
necessary information is as indicated on the following page:
<PAGE> 58
Cushman & Wakefield of Connecticut, Inc.
BDS Business Center, Inc.
September 8, 1998 Page Two of Two
Identifier (Tenant Address): Glastonbury Corporate Center
628 Hebron Avenue
Glastonbury, CT 06033
Certificate Holder: TR 628 Hebron Limited Partnership
c/o Cushman & Wakefield of Connecticut, Inc.
280 Trumbull Street
Hartford, CT 06103
Comments/Special Items: TR 628 Hebron Limited Partnership
and
Cushman and Wakefield of Connecticut, Inc.
are listed as additional insureds
The certificate copy we have on file only lists the Landlord as additional
insured. Please have a copy of the updated certificate faxed to the Hartford
office of Cushman & Wakefield at (860) 522-3941. Have the original certificate
mailed to the Certificate Holder address noted above.
We have enclosed a "Tenant Contact Summary" form for your completion. Having
these contact names on file will allow us to administer your lease more
efficiently. Please return this form to my attention at the Hartford office.
We look forward to a long and mutually beneficial relationship with BDS Business
Center, Inc. If you have any questions, please call me at (860) 659-8540.
Sincerely,
/s/ Kathleen J. Waterman
Kathleen J. Waterman, CSM
Property Manager
Enclosures (3)
welccorp
<PAGE> 1
Exhibit 10.6
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE (this "AMENDMENT") is made as of the 27th day of
April, 1999, by and between TR 628 HEBRON LIMITED PARTNERSHIP, an Illinois
limited partnership ("Landlord"), and BDS BUSINESS CENTER, INC,, a Connecticut
corporation ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Lease dated June,
1998 (together with all written modifications thereto, the "Lease"), demising
certain premises commonly known as Suite 502 (the "Current Premises"), as more
fully described in the Lease, in the building known as Building (2), located at
628 Hebron Avenue, Glastonbury, Connecticut (the "Building"); and
WHEREAS, Landlord and Tenant desire to expand the Current Premises to
include the premises outlined on the floor plan attached hereto as Exhibit A on
the fifth floor of the Building, which contains approximately 1,500 rentable
square feet (the "First Expansion Premises"), and the premises outlined on the
floor plan attached hereto as Exhibit B in the garage of the Building, which
contains approximately 206 usable square feet (the "Second Expansion Premises");
and
WHEREAS, the parties hereto are desirous of amending the Lease in
accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Landlord and Tenant hereby amend the Lease as follows:
1. DEFINITIONS. Unless the context otherwise requires, any capitalized
term used herein shall have its respective meaning as set forth in the Lease.
2. INTEGRATION OF AMENDMENT AND LEASE. This Amendment and the Lease
shall be deemed to be, for all purposes, one instrument. In the event of any
conflict between the terms and provisions of this Amendment and the terms and
provisions of the Lease, the terms and provisions of this Amendment shall, in
all instances, control and prevail.
3. PREMISES. Upon the date (the "New Commencement Date") Landlord
delivers a possession notice to Tenant, Tenant shall take possession of the
First Expansion Premises and the Second Expansion Premises in an "as is"
condition. Upon the New Commencement Date, the Current Premises, the First
Expansion Premises and the Second Expansion Premises shall be deemed to be the
Premises (as defined in Paragraph 2 of the Lease) and the square footage of the
Premises shall be deemed to be 15,914 square feet.
<PAGE> 2
4. SECOND EXPANSION PREMISES. The Second Expansion Premises shall be
used as storage space to support the operation of the Current Premises and the
First Expansion Premises, and for no other purpose.
5. MONTHLY BASE RENTAL. Notwithstanding anything to the contrary
contained in the Lease, commencing on the New Commencement Date, and continuing
through and including the Termination Date, Monthly Base Rental for the Current
Premises and the First Expansion Premises shall be paid at the times and in the
same manner as set forth in Paragraph 3 of the Lease, payable as follows:
- --------------------------------------------------------------------------------
Period Monthly Base Rental Per Square Foot
- --------------------------------------------------------------------------------
New Commencement Date
- 11/30/00 $26,834.50 $20.50
- --------------------------------------------------------------------------------
12/01/00 - 11/26/04 $28,143.50 $21.50
- --------------------------------------------------------------------------------
Commencing on the New Commencement Date and continuing through and
including the Termination Date, Base Rental for the Second Expansion Premises
shall be paid in the manner and the times as set forth in Paragraph 3 of the
Lease and shall be an amount equal to Two Thousand Forty and 00/100 Dollars
($2,040.00) per annum, payable in equal monthly installments of One Hundred
Seventy and 00/100 Dollars ($170.00).
6. TENANT'S SHARE. Effective as of the New Commencement Date, Paragraph
1 .H. of the Lease shall be amended by deleting the phrase "9.17%
(14,208/155,000)", and inserting in lieu thereof the phrase "10.13%
(15,708/155,000)".
7. CONDITION OF PREMISES. Tenant is in possession of the Current
Premises pursuant to the Lease and Tenant acknowledges and agrees that the
Current Premises are in good order and satisfactory condition as of the date
hereof. No agreement of Landlord to alter, remodel, decorate, clean or improve
the Premises or the Building and no representation or warranty regarding the
condition of the Premises or the Building has been made by or on behalf of
Landlord to Tenant under or by reason of this Amendment, except that Landlord
shall perform the following leasehold improvement work ("Landlord's Work") in
the First Expansion Premises on or before the New Commencement Date: (a) repair
(or install, as the case may be) building standard white ceiling tiles where
necessary, (b) repair (or install, as the case may be) building standard
parabolic lighting fixtures where necessary (as determined by Landlord), (c)
repaint all walls in the First Expansion Premises with one coat of building
standard paint (color to be selected by Tenant), and (d) recarpet the First
Expansion Premises with the same color and type of carpeting currently installed
in the Current Premises. Tenant shall have thirty (30) days (the "Notification
Period") from the New Commencement Date in which to notify Landlord of any
omissions or latent or patent defects in Landlord's Work (hereinafter, the
"Defects") as described herein. If Tenant fails to notify Landlord during the
Notification Period of any Defects, then it shall be deemed that Tenant
acknowledges and
2
<PAGE> 3
agrees that the First Expansion Premises are in good order and satisfying
condition and free of Defects.
8. NO BROKER. Each of the parties represent to the other that such
party has not dealt with any broker (other than Cushman & Wakefield of
Connecticut, Inc.) in connection with this Amendment and each party agrees to
indemnify, defend (with counsel acceptable to Landlord) and hold the other
harmless from all damages, liability and expense arising from any claims or
demands of any brokers or finders (other than Cushman & Wakefield of
Connecticut, Inc.) for any commission alleged to be due such brokers or finders
in connection with their participation in the negotiation with either party of
this Amendment.
9. LEASE IN FULL FORCE AND EFFECT. Except as expressly provided herein,
all of the terms and provisions of the Lease shall remain in full force and
effect.
This Amendment to Lease is executed by the undersigned as of the date
first above written.
LANDLORD:
TR 628 HEBRON LIMITED PARTNERSHIP, an
Illinois limited partnership
By: TR 628 Hebron Corporation, its General
Partner
By: /s/ ??????????????
------------------------------------
Name:
----------------------------------
Title: President
----------------------------------
TENANT:
BDS BUSINESS CENTER, INC., a Connecticut
corporation
By: /s/ Peter A. Bourdon
-----------------------------------------
Name: Peter A. Bourdon
-----------------------------------------
Title: EVP Chief financial officer
-----------------------------------------
3
<PAGE> 4
NOTICE OF LEASE
---------------
THIS NOTICE OF LEASE is given pursuant to Section 47-19 of the Connecticut
General Statutes, as amended, as evidence that as of the 27th day of April,
1999, TR 628 HEBRON LIMITED PARTNERSHIP, an Illinois limited partnership
("Landlord"), has entered into a Lease with BDS BUSINESS CENTER, INC., a
Connecticut corporation ("Tenant"), as follows:
1. PARTIES: Landlord: TR 628 Hebron Limited Partnership
Address: c/o Lincoln Property Company
1530 Wilson Boulevard, Suite 220
Arlington, Virginia 22001
Tenant: BDS Business Center, Inc.
Address: 628 Hebron Avenue, Building Two
Suite 502
Glastonbury, Connecticut 06033
2. DATE OF EXECUTION: Lease: As of June 1998, amended as of April 27, 1999.
3. RENEWAL TERM: The renewal term of the lease commences on July 27, 1995 and
terminates on November 26, 2004.
4. LEASED PROPERTY: Suite 502, Suite 503 and Storage Space #2 (located in the
garage), 628 Hebron Avenue, Building (2), Glastonbury, Connecticut.
5. EXTENSION RIGHT: One (1) option to extend for sixty (60) months.
6. OPTION TO PURCHASE: None.
7. ORIGINAL LEASE: The Lease is on file at the office of Landlord and Tenant.
<PAGE> 5
IN WITNESS WHEREOF, the parties have hereunto set or caused to be set
their hands and seals as of the date first above written and to a duplicate
instrument of the same tenor and date.
LANDLORD:
TR 628 HEBRON LIMITED PARTNERSHIP, an
Illinois limited partnership
By: TR 628 Hebron Corporation, its General
Partner
By: /s/ ??????????????
------------------------------------
Name:
----------------------------------
Title: President
----------------------------------
TENANT:
BDS BUSINESS CENTER, INC., a Connecticut
corporation
By: /s/ Peter A. Bourdon
-----------------------------------------
Name: Peter A. Bourdon
-----------------------------------------
Title: EVP Chief financial officer
-----------------------------------------
2
<PAGE> 6
EXHIBIT A
---------
MAIER
DESIGN
GROUP
Architecture & Interior Design
[MAP]
- --------------------------------------------------------------------------------
Fifth Floor Vacant Area MDC-9861
01/19/99
- --------------------------------------------------------------------------------
Glastonbury Corporate Center, Building "B" 5
- --------------------------------------------------------------------------------
100 Wells Street, Hartford, CT 06103 / Tel: 860.293.0093 / Fax: 860.293.0094
<PAGE> 7
EXHIBIT B
- ---------
BASEMENT/GARAGE PLAN
[MAP]
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of May, 1999 by and between
BDS BUSINESS CENTER, INC., a Connecticut corporation (the "COMPANY"), and Jack
Hughes of Hebron, CT (the "EMPLOYEE").
WITNESSETH:
WHEREAS, the Company desires to enter into an employment relationship
with the Employee on the terms and conditions as set forth herein; and
WHEREAS, during the course of the Employee's employment with the
Company, the Employee will have access to certain confidential and proprietary
information of the Company;
WHEREAS, the Company's confidential and proprietary information is
highly valuable and its disclosure would cause serious harm to the Company;
WHEREAS, competition by the Employee against the Company could cause
serious and irreparable harm to the Company; and
WHEREAS, the Employee is willing to accept such employment and to
protect the Company's confidential and proprietary information and competitive
advantage on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement and intending to be legally bound, the Employee and
the Company covenant and agree as follows:
1. Definitions.
As used in this Agreement:
A. "ACCOUNT INFORMATION" means names, addresses, contact
persons, purchasing histories and prices, credit standing and other information
relating to the Company's customers or prospective customers and their
personnel.
B. "CONFIDENTIAL INFORMATION" means Account Information, and
any information concerning the organization, business or finances of the Company
or of any third party which the Company is under an obligation to keep
confidential and that is maintained by the Company as confidential including,
but not limited to, trade secrets or confidential information respecting,
current, past, potential or prospective customers or clients, customer lists,
finances, business plans, projects, plans, proposals, pricing, costs, profits,
markets, products, services, designs, methods, techniques, know-how and
show-how, database information systems, processes, engineering data, software
programs, works of authorship, innovations, the Company's own internal practices
and procedures, technologies, developments, inventions or
<PAGE> 2
-2-
improvements, or any other information, or trade secrets and proprietary
information belonging to or developed by the Company.
C. "PROSPECT" means any prospective customer or client to whom
the Company has provided a proposal within the six (6) months prior to the
Employee's termination.
2. Employment. The Company hereby employs the Employee and the Employee
accepts employment upon the terms and conditions contained herein.
3. Duties. The Employee is engaged by the Company to serve as
Chairperson and Chief Executive Officer and shall perform those duties set forth
in the Job Description annexed hereto as EXHIBIT A and/or such other duties as
the Board of Directors may direct from time to time. The Employee shall be
subject to the direction and control of the Board of Directors in performing his
duties under this Agreement.
4. Extent of Service. The Employee shall devote his full time and
attention to the advancement of the interests and business of the Company, and
shall be permitted to engage in other business ventures only during non-business
hours and only to the extent it does not affect the performance of the
Employee's duties hereunder. The Employee shall work the number of hours
required for the reasonable standards of performance of the Employee's duties
hereunder.
5. Employment Term. The term of employment will commence on the date
hereof and continue until terminated pursuant to Section 7 of this Agreement.
6. Compensation. For services rendered by the Employee to the Company
under this Agreement, the Company shall pay compensation to the Employee in the
manner and form as set forth in EXHIBIT B attached hereto. Such compensation may
be modified from time to time thereafter by the Board of Directors of the
Company in its sole discretion upon ten (10) calendar days prior written notice
to the Employee.
7. Termination. Employment of the Employee under this Agreement will be
terminated as follows:
A. Automatically, by the Employee's death.
B. If the Employee becomes incapacitated or disabled. For the
purposes of this Agreement, the Employee shall be deemed to have become
incapacitated or disabled if the Employee is unable to perform the essential
functions of his job without reasonable accommodation. Any accommodation will
not be deemed reasonable if it imposes an undue hardship on the Company. If the
Employee becomes incapacitated or disabled, then the Company may, upon written
notice to the Employee, terminate the Employee's employment hereunder, but the
Employee may continue to be eligible to receive any benefits to which he may be
entitled in accordance with, and subject to, the terms, conditions and
limitations of any long-term disability plan or insurance policy maintained by
the Company for its employees. In the event of such incapacity or disability,
the Company shall continue to pay full compensation to the Employee until the
date of such termination.
