<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CHEMATCH.COM, INC.
(Exact name of registration as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 7375 76-0622635
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
2900 NORTH LOOP WEST, SUITE 1120
HOUSTON, TEXAS 77092
(713) 681-6600
ATTENTION: GENERAL COUNSEL
(Address, including zip code, and telephone number, including
area code, of the Registrant's principal executive offices)
---------------------
Copies to:
<TABLE>
<S> <C>
JOHN S. WATSON ROBERT F. GRAY, JR.
KEVIN P. LEWIS MICHAEL D. HANSEN
D. ALAN BECK SETH D. WEXLER
Vinson & Elkins L.L.P. Fulbright & Jaworski L.L.P.
1001 Fannin, Suite 2300 1301 McKinney, Suite 5100
Houston, Texas 77002 Houston, Texas 77010
(713) 758-2222 (713) 651-5151
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, 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 this prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED (1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per share............... $50,400,000 $13,306
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o).
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH
WE ARE PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES
USING THIS PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY
THEM UNTIL THE DOCUMENTATION FILED WITH THE SEC RELATING TO THESE
SECURITIES HAS BEEN DECLARED EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THAT WOULD NOT BE
PERMITTED OR LEGAL.
SUBJECT TO COMPLETION -- MARCH 1, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 2000
[CHEMATCH.COM LOGO]
SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
CHEMATCH.COM, INC.:
- - We are a leading business-to-business Internet-based marketplace for
purchasers and sellers of commodity chemicals, plastics and fuel products.
PROPOSED SYMBOL & MARKET:
- - CHEM/Nasdaq National Market
THE OFFERING:
- - We are offering shares of our common stock.
- - The underwriters have an option to purchase an additional shares of
common stock to cover over-allotments.
- - This is our initial public offering, and no public market currently exists for
our shares.
- - We anticipate that the initial public offering price will be between $
and $ per share.
- - Closing: , 2000.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Per Share Total
- --------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to CheMatch.com, Inc.:
- -------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
DEUTSCHE BANC ALEX. BROWN
SALOMON SMITH BARNEY
SG COWEN
DLJDIRECT INC.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 6
Special Note Regarding Forward
Looking Statements............... 17
Use of Proceeds.................... 17
Dividend Policy.................... 18
Capitalization..................... 19
Dilution........................... 20
Unaudited Pro Forma Statements of
Operations....................... 21
Selected Financial Data............ 22
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Business........................... 30
Management......................... 45
Related Party Transactions......... 59
Principal Stockholders............. 62
Description of Capital Stock....... 64
Shares Eligible for Future Sale.... 67
Underwriting....................... 69
Legal Matters...................... 72
Experts............................ 72
Change in Independent
Accountants...................... 72
Where You Can Find More
Information...................... 72
Index to Financial Statements...... F-1
</TABLE>
<PAGE> 4
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all the information that is important to you. To learn more
about the offering and our business, you should read the entire prospectus
including our financial statements and related notes appearing elsewhere in this
prospectus.
CHEMATCH.COM, INC.
OUR BUSINESS
CheMatch.com is a leading business-to-business Internet-based marketplace
for purchasers and sellers of commodity chemicals, plastics and fuel products.
Our marketplace is centered around a real-time, interactive trading exchange,
where our members bid, offer and negotiate online for the purchase and sale of
products 24 hours a day, seven days a week. Members of our secure, neutral
exchange trade products anonymously, utilizing real-time pricing and other
market information provided through our exchange. Members are pre-qualified by
us and pre-selected by each other before trading on our exchange. Our members
include more than 125 of the world's leading chemical companies and other
leading purchasers and sellers of commodity chemicals, plastics and fuel
products, including traders, distributors, brokers, manufacturers and other end
users.
Our trading exchange, located at www.chematch.com, was the first and is one
of the largest online exchanges serving the chemical industry. Over $125 million
in transactions have been traded on our exchange since February 1998, and over
$29 million in transactions were traded on our exchange in the quarter ended
December 31, 1999. In the fourth quarter of 1999, we averaged more than 35,000
metric tons of daily product bids and offers and the average transaction value
of completed trades exceeded $500,000. We generate revenues on our trading
exchange from commissions typically paid by each party to a completed
transaction.
Our strategic investors include Bayer AG, Computer Sciences Corporation,
E.I. duPont de Nemours and Company, General Electric Company, Millennium
Holdings Inc., Muehlstein Holding Corporation, Stolt-Nielsen Transportation
Group Ltd., TownsendTarnell, Inc. and William Heinemann Inc., a subsidiary of
Reed Elsevier plc. We have entered into strategic alliances with Bayer, CSC,
duPont, General Electric and Muehlstein to build our membership, to increase the
trading volume on our exchange and to generally enhance our trading exchange. In
addition, we have strategic relationships with Stolt-Nielsen to facilitate
logistics, with DeWitt & Company, Incorporated and Reed Elsevier to provide
information services, and with eCredit.com and TownsendTarnell to provide credit
and other services.
We maintain an extensive information resource center, located at
www.petrochem.net, that provides over 5,000 users access to industry news,
forums, reference materials and more than 100 offerings from a number of highly
respected chemical industry sources. We generate revenues through our
information resource center from subscription and other user fees. Users may
subscribe to market updates featuring chemical industry news, pricing
information and related statistics, over 40 product-specific consulting reports
containing summaries of marketing and pricing trends, and over 20 newsletters
that detail market trends in the chemical industry. In addition, the CheMatch
trading screen integrates relevant news, trends, commentaries and analyses from
our information resource center.
OUR MARKET OPPORTUNITY
The Internet has emerged as a global communications medium enabling
businesses worldwide to communicate, share information and transact business
electronically. Businesses are increasingly using the Internet to streamline
complex processes, lower costs and improve efficiency by reducing traditional
business communication barriers of time, geography and number of participants.
Forrester Research predicts that business-to-business electronic commerce, or
e-commerce, in the United States will grow from $109 billion in 1999 to over
$1.3 trillion in 2003.
1
<PAGE> 5
The global chemical industry, which is comprised of three principal
segments -- commodities, specialties and life sciences -- is a $1.6 trillion
annual market. The commodity chemicals -- including basic industrial chemicals,
petrochemicals and agrichemicals -- and plastics market is the largest segment
of the global chemical industry, representing in excess of $700 billion of
products purchased and sold worldwide each year. Fuel products, an additional
market segment served by our exchange, represents over $100 billion of products
purchased and sold worldwide annually. The petrochemical industry is projected
by Forrester Research to be the third largest segment of the Internet economy in
the United States by 2003, growing from $23 billion in 2000 to $178 billion in
2003.
The traditional marketplace for commodity chemicals, plastics and fuel
products is characterized by a high degree of fragmentation, a lack of real-time
market information, geographic insularity and relatively illiquid markets. The
process of initiating, negotiating and completing a transaction is time
consuming and subjects the parties to market risk related to price fluctuations.
Communications between industry parties occur primarily by telephone and
facsimile and require significant paper documentation. These market limitations
create the need for a more efficient, information-based, business-to-business
online solution.
THE CHEMATCH SOLUTION
Our Internet-based marketplace has the following key features:
- Real-Time, Interactive Exchange. Our members bid, offer and negotiate
online for the purchase and sale of commodity chemicals, plastics and
fuel products in real-time 24 hours a day, seven days a week based on
current market information.
- Market Intelligence. We provide our members with real-time pricing and
other relevant market information, including news, trends, commentaries
and analyses, which enables them to trade on a more fully-informed basis.
- Global Reach. Our trading exchange is designed to facilitate a global
marketplace that transcends time zones and established personal networks,
providing our members with expanded market reach.
- Qualified Traders and Products. We screen our members before they are
cleared to join and participate on our trading exchange, and all products
traded on our exchange are required to meet defined specifications.
- Pre-Selection of Trading Partners. Prior to their participation on our
exchange, our members pre-select the other members from whom they will
purchase and to whom they will sell products and set the credit terms for
those selected members.
- Anonymity. After pre-selecting the parties with whom they will trade, our
members bid, offer and negotiate online on an anonymous basis with
respect to other exchange members. Only upon matching of a trade is the
identity of each party revealed and then only to the other party to the
transaction.
- Increased Liquidity and Velocity. We expect the efficiencies associated
with our marketplace to improve liquidity and increase trading volume
within our target market, enabling our members to better manage their
capacity utilization and inventory.
- Reduced Cost Structure. Our trading exchange allows our members to reduce
the expense and streamline the processes of procurement, sales and
marketing, administration and logistics.
- Reliability and Confirmation. Our members' ability to pre-select the
parties with whom they will trade and our system's online documentation
and confirmation procedures bring greater certainty to the trading
process.
2
<PAGE> 6
THE CHEMATCH STRATEGY
Our objective is to expand upon our position as a leading Internet-based
solution for purchasers and sellers of commodity chemicals, plastics and fuel
products. We intend to achieve this objective by implementing the following
strategies:
- increase the adoption of our trading exchange through our focused sales
and marketing efforts to promote liquidity within the market for
commodity chemicals, plastics and fuel products;
- expand the number of products eligible for trading on our exchange and
about which we offer market information;
- enhance functionality by integrating various personalized services,
offering back office integration capabilities, providing improved
interactive content and introducing online auction and tender features;
- implement recent strategic relationships to facilitate logistics and
offer credit services, and enter into additional strategic relationships
to provide financial risk management products;
- leverage our management's chemical industry expertise to increase the
adoption of our marketplace;
- maintain the integrity of our marketplace through our third-party neutral
approach;
- expand our international operations; and
- maintain our technological leadership.
CHEMATCH.COM
CheMatch.com, Inc. was incorporated in Delaware on June 21, 1999 as
PetroChemNet Holdings, Inc. We acquired PetroChemNet, Inc. and CheMatch, Inc.
through a series of corporate transactions shortly after we were incorporated.
On November 29, 1999, we changed our name to CheMatch.com, Inc. We refer to the
consolidated company in this prospectus as CheMatch.
Our principal executive offices are located at 2900 North Loop West, Suite
1120, Houston, Texas 77092 and our telephone number is (713) 681-6600. We also
maintain domestic offices in San Ramon, California and Stamford, Connecticut and
international offices in Manchester, England, Singapore and Tokyo, Japan. Our
web sites are located at www.chematch.com and www.petrochem.net. The information
contained on our web sites is not incorporated by reference into this
prospectus.
3
<PAGE> 7
THE OFFERING
Common stock offered.................... shares
Common stock to be outstanding after
this offering........................... shares
Use of proceeds......................... For working capital, general
corporate purposes and payments to
management and current and former
employees. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol.................................. CHEM
Unless otherwise indicated, the information in this prospectus:
- is based upon 5,234,482 shares of common stock outstanding as of February
16, 2000;
- assumes the net exercise of all convertible preferred stock warrants
immediately prior to the consummation of this offering;
- assumes the conversion of all outstanding shares of convertible preferred
stock into shares of common stock immediately prior to the consummation
of this offering;
- assumes the net exercise of 482,571 common stock warrants that would
otherwise expire upon the consummation of this offering into 428,845
shares of common stock;
- does not assume the issuance of 397,440 shares of common stock upon
exercise of outstanding warrants at a weighted average exercise price of
$3.33 per share that will remain outstanding upon consummation of this
offering;
- does not assume the issuance of 4,482,556 shares of common stock upon
exercise of outstanding options under our stock option plans at a
weighted average exercise price of $7.09;
- does not assume the issuance of 490,698 options available for grant under
our stock option plans; and
- does not assume the exercise of the underwriters' over-allotment option
to purchase additional shares.
4
<PAGE> 8
SUMMARY FINANCIAL DATA
The following table presents summary unaudited consolidated financial data
for our business. The pro forma statement of operations data for the year ended
December 31, 1999 combine the historical statements of operations of CheMatch,
PetroChemNet, Inc. and CheMatch, Inc. as if the acquisition of PetroChemNet,
Inc. and CheMatch, Inc., which occurred on June 21, 1999, had been completed on
January 1, 1999. You should read the following summary unaudited consolidated
financial data together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
DECEMBER 31, 1999
(UNAUDITED)
(IN THOUSANDS,
EXCEPT SHARE AND
PER SHARE DATA)
<S> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 373
Operating loss.............................................. (9,740)
Net loss.................................................... (9,518)
Net loss available to common stockholders................... $ (39,023)
==========
Net loss per share, basic and diluted....................... $ (12.89)
Pro forma net loss per share adjusted for the assumed net
exercise of all convertible preferred stock warrants, the
conversion of all convertible preferred stock and the net
exercise of 482,571 common stock warrants into 428,845
shares of common stock, basic and diluted................. (1.17)
Shares used to compute net loss per share, basic and
diluted................................................... 3,026,581
Shares used to compute pro forma net loss per share adjusted
for the assumed net exercise of all convertible preferred
stock warrants, the conversion of all convertible
preferred stock and the net exercise of 482,571 common
stock warrants into 428,845 shares of common stock, basic
and diluted............................................... 8,123,497
</TABLE>
The following table presents summary consolidated balance sheet data as of
December 31, 1999. The unaudited pro forma balance sheet assumes the net
exercise of all outstanding warrants for the purchase of convertible preferred
stock and the conversion of all convertible preferred stock into shares of
common stock and includes the effect of the net exercise of 428,571 common stock
warrants into 482,845 shares of common stock. The pro forma as adjusted
information reflects the sale of shares at a price of $ and our
proposed use of the estimated net proceeds. The unaudited pro forma balance
sheet does not include the effect of the issuance of 929,523 shares of common
stock to certain strategic investors during February 2000.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $30,170 $30,170 $
Working capital........................................... 28,148 28,148
Total assets.............................................. 40,768 40,768
Total convertible preferred stock......................... 66,951 --
Total stockholders' equity (deficit)...................... (29,323) 37,628
</TABLE>
5
<PAGE> 9
RISK FACTORS
Before you invest in our common stock, you should understand the high
degree of risk involved. You should consider carefully the following risks and
other information in this prospectus, including our combined financial
statements and related notes, before you decide to purchase shares of our common
stock. The following risks and uncertainties are not the only ones we face. If
any of the following risks actually occur, our business, financial condition and
operating results could be adversely affected. As a result, the trading price of
our common stock could decline and you may lose part or all of your investment.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES AN EVALUATION OF OUR BUSINESS AND OUR
PROSPECTS DIFFICULT.
Our predecessor company has operated since January 1997. We were
incorporated in connection with a series of corporate transactions in June 1999
and have a limited operating history. Prior to investing in our common stock,
you should consider the risks and difficulties that we face as an early stage
company with an unproven business model in a new and rapidly evolving e-commerce
market. Some of these specific risks and difficulties include:
- we depend substantially on an Internet-based trading exchange that has
been present in the market for a limited time and may not be successful;
- we depend substantially on commissions generated from purchases and sales
of commodity chemicals, plastics and fuel products on our trading
exchange and we may be unable to significantly increase revenues from
these commissions or generate revenues from other sources;
- we may be unable to significantly increase and maintain industry adoption
and use of our Internet-based solution for purchasing and selling
commodity chemicals, plastics and fuel products;
- we may be unable to develop and enhance the CheMatch.com brand;
- we may be unable to maintain existing or establish new relationships with
purchasers and sellers of commodity chemicals, plastics and fuel
products;
- we may be unable to adapt to rapidly changing technologies and developing
markets;
- we may be unable to effectively manage our rapidly expanding operations
and the increasing use of our trading exchange and related services; and
- we may be unable to attract, retain and motivate qualified personnel,
particularly people who understand our trading exchange and the
industries and products represented on it.
We have generated only immaterial revenues to date. Due to our limited
operating history, we believe that period-to-period comparisons of our revenues
and results of operations are not meaningful. As a result, you should not rely
on our revenues or results of operations for any prior period as an indication
of our future performance or prospects. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.