<PAGE> 3
-3-
C. By mutual agreement of the Employee and the Company.
D. By the Employee or the Company, without cause, at any time
upon thirty (30) calendar days' prior written notice to the other party. The
Company may elect to provide the Employee with the compensation due to the
Employee under Section 6 in lieu of any notice requirement.
E. Immediately by the Company for cause.
Upon termination of employment of the Employee under this
Agreement, the Company shall pay the Employee the compensation that is due to
the Employee pursuant to Section 6 through the date of termination and the
Employee shall resign from all positions held in the Company, including without
limitation any position as a director, officer, agent, employee or trustee of
the Company or any affiliate of the Company. The Company shall have no other
obligations to the Employee except as required by applicable law.
For purposes of this Section, the term "CAUSE" shall mean (i) theft,
embezzlement or other felonious criminal activity; (ii) the willful or
intentional misconduct of the Employee; (iii) the dereliction of duties and
responsibilities of the Employee to the Company, after prior written notice from
the Company to the Employee, which notice specifies the conduct which will be
the basis for cause if not cured within fifteen (15) calendar days from the date
of notice; (iv) the use of illegal drugs; and (v) the violation by the Employee
of the provisions of Section 10, 11, 12, 13, 14 or 15 of this Agreement.
8. Employee Benefits. The Employee will be entitled to participate on
the same general basis and subject to the same rules and regulations as other
similar level employees of the Company in the Company's employee benefit plans
as such benefits or plans may be modified or terminated from time to time.
9. Business Expenses. The Company shall pay or reimburse the Employee
for all reasonable and necessary travel, entertainment and other business
expenses incurred by the Employee in the performance of his duties under this
Agreement, upon presentation of expense statements or other supporting
information as the Company may from time to time request; provided, however,
that the Employee shall comply with all applicable policies of the Company
relating to reimbursement for business expenses.
10. Non-Competition. The Employee acknowledges that because of the
unique nature of his services to the Company and the nature of the Confidential
Information which he will acquire, his employment with a competitor would
irreparably damage the Company. Therefore, the Employee agrees to the following
non-competition restrictions.
A. During the period of Employee's employment, Employee will not,
directly or indirectly, alone or as a partner, proprietor, joint venturer,
officer, director, employee, consultant, independent contractor or stockholder
(other than ownership by the Employee of less than 1% of the equity security of
any publicly-traded Company) of any entity engage in any business activity that
is in competition with the products or services being developed or sold by the
Company.
<PAGE> 4
-4-
B. For a period of six (6) months after Employee's termination of
employment with the Company for any reason whatsoever (the "Noncompetition
Period"), Employee agrees that he will not, directly or indirectly, alone or as
a partner, proprietor, joint venturer, officer, director, employee, consultant,
independent contractor or stockholder (other than ownership by the Employee of
less than 1% of the equity securities of any publicly-traded Company) of any
entity engage in any business activity that is in competition with the products
or services being developed or sold by the Company in: (i) the United States,
(ii) North America, and/or (iii) any place where the Company does business at
the time of Employee's termination of employment, PROVIDED, the Company, in its
sole discretion, decides to pay the Employee a Severance Payment as defined
below over the course of the Noncompetition Period. For the purposes of this
section, the Severance Payment is equal to, in the aggregate, one half of the
wages from the Company as reported on the Employee's Form W-2 for the year prior
to his termination not to exceed $125,000. The Severance Payment will be paid in
six equal monthly installments, in accordance with the Company's then current
payroll practices and be subject to all applicable federal, state and local
withholding and payroll taxes.
C. The Company and the Employee agree that the Noncompetition Period
shall be tolled for the length of time during which any of the restrictions are
violated and no further amounts other than the Severance Payment will be
required to be paid to the Employee in connection with such modification of the
Noncompetition Period.
11. Non-Solicitation. The Company has developed and has acquired, at
considerable expense, relationships with, and knowledge about, customers and
Prospects, which are a major part of the value of the Company. As an employee of
the Company, the Employee has substantial contact with these customers and
Prospects and access to Confidential Information about these customers and
Prospects. Therefore, to protect the value of the Company's business, the
Employee agrees that he will not, either directly or indirectly, while employed
by the Company (except in the performance of his duties for and on behalf of the
Company) and for a period of one (1) year after the date of his termination of
employment (plus any additional time that he is in breach of this Section), in
any capacity whatsoever (either as an employee, officer, director, stockholder,
proprietor, partner, joint venturer, consultant, independent contractor or
otherwise):
A. solicit, sell to, divert, serve, contact, allow himself to
continue to be contacted and approached by, or accept consulting business from
any customer, client or Prospect of the Company: (i) who Employee handled,
serviced, solicited or had contact with, or (ii) who Employee had access to
Confidential Information about, or (iii) who Employee had learned or known the
identity of, or (iv) who anyone else affiliated with the Company, handled,
serviced, solicited or had contact with during the twelve (12) month period
immediately preceding the Employee's termination as an employee of the Company.;
B. (i) employ; or (ii) solicit, induce, encourage, recruit or
attempt to employ any person who is or was employed by the Company, or is or was
an agent, representative, or consultant of the Company within the six months
prior to the termination of Employee's employment with the Company;
<PAGE> 5
-5-
C. interfere with any of the Company's contracts or
relationships with any customer, client, vendor or supplier; or
D. disparage the Company or any of its officers, directors or
employees.
12. Confidential Information. A. Disclosure of Confidential
Information. As an employee of the Company, the Employee will learn and will
have access to Confidential Information. The Company developed this Confidential
Information at great expense, it is proprietary to the Company and it is and
shall remain the exclusive property of the Company. The Employee agrees not to,
without the express, written consent of the Company, either while employed by
the Company or thereafter, disclose, copy, make any use of, or remove from the
Company's premises the Confidential Information except as required in the
performance of the Employee's duties and responsibilities as an employee of the
Company. Upon the Employee's termination as an employee of the Company, the
Employee shall immediately deliver to the Company any Confidential Information
and all copies thereof, whether in hard copy, computerized or other form, which
the Employee has in his possession or control.
B. Competitive Use of Confidential Information. The Employee
hereby acknowledges that the Confidential Information is maintained as
confidential by the Company, is highly valuable and proprietary to the Company
and that the disclosure of any Confidential Information to third parties or
unauthorized use of the Confidential Information by the Employee could allow a
competitor of the Company to discover and understand the inner workings,
proprietary information and technology of the Company, use the Confidential
Information to the detriment of the Company and cause the Company serious
competitive harm. Accordingly, the Employee agrees not to, directly or
indirectly, use the Confidential Information in competition with the Company
until such time as such the Confidential Information shall have properly become
known to the general public without disclosure by the Employee.
C. Disclosure of Customer's Confidential Information. As an
employee of the Company, the Employee will learn and will have access to
confidential information, proprietary information and/or trade secrets of the
Company's customers and clients. The Employee agrees not to, without the
express, written consent of the Company, either while employed by the Company or
thereafter, disclose, copy, make any use of, or remove from the Company's
premises confidential information, proprietary information and/or trade secrets
of the Company's customers and clients except as required in the performance of
the Employee's duties and responsibilities as an employee of the Company.
13. Disclosure of Prior Agreements. The Employee represents that he has
disclosed to the Company any agreement, still in effect, which imposes any
restrictions on the Employee. The Employee represents that, except for those
restrictions, if any, specifically disclosed on EXHIBIT C to this Agreement, the
Employee is not subject to any restrictions arising from any previous
employment. The Employee represents that his employment by the Company pursuant
to this Agreement does not violate any agreement, covenant or obligation to
which he is a party or by which he is bound.
<PAGE> 6
-6-
14. Assignment of Inventions. The Employee agrees to disclose promptly
and fully to the Company and to no one else: (i) all inventions, ideas,
improvements, discoveries and works ("inventions") made or conceived by the
Employee, solely or jointly with others, during the period of his employment
which are related to the business of the Company and (ii) all inventions which
are related to the business of the Company and in which the Employee had an
assignable interest at the time of first employment by the Company. The
determination as to whether an invention is related to the business of the
Company will be made solely by the Board of Directors of the Company. The
"business of the Company" includes not only the actual business currently
conducted by the Company but also any business in which the Company proposes to
engage. The Employee hereby assigns to the Company all right, title and
interest, including tangible and intangible rights such as patent rights,
trademarks and copyrights, in and to all such inventions, and agrees promptly to
execute any further specific assignments related to such inventions and rights
at the request of the Company. The Employee also hereby assigns to the Company,
or waives if not assignable, all "moral rights" in and to all such inventions,
and agrees promptly to execute any further specific assignments or waivers
related to moral rights at the request of the Company. The assignments will
survive the termination of the employment relationship. The Employee agrees to
assist the Company without charge and for as long as may be necessary (but at
the Company's expense): (1) to obtain for the Company's benefit, patents,
trademarks, copyrights and other protection for such inventions in all
countries, and (2) in any controversy or legal proceeding relating to
inventions.
15. Non-Use of Third Party Confidential Information or Trade Secrets.
The Employee further represents that he has not disclosed and will not disclose
to the Company and has not used and will not use on the Company's behalf any
trade secrets or other confidential and proprietary information belonging to a
third party, without consent from that third party.
16. Remedies. The Employee recognizes that a breach by him of Sections
11, 12, 13, 14 or 15 of this Agreement will cause irreparable injury to the
Company inadequately compensable in damages and, accordingly, agrees that the
Company may seek and obtain an injunction, specific performance, or other
equitable relief against such breach or threatened breach, in addition to any
other legal remedies which may be available, including the recovery of monetary
damages from the Employee. In any action successfully brought by the Company
against the Employee to enforce the rights of the Company under Sections 11, 12,
13, 14 and 15 of this Agreement, the Company shall also be entitled to recover
from the Employee its reasonable attorneys' fees and costs of the action and the
post-employment period of the restriction shall be deemed to commence upon the
entry of the court's order for relief.
<PAGE> 7
-7-
17. Severability. The Company and the Employee agree that the terms
contained in this Agreement are reasonable in all respects and that the
restrictions contained herein are designed to ensure that the Employee does not
engage in unfair competition with the Company. If any provision or clause of
this Agreement, or any portion thereof, shall be held by any court or other
tribunal of competent jurisdiction to be illegal, void or unenforceable in such
jurisdiction, the remainder of such provision, clause or any portion thereof and
of the Agreement shall not be affected thereby and shall be given full effect,
without regard to the invalid provision. The parties agree that such court or
tribunal, if possible, shall limit such invalid provision, clause or part
thereof in scope so that it shall not be invalid and shall be enforceable as so
limited. Sections 11, 12, 13, 14, 15, 16, 17 and 18 shall survive the
termination of this Agreement and the termination of the Employee's employment
hereunder.
18. Miscellaneous.
A. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the matters described herein and is a
complete and exclusive statement as to the terms thereof and supersedes all
previous agreements with respect to such matters.
B. Amendment. This Agreement may not be altered or modified except by a
writing signed by the Company and the Employee. No waiver of compliance with any
provision or condition hereof, and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent.
C. Notice. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally, mailed by registered or certified mail
or sent via overnight courier to the Company at its principal place of business
and to the Employee at the address hereinafter set forth following the
Employee's signature, or at such other address or addresses as either party may
hereafter designate in writing to the other.
D. Assignment. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors and administrators of the Employee, and to the
successors and assigns of the Company, including without limitation, to BDS
Business Center, Inc., a Delaware corporation, into which the Company is
expected to be merged in order to change the Company's jurisdiction of
incorporation to Delaware. The Employee may not assign or delegate any of his
rights or obligations hereunder without the prior written consent of the
Company.
E. Governing Law and Choice of Forum. Connecticut law shall govern the
construction and enforceability of this Agreement. Any and all actions
concerning any dispute arising hereunder shall be filed and maintained only in a
state or federal court sitting in the State of Connecticut.
F. Counterparts. This Agreement may be executed in one or more
counterparts and all such counterparts shall constitute one and the same
instrument.
<PAGE> 8
-8-
G. Gender. Unless the context otherwise requires, words in the singular
number include the plural, and in the plural include the singular; and, words of
the masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender.
H. Headings. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
I. No Implied Waivers. Failure of either party to insist upon strict
performance of any part of this Agreement shall not be considered a waiver of
such performance and shall not prevent either party from subsequently insisting
upon strict performance.
J. ACKNOWLEDGMENT. THE EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND
UNDERSTANDS THE COMPLETE AGREEMENT. THE EMPLOYEE FURTHER ACKNOWLEDGES THAT THIS
AGREEMENT HAS BEEN PREPARED BY COUNSEL TO THE COMPANY AND THAT THE EMPLOYEE HAS
BEEN ADVISED TO OBTAIN SEPARATE LEGAL COUNSEL TO REPRESENT THE LEGAL INTERESTS
OF THE EMPLOYEE.
[NEXT PAGE IS THE SIGNATURE PAGE]
<PAGE> 9
-9-
IN WITNESS WHEREOF, the parties have made this Agreement effective on
the day and year first above written.
COMPANY:
BDS BUSINESS CENTER, INC.
By: /s/ Peter A. Bourdon
___________________________________
Its: Peter A. Bourdon
___________________________________
Chief Financial Officer
EMPLOYEE:
/s/ John M. Hughes
___________________________________
John M. Hughes
___________________________________
Full Name of Employee
___________________________________
Street Address
___________________________________
City, State and Zip Code
<PAGE> 10
EXHIBIT A
JOB DESCRIPTION
CHAIRPERSON
The Chairperson shall preside at all meetings of the shareholders and of the
board of directors of the Company.
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall oversee all of the business and affairs of the
Company, may sign any contract or other instrument which the board of directors
of the Company has authorized and shall perform all duties incident to the
office of the Chief Executive Officer.
<PAGE> 11
EXHIBIT B
COMPENSATION
Base salary of $300,000 plus discretionary bonuses.