We have had substantial losses since our inception. We currently expect our
losses to increase in the future, and we cannot assure you that we will ever
achieve or sustain profitability. From June 21, 1999 through December 31, 1999,
we incurred a net loss of $8.3 million. The extent of future losses will depend,
in part, on the amount of growth in our revenue, which will depend primarily
upon commissions generated from the increased adoption of our trading exchange
by companies in the chemical industry. The extent of these losses will also
depend, in part, on the amount of growth in our operating expenses, which we
plan to increase. If our revenues grow more slowly than we anticipate, or our
operating expenses
6
<PAGE> 10
increase without a corresponding increase in our revenues, or we fail to keep
operating expense levels down, the imbalance between revenues and operating
expenses will negatively affect our business, revenues, results of operations
and financial condition.
OUR BUSINESS MODEL IS UNPROVEN AND MAY NOT BE SUCCESSFUL.
Our business-to-business Internet-based model is based on the establishment
of our trading exchange as a viable alternative to the traditional methods of
transacting business for purchasers and sellers of commodity chemicals, plastics
and fuel products. This business model is new and not proven. We cannot be
certain that our business model will be successful or that we can achieve or
sustain revenue growth or generate any profits. We must develop and market our
trading exchange and achieve broad market acceptance by the chemical industry
for our business model to succeed. We cannot be certain that a market for
business-to-business commerce on the Internet generally, or our marketplace in
particular, will emerge, grow or be sustainable. For example, industry
participants may not adopt an Internet-based solution because of their comfort
with traditional purchasing and selling habits and long-term relationships, the
costs and resources required to switch trading methods, the need for products
not offered on our trading exchange, security and privacy concerns, or general
reticence about technology or the Internet.
WE MAY NOT BE ABLE TO ATTRACT A CRITICAL MASS OF PURCHASERS AND SELLERS.
Acceptance of our business model depends primarily on our ability to
attract a critical mass of purchasers and sellers of commodity chemicals,
plastics and fuel products to our trading exchange. Our current and prospective
members must perceive value in our marketplace which, in large part, depends
upon the breadth of the products available for trading on our exchange and the
services we provide. A key component of our strategy is creating a network
effect, where the value to purchasers and sellers increases as the number of
members to our marketplace increases. If we are unable to increase the number of
purchasers and sellers in our marketplace by drawing new members, we will not be
able to benefit from this network effect. As a result, the overall value of our
Internet-based solution would be harmed, which would negatively affect our
business, revenues, results of operations and financial condition.
OUR SALES CYCLE IS LONG AND UNCERTAIN AND MAY NOT RESULT IN REVENUES.
A significant amount of time may elapse from the time we make initial
contact with a company we have targeted as a potential member of our marketplace
and the time that company executes a membership agreement enabling it to trade
on our exchange. Further, the membership agreement does not obligate our members
to trade on our exchange and its execution may not result in future revenues.
Because we offer a new method of trading commodity chemicals, plastics and fuel
products, we must educate our current and potential members on the use and
benefits of our marketplace. We need to spend a significant amount of time with
multiple decision makers in a prospective member's organization to sell our
marketplace. If we are unable to attract new members willing to adopt our
marketplace for trading commodity chemicals, plastics and fuel products and
purchase the services we offer, then our business will be adversely affected.
OUR FUTURE REVENUES DEPEND ON OUR ABILITY TO INCREASE TRANSACTION VOLUME ON OUR
TRADING EXCHANGE.
If the transaction volume on our trading exchange does not grow, it is
unlikely that we will ever achieve or maintain profitability. We depend heavily
on commissions generated from purchases and sales of commodity chemicals,
plastics and fuel products on our trading exchange. From our inception through
February 15, 2000, 34 of our members completed a trade on our trading exchange.
These members have completed 219 transactions. Our business model calls for a
substantial portion of our revenues in the future to be based upon the number of
transactions completed on our trading exchange. Our inability to increase the
number of transactions completed on our trading exchange will negatively affect
our business, revenues, results of operations and financial condition.
7
<PAGE> 11
WE HAVE PROVIDED SOME OF OUR MEMBERS WITH INCENTIVES TO TRADE ON OUR EXCHANGE
THAT MAY HAVE THE EFFECT OF TEMPORARILY INCREASING THE LEVEL OF ACTIVITY ON OUR
TRADING EXCHANGE WITHOUT CORRESPONDING REVENUES.
We have entered into agreements with some of our members to encourage the
adoption and use of our trading exchange. We have provided these members with
trading concessions and other incentives to transact business on our trading
exchange. In the near term, these concessions and incentives may temporarily
increase the level of activity on our trading exchange without generating a
corresponding increase in revenue. Additionally, these companies may discontinue
their support or use of our trading exchange when these agreements expire or are
terminated.
A SIGNIFICANT PORTION OF OUR REVENUES ARE CURRENTLY GENERATED FROM A RELATIVELY
SMALL NUMBER OF MEMBERS.
In fiscal 1999, three of our members accounted for more than 38% of our
trading exchange revenues and, in the three months ended December 31, 1999, five
of our members accounted for more than 62% of our trading exchange revenues. We
may continue to derive a significant portion of our revenues from a relatively
small number of members. The loss of any of these members may adversely affect
our business, results of operations or financial condition.
A MAJORITY OF THE TRANSACTION VOLUME OF TRADES ON OUR EXCHANGE INVOLVED A SINGLE
PRODUCT.
In fiscal 1999, approximately 69% of the physical transaction volume of
trades on our exchange involved benzene. In the three months ended December 31,
1999, approximately 59% of the physical transaction volume of trades involved
benzene. We may continue to derive a significant portion of our revenues from
trades involving benzene. If a diversity of commodity chemicals, plastics and
fuel products are not traded on our exchange, our business may not be
successful.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
The market for Internet-based, business-to-business commerce solutions is
extremely competitive. Our competitors include Ariba, Inc., Autobase Information
Systems Inc. (efuel.com), ChemConnect, Inc., Commerce One, Inc., Commerx, Inc.
(PlasticsNet.com), e-Chemicals Inc., fob.com, FreeMarkets, Inc.,
PurchasePro.com., Inc., VerticalNet, Inc. and their respective affiliates. We
may also face competition from large, established chemical companies. We expect
competition to intensify as our current online competitors expand their product
offerings. There are relatively low barriers to entry in our market, and we
expect additional competition from emerging or established companies to develop.
We cannot assure you that we will be able to compete successfully against
current or future competitors, or that competitive pressures we face will not
harm our business, operating results or financial condition.
Our competitors may be able to negotiate alliances with strategic partners
on more favorable terms than we are able to negotiate. Some of our members have
and others may in the future invest in our competitors and discontinue their use
or support of our marketplace. Our competitors may develop superior solutions
that achieve greater market acceptance than our marketplace. Further, some of
these competitors have long operating histories in the chemical industry,
greater name recognition, an established network of potential users and
significantly greater financial, technical and marketing resources than we do.
These potential competitors would be able to undertake more extensive marketing
campaigns for their Internet-based solution and adopt more aggressive pricing
policies in attracting potential users of their solution. For these reasons, our
ability to compete effectively against these larger enterprises is uncertain.
IF WE ARE UNABLE TO RESPOND TO RAPID TECHNOLOGICAL CHANGES ASSOCIATED WITH
INTERNET-BASED SOLUTIONS, WE MAY LOSE MEMBERS TO OUR COMPETITORS.
The market for our trading exchange is likely to be characterized by rapid
technological advances in the hardware and software markets and changes in our
members' and the market's requirements. As a result, our future success depends
upon our ability to enhance our marketplace through technological advances and
where necessary to adapt our trading exchange to our members' and the market's
specific needs. If we are not able to maintain a reliable, scalable technology
platform that can rapidly incorporate
8
<PAGE> 12
technological advances and that meets the needs of our members and the market,
we may lose members to our competitors who are able to provide a technologically
advanced solution that meets the needs of purchasers and sellers of commodity
chemicals, plastics and fuel products.
IF WE ARE NOT ABLE TO DETERMINE OR DESIGN THE FEATURES AND FUNCTIONALITY THAT
COMPANIES REQUIRE OR PREFER, WE MAY NOT BE ABLE TO ATTRACT MEMBERS AND MAY LOSE
CURRENT MEMBERS TO COMPETITORS.
Our success depends upon our ability to accurately determine the features
and functionality that our members require or prefer in a business-to-business
Internet-based marketplace. We may lack the ability to successfully design and
implement these features and functionality. We have designed our marketplace
based upon internal design efforts and feedback from a relatively limited number
of members. We cannot be certain, however, that the features and functionality
we offer through our marketplace, or those that we may offer in future, will
satisfy the requirements or preferences of our current or target members. If we
are unable to determine or design the features and functionality that members
require or prefer in a business-to-business Internet-based marketplace, we may
not be able to attract members and may lose current members to our competitors
who are able to provide those features and functionality.
OUR MEMBERS MAY ABANDON OUR MARKETPLACE IF WE EXPERIENCE HARDWARE OR SOFTWARE
FAILURES.
A significant disruption in our trading exchange could seriously undermine
our members' confidence in our business. Our members hold us to a high standard
of reliability and performance. We have experienced brief service interruptions
on our trading exchange. These interruptions undermine current and prospective
members' confidence in the reliability of our marketplace. Operating a
successful online marketplace requires the successful technical operation of an
entire chain of software, hardware and telecommunications equipment. A failure
of any element in this chain may partially or completely disrupt transactions on
our exchange and access to our information resource center. We may have members
operating outside North America who use older or inferior technologies, which
may not operate properly. In addition, our hardware and software systems are
vulnerable to interruption from power failures, telecommunications outages,
network service outages and disruptions, natural disasters, and vandalism and
other misconduct. If we experience hardware or software failures, our members
may abandon our marketplace.
IF WE DO NOT ADEQUATELY MAINTAIN OUR MEMBERS' CONFIDENTIAL INFORMATION, OUR
REPUTATION COULD BE HARMED AND WE COULD INCUR LEGAL LIABILITY.
Any breach of security relating to our members' confidential information
could result in legal liability for us and a reduction in use of our trading
exchange by our members, which could materially harm our business. Our personnel
receive highly confidential information from our members that is stored in our
files and on our computer systems. For example, we receive sensitive pricing and
other information that could be valuable to our members' competitors if
misappropriated. We enter into standard non-disclosure agreements with all of
our members.
Our security procedures may fail to adequately protect information that we
are obligated to keep confidential. We may be unable to successfully adopt
effective systems for maintaining confidential information. The risk of
disclosing confidential information may grow as we add more members to our
trading exchange. If we fail to adequately maintain our members' confidential
information, some of our members could end their business relationships with us
and we could be subject to legal liability. This would adversely affect our
business, results of operations and financial condition.
OUR NEW MANAGEMENT TEAM MAY NOT OPERATE EFFECTIVELY OR SUCCESSFULLY IMPLEMENT
OUR BUSINESS PLAN.
We have only recently assembled our management team and instituted a
management control structure. Almost all of our executive officers have joined
our management team since June 1999. We cannot guarantee that our new management
team will be able to operate effectively or implement
9
<PAGE> 13
successfully our business model. Our new management team's ability to manage our
growth depends upon many factors, including its ability to:
- maintain appropriate procedures, policies and systems to ensure that our
marketplace operates in accordance with our member's expectations;
- satisfy our need for additional financing on reasonable terms; and
- manage the costs associated with expanding our infrastructure, including
our marketplace, personnel and facilities.
If management cannot successfully execute our strategic initiatives, our
business may not be successful.
THE LOSS OF KEY PERSONNEL WOULD NEGATIVELY IMPACT OUR BUSINESS.
Our expansion and development will be largely dependent upon the continued
services of the following members of our new management team: Carl McCutcheon,
our Chairman, President and Chief Executive Officer, Lawrance McAfee, our
Executive Vice President and Chief Financial Officer, Fred Cook, our Senior Vice
President and General Manager - North America and the founder of our trading
exchange, and our other senior executives. The loss of the services of Mr.
McCutcheon, Mr. McAfee or Mr. Cook for any reason could have a material adverse
effect on our business.
In addition, Mr. McCutcheon and Mr. McAfee will receive a specified portion
of the proceeds from this offering pursuant to a management incentive agreement.
Pursuant to this agreement, Mr. McCutcheon, Mr. McAfee and other current members
of our management may receive a large cash payment shortly after this offering.
The total payment, up to a maximum of $9 million to members of current
management, will be based upon the average daily closing price of our common
stock for the 90 day period immediately following the consummation of this
offering and the number of shares of common stock outstanding on a fully diluted
basis on the 90th day following the consummation of this offering. If we are
required to make the maximum payment under this agreement, Mr. McCutcheon and
Mr. McAfee will receive $3 million and $2.25 million, respectively. The receipt
of these amounts by Mr. McCutcheon, Mr. McAfee or other current members of our
management following this offering may hinder our ability to retain them.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT, DEVELOP AND RETAIN
QUALIFIED PERSONNEL.
Our future success depends in large part on our ability to hire, train and
retain qualified employees. Any inability to hire, train and retain a sufficient
number of qualified employees could hinder the growth of our business. Skilled
personnel are in short supply, and this shortage is likely to continue for some
time. As a result, competition for these people is intense, and the industry
turnover rate for them is high. Consequently, we may have difficulty hiring our
desired numbers of qualified employees. Moreover, even if we are able to expand
our employee base, the resources required to attract and retain employees may
adversely affect our operating margins by increasing expenses associated with
our employees.
IF WE FAIL TO MANAGE OUR BUSINESS EFFECTIVELY, OUR REVENUES AND RESULTS OF
OPERATIONS MAY NOT MEET MEMBER AND INVESTOR EXPECTATIONS.
We have rapidly expanded our operations and expect to continue to do so.
This growth has placed, and is expected to continue to place, a significant
demand on our sales, marketing, managerial, operational, financial and other
resources. If we cannot manage our growth effectively, it is likely that our
revenues and results of operations will not meet investor expectations. From
June 21, 1999 through February 15, 2000, we grew from 13 to 56 employees. We
expect to hire a number of new employees to support our business. Our current
information systems, procedures and controls may not be adequate to support our
operations which would hinder our ability to exploit the market for trading
commodity chemicals, plastics and fuel products over the Internet.
10
<PAGE> 14
WE MAY NOT BE ABLE TO INTEGRATE SUCCESSFULLY BUSINESSES OR TECHNOLOGIES THAT WE
MAY ACQUIRE IN THE FUTURE.
We may acquire businesses, technologies, services or products that we
believe are strategic to or complement our business-to-business Internet-based
business model. We do not currently have any understandings, commitments or
agreements with respect to any acquisition, nor are we currently pursuing any
acquisition. We may not be able to identify, negotiate or finance any future
acquisition successfully. Even if we do succeed in acquiring a business,
technology, service or product, we have no experience in integrating an
acquisition into our business. The process of integration may produce unforeseen
operating difficulties and expenditures and may absorb significant attention of
our management that would otherwise be available for the ongoing development of
our business. Moreover, we may not achieve any of the benefits that we might
anticipate from a future acquisition. If we make future acquisitions, we may
issue shares of stock that dilute other stockholders, incur debt, assume
contingent liabilities or create additional expenses related to amortizing
goodwill and other intangible assets, any of which might harm our financial
results and cause the price of our stock to decline. Any financing that we might
need for future acquisitions may only be available to us on terms that restrict
our business or that impose on us costs that reduce our net income.
OUR INTERNATIONAL OPERATIONS WILL BE EXPENSIVE AND MAY NOT SUCCEED.
We have limited experience in marketing, selling and supporting our
marketplace in foreign countries. The acquisition and development of those
skills may be more difficult or take longer than we anticipate, especially due
to language barriers and the fact that the Internet infrastructure in foreign
countries may be less developed than the Internet infrastructure in the United
States. To date, we have not generated significant revenues from international
members. We currently maintain international offices in Manchester, England,
Singapore and Tokyo, Japan. We intend to expand our international operations by
opening additional international offices and hiring additional international
management, sales, marketing and support personnel.