<PAGE> 12
EXHIBIT C
PRIOR AGREEMENTS
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 17th day of May, 1999 by and between
BDS BUSINESS CENTER, INC., a Connecticut corporation (the "COMPANY"), and Robert
Hughes with a current address at Marlborough, CT (the "EMPLOYEE").
WITNESSETH:
WHEREAS, the Company desires to enter into an employment relationship
with the Employee on the terms and conditions as set forth herein; and
WHEREAS, during the course of the Employee's employment with the
Company, the Employee will have access to certain confidential and proprietary
information of the Company;
WHEREAS, the Company's confidential and proprietary information is
highly valuable and its disclosure would cause serious harm to the Company;
WHEREAS, competition by the Employee against the Company could cause
serious and irreparable harm to the Company; and
WHEREAS, the Employee is willing to accept such employment and to
protect the Company's confidential and proprietary information and competitive
advantage on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement and intending to be legally bound, the Employee and
the Company covenant and agree as follows:
1. Definitions.
As used in this Agreement:
A. "ACCOUNT INFORMATION" means names, addresses, contact
persons, purchasing histories and prices, credit standing and other information
relating to the Company's customers or prospective customers and their
personnel.
B. "CONFIDENTIAL INFORMATION" means Account Information, and
any information concerning the organization, business or finances of the Company
or of any third party which the Company is under an obligation to keep
confidential and that is maintained by the Company as confidential including,
but not limited to, trade secrets or confidential information respecting,
current, past, potential or prospective customers or clients, customer lists,
finances, business plans, projects, plans, proposals, pricing, costs, profits,
markets, products, services, designs, methods, techniques, know-how and
show-how, database information systems, processes, engineering data, software
programs, works of authorship, innovations, the Company's own internal practices
and procedures, technologies, developments, inventions or
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improvements, or any other information, or trade secrets and proprietary
information belonging to or developed by the Company.
C. "PROSPECT" means any prospective customer or client to whom
the Company has provided a proposal within the six (6) months prior to the
Employee's termination.
2. Employment. The Company hereby employs the Employee and the Employee
accepts employment upon the terms and conditions contained herein.
3. Duties. The Employee is engaged by the Company to serve as President
and Chief Operating Officer and shall perform those duties set forth in the Job
Description annexed hereto as EXHIBIT A and/or such other duties as the Chief
Executive Officer or any officer of the Company assigned by the Chief Executive
Officer to supervise the Employee may direct from time to time. The Employee
shall be subject to the direction and control of the Chief Executive Officer of
the Company or any officer assigned by the Chief Executive Officer in performing
his duties under this Agreement.
4. Extent of Service. The Employee shall devote his full time and
attention to the advancement of the interests and business of the Company, and
shall be permitted to engage in other business ventures only during non-business
hours and only to the extent it does not affect the performance of the
Employee's duties hereunder. The Employee shall work the number of hours
required for the reasonable standards of performance of the Employee's duties
hereunder.
5. Employment Term. The term of employment will commence on the date
hereof and continue until terminated pursuant to Section 7 of this Agreement.
6. Compensation. For services rendered by the Employee to the Company
under this Agreement, the Company shall pay compensation to the Employee in the
manner and form as set forth in EXHIBIT B attached hereto. Such compensation may
be modified from time to time thereafter by the Chairman or the Board of
Directors of the Company in his or its sole discretion upon ten (10) calendar
days prior written notice to the Employee.
7. Termination. Employment of the Employee under this Agreement will be
terminated as follows:
A. Automatically, by the Employee's death.
B. If the Employee becomes incapacitated or disabled. For the
purposes of this Agreement, the Employee shall be deemed to have become
incapacitated or disabled if the Employee is unable to perform the essential
functions of his job without reasonable accommodation. Any accommodation will
not be deemed reasonable if it imposes an undue hardship on the Company. If the
Employee becomes incapacitated or disabled, then the Company may, upon written
notice to the Employee, terminate the Employee's employment hereunder, but the
Employee may continue to be eligible to receive any benefits to which he may be
entitled in accordance with, and subject to, the terms, conditions and
limitations of any long-term disability plan or insurance policy maintained by
the Company for its employees. In the
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event of such incapacity or disability, the Company shall continue to pay full
compensation to the Employee until the date of such termination.
C. By mutual agreement of the Employee and the Company.
D. By the Employee or the Company, without cause, at any time
upon thirty (30) calendar days' prior written notice to the other party. The
Company may elect to provide the Employee with the compensation due to the
Employee under Section 6 in lieu of any notice requirement.
E. Immediately by the Company for cause.
Upon termination of employment of the Employee under this
Agreement, the Company shall pay the Employee the compensation that is due to
the Employee pursuant to Section 6 through the date of termination and the
Employee shall resign from all positions held in the Company, including without
limitation any position as a director, officer, agent, employee or trustee of
the Company or any affiliate of the Company. The Company shall have no other
obligations to the Employee except as required by applicable law.
For purposes of this Section, the term "CAUSE" shall mean (i) theft,
embezzlement or other felonious criminal activity; (ii) the willful or
intentional misconduct of the Employee; (iii) the dereliction of duties and
responsibilities of the Employee to the Company, after prior written notice from
the Company to the Employee, which notice specifies the conduct which will be
the basis for cause if not cured within fifteen (15) calendar days from the date
of notice; (iv) the use of illegal drugs; and (v) the violation by the Employee
of the provisions of Section 10, 11, 12, 13, 14 or 15 of this Agreement.
8. Employee Benefits. The Employee will be entitled to participate on
the same general basis and subject to the same rules and regulations as other
similar level employees of the Company in the Company's employee benefit plans
as such benefits or plans may be modified or terminated from time to time.
9. Business Expenses. The Company shall pay or reimburse the Employee
for all reasonable and necessary travel, entertainment and other business
expenses incurred by the Employee in the performance of his duties under this
Agreement, upon presentation of expense statements or other supporting
information as the Company may from time to time request; provided, however,
that the Employee shall comply with all applicable policies of the Company
relating to reimbursement for business expenses.
10. Non-Competition. The Employee acknowledges that because of the
unique nature of his services to the Company and the nature of the Confidential
Information which he will acquire, his employment with a competitor would
irreparably damage the Company. Therefore, the Employee agrees to the following
non-competition restrictions.
A. During the period of Employee's employment, Employee will not,
directly or indirectly, alone or as a partner, proprietor, joint venturer,
officer, director, employee, consultant,
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independent contractor or stockholder (other than ownership by the Employee of
less than 1% of the equity security of any publicly-traded Company) of any
entity engage in any business activity that is in competition with the products
or services being developed or sold by the Company.
B. For a period of six (6) months after Employee's termination of
employment with the Company for any reason whatsoever (the "Noncompetition
Period"), Employee agrees that he will not, directly or indirectly, alone or as
a partner, proprietor, joint venturer, officer, director, employee, consultant,
independent contractor or stockholder (other than ownership by the Employee of
less than 1% of the equity securities of any publicly-traded Company) of any
entity engage in any business activity that is in competition with the products
or services being developed or sold by the Company in: (i) the United States,
(ii) North America, and/or (iii) any place where the Company does business at
the time of Employee's termination of employment, PROVIDED, the Company, in its
sole discretion, decides to pay the Employee a Severance Payment as defined
below over the course of the Noncompetition Period. For the purposes of this
section, the Severance Payment is equal to, in the aggregate, one half of the
wages from the Company as reported on the Employee's Form W-2 for the year prior
to his termination not to exceed $125,000. The Severance Payment will be paid in
six equal monthly installments, in accordance with the Company's then current
payroll practices and be subject to all applicable federal, state and local
withholding and payroll taxes.
C. The Company and the Employee agree that the Noncompetition Period
shall be tolled for the length of time during which any of the restrictions are
violated and no further amounts other than the Severance Payment will be
required to be paid to the Employee in connection with such modification of the
Noncompetition Period.
11. Non-Solicitation. The Company has developed and has acquired, at
considerable expense, relationships with, and knowledge about, customers and
Prospects, which are a major part of the value of the Company. As an employee of
the Company, the Employee has substantial contact with these customers and
Prospects and access to Confidential Information about these customers and
Prospects. . Therefore, to protect the value of the Company's business, the
Employee agrees that he will not, either directly or indirectly, while employed
by the Company (except in the performance of his duties for and on behalf of the
Company) and for a period of one (1) year after the date of his termination of
employment (plus any additional time that he is in breach of this Section), in
any capacity whatsoever (either as an employee, officer, director, stockholder,
proprietor, partner, joint venturer, consultant, independent contractor or
otherwise):
A. solicit, sell to, divert, serve, contact, allow himself to
continue to be contacted and approached by, or accept consulting business from
any customer, client or Prospect of the Company: (i) who Employee handled,
serviced, solicited or had contact with, or (ii) who Employee had access to
Confidential Information about, or (iii) who Employee had learned or known the
identity of, or (iv) who anyone else affiliated with the Company, handled,
serviced, solicited or had contact with during the twelve (12) month period
immediately preceding the Employee's termination as an employee of the Company.;
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B. (i) employ; or (ii) solicit, induce, encourage, recruit or
attempt to employ any person who is or was employed by the Company, or is or was
an agent, representative, or consultant of the Company within the six months
prior to the termination of Employee's employment with the Company;
C. interfere with any of the Company's contracts or
relationships with any customer, client, vendor or supplier; or
D. disparage the Company or any of its officers, directors or
employees.
12. Confidential Information. A. Disclosure of Confidential
Information. As an employee of the Company, the Employee will learn and will
have access to Confidential Information. The Company developed this Confidential
Information at great expense, it is proprietary to the Company and it is and
shall remain the exclusive property of the Company. The Employee agrees not to,
without the express, written consent of the Company, either while employed by
the Company or thereafter, disclose, copy, make any use of, or remove from the
Company's premises the Confidential Information except as required in the
performance of the Employee's duties and responsibilities as an employee of the
Company. Upon the Employee's termination as an employee of the Company, the
Employee shall immediately deliver to the Company any Confidential Information
and all copies thereof, whether in hard copy, computerized or other form, which
the Employee has in his possession or control.
B. Competitive Use of Confidential Information. The Employee
hereby acknowledges that the Confidential Information is maintained as
confidential by the Company, is highly valuable and proprietary to the Company
and that the disclosure of any Confidential Information to third parties or
unauthorized use of the Confidential Information by the Employee could allow a
competitor of the Company to discover and understand the inner workings,
proprietary information and technology of the Company, use the Confidential
Information to the detriment of the Company and cause the Company serious
competitive harm. Accordingly, the Employee agrees not to, directly or
indirectly, use the Confidential Information in competition with the Company
until such time as such the Confidential Information shall have properly become
known to the general public without disclosure by the Employee.
C. Disclosure of Customer's Confidential Information. As an
employee of the Company, the Employee will learn and will have access to
confidential information, proprietary information and/or trade secrets of the
Company's customers and clients. The Employee agrees not to, without the
express, written consent of the Company, either while employed by the Company or
thereafter, disclose, copy, make any use of, or remove from the Company's
premises confidential information, proprietary information and/or trade secrets
of the Company's customers and clients except as required in the performance of
the Employee's duties and responsibilities as an employee of the Company.
13. Disclosure of Prior Agreements. The Employee represents that he has
disclosed to the Company any agreement, still in effect, which imposes any
restrictions on the Employee. The Employee represents that, except for those
restrictions, if any, specifically disclosed on EXHIBIT C to this Agreement, the
Employee is not subject to any restrictions arising from any
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previous employment. The Employee represents that his employment by the Company
pursuant to this Agreement does not violate any agreement, covenant or
obligation to which he is a party or by which he is bound.
14. Assignment of Inventions. The Employee agrees to disclose promptly
and fully to the Company and to no one else: (i) all inventions, ideas,
improvements, discoveries and works ("inventions") made or conceived by the
Employee, solely or jointly with others, during the period of his employment
which are related to the business of the Company and (ii) all inventions which
are related to the business of the Company and in which the Employee had an
assignable interest at the time of first employment by the Company. The
determination as to whether an invention is related to the business of the
Company will be made solely by the Chief Executive Officer of the Company. The
Employee also agrees to disclose any invention made using the Company's time,
materials or facilities, even if such invention does not relate to the business
of the Company. The "business of the Company" includes not only the actual
business currently conducted by the Company but also any business in which the
Company proposes to engage. The Employee hereby assigns to the Company all
right, title and interest, including tangible and intangible rights such as
patent rights, trademarks and copyrights, in and to all such inventions, and
agrees promptly to execute any further specific assignments related to such
inventions and rights at the request of the Company. The Employee also hereby
assigns to the Company, or waives if not assignable, all "moral rights" in and
to all such inventions, and agrees promptly to execute any further specific
assignments or waivers related to moral rights at the request of the Company.
The assignments will survive the termination of the employment relationship. The
Employee agrees to assist the Company without charge and for as long as may be
necessary (but at the Company's expense): (1) to obtain for the Company's
benefit, patents, trademarks, copyrights and other protection for such
inventions in all countries, and (2) in any controversy or legal proceeding
relating to inventions.
15. Non-Use of Third Party Confidential Information or Trade Secrets.
The Employee further represents that he has not disclosed and will not disclose
to the Company and has not used and will not use on the Company's behalf any
trade secrets or other confidential and proprietary information belonging to a
third party, without consent from that third party.
16. Remedies. The Employee recognizes that a breach by him of Sections
11, 12, 13, 14 or 15 of this Agreement will cause irreparable injury to the
Company inadequately compensable in damages and, accordingly, agrees that the
Company may seek and obtain an injunction, specific performance, or other
equitable relief against such breach or threatened breach, in addition to any
other legal remedies which may be available, including the recovery of monetary
damages from the Employee. In any action successfully brought by the Company
against the Employee to enforce the rights of the Company under Sections 11, 12,
13, 14 and 15 of this Agreement, the Company shall also be entitled to recover
from the Employee its reasonable attorneys' fees and costs of the action and the
post-employment period of the restriction shall be deemed to commence upon the
entry of the court's order for relief.