We may be unable to successfully market, sell, and support our marketplace
internationally. If we are unable to expand our international operations
successfully and in a timely manner, our business could be seriously harmed. We
will need to devote significant management and financial resources to our
international expansion. In particular, we will have to attract and retain
management, sales, marketing and support personnel for our international
offices. Competition for personnel experienced in these areas is intense, and we
may be unable to attract and retain qualified staff.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO A VARIETY OF RISKS THAT COULD HARM
OUR FINANCIAL CONDITION AND OPERATING RESULTS.
Our international operations are subject to a variety of additional risks
that could seriously harm our financial condition and operating results. These
risks include the following:
- the establishment of a market for Internet-based trading of commodity
chemicals and other products internationally;
- global economic events;
- fluctuations in foreign currencies;
- unexpected changes in regulatory requirements;
- longer payment cycles and problems collecting accounts receivable;
- reduced protection for intellectual property and proprietary rights in
some countries; and
- seasonal fluctuations in business activity in some international regions.
11
<PAGE> 15
WE MAY NOT BE ABLE TO CONTINUE TO FACILITATE SWAP TRANSACTIONS UNDER THE
COMMODITY EXCHANGE ACT.
We facilitate trading in financial derivatives known as swap agreements, in
which the parties exchange cash payments with reference to changes in the price
of a commodity or another agreed benchmark. The Commodity Exchange Act requires
that trading in many instruments regulated by the U.S. Commodity Futures Trading
Commission, or CFTC, must be confined to CFTC-regulated "contract markets."
However, swap agreements that meet the CFTC's exemption standards may be offered
and entered into without using a designated contract market. While these
exemption standards are not free from ambiguity, we believe that our swap
program complies with these standards. In particular, we believe that the
participants on our exchange meet the criteria of "eligible swap participants"
as defined by the CFTC. Further, after matching offered terms on our exchange,
participants must enter into bilateral swap agreements offline in order to
create legally binding swap transactions. If the CFTC were to challenge our
treatment of these transactions or take other actions that make the exemption
unavailable to us, or if Congress were to amend the Commodity Exchange Act in an
adverse manner, our ability to offer a swap program could be impaired or
foreclosed, and past transactions could become subject to rescission, possibly
resulting in claims against us and the counterparties to those transactions. The
occurrence of any of these events would adversely affect our business, results
of operations and financial condition.
WE COULD INCUR LIABILITY AS A RESULT OF OUR ARRANGING FOR THE TRANSPORTATION OF
PRODUCTS PURCHASED AND SOLD ON OUR TRADING EXCHANGE.
As an additional service for our members, we plan in the future to assist
in arranging for the transportation of the commodity chemicals, plastics and
other products purchased and sold on our trading exchange. While we will not
take title to these products, we intend to provide one or more hyperlinks from
our trading exchange web site to web sites operated by one or more transporters
of products purchased and sold on our trading exchange. We believe our
contractual arrangements with these transporters provide us with full
indemnification against any claims made against us. By arranging for
transportation of these products, however, we could become subject to claims for
environmental cleanup costs, property damages or personal injuries in connection
with a release or spill of these products while they are in transit. Any such
claim may result in considerable expense to us and divert our management's
attention from our business and, in the event that our contractual rights are
not upheld in court, may subject us to significant liability.
WE MAY BECOME SUBJECT TO LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITES
THAT REQUIRES US TO DEFEND AGAINST LEGAL CLAIMS.
An array of information resources are available on our web sites to our
exchange members and users of our information resources. We may be subject to
claims for defamation, libel, copyright or trademark infringement or based on
other theories relating to the information we publish on our web sites. These
types of claims have been brought, sometimes successfully, against online
services as well as other print publications in the past. We could also be
subject to claims based upon the content that is accessible from our web sites
through links to other web sites. Our insurance may not adequately protect us
against these claims. Any costs incurred as a result of these claims could
negatively affect our business, revenues, results of operations and financial
condition.
WE MAY INCUR SIGNIFICANT COSTS TO DEFEND OR ESTABLISH OUR INTELLECTUAL PROPERTY
AND PROPRIETARY RIGHTS.
We cannot guarantee that the steps we have taken or will take to protect
our proprietary rights will be adequate to deter misappropriation of our
intellectual property. In addition, we may not be able to detect unauthorized
use of our intellectual property and take appropriate steps to enforce our
rights. If third parties infringe or misappropriate our trade secrets,
copyrights, trademarks or other proprietary information, our business could be
seriously harmed. In addition, although we believe that our proprietary rights
do not infringe the intellectual property rights of others, other parties may
assert infringement claims against us or claim that we have violated their
intellectual property rights. Infringement claims, even if not true, could
result in significant legal and other costs and may be a distraction to
management. In addition, protection
12
<PAGE> 16
of intellectual property in many foreign countries is weaker and less reliable
than in the United States, so if our business expands into foreign countries,
risks associated with protecting our intellectual property will increase.
UNDETECTED YEAR 2000 COMPLIANCE ISSUES COULD STILL HARM OUR BUSINESS.
Our business may suffer as a result of defects relating to Year 2000
compliance issues that have not yet been detected. The hardware and software
systems that are central to our marketplace are vulnerable to interruption from
power failures, telecommunications outages, and network service outages. Our
trading exchange and information resource center could fail to function properly
in the event that third party service providers we rely upon encounter Year 2000
problems. If this happens, it could result in liability to us or adversely
affect our business, revenues, results of operations and financial condition.
RISKS RELATED TO INTERNET-BASED BUSINESSES
OUR SUCCESS DEPENDS ON THE CONTINUED ADOPTION OF THE INTERNET AS A MEANS FOR
COMMERCE.
Our future success depends heavily on the continued adoption of the
Internet as a means for commerce. The widespread acceptance and adoption of the
Internet for conducting business is likely only in the event that the Internet
provides businesses with greater efficiencies and other advantages. If commerce
on the Internet does not continue to grow, or grows more slowly than expected,
our growth would decline and our business would be seriously harmed. Businesses
may reject the Internet as a viable commercial medium for a number of reasons,
including:
- potentially inadequate network infrastructure;
- delay in the development of Internet enabling technologies and
performance improvements;
- delay in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity;
- delay in the development of security and authentication technology
necessary to effect secure transmission of confidential information;
- change in, or insufficient availability of, telecommunications services
to support the Internet; and
- failure of companies to meet their customers' expectations in delivering
goods and services over the Internet.
INCREASING GOVERNMENT REGULATION COULD AFFECT OUR BUSINESS.
We are subject to laws and regulations directly applicable to general
business as well as e-commerce. State, federal and foreign governments may adopt
new and cumbersome laws and regulations relating to e-commerce. Any such
legislation or regulation could dampen the growth of the Internet and decrease
its acceptance as a communications and commercial medium. If such a decline
occurs, companies may decide in the future not to use our services as an
electronic business channel. This decrease in the demand for our services would
seriously harm our business and operating results.
Any new laws and regulations may govern or restrict any of the following
issues:
- user privacy;
- the pricing and taxation of goods and services offered over the Internet;
- the content of web sites;
- consumer protection; and
- the characteristics and quality of products and services offered over the
Internet.
13
<PAGE> 17
SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING
COMMERCE.
Concern about the security of the transmission of confidential information
over public networks is a significant barrier to e-commerce and communication.
Advances in computer capabilities, new discoveries in the field of cryptography
or other events or developments could result in compromises or breaches of
Internet security systems that protect proprietary information. If any
well-publicized compromises of security were to occur, they could substantially
reduce the use of the Internet for commerce and communications.
Anyone who circumvents our security measures could misappropriate
proprietary information or cause interruptions in our services or operations.
Our activities involve the storage and transmission of proprietary information,
such as confidential buyer and supplier information. The Internet is a public
network, and data is sent over this network from many sources. In the past,
computer viruses have been distributed and have rapidly spread over the
Internet. Computer viruses could be introduced into our systems or those of our
members, which could disrupt our trading exchange technology or make it
inaccessible to our members. We may be required to expend significant capital
and other resources to protect against the threat of, or to alleviate problems
caused by, security breaches and the introduction of computer viruses. Our
security measures may be inadequate to prevent security breaches or combat the
introduction of computer viruses, either of which may result in loss of data,
increased operating costs, litigation and possible liability.