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17. Severability. The Company and the Employee agree that the terms
contained in this Agreement are reasonable in all respects and that the
restrictions contained herein are designed to ensure that the Employee does not
engage in unfair competition with the Company. If any provision or clause of
this Agreement, or any portion thereof, shall be held by any court or other
tribunal of competent jurisdiction to be illegal, void or unenforceable in such
jurisdiction, the remainder of such provision, clause or any portion thereof and
of the Agreement shall not be affected thereby and shall be given full effect,
without regard to the invalid provision. The parties agree that such court or
tribunal, if possible, shall limit such invalid provision, clause or part
thereof in scope so that it shall not be invalid and shall be enforceable as so
limited. Sections 11, 12, 13, 14, 15, 16, 17 and 18 shall survive the
termination of this Agreement and the termination of the Employee's employment
hereunder.
18. Miscellaneous.
A. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the matters described herein and is a
complete and exclusive statement as to the terms thereof and supersedes all
previous agreements with respect to such matters.
B. Amendment. This Agreement may not be altered or modified except by a
writing signed by the Company and the Employee. No waiver of compliance with any
provision or condition hereof, and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent.
C. Notice. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally, mailed by registered or certified mail
or sent via overnight courier to the Company at its principal place of business
and to the Employee at the address hereinafter set forth following the
Employee's signature, or at such other address or addresses as either party may
hereafter designate in writing to the other.
D. Assignment. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors and administrators of the Employee, and to the
successors and assigns of the Company, including without limitation, to BDS
Business Center, Inc., a Delaware corporation, into which the Company is
expected to be merged in order to change the Company's jurisdiction of
incorporation to Delaware. The Employee may not assign or delegate any of his
rights or obligations hereunder without the prior written consent of the
Company.
E. Governing Law and Choice of Forum. Connecticut law shall govern the
construction and enforceability of this Agreement. Any and all actions
concerning any dispute arising hereunder shall be filed and maintained only in a
state or federal court sitting in the State of Connecticut.
F. Counterparts. This Agreement may be executed in one or more
counterparts and all such counterparts shall constitute one and the same
instrument.
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G. Gender. Unless the context otherwise requires, words in the singular
number include the plural, and in the plural include the singular; and, words of
the masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender.
H. Headings. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
I. No Implied Waivers. Failure of either party to insist upon strict
performance of any part of this Agreement shall not be considered a waiver of
such performance and shall not prevent either party from subsequently insisting
upon strict performance.
J ACKNOWLEDGMENT. THE EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND
UNDERSTANDS THE COMPLETE AGREEMENT. THE EMPLOYEE FURTHER ACKNOWLEDGES THAT THIS
AGREEMENT HAS BEEN PREPARED BY COUNSEL TO THE COMPANY AND THAT THE EMPLOYEE HAS
BEEN ADVISED TO OBTAIN SEPARATE LEGAL COUNSEL TO REPRESENT THE LEGAL INTERESTS
OF THE EMPLOYEE.
[NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties have made this Agreement effective on
the day and year first above written.
COMPANY:
BDS BUSINESS CENTER, INC.
By: /s/ John M. Hughes
-----------------------------------
Its: John M. Hughes
----------------------------------
Chief Executive Officer
EMPLOYEE:
/s/ Robert Hughes
---------------------------------------
Robert Hughes
---------------------------------------
Full Name of Employee
---------------------------------------
Street Address
---------------------------------------
City, State and Zip Code
<PAGE> 10
EXHIBIT A
JOB DESCRIPTION
PRESIDENT
In the absence of the Chief Executive Officer, the President shall perform the
duties of the Chief Executive Officer.
CHIEF OPERATING OFFICER
The Chief Operating Officer shall perform all duties incident to the office of
Chief Operating Officer.
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EXHIBIT B
COMPENSATION
Base salary of $250,000 plus discretionary bonuses.
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EXHIBIT C
PRIOR AGREEMENTS
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of May, 1999 by and between
BDS BUSINESS CENTER, INC., a Connecticut corporation (the "COMPANY"), and Peter
Bourdon with a current address at Simsbury, CT (the "EMPLOYEE").
WITNESSETH:
WHEREAS, the Company desires to enter into an employment relationship
with the Employee on the terms and conditions as set forth herein; and
WHEREAS, during the course of the Employee's employment with the
Company, the Employee will have access to certain confidential and proprietary
information of the Company;
WHEREAS, the Company's confidential and proprietary information is
highly valuable and its disclosure would cause serious harm to the Company;
WHEREAS, competition by the Employee against the Company could cause
serious and irreparable harm to the Company; and
WHEREAS, the Employee is willing to accept such employment and to
protect the Company's confidential and proprietary information and competitive
advantage on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement and intending to be legally bound, the Employee and
the Company covenant and agree as follows:
1. Definitions.
As used in this Agreement:
A. "ACCOUNT INFORMATION" means names, addresses, contact
persons, purchasing histories and prices, credit standing and other information
relating to the Company's customers or prospective customers and their
personnel.
B. "CONFIDENTIAL INFORMATION" means Account Information, and
any information concerning the organization, business or finances of the Company
or of any third party which the Company is under an obligation to keep
confidential and that is maintained by the Company as confidential including,
but not limited to, trade secrets or confidential information respecting,
current, past, potential or prospective customers or clients, customer lists,
finances, business plans, projects, plans, proposals, pricing, costs, profits,
markets, products, services, designs, methods, techniques, know-how and
show-how, database information systems, processes, engineering data, software
programs, works of authorship, innovations, the Company's own internal practices
and procedures, technologies, developments, inventions or
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improvements, or any other information, or trade secrets and proprietary
information belonging to or developed by the Company.
C. "PROSPECT" means any prospective customer or client to whom
the Company has provided a proposal within the six (6) months prior to the
Employee's termination.
2. Employment. The Company hereby employs the Employee and the Employee
accepts employment upon the terms and conditions contained herein.
3. Duties. The Employee is engaged by the Company to serve as Chief
Financial Officer and shall perform those duties set forth in the Job
Description annexed hereto as EXHIBIT A and/or such other duties as the Chief
Executive Officer or any officer of the Company assigned by the Chief Executive
Officer to supervise the Employee may direct from time to time. The Employee
shall be subject to the direction and control of the Chief Executive Officer of
the Company or any officer assigned by the Chief Executive Officer in performing
his duties under this Agreement.
4. Extent of Service. The Employee shall devote his full time and
attention to the advancement of the interests and business of the Company, and
shall be permitted to engage in other business ventures only during non-business
hours and only to the extent it does not affect the performance of the
Employee's duties hereunder. The Employee shall work the number of hours
required for the reasonable standards of performance of the Employee's duties
hereunder.
5. Employment Term. The term of employment will commence on the date
hereof and continue until terminated pursuant to Section 7 of this Agreement.
6. Compensation. For services rendered by the Employee to the Company
under this Agreement, the Company shall pay compensation to the Employee in the
manner and form as set forth in EXHIBIT B attached hereto. Such compensation may
be modified from time to time thereafter by the Chairman or the Board of
Directors of the Company in his or its sole discretion upon ten (10) calendar
days prior written notice to the Employee.
7. Termination. Employment of the Employee under this Agreement will be
terminated as follows:
A. Automatically, by the Employee's death.
B. If the Employee becomes incapacitated or disabled. For the
purposes of this Agreement, the Employee shall be deemed to have become
incapacitated or disabled if the Employee is unable to perform the essential
functions of his job without reasonable accommodation. Any accommodation will
not be deemed reasonable if it imposes an undue hardship on the Company. If the
Employee becomes incapacitated or disabled, then the Company may, upon written
notice to the Employee, terminate the Employee's employment hereunder, but the
Employee may continue to be eligible to receive any benefits to which he may be
entitled in accordance with, and subject to, the terms, conditions and
limitations of any long-term disability plan or insurance policy maintained by
the Company for its employees. In the
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event of such incapacity or disability, the Company shall continue to pay full
compensation to the Employee until the date of such termination.
C. By mutual agreement of the Employee and the Company.
D. By the Employee or the Company, without cause, at any time
upon thirty (30) calendar days' prior written notice to the other party. The
Company may elect to provide the Employee with the compensation due to the
Employee under Section 6 in lieu of any notice requirement.
E. Immediately by the Company for cause.
Upon termination of employment of the Employee under this
Agreement, the Company shall pay the Employee the compensation that is due to
the Employee pursuant to Section 6 through the date of termination and the
Employee shall resign from all positions held in the Company, including without
limitation any position as a director, officer, agent, employee or trustee of
the Company or any affiliate of the Company. The Company shall have no other
obligations to the Employee except as required by applicable law.
For purposes of this Section, the term "CAUSE" shall mean (i) theft,
embezzlement or other felonious criminal activity; (ii) the willful or
intentional misconduct of the Employee; (iii) the dereliction of duties and
responsibilities of the Employee to the Company, after prior written notice from
the Company to the Employee, which notice specifies the conduct which will be
the basis for cause if not cured within fifteen (15) calendar days from the date
of notice; (iv) the use of illegal drugs; and (v) the violation by the Employee
of the provisions of Section 10, 11, 12, 13, 14 or 15 of this Agreement.
8. Employee Benefits. The Employee will be entitled to participate on
the same general basis and subject to the same rules and regulations as other
similar level employees of the Company in the Company's employee benefit plans
as such benefits or plans may be modified or terminated from time to time.
9. Business Expenses. The Company shall pay or reimburse the Employee
for all reasonable and necessary travel, entertainment and other business
expenses incurred by the Employee in the performance of his duties under this
Agreement, upon presentation of expense statements or other supporting
information as the Company may from time to time request; provided, however,
that the Employee shall comply with all applicable policies of the Company
relating to reimbursement for business expenses.
10. Non-Competition. The Employee acknowledges that because of the
unique nature of his services to the Company and the nature of the Confidential
Information which he will acquire, his employment with a competitor would
irreparably damage the Company. Therefore, the Employee agrees to the following
non-competition restrictions.
A. During the period of Employee's employment, Employee will not,
directly or indirectly, alone or as a partner, proprietor, joint venturer,
officer, employee, consultant,
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independent contractor or stockholder (other than ownership by the Employee of
less than 1% of the equity security of any publicly-traded Company) of any
entity engage in any business activity that is in competition with the products
or services being developed or sold by the Company.
B. For a period of six (6) months after Employee's termination of
employment with the Company for any reason whatsoever (the "Noncompetition
Period"), Employee agrees that he will not, directly or indirectly, alone or as
a partner, proprietor, joint venturer, officer, director, employee, consultant,
independent contractor or stockholder (other than ownership by the Employee of
less than 1% of the equity securities of any publicly-traded Company) of any
entity engage in any business activity that is in competition with the products
or services being developed or sold by the Company in: (i) the United States,
(ii) North America, and/or (iii) any place where the Company does business at
the time of Employee's termination of employment, PROVIDED, the Company, in its
sole discretion, decides to pay the Employee a Severance Payment as defined
below over the course of the Noncompetition Period. For the purposes of this
section, the Severance Payment is equal to, in the aggregate, one half of the
wages from the Company as reported on the Employee's Form W-2 for the year prior
to his termination not to exceed $125,000. The Severance Payment will be paid in
six equal monthly installments, in accordance with the Company's then current
payroll practices and be subject to all applicable federal, state and local
withholding and payroll taxes.
C. The Company and the Employee agree that the Noncompetition Period
shall be tolled for the length of time during which any of the restrictions are
violated and no further amounts other than the Severance Payment will be
required to be paid to the Employee in connection with such modification of the
Noncompetition Period.
11. Non-Solicitation. The Company has developed and has acquired, at
considerable expense, relationships with, and knowledge about, customers and
Prospects, which are a major part of the value of the Company. As an employee of
the Company, the Employee has substantial contact with these customers and
Prospects and access to Confidential Information about these customers and
Prospects. . Therefore, to protect the value of the Company's business, the
Employee agrees that he will not, either directly or indirectly, while employed
by the Company (except in the performance of his duties for and on behalf of the
Company) and for a period of one (1) year after the date of his termination of
employment (plus any additional time that he is in breach of this Section), in
any capacity whatsoever (either as an employee, officer, director, stockholder,
proprietor, partner, joint venturer, consultant, independent contractor or
otherwise):
A. solicit, sell to, divert, serve, contact, allow himself to
continue to be contacted and approached by, or accept consulting business from
any customer, client or Prospect of the Company: (i) who Employee handled,
serviced, solicited or had contact with, or (ii) who Employee had access to
Confidential Information about, or (iii) who Employee had learned or known the
identity of, or (iv) who anyone else affiliated with the Company, handled,
serviced, solicited or had contact with during the twelve (12) month period
immediately preceding the Employee's termination as an employee of the Company.;
<PAGE> 5
-5-
B. (i) employ; or (ii) solicit, induce, encourage, recruit or
attempt to employ any person who is or was employed by the Company, or is or was
an agent, representative, or consultant of the Company within the six months
prior to the termination of Employee's employment with the Company;
C. interfere with any of the Company's contracts or
relationships with any customer, client, vendor or supplier; or
D. disparage the Company or any of its officers, directors or
employees.
12. Confidential Information. A. Disclosure of Confidential
Information. As an employee of the Company, the Employee will learn and will
have access to Confidential Information. The Company developed this Confidential
Information at great expense, it is proprietary to the Company and it is and
shall remain the exclusive property of the Company. The Employee agrees not to,
without the express, written consent of the Company, either while employed by
the Company or thereafter, disclose, copy, make any use of, or remove from the
Company's premises the Confidential Information except as required in the
performance of the Employee's duties and responsibilities as an employee of the
Company. Upon the Employee's termination as an employee of the Company, the
Employee shall immediately deliver to the Company any Confidential Information
and all copies thereof, whether in hard copy, computerized or other form, which
the Employee has in his possession or control.