RISKS RELATED TO THIS OFFERING AND THE SECURITIES MARKETS
OUR STOCK PRICE MAY BE VOLATILE BECAUSE OUR SHARES HAVE NOT BEEN PUBLICLY TRADED
PREVIOUSLY.
Prior to this offering, you could not buy or sell our common stock
publicly. Accordingly, we cannot assure you that an active public trading market
for our stock will develop or be sustained after this offering. The market price
after this offering may vary significantly from the initial offering price in
response to any of the following factors, some of which are beyond our control:
- changes in financial estimates or investment recommendations by
securities analysts relating to our stock;
- changes in market valuations of other e-commerce marketplaces, software
and service providers or other electronic businesses;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- loss of significant members;
- additions or departures of key personnel; and
- fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology and Internet sectors.
OUR STOCK WILL LIKELY BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME FLUCTUATIONS
THAT MAY PREVENT YOU FROM RESELLING YOUR SHARES AT A PROFIT.
The securities markets have experienced significant price and volume
fluctuations, and the market prices of the securities of technology and Internet
companies have been especially volatile. This market volatility, as well as
general economic, market or political conditions, could reduce the market price
of our common stock in spite of our operating performance. In addition, our
operating results could be below the expectations of public market analysts and
investors, and in response the market price of our common stock could decrease
significantly. Investors may be unable to resell their shares of our common
stock at or above the offering price. In the past, companies that have
experienced volatility in the market price of their stock have been the object
of securities class action litigation. If we were the object of securities class
14
<PAGE> 18
action litigation, it could result in substantial costs and a diversion of
management's attention and resources.
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS OF THIS OFFERING, AND WE MAY
NOT USE THE PROCEEDS EFFECTIVELY.
Our management could spend the proceeds from this offering in ways with
which our stockholders may not agree. Our primary purpose in conducting this
offering is to create a public market for our common stock. As of the date of
this prospectus, we plan to use the proceeds from this offering for working
capital and other corporate purposes as described under "Use of Proceeds"
elsewhere in this prospectus. We may also use the proceeds in future strategic
acquisitions but do not at present have any acquisitions planned. Until we need
to use the proceeds of this offering, we plan to invest the net proceeds in
short-term, investment grade, interest-bearing securities. We cannot predict
that the proceeds from this offering will be invested to yield a favorable
return.
OUR OFFICERS AND DIRECTORS AND AFFILIATED PERSONS INFLUENCE OUR BUSINESS AND
HOLD A SUBSTANTIAL PORTION OF OUR STOCK AND COULD REJECT MERGERS OR OTHER
BUSINESS COMBINATIONS THAT YOU MAY BELIEVE ARE DESIRABLE.
We anticipate that our executive officers, directors and individuals or
entities affiliated with our executive officers and directors will beneficially
own approximately % of our outstanding common stock as a group following
the consummation of this offering. Acting together, these stockholders would be
able to significantly influence matters that our stockholders vote upon,
including the election of directors and mergers or other business combinations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE.
We expect that the net proceeds from this offering and our existing cash
balances will be sufficient to meet our working capital and capital expenditure
needs excluding acquisitions for at least two years. After that, we may need to
raise additional funds, and we cannot be certain that we will be able to obtain
additional financing on favorable terms or at all. If we need additional capital
and cannot raise it on acceptable terms, we may not be able to:
- open new offices;
- create additional market-specific business units;
- enhance our infrastructure and leveragable assets;
- hire, train and retain employees;
- respond to competitive pressures or unanticipated requirements; or
- pursue acquisition opportunities.
Our failure to do any of these things could seriously harm our financial
condition. Further, any additional capital raised through the sale of equity may
dilute your ownership percentage in us.
WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS, WHICH MAY
REDUCE OR ELIMINATE YOUR ABILITY TO SELL YOUR SHARES FOR A PREMIUM IN A CHANGE
OF CONTROL TRANSACTION.
Various provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a change in control of CheMatch that a stockholder
may 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 outstanding
shares and thwart a takeover attempt;
- prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
15
<PAGE> 19
- requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
- limiting who may call special meetings of stockholders;
- prohibiting stockholder action by written consent, which requires all
actions to be taken at a meeting of the 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 by stockholders at stockholder meetings.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW MAY INHIBIT POTENTIAL
ACQUISITION BIDS.
Section 203 of the Delaware General Corporation Law may inhibit potential
acquisition bids for our company. Upon completion of this offering, we will be
subject to the antitakeover provisions of the Delaware General Corporation Law,
which regulate corporate acquisitions. Delaware law will prevent us from
engaging, under certain circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that the interested
stockholder became an interested stockholder unless our board of directors or a
supermajority of our uninterested stockholders agree. For purposes of Delaware
law, a "business combination" includes a merger or consolidation involving us
and the interested stockholder and the sale of more than 10% of our assets. In
general, Delaware law defines an "interested stockholder" as any holder
beneficially owning 15% or more of the outstanding voting stock of a corporation
and any entity or person affiliated with or controlling or controlled by the
holder. Under Delaware law, a corporation may opt out of the foregoing
antitakeover provisions. We do not intend to opt out of the antitakeover
provisions of Delaware Law.
PURCHASERS IN THIS OFFERING WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price of our common stock will be substantially
higher than the book value per share of our outstanding common stock. As a
result, if we were liquidated for book value immediately following this
offering, each stockholder purchasing in this offering would receive less than
the price they paid for their common stock.
SHARES BECOMING AVAILABLE FOR SALE COULD AFFECT OUR STOCK PRICE AND DILUTE YOUR
OWNERSHIP IN US.
Sales of a substantial number of shares of common stock after this
offering, or the perception that such sales could occur, could adversely affect
the market price of our common stock and could impair our ability to raise
capital through the sale of additional equity securities. Immediately after this
offering, affiliates and holders of restricted securities, as defined in Rule
144 of the Securities Act, will own shares, representing approximately %
of the outstanding shares of common stock. A decision by such persons to sell
shares of common stock could adversely affect the trading price of the common
stock.
16
<PAGE> 20
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. We have based these forward-looking statements on
our current expectations, which are subject to known and unknown risks,
uncertainties and assumptions. They include statements relating to:
- future revenues, expenses and profitability;
- the development and growth of the business-to-business commerce over the
Internet;
- the perceived benefits to purchasers and sellers of commodity chemicals,
plastics and fuel products associated with an online marketplace;
- the market liquidity and costs efficiencies associated with an online
trading solution for purchasers and sellers of commodity chemicals,
plastics and fuel products;
- our ability to successfully execute our business model and our business
strategy;
- our ability to identify trends within the chemical industry and to offer
products and services that meet the changing needs of our members and the
market; and
- trends in government regulation.
You can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially from those suggested
by these forward-looking statements. In evaluating these statements, you should
carefully consider the risks outlined under "Risk Factors."
We are under no duty to update any of the forward-looking statements after
the date of this prospectus to conform such statements to actual results and do
not intend to do so.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of
common stock offered by us will be approximately $ million, at our assumed
initial public offering price of $ per share, and after deducting the
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that the
net proceeds will be approximately $ million, after deducting the estimated
underwriting discounts and commissions and unreimbursed offering expenses.
The primary purposes of this offering are to obtain additional equity
capital, create a public market for the common stock, facilitate future access
to public markets and increase our visibility in the marketplace. We expect to
use the net proceeds from this offering to expand our sales and marketing
efforts, enhance our technology, add to our online marketplace and for working
capital and general corporate purposes. We also may use a portion of the net
proceeds of this offering to acquire or invest in complementary businesses or
technologies, although we presently have no plans, commitments or agreements
respecting any acquisitions or investments. Pending these uses, the net proceeds
of this offering will be invested in short-term, investment grade,
interest-bearing securities.
Additionally, pursuant to a management incentive agreement a portion of the
proceeds from this offering will be paid to current and former members of our
management team and to current employees, up to a maximum of $9 million to
current officers and employees, and a maximum of $6 million to two of our former
executives. The portion of the net proceeds payable to these individuals will be
two percent of the average daily closing price of our common stock for the 90
day period immediately following the
17
<PAGE> 21
consummation of this offering, multiplied by the number of shares of common
stock outstanding on a fully diluted basis on the 90th day immediately following
the consummation of this offering.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock since
our inception, and do not anticipate declaring or paying any cash dividends in
the foreseeable future. Instead, we currently expect to retain our earnings, if
any, to finance our business and to use for general corporate purposes. Our
board of directors has the authority to declare and pay dividends on the common
stock, in its discretion, as long as there are funds legally available to do so.
18
<PAGE> 22
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999.
The pro forma information reflects the assumed net exercise of all outstanding
warrants for the purchase of convertible preferred stock and the conversion of
all shares of convertible preferred stock into 11,083,111 shares of common stock
and includes the effect of the net exercise of 482,571 common stock warrants
into 428,845 shares of common stock. The pro forma as adjusted information
reflects the receipt of $ million of estimated net proceeds from the sale by
us of shares of common stock in this offering at an assumed initial public
offering price of $ per share, after deducting the estimated underwriting
discounts and commissions and estimated unreimbursed offering expenses. This
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
and accompanying notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 30,170 $ 30,170 $
======== ======== ========
Mandatorily redeemable convertible preferred stock:
Series A convertible preferred stock, $.01 par value,
3,742,200 shares authorized; 2,138,400 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma............................... $ 17,488 $ -- $
Series B convertible preferred stock, $.01 par value,
3,556,350 shares authorized; 2,032,200 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma............................... 16,809 --
Series C convertible preferred stock, $.01 par value,
6,130,547 shares authorized; 3,503,169 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma............................... 32,654 --
Stockholders' equity (deficit):
Common stock, $.01 par value, 25,000,000 shares
authorized; 4,304,959 shares issued and outstanding,
actual; 15,816,915 shares issued and outstanding, pro
forma.................................................. 43 158
Additional paid-in capital................................ 11,416 78,252
Notes receivable from employees........................... (822) (822)
Deferred stock compensation............................... (2,130) (2,130)
Accumulated deficit....................................... (37,830) (37,830)
-------- -------- --------
Total stockholders' equity (deficit)................... (29,323) 37,628
-------- -------- --------
Total capitalization........................................ $ 37,628 $ 37,628 $
======== ======== ========
</TABLE>
The foregoing table excludes 397,440 shares of common stock issuable upon
exercise of outstanding warrants that will remain outstanding upon consummation
of this offering. The pro forma data in the foregoing table also excludes the
effect of the issuance of 929,523 shares of common stock to certain strategic
investors during February 2000.
19
<PAGE> 23
DILUTION
The pro forma net tangible book value of our common stock as of February
16, 1999, was $ million or approximately $ per share. Pro forma net
tangible book value per share represents the amount of our stockholders' equity
less intangible assets, divided by shares of outstanding common
stock, after giving effect to the net exercise of all outstanding warrants for
the purchase of convertible preferred stock, the conversion of all shares of
convertible preferred stock into shares of common stock and the net exercise of
482,571 common stock warrants into 428,845 shares of common stock.
Pro forma net tangible book value dilution per share to new investors
represents the difference between the amount per share paid by purchasers of
common stock in this offering and the pro forma net tangible book value per
share of common stock immediately after completion of this offering. After
giving effect to the sale by us of shares of common stock in this
offering at an assumed initial offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses and the application of the estimated net proceeds from this
offering, our pro forma net tangible book value as of February 16, would have
been $ , or $ per share. This represents an immediate increase in
net tangible book value of $ per share to existing stockholders and an
immediate dilution in net tangible book value of $ per share to purchasers
of common stock in this offering. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of February
16..................................................... $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table illustrates on a pro forma basis as of February 16, the
difference between the number of shares of common stock purchased from us, the
total consideration paid to us and the average price paid by existing
stockholders and by the new investors purchasing shares of common stock in this
offering, before deduction of estimated discounts and commission and estimated
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... % $ % $
New investors..................
---------- --- ----------- --- ------
Total................ % $ % $
========== === =========== === ======
</TABLE>
The foregoing table excludes 4,482,556 shares of common stock to be issued
upon the exercise of options outstanding under our stock option plans as of
February 16 at a weighted average price of $7.09 per share and 397,440 shares of
common stock which will be issuable upon exercise of common stock warrants at a
weighted average price of $3.33 per share. If these outstanding options and
warrants are exercised, new investors will be further diluted.
20
<PAGE> 24
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
The unaudited pro forma combined statement of operations data for the year
ended December 31, 1999, combine the historical statements of operations of
CheMatch, PetroChemNet, Inc. and CheMatch, Inc. as if the acquisition of
PetroChemNet, Inc. and CheMatch, Inc., which occurred on June 21, 1999, had been
completed on January 1, 1999. The total cost of the acquisitions was
approximately $5.2 million and has been accounted for using the purchase method
of accounting. The unaudited pro forma statement of operations and the
accompanying notes should be read in conjunction with the historical financial
statements and the related notes of CheMatch, PetroChemNet, Inc. and CheMatch,
Inc. and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," appearing elsewhere in this prospectus.
The pro forma adjustments reflecting the consummation of the acquisitions
are based on the purchase method of accounting, available financial information
and the estimated fair value of assets acquired and liabilities assumed.
Depreciation and amortization expense has been adjusted to reflect the
amortization of goodwill related to the excess of purchase price over the fair
value of assets acquired and liabilities assumed as if the acquisitions had
occurred on January 1, 1999.
The unaudited pro forma financial data for the year ended December 31, 1999
excludes the effect of the issuance of 929,523 shares of common stock to certain
strategic investors during February 2000.
The unaudited pro forma financial data for the year ended December 31,
1999, does not purport to represent what the actual results of the combined
businesses would have been if the acquisitions of PetroChemNet, Inc. and
CheMatch, Inc. had occurred on January 1, 1999, nor does this information
purport to project the results for any future period.
<TABLE>
<CAPTION>
PETROCHEMNET, INC. CHEMATCH, INC. CHEMATCH.COM, INC.