B. Competitive Use of Confidential Information. The Employee
hereby acknowledges that the Confidential Information is maintained as
confidential by the Company, is highly valuable and proprietary to the Company
and that the disclosure of any Confidential Information to third parties or
unauthorized use of the Confidential Information by the Employee could allow a
competitor of the Company to discover and understand the inner workings,
proprietary information and technology of the Company, use the Confidential
Information to the detriment of the Company and cause the Company serious
competitive harm. Accordingly, the Employee agrees not to, directly or
indirectly, use the Confidential Information in competition with the Company
until such time as such the Confidential Information shall have properly become
known to the general public without disclosure by the Employee.
C. Disclosure of Customer's Confidential Information. As an
employee of the Company, the Employee will learn and will have access to
confidential information, proprietary information and/or trade secrets of the
Company's customers and clients. The Employee agrees not to, without the
express, written consent of the Company, either while employed by the Company or
thereafter, disclose, copy, make any use of, or remove from the Company's
premises confidential information, proprietary information and/or trade secrets
of the Company's customers and clients except as required in the performance of
the Employee's duties and responsibilities as an employee of the Company.
13. Disclosure of Prior Agreements. The Employee represents that he has
disclosed to the Company any agreement, still in effect, which imposes any
restrictions on the Employee. The Employee represents that, except for those
restrictions, if any, specifically disclosed on EXHIBIT C to this Agreement, the
Employee is not subject to any restrictions arising from any
<PAGE> 6
-6-
previous employment. The Employee represents that his employment by the Company
pursuant to this Agreement does not violate any agreement, covenant or
obligation to which he is a party or by which he is bound.
14. Assignment of Inventions. The Employee agrees to disclose promptly
and fully to the Company and to no one else: (i) all inventions, ideas,
improvements, discoveries and works ("inventions") made or conceived by the
Employee, solely or jointly with others, during the period of his employment
which are related to the business of the Company and (ii) all inventions which
are related to the business of the Company and in which the Employee had an
assignable interest at the time of first employment by the Company. The
determination as to whether an invention is related to the business of the
Company will be made solely by the Chief Executive Officer of the Company. The
Employee also agrees to disclose any invention made using the Company's time,
materials or facilities, even if such invention does not relate to the business
of the Company. The "business of the Company" includes not only the actual
business currently conducted by the Company but also any business in which the
Company proposes to engage. The Employee hereby assigns to the Company all
right, title and interest, including tangible and intangible rights such as
patent rights, trademarks and copyrights, in and to all such inventions, and
agrees promptly to execute any further specific assignments related to such
inventions and rights at the request of the Company. The Employee also hereby
assigns to the Company, or waives if not assignable, all "moral rights" in and
to all such inventions, and agrees promptly to execute any further specific
assignments or waivers related to moral rights at the request of the Company.
The assignments will survive the termination of the employment relationship. The
Employee agrees to assist the Company without charge and for as long as may be
necessary (but at the Company's expense): (1) to obtain for the Company's
benefit, patents, trademarks, copyrights and other protection for such
inventions in all countries, and (2) in any controversy or legal proceeding
relating to inventions.
15. Non-Use of Third Party Confidential Information or Trade Secrets.
The Employee further represents that he has not disclosed and will not disclose
to the Company and has not used and will not use on the Company's behalf any
trade secrets or other confidential and proprietary information belonging to a
third party, without consent from that third party.
16. Remedies. The Employee recognizes that a breach by him of Sections
11, 12, 13, 14 or 15 of this Agreement will cause irreparable injury to the
Company inadequately compensable in damages and, accordingly, agrees that the
Company may seek and obtain an injunction, specific performance, or other
equitable relief against such breach or threatened breach, in addition to any
other legal remedies which may be available, including the recovery of monetary
damages from the Employee. In any action successfully brought by the Company
against the Employee to enforce the rights of the Company under Sections 11, 12,
13, 14 and 15 of this Agreement, the Company shall also be entitled to recover
from the Employee its reasonable attorneys' fees and costs of the action and the
post-employment period of the restriction shall be deemed to commence upon the
entry of the court's order for relief.
<PAGE> 7
-7-
17. Severability. The Company and the Employee agree that the terms
contained in this Agreement are reasonable in all respects and that the
restrictions contained herein are designed to ensure that the Employee does not
engage in unfair competition with the Company. If any provision or clause of
this Agreement, or any portion thereof, shall be held by any court or other
tribunal of competent jurisdiction to be illegal, void or unenforceable in such
jurisdiction, the remainder of such provision, clause or any portion thereof and
of the Agreement shall not be affected thereby and shall be given full effect,
without regard to the invalid provision. The parties agree that such court or
tribunal, if possible, shall limit such invalid provision, clause or part
thereof in scope so that it shall not be invalid and shall be enforceable as so
limited. Sections 11, 12, 13, 14, 15, 16, 17 and 18 shall survive the
termination of this Agreement and the termination of the Employee's employment
hereunder.
18. Miscellaneous.
A. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the matters described herein and is a
complete and exclusive statement as to the terms thereof and supersedes all
previous agreements with respect to such matters.
B. Amendment. This Agreement may not be altered or modified except by a
writing signed by the Company and the Employee. No waiver of compliance with any
provision or condition hereof, and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent.
C. Notice. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally, mailed by registered or certified mail
or sent via overnight courier to the Company at its principal place of business
and to the Employee at the address hereinafter set forth following the
Employee's signature, or at such other address or addresses as either party may
hereafter designate in writing to the other.
D. Assignment. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors and administrators of the Employee, and to the
successors and assigns of the Company, including without limitation, to BDS
Business Center, Inc., a Delaware corporation, into which the Company is
expected to be merged in order to change the Company's jurisdiction of
incorporation to Delaware. The Employee may not assign or delegate any of his
rights or obligations hereunder without the prior written consent of the
Company.
E. Governing Law and Choice of Forum. Connecticut law shall govern the
construction and enforceability of this Agreement. Any and all actions
concerning any dispute arising hereunder shall be filed and maintained only in a
state or federal court sitting in the State of Connecticut.
F. Counterparts. This Agreement may be executed in one or more
counterparts and all such counterparts shall constitute one and the same
instrument.
<PAGE> 8
-8-
G. Gender. Unless the context otherwise requires, words in the singular
number include the plural, and in the plural include the singular; and, words of
the masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender.
H. Headings. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
I. No Implied Waivers. Failure of either party to insist upon strict
performance of any part of this Agreement shall not be considered a waiver of
such performance and shall not prevent either party from subsequently insisting
upon strict performance.
J ACKNOWLEDGMENT. THE EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND
UNDERSTANDS THE COMPLETE AGREEMENT. THE EMPLOYEE FURTHER ACKNOWLEDGES THAT THIS
AGREEMENT HAS BEEN PREPARED BY COUNSEL TO THE COMPANY AND THAT THE EMPLOYEE HAS
BEEN ADVISED TO OBTAIN SEPARATE LEGAL COUNSEL TO REPRESENT THE LEGAL INTERESTS
OF THE EMPLOYEE.
[NEXT PAGE IS THE SIGNATURE PAGE]
<PAGE> 9
-9-
IN WITNESS WHEREOF, the parties have made this Agreement effective on
the day and year first above written.
COMPANY:
BDS BUSINESS CENTER, INC.
By: /s/ John M. Hughes
---------------------------------------
Its: John M. Hughes
---------------------------------------
Chief Executive Officer
EMPLOYEE:
/s/ Peter A. Bourdon
---------------------------------------
Peter A. Bourdon
---------------------------------------
Full Name of Employee
---------------------------------------
Street Address
---------------------------------------
City, State and Zip Code
<PAGE> 10
EXHIBIT A
JOB DESCRIPTION
CHIEF FINANCIAL OFFICER
The Chief Financial Officer is responsible for the organization's financial
plans and policies, accounting practices, and relationships with lending
institutions and the financial community. Duties include the development of
accounting and statistical procedures for internal control.
<PAGE> 11
EXHIBIT B
COMPENSATION
Base salary of $250,000 plus discretionary bonuses.
<PAGE> 12
EXHIBIT C
PRIOR AGREEMENTS
<PAGE> 1
EXHIBIT 10.10
BDS BUSINESS CENTER, INC.
INVESTORS' RIGHTS AGREEMENT
DATED AS OF
AUGUST 20, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
1. Definitions....................................................... 1
1.1 Capitalized Terms........................................ 1
1.2 Definitions.............................................. 1
2. Registration Rights............................................... 4
2.1 Demand Registration Rights............................... 4
2.2 Company Registration..................................... 6
2.3 Obligations of the Company............................... 6
2.4 Furnish Information...................................... 9
2.5 Expenses of Registration................................. 9
2.6 Underwriting Requirements................................ 9
2.7 Damages.................................................. 10
2.8 Indemnification.......................................... 10
2.9 Reports Under Securities Exchange Act of 1934............ 13
2.10 Form S-3 Registration.................................... 14
2.11 Assignment of Registration Rights........................ 14
2.12 Limitations on Subsequent Registration Rights............ 15
2.13 "Market Stand-Off" Agreement............................. 15
2.14 "Lock-Up" Agreement...................................... 15
2.15 Amendments............................................... 16
3. Covenants of the Company.......................................... 16
3.1 Pre-emptive Rights....................................... 16
3.2 Delivery of Financial Statements......................... 17
3.3 Budget and Operating Forecast: Inspection................ 18
3.4 Board of Directors; Meetings; Indemnification............ 18
3.5 Board Observation Rights................................. 19
3.6 Composition of Board Committees.......................... 19
3.7 Positive Covenants....................................... 20
4. Miscellaneous..................................................... 22
4.1 Survival of Covenants.................................... 22
4.2 Legend on Securities..................................... 22
4.3 Successors and Assigns................................... 22
4.4 Governing Law............................................ 23
4.5 Counterparts............................................. 23
4.6 Titles and Subtitles; Gender............................. 23
4.7 Notices.................................................. 23
4.8 Expenses................................................. 23
4.9 Amendments and Waivers................................... 23
4.10 Severability............................................. 24
4.11 Aggregation of Stock..................................... 24
4.12 Entire Agreement; Amendment; Waiver...................... 24
i
<PAGE> 3
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of the
20th day of August, 1999, by and between BDS Business Center, Inc., a Delaware
corporation (the "Company") and the investors named on Schedule A attached
hereto (collectively, the "Investors," and each individually, an "Investor").
RECITALS
WHEREAS, the Company and the Investors are parties to the Stock
Purchase Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Purchase Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS.
1.1 Capitalized Terms. Capitalized terms used herein but not
defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement.
1.2 Definitions. The following capitalized terms as used in
this Agreement shall have the meanings set forth below.
(a) An "Affiliate" of any Person shall mean a Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the first mentioned Person. A
Person shall be deemed to control another Person if such first Person possesses
directly or indirectly the power to direct, or cause the direction of, the
management and policies of the second Person, whether through the ownership of
voting securities, by contract or otherwise.
(b) The term "Board of Directors" shall mean the
Board of Directors of the Company.
(c) The term "Change in Control" shall mean a change
in ownership or control of the Company effected through any of the following
transactions: (i) a merger, consolidation or reorganization approved by the
Company's stockholders, unless securities representing more than fifty percent
(50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Company's outstanding voting securities immediately prior
to such transaction, (ii) any stockholder-approved transfer or other disposition
of all or substantially all of the Company's assets, or (iii) the acquisition,
directly or indirectly, by any person or related group of persons
<PAGE> 4
(other than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board recommends such
stockholders accept.
(d) The term "Common Stock" shall mean the Common
Stock, and any other securities into which the Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
(e) The term "Form S-3" shall mean such form under
the Securities Act as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the SEC in lieu of such form as
currently in effect which similarly permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
(f) The term "Holder" shall mean any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 2.11 hereof.
(g) The term "Initial Public Offering" shall mean the
initial sale of securities pursuant to an effective registration statement filed
by the Company under the Securities Act (as hereinafter defined) in connection
with a firm commitment underwritten offering of its securities to the general
public.
(h) The term "Investor" shall mean an Investor or its
Permitted Transferees.
(i) The term "J.H. Whitney Investors" shall mean J.H.
Whitney III, L.P., Whitney Strategic Partners III, L.P. and their respective
Permitted Transferees.
(j) The term "MSVP Investors" shall mean Morgan
Stanley Venture Partners III, L.P., Morgan Stanley Venture Investors III, L.P.,
The Morgan Stanley Venture Partners Entrepreneur Fund, L.P., and their
respective Permitted Transferees.
(k) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
(l) The term "Permitted Transferee" shall mean with
respect to any Investor, (i) the spouse, children, grandchildren or parents
thereof, or a trust of which such Investor is the settlor and a trustee for the
benefit of such spouse, children or parents, provided that any such trust does
not require or permit distribution of any Registrable Securities during the term
of this Agreement, (ii) any such Investor's affiliates, partners, retired
partners, members, employees (provided the number of employees of any Investor
who may be Permitted Transferees shall not exceed 30), general partners or
managing members of such Investor; (iii) a liquidating trust established for the
benefit of any partners or members of such Investor; (iv) any investment fund or
other entity controlled or managed by an Affiliate of such Investor; and (v)
2
<PAGE> 5
any person who acquires at least twenty-five (25%) of (A) the shares of Series B
Convertible Preferred Stock or Common Stock issued upon conversion of such
shares or (B) the shares of Common Stock initially issued pursuant to the
Purchase Agreement, provided that the Company has been provided with written
notice of such transfer and such person agrees in writing to be bound by the
terms of this Agreement.
(m) The term "Person" shall mean an individual, a
corporation, a partnership, a joint venture, a trust, an unincorporated
organization, a limited liability company, and any other entity or organization,
governmental or otherwise.
(n) The term "Preferred Stock" shall mean the Series
A Redeemable Preferred Stock and the Series B Convertible Preferred Stock, and
any other securities into which the Preferred Stock may be converted or
exchanged pursuant to a plan or recapitalization, reorganization, merger, sale
of assets or otherwise.
(o) The term "Pro Rata Share" shall mean the
percentage that the Shares held by the Investors then represents of all Common
Stock of the Company then outstanding, giving effect to the conversion of
convertible securities and assuming the exercise of all vested outstanding
options, warrants or subscription rights for Common Stock.
(p) The terms "register," "registered," and
"registration" shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement or document.
(q) The term "Registrable Securities" shall mean (i)
the Common Stock issuable or issued upon conversion of the Series B Convertible
Preferred Stock and held by the Investors or their Permitted Transferees (it
being understood that for purposes of this Agreement, a Person will be deemed to
be a holder of Registrable Securities whenever such Person has the right to then
acquire or obtain from the Company any Registrable Securities, whether or not
such acquisition has actually been effected), (ii) the Common Stock initially
issued pursuant to the Purchase Agreement and held by the Investors or their
Permitted Transferees, (iii) any Common Stock that may be subsequently issued
pursuant to the Purchase Agreement and held by the Investors or their Permitted
Transferees, (iv) any shares of Common Stock held by any Permitted Transferees,
and (v) any shares of Common Stock issued or issuable with respect to any such
shares described in clause (i), (ii), (iii) or (iv) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; provided,
however, that notwithstanding anything to the contrary contained herein,
"Registrable Securities" shall not at any time include any securities (i)
registered and sold pursuant to the Securities Act, (ii) sold to the public
pursuant to Rule 144 promulgated under the Securities Act or (iii) that may be
sold to the public under Rule 144(k) of the Securities Act.
(r) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
3
<PAGE> 6
(s) The term "SEC" shall mean the Securities and
Exchange Commission.
(t) The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
(u) The term "Shares" shall mean the shares of Common
Stock (including the Common Stock issuable or issued upon conversion of the
Series B Convertible Preferred Stock), Series B Convertible Preferred Stock and
any other equity securities now or hereafter issued by the Company, together
with any options thereon and any other shares of stock issued or issuable with
respect thereto (whether by way of a stock dividend, stock split or in exchange
for or upon conversion of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization).
2. REGISTRATION RIGHTS.
2.1 Demand Registration Rights.
(a) If the Company shall receive at any time after
one hundred and eighty (180) days after the effective date of the first
registration statement for an Initial 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
either the MSVP Investors or the J.H. Whitney Investors that the Company file a
registration statement under the Securities Act covering the registration and
sale of Registrable Securities and such other securities (if any) then
outstanding and held by the Investors at an aggregate price to the public (net
of any underwriters' discounts and commissions) of at least Ten Million Dollars
($10,000,000), then the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice of such request to all Investors; and
(ii) file, as soon as practicable and in any
event within ninety (90) days of the receipt of such request, a
registration statement with the SEC under the Securities Act covering
all Registrable Securities which the Investors request to be registered
(such request having been made within twenty (20) days of the mailing
of such notice by the Company in accordance with Section 4.7) subject
to the limitations of Section 2.1(b), and thereafter to use its
reasonable best efforts to cause the registration statement to be
declared effective as soon as practicable.
(b) If the Holders initiating the registration
request hereunder (the "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
Section 2.1(a) and the Company shall include such information in the written
notice referred to in Section 2.1(a). The managing underwriter will be selected
by the Company and shall be reasonably acceptable to 50.01% in interest of the
Initiating Holders. In such event, the right of any Investor to include his
Registrable Securities in such registration shall be conditioned upon such
Investor's participation in such underwriting and the inclusion of such
4
<PAGE> 7
Investor's Registrable Securities in the underwriting (unless otherwise mutually
agreed by 50.01% in interest of the Initiating Holders and such Investor) to the
extent provided herein. All Investors proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 2.3(j)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 2.1, 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 number of shares of Registrable Securities
that may be included in the underwriting shall be reduced to a number deemed
satisfactory by such managing underwriter, provided that the shares to be
excluded shall be determined in the following sequence: (i) first, securities
held by any other Persons (other than the Investors holding Registrable
Securities) having a contractual, incidental "piggyback" right to include such
securities in the registration statement, (ii) second, shares sought to be
registered by the Company, (iii) third, Registrable Securities of Holders who
are not Investors, and (iv) fourth, Registrable Securities held by the
Investors, it being understood that no shares shall be registered for the
account of the Company or any stockholder other than the Investors unless all
Registrable Securities for which Investors have requested registration have been
registered. If there is a reduction of the number of Registrable Securities
pursuant to clauses (ii), (iii) or (iv), such reduction shall be made on a pro
rata basis (based upon the aggregate number of shares of Common Stock or
Registrable Securities held by the holders in each tranche).
(c) The Company may not cause any other registration
of securities for sale for its own account (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
of the Securities Act is applicable) to become effective within one hundred
eighty (180) days following the effective date of the Company's initial public
offering and ninety (90) days following the effective date of any registration
required pursuant to this Section 2.
(d) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 2.1 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 materially 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 and 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.
(e) In addition, the Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Section 2.1:
(i) After the Company has effected one (1)
registration requested by the MSVP Investors and one (1) registration
requested by the J.H. Whitney Investors pursuant to this Section 2.1
and such registrations have been declared or ordered effective, unless
one or both such registrations are on Form S-3, in which case the
Company may be required to effect more than two registrations pursuant
to this Section 2.1;
5
<PAGE> 8
(ii) During the period starting with the
date sixty (60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date ninety (90) days after the
effective date of, a registration subject to Section 2.2 hereof;
provided that the Company is actively employing in good faith its
reasonable best efforts to cause such registration statement to become
effective; or
(iii) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to Section
2.10 below.
2.2 Company Registration. If the Company at any 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 Securities Act in connection with the public offering of such
securities solely for cash (other than an Initial Public Offering or 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), the Company shall, at such time, promptly give each
Holder at least thirty (30) days written notice of its intention to do so. Upon
the written request of each Holder given within twenty (20) days after receipt
of such notice by the Holder in accordance with Section 5.7, the Company shall
use its reasonable best efforts to cause to be registered under the Securities
Act all of the Registrable Securities that each such Holder has requested to be
registered; provided, however, that if the Company is advised in writing in good
faith by any managing underwriter of the Company's securities being offered in
an underwritten public offering pursuant to such registration statement that the
amount to be sold by persons other than the Company (collectively, "Selling
Stockholders") is greater than the amount which can be offered without adversely
affecting the offering, the Company may reduce the amount offered for the
accounts of Selling Stockholders (including such holders of Registrable
Securities) to a number deemed satisfactory by such managing underwriter; and
provided further, that the shares to be excluded shall be determined in the
following order of priority: (i) first, securities held by any Persons not
having any such contractual, incidental registration rights, (ii) second,
securities held by any Persons having contractual, incidental registration
rights pursuant to an agreement which is not this Agreement and (iii) third,
Registrable Securities held by the Investors; provided that in no event shall
the amount of Registrable Securities of the selling Investors be included in
such delivery be reduced below Twenty Percent (20%) of the total amount of
securities to be included in such offering, in which case, the Investors may be
excluded if any managing underwriter advises as provided above and no other
stockholder's securities are included.
2.3 Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as possible:
(a) Prepare and file with the SEC, within ninety (90)
days of the receipt of a request pursuant to this Section 2, a registration
statement on the appropriate form under the Securities Act with respect to such
securities, which form shall comply in all material respects with the
requirements of the SEC, and use its reasonable best efforts to cause such
registration statement to become and remain effective until the completion of
the proposed offering (but for no more than One Hundred Eighty (180) days);
provided, however, that (i) such
6
<PAGE> 9
One Hundred Eighty (180) day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such One Hundred Eighty (180) day period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all of the securities covered by such registration statement;
(c) Furnish to the Holders and the underwriters, if
any, such numbers of copies of such registration statement, any amendments
thereto, any documents incorporated by reference therein, the prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the sale or other disposition of the securities owned by them;
(d) Use its reasonable best 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 and do any and all other acts and things that may be
necessary under such securities and blue sky laws to enable such selling Holders
to consummate the sale or other disposition of the securities owned by them;
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, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(e) Within a reasonable time before each filing of
the registration statement or prospectus or amendments or supplements thereto
with the SEC, furnish to counsel selected by any holders of Registrable
Securities copies of such documents proposed to be filed, which documents shall
be subject to the reasonable approval of such counsel;
(f) Promptly notify each selling Holder of
Registrable Securities, such selling Holder's counsel and any underwriter and
(if requested by any such Person) confirm such notice in writing, of the
happening of any event which makes any statement made in the registration
statement or related prospectus untrue or which requires the
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<PAGE> 10
making of any changes in such registration statement or prospectus so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading; and, as promptly as practicable thereafter, prepare and file with
the SEC and furnish a supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Registrable Securities, such
prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(g) Use its reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of a registration statement
and, if one is issued, use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of a registration statement at the
earliest possible moment;
(h) If requested by the managing underwriter or
underwriters (if any), any selling Holder, or such selling Holder's counsel,
promptly incorporate in a prospectus supplement or post-effective amendment such
information as such Person requests to be included therein with respect to the
selling Holder or the securities being sold, including, without limitation, with
respect to the securities being sold by such selling Holder to such underwriter
or underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(i) Make available to each selling Holder, any
underwriter participating in any disposition pursuant to a registration
statement, and any attorney, accountant or other agent or representative
retained by any such selling Holder or underwriter (collectively, the
"Inspectors"), upon request, all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement subject, in each case, to such confidentiality
agreements as the Company shall reasonably request;
(j) 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 or underwriters of such
offering;
(k) Cause all such Registrable Securities registered
pursuant to such registration statement to be listed on each securities exchange
or quoted on the quotation system on which the Company's Common Stock is then
listed or quoted (or if the Common Stock of the Company is not yet listed or
quoted, then on such exchange or quotation system as the selling Holders of
Registrable Securities and the Company shall mutually agree);
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(l) 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;
(m) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities;
(n) Otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC and make generally
available to its security holders, in each case as soon as practicable, but not
later than 45 days after the close of the period covered thereby, an earnings
statement of the Company which will satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any comparable successor
provisions); and
(o) Otherwise cooperate with the underwriter(s), the
SEC and other regulatory agencies and take all reasonable actions and execute
and deliver or cause to be executed and delivered all documents reasonably
necessary to effect the registration of any securities under this Agreement.
2.4 Furnish Information. 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 reasonably be required to effect the registration of
such Holder's Registrable Securities.
2.5 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.1, Section 2.2
(which right may be assigned as provided in Section 2.11) or Section 2.10,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of a single counsel for the selling
Holders shall be borne by the Company; provided, however, that the selling
Holders shall bear the fees and expenses of counsel for the selling Holders in
excess of Twenty Five Thousand Dollars ($25,000) for any single registration,
filing or qualification.
2.6 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be
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required under Section 2.2 to include any of the Holders' securities in such
underwriting unless such Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the Company (or by
other persons entitled to select the underwriters) and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holders according to the
total amount of securities entitled to be included therein owned by each selling
Holder or in such other proportions as shall mutually be agreed to by such
selling Holders) but in no event shall the amount of securities of the selling
Holders included in the offering be reduced below twenty percent (20%) of the
total amount of securities included in such offering unless such offering is
pursuant to another stockholder's demand right in which case the selling Holders
may be excluded if the underwriters make the determination described above.
2.7 Damages. The Company recognizes and agrees that each
holder of Registrable Securities will not have an adequate remedy if the Company
fails to comply with the terms and provisions of this Agreement and that damages
will not be readily ascertainable, and the Company expressly agrees that, in the
event of such failure, it shall not oppose an application by any holder of
Registrable Securities or any other Person entitled to the benefits of this
Agreement requiring specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such breach of this
Agreement.
2.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 2:
(a) The Company shall indemnify and hold harmless
each selling Holder, each underwriter (as defined in the Securities Act) and
each Person who participates in the offering of securities under such
registration statement, and each other Person, if any, who controls (within the
meaning of the Securities Act) such seller, underwriter or participating Person
(individually and collectively, the "Indemnified Person"), against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (joint or several), or
actions in respect thereof, to which such Indemnified Person may become subject
under the Securities Act or any other statute or at common law which arise out
of or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the 1934 Act or any
state securities law, and the Company shall pay to each such Indemnified Person,
as incurred, any legal or other expenses reasonably
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<PAGE> 13
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the Company shall
not be liable to any Indemnified Person 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 any untrue statement or alleged untrue statement or omission or
alleged omission in such registration statement, preliminary or final
prospectus, or amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by such Person
expressly for use therein.
(b) To the extent permitted by law, each selling
Holder of Registrable Securities included in such registration being effected
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each underwriter, any
other Holder selling securities in such registration statement and any Person
who controls (within the meaning of the Securities Act) the Company, such
underwriter or such Holder (individually or collectively, also the "Indemnified
Person"), against any losses, claims, damages, or liabilities (joint or
several), or actions in respect thereof, to which they may become subject, under
the Securities Act or any other statute or at common law, which arise out of or
are based upon any other statute or at common law, which arises out of or is
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any omission or alleged omission by such selling Holder to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading under the circumstances in which such
statements were made, in the case of (i) and (ii) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary or final
prospectus, amendment or supplement thereto in reliance upon and in conformity
with information furnished in writing to the Company by such selling holder
specifically for use therein; and such selling holder shall reimburse any
Indemnified Person for any legal fees incurred in investigating or defending any
such liability; provided, however, that such selling Holder's obligations
hereunder shall be limited to an amount equal to the proceeds (net of
underwriting discounts, commissions and expenses) to such selling Holder of the
securities sold in any such registration; and provided further, that no selling
Holder shall be required to indemnify any Person against any liability arising
from any untrue or misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final prospectus or for any
liability which arises out of the failure of any Person to deliver a prospectus
as required by the Securities Act.
(c) Promptly after receipt by an indemnified party
under this Section 2.8 of a complaint, claim or notice of the commencement of
any liability or 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 2.8, promptly notify the indemnifying party of such
complaint, claim, notice or action, and such indemnifying party shall have the
right to investigate and assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying
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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 Person claiming indemnification shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and the expenses of such counsel shall not be at the
expense of the Person against whom indemnification is sought (unless the
indemnifying party fails to promptly defend, in which case the reasonable fees
and expenses of such separate counsel shall be borne by the Person against whom
indemnification is sought). The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party for
any losses, claims, damages or liabilities emanating from such action for which
indemnification would otherwise be available under this Section 2.8, but the
omission to so 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 2.8. In no event shall a Person against whom indemnification
is sought be obligated to indemnify any Person for any settlement of any claim
or action effected without the indemnifying Person's prior written consent which
shall not be unreasonably withheld.
(d) If the indemnification provided for in this
Section 2.8 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 each 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 (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the other Selling Stockholders and the
underwriters from the offering of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, the
selling Holders of Registrable Securities and the underwriters in connection
with the statements or omissions which resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
The relative benefits received by the Company, the selling Holders of
Registrable Securities and the underwriters shall be deemed to be in the same
respective proportions that the proceeds from the offering received by the
Company and the selling Holders of Registrable Securities and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the Company,
the selling Holders of Registrable Securities and the underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the selling
Holders of Registrable Securities or the underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the selling Holders of Registrable Securities
agree that it would not be just and equitable if contribution pursuant to this
Section 2.8 were determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. In no event, however, shall
a Selling Stockholder be required to contribute any amount under this Section
2.8
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in excess of the proceeds (net of underwriting discounts, commissions and
expenses) received by such Selling Stockholder from its sale of Registrable
Securities under such registration statement. No person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
found guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Holders under
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise, and
the termination of this Agreement.
2.9 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 (together, with any
successor rule, Rule 144) promulgated under the Securities Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, provided the Company is qualified to register
securities on Form S-3 (or any successor form), the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public,
and all action as may be required as a condition to the availability of SEC Rule
144;
(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) use its reasonable best efforts to file with the
SEC in a timely manner all reports and other documents required of the Company
under the Securities Act and the 1934 Act;
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the 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 which
permits the selling of any such securities without registration or pursuant to
such form; and
(e) facilitate and expedite transfers of Registrable
Securities pursuant to SEC Rule 144, including providing timely notice to its
transfer agent to expedite such transfers.
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2.10 Form S-3 Registration. After the first public offering of
its securities registered under the Securities Act, the Company shall use its
commercially reasonable efforts to qualify and remain qualified to register
securities on Form S-3 (or any successor form) under the Securities Act. In case
the Company shall receive from any Holder or Holders a written request or
requests 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 at least thirty (30) days 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
2.10: (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 (net of any underwriters' discounts or commissions) of less than Three
Million Dollars ($3,000,000); (3) if the Company shall furnish to the Holders 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
materially 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 2.10; 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 2.10; (5) if the Company has already effected three (3)
registrations on Form S-3 for the Holders pursuant to the Section 2.10; or (6)
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. Registrations effected pursuant to this
Section 2.10 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.1 or 2.2, respectively.
2.11 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 Permitted
Transferee of such Registrable Securities, provided that: (a) the Company is,
within a reasonable time after such transfer, furnished with
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<PAGE> 17
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and (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 2.13 below.
2.12 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Investors holding 50.01% of the outstanding Registrable
Securities held by the Investors, (a) allow purchasers of the Company's
securities to become a party to this Agreement or (b) grant any other
registration rights to any third parties other than subordinate piggyback
registration rights.
2.13 "Market Stand-Off" Agreement. 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 date of the
first sale to the public pursuant to a registration statement of the Company
filed under the Securities Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except 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 which covers Common Stock to be
sold on its behalf to the public in an underwritten offering;
(b) officers and directors of the Company, all
holders of more than Five Percent (5%) of the outstanding capital stock of the
Company, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements; and
(c) such market stand-off time period shall not
exceed one hundred eighty (180) days.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
the Investors (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-4 or similar forms which may be
promulgated in the future.
2.14 "Lock-Up" Agreement. Each Investor hereby agrees that,
during the one-year period continuing to and including August 20, 2000, such
Investor will not directly or indirectly offer, sell, contract to sell, make any
short sale, pledge, grant any option to purchase or otherwise dispose of or
enter into any hedging transaction that is likely to result in a transfer of,
any Registrable Securities, except in connection with the redemption by the
Company of the shares of Series A Redeemable Preferred Stock in connection with
Qualified Public Offering;
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provided, however, that this Section 2.14 shall terminate and be of no further
force or effect upon a Change in Control.
2.15 Amendments. The provisions of this Section 2 may be
amended, and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the MSVP Investors and the J.H. Whitney
Investors.
3. COVENANTS OF THE COMPANY.
The Company agrees for the benefit of the Investors that it shall
comply with the following covenants, provided that the covenants set forth in
Section 3.2 shall not be in effect during any period in which the Company is
subject to the periodic reporting obligations set forth in Section 13(a) or
Section 15(d) of the 1934 Act and that all of the covenants set forth in this
Section 3 shall terminate as of the closing of the Company's first Qualified
Public Offering (as defined in the Company's certificate of incorporation, as
amended).
3.1 Pre-emptive Rights. So long as any shares of Series A
Redeemable Preferred Stock or Series B Convertible Preferred Stock are
outstanding, the Company hereby grants the Investors certain pre-emptive rights
with respect to future sales of equity securities by the Company. The Company
agrees that it will not sell or issue any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock
("Securities"), unless the Company shall first submit a written offering of such
Securities to the Stockholders in accordance with the following provisions:
(1) The Company shall deliver a notice by certified mail
("Notice") to the Investors stating (i) that the Company is offering such
Securities, (ii) the number of such Securities to be offered, and (iii) the
price and material terms, if any, upon which it proposes to offer such
Securities, and offering the Investors the opportunity to purchase their Pro
Rata Share of the Securities on terms and conditions, including price, not less
favorable than those on which the Company proposes to sell such Securities to a
third party or parties.
(2) Within twenty (20) days after receipt of the Notice, the
Investors may elect to purchase or obtain, at the price and on the terms and
conditions specified in the Notice, up to their Pro Rata Share of such
Securities. The Company shall promptly, in writing, inform each Investor who
purchases all the Securities available to it (each a "Fully Exercising
Investor") of any other Investor's failure to do likewise. During the ten (10)
day period commencing after the receipt of such information, each Fully
Exercising Investor shall be entitled to obtain that portion of the Securities
not subscribed for by the other Investors which is equal to the proportion that
the number of Shares issued and held by, or issuable to, such Fully Exercising
Investor bears to the total number of Shares issued and held by, or issuable to,
all Fully Exercising Investors who wish to purchase some of the unsubscribed
Securities.
(3) If all Securities referred to in the Notice which the
Investors are entitled to obtain pursuant to Section 3.1(1) are not elected to
be obtained as provided in Section 3.1(2) hereof, the Company may, during the
ninety (90) day period following the expiration of the period provided in
Section 3.1(2) hereof, offer the remaining unsubscribed portion of such
16
<PAGE> 19
Securities to any person or persons at a price not less than, and upon terms and
conditions 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 Securities
within such period, or if such agreement is not consummated within three (3)
months of the execution thereof, the right provided hereunder shall be deemed to
be revived and such Shares shall not be offered unless first re-offered to the
Investors in accordance herewith.
(4) The pre-emptive rights in this Section 3.1 shall not be
applicable (i) to the issuance or sale of not more than Ten Million One Hundred
Fifty Thousand (10,150,000) shares of Common Stock (or the grant of options
therefor) (such number to be equitably adjusted to compensate for stock splits,
stock dividends, stock combinations and similar events) under the 1998 Employee
Stock Option and Performance Incentive Plan and 1999 Stock Option and Incentive
Plan (together, the "Option Plans"), (ii) with respect to, or after consummation
of, a Qualified Public Offering as defined in the Certificate of Designations of
Series B Preferred Stock or (iii) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities outstanding on
the date hereof. In addition, provided that the Board of Directors of the
Company has approved each of the following issuances, which approval must
include the approval of the MSVP Nominee and the Whitney Nominee (each as
defined in the Stock Restriction Agreement), the pre-emptive rights in this
Section 3.1 shall not be applicable (i) to issuances or sales under the Option
Plans (as may be amended) in excess of Ten Million One Hundred Fifty Thousand
(10,150,000) shares of Common Stock, (ii) to the issuance of securities solely
as consideration for the acquisition (whether by merger or otherwise) by the
Company or any of its subsidiaries of all or substantially all of the stock or
assets of any other entity (including all or substantially all of the assets of
a line of business or division of such entity), (iii) to the issuance of
securities pursuant to any debt or lease financing transaction, or (iv) to the
issuance of securities in connection with strategic transactions involving the
Company and other entities, including, but not limited to, joint ventures,
marketing or distribution arrangements, technology transfer arrangements or
development arrangements.
(5) The pre-emptive rights set forth in this Section 3.1 may
not be assigned or transferred except by the Investors to a Permitted
Transferee.
3.2 Delivery of Financial Statements. The Company will
maintain a comparative system of accounts in accordance with generally accepted
accounting principles, keep full and complete financial records and furnish to
each Investor the following reports:
(a) as soon as available and within ninety (90) days
after the end of each fiscal year commencing with the year ending December 31,
1999, a copy of the balance sheet of the Company as of the end of such year,
together with statements of income and retained earnings and cash flow of the
Company for such year, audited and reported on by independent public accountants
of recognized national standing reasonably satisfactory to the Board of
Directors, prepared in accordance with generally accepted accounting principles
and practices consistently applied;
(b) as soon as available and in any event within
forty-five (45) days after the end of each quarter of each fiscal year
commencing with the quarter ending
17
<PAGE> 20
September 30, 1999, a copy of the balance sheet of the Company as of the end of
such quarter, together with statements of income and retained earnings and cash
flow of the Company for the period commencing at the end of the previous fiscal
quarter and ending with the end of such fiscal quarter, all in reasonable detail
and certified (subject to year-end audit adjustments) by the chief financial
officer of the Company as having been prepared in a manner consistent with
generally accepted accounting principles and practices consistently applied; and
(c) as soon as available and in any event within
thirty (30) days after the end of each month commencing with the month ending
June 30, 1999, an unaudited balance sheet of the Company as of the end of such
month and unaudited statements of income and retained earnings and cash flow for
the Company for such month, each of the foregoing balance sheets and statements
of income and retained earnings (except those delivered pursuant to Section
3.2(c)) shall set forth in comparative form the corresponding figures for the
corresponding fiscal period in the prior fiscal year; and
(d) such other information relating to the financial
condition, business, prospects or results of operations as Investors holding 25%
or more of the Registrable Securities may reasonably request, including, without
limitation, certificates of the principal financial officer of the Company
concerning compliance with the covenants of the Company under this Section 3.2.
3.3 Budget and Operating Forecast: Inspection.
(a) The Company will prepare and submit to the Board
of Directors of the Company a budget for the Company for each fiscal year of the
Company at least thirty (30) days prior to the beginning of such fiscal year.
The budget shall be accepted as the budget for such fiscal year when it has been
approved by a majority of the Board of Directors of the Company and, thereupon,
a copy of such budget promptly shall be sent to each Investor. The Company shall
review the budget periodically and shall advise the Board of Directors of all
material changes therein and all material deviations therefrom.
(b) The Company will, upon reasonable prior notice to
the Company, permit authorized representatives (including, without limitation,
accountants and legal counsel) of any Investor, at the Investor's expense, to
visit and inspect any of the properties of the Company, including its books of
account (and to make copies thereof and take extracts therefrom), and to discuss
its affairs, finances and accounts with its officers, administrative employees
and independent accountants, all at such reasonable times during normal business
hours and as often as may be reasonably requested by any Investor; provided,
that in the event any person exercising such inspection rights shall be someone
other than an Investors' Nominee (as defined below) or a director designated by
the Investors, the Company may, as a condition to the exercise of such
visitation or inspection rights, require such person to execute a standard form
non-disclosure agreement in form and substance satisfactory to the Company.
3.4 Board of Directors; Meetings; Indemnification. The Company
will ensure that meetings of its Board of Directors are held at least four (4)
times each year at intervals of not more than four (4) months. The Company shall
reimburse each Investors' Nominee for reasonable travel expenses incurred in
connection with attending meetings or other
18
<PAGE> 21
functions of the Board of Directors and for the Investors' Nominees' reasonable
out-of-pocket costs associated with any other work performed at the request of,
and on behalf of, the Company. The Charter and By-laws of the Company will in
respect of all times during which any Investors' Nominee serves as a director of
the Company provide for exculpation and indemnification of the directors and
limitations on the liability of the directors to the fullest extent permitted
under applicable state law, and within ninety (90) days of the date hereof the
Company shall obtain and maintain thereafter directors and officers' liability
insurance coverage in such form and amount and from such insurance carrier as
shall be reasonably satisfactory to the Investors and their special counsel
covering, among other things, violations of federal or state securities laws by
the Company and shall use its reasonable best efforts to obtain, prior to an
Initial Public Offering, additional directors and officers' liability insurance
coverage to include claims under the Securities Act and the 1934 Act.
3.5 Board Observation Rights. The Company agrees that, as long
as Canaan Equity L.P. ("Canaan") owns at least 50% of the Common Stock
(including the Common Stock issued or issuable upon conversion of the Series B
Convertible Preferred Stock) purchased by Canaan pursuant to the terms of the
Purchase Agreement, Canaan or its designee shall be permitted to have one
representative attend each meeting of the Board of Directors of the Company and
each meeting, which is material to the interests of the Series A Preferred Stock
and the Series B Preferred Stock, of any Committee thereof (a "Relevant
Committee") and to participate in all discussions during each such meeting. The
Company shall send to Canaan and its designee the notice of the time and place
of such meeting in the same manner and at the same time as it shall send such
notice to its directors or committee members as the case may be. The Company
shall also provide to Canaan and its designee copies of all notices, reports,
minutes and consents at the time and in the manner as they are provided to the
Board of Directors or the Relevant Committee, except for information reasonably
designated as proprietary information by the Board of Directors. Any notices,
reports, minutes and consents provided to Canaan shall also be provided to the
Investor Nominees (as defined below) at the same time and in the same manner.
3.6 Composition of Board Committees. The Company agrees to
cause the Board of Directors to establish or maintain a Compensation Committee
(which shall be charged with exclusive authority over all compensation matters
with respect to the senior management of the Company and shall serve as the
administering committee under the Option Plans and any future stock option
plans) and an Audit Committee (which shall be charged with reviewing the
Company's financial statements and accounting practices). The Compensation
Committee shall be comprised of independent directors, one of whom shall be
nominated by the MSVP Investors and one of whom shall be nominated by the J.H.
Whitney Investors (collectively, the "Investor Nominees"). The MSVP Investors'
and the J.H. Whitney Investors' respective right to nominate a member of the
Compensation Committee shall terminate upon the earlier of (i) the date on which
the Investors do not hold at least fifty percent (50%) of the shares of Common
Stock issued to the Investors under the Purchase Agreement (including those
shares of Common Stock issued or issuable upon conversion of the Series B
Convertible Preferred Stock) or (ii) consummation of a merger, acquisition or
sale of all or substantially all of the assets of the Corporation which has been
approved by the Board of Directors unless the Corporation's stockholders of
record as constituted immediately prior to such merger, acquisition or sale
will, immediately after such merger, acquisition or sale (by virtue of
securities issued as
19
<PAGE> 22
consideration for the Corporation's merger, acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity.
3.7 Positive Covenants. So long as any shares of Series A
Redeemable Preferred Stock or Series B Convertible Preferred Stock are
outstanding, the Company agrees as follows:
(a) The Company will promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all lawful Taxes,
assessments, and governmental charges or levies imposed upon the income,
profits, property, or business of the Company or any subsidiary; provided,
however, that any such Taxes, assessments, charges, or levies need not be paid
if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereof, and provided further, that the Company
will pay all such taxes, assessments, charges, or levies forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor. The Company will promptly pay or cause to be paid when due,
or in conformance with customary trade terms, all other indebtedness incident to
the operations of the Company;
(b) The Company will continue to engage principally
in the business now conducted by the Company or a business or businesses
substantially similar thereto. The Company will keep in full force and effect
its corporate existence and all Intellectual Property Rights useful in its
business (except such rights as the Board of Directors has reasonably determined
are not material to the continuing operations of the Company);
(c) The Company will keep its properties and those of
its subsidiaries in good repair, working order, and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions, and improvements thereto; and the Company and
its subsidiaries will at all times comply in all material respects with the
provisions of all material leases to which any of them is a party or under which
any of them occupies property so as to prevent any loss or forfeiture thereof or
thereunder;
(d) The Company will comply in all material respects
with all applicable laws and regulations in the conduct of its business,
including, without limitation, all applicable material federal and state
securities laws in connection with the issuance of any shares of its capital
stock;
(e) The Company will keep its assets and those of its
subsidiaries that are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, extended coverage, and
explosion insurance in amounts customary for companies in similar businesses
similarly situated; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards, risks, and liabilities to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated;
20
<PAGE> 23
(f) The Company will keep true records and books of
account in which full, true, and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis;
(g) The Company will promptly advise the Board of
Directors of any event which represents or is reasonably likely to result in a
Material Adverse Effect, and of each suit or proceeding commenced or threatened
against the Company which, if adversely determined, is reasonably likely to have
a Material Adverse Effect. The Company will promptly advise the Board of
Directors of any adverse developments relating to the Company's products or
services, and any suit or proceeding commenced or threatened which is related to
the Company's products or services which, if adversely determined, in the
reasonable judgment of the Company, is reasonably likely to have a Material
Adverse Effect;
(h) The compensation and other benefit arrangements
of any senior management of the Company shall be adjusted from time to time only
by the Compensation Committee;
(i) All transactions by and between the Company and
any officer or key employee of the Company or persons controlling, controlled
by, under common control with or otherwise affiliated with or members of the
families of such officer or key employee (including compensation matters covered
by Section 3.7(h) hereof), shall be conducted on an arm's-length basis, shall be
on terms and conditions no less favorable to the Company than could be obtained
from unrelated persons and shall be approved in advance by a majority of the
Board of Directors, including the Investors' Nominees, after full disclosure of
the terms thereof;
(j) The Company shall maintain in full force and
effect its corporate existence, rights, and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade names, or
copyrights owned or possessed by it or any subsidiary and deemed by the Company
to be necessary to the conduct of its business; and
The Company will retain independent public accountants of
recognized national standing who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
Company's independent public accountants, or any firm of independent public
accountants hereafter employed by the Company are terminated, the Company will
promptly thereafter notify the Investors and will request the firm of
independent public accountants whose services are terminated to deliver to the
Investors a letter from such firm setting forth the reasons for the termination
of their services. In the event of such termination, the Company will promptly
thereafter engage another firm of independent public accountants of recognized
national standing. In its notice to the Investors the Company shall state
whether the change of accountants was recommended or approved by the Board of
Directors of the Company or any committee thereof.
21
<PAGE> 24
4. COVENANT OF THE INVESTORS. The Investors agree that, prior to the
earlier of (i) the consummation of a Qualified Public Offering or (ii) August
20, 2003, they or their Permitted Transferees will not transfer any of their
shares to a Direct Competitor (as defined below) of the Company. For purposes of
this Section 4, the term Direct Competitor shall mean a person engaged in
information technology consulting or services in the same geographic areas as
the Company and which provides services that are competitive with those of the
Company. Nothing in this Section 4 shall prohibit transfers by any Investor to a
Permitted Transferee.
5. MISCELLANEOUS.
5.1 Survival of Covenants. Each of the parties hereto agrees
that each covenant and agreement made by it in this Agreement or in any
certificate, instrument or other document delivered pursuant to this Agreement
is material, shall be deemed to have been relied upon by the other parties and,
except as provided herein, shall remain operative and in full force and effect
after the date hereof regardless of any investigation. This Agreement shall not
be construed so as to confer any right or benefit upon any Person other than the
parties hereto and their respective successors and permitted assigns to the
extent contemplated herein.
5.2 Legend on Securities. The Company and the Investors
acknowledge and agree that the following legend shall be typed on each
certificate evidencing any of the securities issued hereunder held at any time
by any of the Investors or their Permitted Transferees:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT, OR (ii) AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED,
OR (iii) THE WRITTEN ACKNOWLEDGEMENT OF THE ISSUER, WHICH ACKNOWLEDGEMENT WILL
NOT BE UNREASONABLY WITHHELD, THAT A SALE IS PURSUANT TO A VALID EXEMPTION FROM
THE REGISTRATION REQUIREMENTS UNDER SUCH ACT.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
INVESTORS' RIGHTS AGREEMENT DATED ON OR ABOUT AUGUST 20, 1999 AND A STOCK
RESTRICTION AGREEMENT DATED ON OR ABOUT AUGUST 20, 1999, INCLUDING THEREIN
CERTAIN RESTRICTIONS ON TRANSFER. COMPLETE AND CORRECT COPIES OF THESE
AGREEMENTS ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY
AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
5.3 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 Permitted 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,
22
<PAGE> 25
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
5.4 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, exclusive of the provisions
thereof governing conflicts of laws.
5.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.6 Titles and Subtitles; Gender. 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. The use in this
Agreement of the masculine pronoun in reference to a party hereto shall be
deemed to include the feminine member, and vice versa as the context may
require.
5.7 Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery to the party to be
notified, upon the date of transmittal of services via telecopy to the party to
whom notice is being given, or on the fifth day after deposit in the United
States Post Office, by registered or certified mail, with postage and fees
prepaid, return receipt requested, and addressed to the other party to:
(a) if to the Company, c/o BDS Business Center, Inc.,
628 Hebron Avenue, Building Two, Suite 502, Glastonbury, Connecticut 06033,
attention to President, with a copy to Testa, Hurwitz & Thibeault, LLP, 125 High
Street, Boston, Massachusetts 02110-2704, attention to Linda DeRenzo, Esq., or
such other address designated by the Company to the Investors and the other
parties hereto in writing;
(b) if to the Investors, to each Investor at the
mailing address as shown on the signature pages hereto, with a copy to Brobeck,
Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York, New York 10019,
attention to Alexander D. Lynch, Esq., or at such other address designated by an
Investor to the Company and the other Investors in writing.
5.8 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.
5.9 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
sixty-six and two-thirds percent (66.67%) of the Series A Redeemable Preferred
Stock and the Common Stock issued or issuable upon conversion of the Series B
Convertible Preferred Stock, voting together as a single class. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any
23
<PAGE> 26
securities purchased under the Purchase Agreement then outstanding, each future
holder of all such securities, and the Company.
5.10 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 were so excluded and shall be enforceable in
accordance with its terms.
5.11 Aggregation of Stock. All shares of Preferred Stock held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
5.12 Entire Agreement; Amendment; Waiver. This Agreement and
the documents referred to herein constitute the entire agreement among the
parties with regard to the subjects hereof and thereof.
[Remainder of Page Intentionally Left Blank]
24
<PAGE> 27
IN WITNESS WHEREOF, the parties have caused this Investors'
Rights Agreement to be duly executed and delivered as of the date first above
written.
THE COMPANY:
BDS BUSINESS CENTER, INC.
By: /s/ John M. Hughes
Name: John M. Hughes
Title: Chief Executive Officer
Address: 628 Hebron Avenue
Building Two, Suite 502
Glastonbury, CT 06033
THE INVESTORS:
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: Morgan Stanley Venture Partners III,
L.L.C., its General Partner
By: Morgan Stanley Venture Capital III,
Inc., its Institutional Managing
Member
By: /s/ Noah Walley
Name: Noah Walley
Title: Vice President
Address: 1221 Avenue of the Americas
New York, NY 10020
Fax: (212) 762-8424
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: Morgan Stanley Venture Partners III,
L.L.C., its General Partner
<PAGE> 28
By: Morgan Stanley Venture Capital III,
Inc., its Institutional Managing
Member
By: /s/ Noah Walley
Name: Noah Walley
Title: Vice President
Address: 1221 Avenue of the Americas
New York, NY 10020
Fax: (212) 762-8424
THE MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: Morgan Stanley Venture Partners III,
L.L.C., its General Partner
By: Morgan Stanley Venture Capital III,
Inc., its Institutional Managing
Member
By: /s/ Noah Walley
Name: Noah Walley
Title: Vice President
Address: 1221 Avenue of the Americas
New York, NY 10020
Fax: (212) 762-8424
J.H. WHITNEY III, L.P.
By: J.H. Whitney Equity Partners III, LLC,
its General Partner
By: /s/ Peter Huff
Name: Peter Huff
Title:
Address:
2
<PAGE> 29
WHITNEY STRATEGIC PARTNERS III, L.P.
By: J.H. Whitney Equity Partners III, LLC
its General Partner
By: /s/ Peter Huff
Name: Peter Huff
Title:
Address:
CANAAN EQUITY L.P.
By: Canaan Equity Partners L.L.C
By: /s/ Gregory Kopchinsky
Name: Gregory Kopchinsky
Title: Member/Manager
Address: 105 Rowayton Avenue
Rowayton, CT 06853
JAMES C. FURNIVALL
/s/ James C. Furnivall
Address: c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
EARL MIX
/s/ Earl Mix
Address: c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
3
<PAGE> 30
ERIC A. YOUNG
/s/ Eric A. Young
Address: c/o Canaan Partners
2884 Sand Hill Road, Suite 115
Menlo Park, CA 94025
THE RYAN ANDERSON YOUNG
IRREVOCABLE TRUST DTD 7/28/95
By: /s/ Eric A. Young
Name: Eric A. Young
Title: Trustee
By: /s/ Jean Amrhein Young
Name: Jean Amrhein Young
Title: Trustee
Address: c/o Canaan Partners
2884 Sand Hill Road, Suite 115
Menlo Park, CA 94025
THE CONNOR ERICKSON YOUNG
IRREVOCABLE TRUST DTD 7/28/95
By: /s/ Eric A. Young
Name: Eric A. Young
Title: Trustee
By: /s/ Jean Amrhein Young
Name: Jean Amrhein Young
Title: Trustee
Address: c/o Canaan Partners
2884 Sand Hill Road, Suite 115
Menlo Park, CA 94025
4
<PAGE> 31
GREGORY KOPCHINSKY
/s/ Gregory Kopchinsky
Address: c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
REGENCY ONE, LLC
By:
By: /s/ Morton Handel
Name: Morton Handel
Title: Member
JB VENTURES, LLC
By:
By: /s/ Ronald Jarvis
Name: Ronald Jarvis
Title: Member
R. NELSON GRIEBEL
/s/ R. Nelson Griebel
MICHAEL R. LEZENSKI
/s/ Michael R. Lezenski
5
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated January 25, 2000 relating to the financial statements of Tallan,
Inc., 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
Hartford, Connecticut
January 31, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001102341
<NAME> TALLAN
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,788,891
<SECURITIES> 302,681
<RECEIVABLES> 10,902,380
<ALLOWANCES> 300,000
<INVENTORY> 0
<CURRENT-ASSETS> 21,157,859
<PP&E> 3,584,089
<DEPRECIATION> 1,251,604
<TOTAL-ASSETS> 24,151,360
<CURRENT-LIABILITIES> 4,267,251
<BONDS> 0
16,663,030
0
<COMMON> 384,811
<OTHER-SE> 2,500,529
<TOTAL-LIABILITY-AND-EQUITY> 7,488,330
<SALES> 0
<TOTAL-REVENUES> 53,940,686
<CGS> 0
<TOTAL-COSTS> 30,573,791
<OTHER-EXPENSES> 11,140,240
<LOSS-PROVISION> 200,000
<INTEREST-EXPENSE> 135,920
<INCOME-PRETAX> 12,195,421
<INCOME-TAX> 5,122,981
<INCOME-CONTINUING> 7,072,440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,249,633
<EPS-BASIC> $0.07
<EPS-DILUTED> $0.05
</TABLE>