JANUARY 1, 1999 JANUARY 1, 1999 JUNE 21, 1999 PRO FORMA
THROUGH THROUGH (INCEPTION) PRO FORMA YEAR ENDED
JUNE 20, 1999 JUNE 20, 1999 THROUGH ADJUSTMENTS DECEMBER 31, 1999
(UNAUDITED) DECEMBER 31, 1999 (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ 111 $ 80 $ 182 $ -- $ 373
------ ---- -------- ----- --------
Costs and expenses:
Technology costs............... 149 20 2,302 -- 2,471
Selling and marketing.......... 70 -- 2,381 -- 2,451
General and administrative..... 657 48 3,536 -- 4,241
Stock-based compensation....... 50 -- 93 -- 143
Depreciation and
amortization................. 82 23 431 271 807
------ ---- -------- ----- --------
Total costs and
expenses............... 1,008 91 8,743 271 10,113
------ ---- -------- ----- --------
Operating loss................... (897) (11) (8,561) (271) (9,740)
Interest income (expense)...... (6) (8) 236 -- 222
------ ---- -------- ----- --------
Net loss......................... (903) (19) (8,325) (271) (9,518)
Accretion of redeemable
convertible preferred stock to
redemption
value.......................... -- -- (29,505) -- (29,505)
------ ---- -------- ----- --------
Net loss available to common
stockholders................... $ (903) $(19) $(37,830) $(271) $(39,023)
====== ==== ======== ===== ========
Net loss per share, basic
and diluted.................... $ (12.89)
Pro forma net loss per share
adjusted for the assumed net
exercise of all convertible
preferred stock warrants, the
conversion of all convertible
preferred stock and the net
exercise of 482,571 common
stock warrants into 428,845
shares of common stock, basic
and diluted.................... (1.17)
Shares used to compute net loss
per common share:
Basic and diluted.............. 3,026,581
Shares used to compute pro forma
net loss per share adjusted for
the assumed net exercise of all
convertible preferred stock
warrants, the conversion of all
convertible preferred stock and
the net exercise of 482,571
common stock warrants into
428,845 shares of common stock,
basic and diluted.............. 8,123,497
</TABLE>
21
<PAGE> 25
SELECTED FINANCIAL DATA
You should read the selected consolidated financial data set forth below
along with "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and with our consolidated financial statements and
related notes appearing elsewhere in this prospectus. The pro forma share
amounts reflect the assumed exercise of all outstanding warrants for the
purchase of convertible preferred stock, the conversion of all convertible
preferred stock into common stock and the net exercise of 482,571 warrants to
purchase common stock into 428,845 shares of common stock. The statement of
operations data for the years ended December 31, 1997 and 1998, and for the
period from January 1, 1999 through June 20, 1999, and the balance sheet data as
of December 31, 1997 and 1998 and June 20, 1999, have been derived from the
audited financial statements and notes appearing elsewhere in this prospectus
for our predecessor, PetroChemNet, Inc. The consolidated statement of operations
data for the period from June 21, 1999 (inception) through December 31, 1999,
and the consolidated balance sheet data as of December 31, 1999, have been
derived from our audited consolidated financial statements and notes appearing
elsewhere in this prospectus. The selected unaudited pro forma financial data
present data for CheMatch, adjusted for the effects of the acquisitions of
PetroChemNet, Inc. and CheMatch, Inc. as if they had been completed on January
1, 1999. See the unaudited pro forma statements of operations data included
elsewhere in this prospectus. The historical results are not necessarily
indicative of the operating results to be expected in the future.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY JUNE 21,
------------------------------------- 1999
YEAR ENDED (INCEPTION), PRO FORMA
DECEMBER 31, JANUARY 1, THROUGH YEAR ENDED
-------------------- 1999, THROUGH DECEMBER 31, DECEMBER 31,
1997 1998 JUNE 20, 1999 1999 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE (IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA) AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 841 $ 698 $ 111 $ 182 $ 373
-------- -------- -------- -------- --------
Costs and expenses:
Technology costs................................ 901 631 149 2,302 2,471
Selling and marketing........................... 222 176 70 2,381 2,451
General and administrative...................... 246 688 657 3,536 4,241
Stock-based compensation........................ 239 1,577 50 93 143
Depreciation and amortization................... 144 161 82 431 807
-------- -------- -------- -------- --------
Total costs and expenses.................. 1,752 3,233 1,008 8,743 10,113
Operating loss.................................... (911) (2,535) (897) (8,561) (9,740)
Interest income (expense)......................... (16) (14) (6) 236 222
-------- -------- -------- -------- --------
Net loss.......................................... (927) (2,549) (903) (8,325) (9,518)
Accretion of redeemable convertible preferred
stock to redemption value....................... -- -- -- (29,505) (29,505)
-------- -------- -------- -------- --------
Net loss available to common stockholders......... $ (927) $ (2,549) $ (903) $(37,830) $(39,023)
======== ======== ======== ======== ========
Net loss per share, basic and diluted............. $(177.65) $(440.09) $(132.72) $ (11.61) $ (12.89)
Pro forma net loss per share adjusted for the
assumed exercise of all convertible preferred
stock warrants, the conversion of outstanding
convertible preferred stock and the net exercise
of 482,571 common stock warrants into 428,845
shares of common stock, basic and diluted....... (1.17)
Shares used to compute net loss per share, basic
and diluted..................................... 5,218 5,792 6,804 3,258,966 3,026,581
Shares used to compute pro forma net loss per
share adjusted for the assumed exercise of all
convertible preferred stock warrants, the
conversion of outstanding convertible preferred
stock and the net exercise of 482,571 common
stock warrants into 428,845 shares of common
stock, basic and diluted........................ 8,123,497
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------
AS OF
DECEMBER 31, AS OF AS OF DECEMBER 31, 1999
-------------------- JUNE 20, ----------------------------
1997 1998 1999 ACTUAL PRO FORMA
(UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 210 $ 2 $ 49 $ 30,170 $ 30,170
Working capital (deficit)......................... (262) (691) (1,087) 28,148 28,148
Total assets...................................... 818 377 498 40,768 40,768
Total convertible preferred stock................. -- -- -- 66,951 --
Total stockholders' equity (deficit).............. 138 (432) (695) (29,323) 37,628
</TABLE>
The foregoing table excludes 397,440 shares of common stock issuable upon
exercise of outstanding warrants, which will remain outstanding upon
consummation of this offering. The pro forma data in the foregoing table also
excludes the effect of the issuance of 929,523 shares of common stock to certain
strategic investors during February 2000.
22
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data," "Summary Financial Data" and our financial statements and notes
thereto appearing elsewhere in this prospectus. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including, but
not limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
CheMatch is a leading business-to-business Internet-based marketplace for
purchasers and sellers of commodity chemicals, plastics and fuel products. Our
marketplace is centered around a real-time, interactive trading exchange, where
our members bid, offer and negotiate online for the purchase and sale of
products 24 hours a day, seven days a week. Members of our secure, neutral
exchange trade products anonymously, utilizing real-time pricing and other
market information provided through our exchange. Members are pre-qualified by
us and pre-selected by each other before trading on our exchange. Our members
include more than 125 of the world's leading chemical companies and other
leading purchasers and sellers of commodity chemicals, plastics and fuel
products, including traders, distributors, brokers, manufacturers and other end
users.
We incorporated in Delaware on June 21, 1999 as PetroChemNet Holdings, Inc.
On November 29, 1999, we changed our name to CheMatch.com, Inc. As a result of a
series of corporate transactions that occurred on June 21, 1999, we acquired
PetroChemNet, Inc. and CheMatch, Inc. These transactions were accounted for
using the purchase method of accounting. The excess of purchase price over the
fair value of assets acquired and liabilities assumed of $5.8 million was
allocated to goodwill and will be amortized over a ten-year period.
CheMatch generates revenues from commissions typically paid by each party
to a transaction on our exchange. CheMatch also generates revenues from
subscription fees related to our Internet-based information resources.
Commissions are based on the volume of chemicals traded on the exchange and
recognized as revenue in the period the transaction is completed. Revenue from
subscription fees is recognized ratably over the term of the subscription, which
is normally one year. Commissions payable by members on our trading exchange are
currently calculated based on a formula of a fraction of cents per gallon or
pound or metric ton equivalent of product traded. Typically, the commission is
payable by both parties to a transaction. Additionally, as we continue to expand
the products offered on our system and add new members, we expect to have the
flexibility to charge commissions based on weight or volume on a
product-by-product basis or by member. Since our commission structure is
currently based on the weight or volume of products traded, the commissions we
receive are not directly affected by fluctuations in the market prices of
products traded over our exchange.
Our costs and expenses consist primarily of (i) salaries and wages for
sales and marketing, technology and administrative personnel (ii) marketing and
advertising costs to promote our interactive trading exchange and information
resource to the petrochemical industry and (iii) technology costs to maintain
and enhance our systems. We intend to continue to increase these costs to expand
our business.
We have entered into strategic relationships with several companies,
including Bayer AG, Computer Sciences Corporation, E.I. du Pont de Nemours and
Company, General Electric Company and Muehlstein Holding Corporation to build
our membership, to increase the trading volume on our exchange and to generally
enhance our trading exchange. In addition, we have strategic relationships with
Stolt-Nielsen Transportation Group Ltd. to facilitate logistics, with DeWitt &
Company, Incorporated and William Heinemann, Inc., a subsidiary of Reed Elsevier
plc to provide information services, and with eCredit.com and TownsendTarnell,
Inc. to provide credit and other services. We believe these strategic
relationships will help establish CheMatch as the leading Internet-based
exchange for the chemical industry. We have
23
<PAGE> 27
provided several of our members with trading concessions and other incentives to
transact business on our trading exchange. In the near term, these concessions
and incentives may temporarily increase the level of activity on our trading
exchange without a corresponding increase in revenue.
CHEMATCH.COM, INC.
PERIOD JUNE 21, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
RESULTS OF OPERATIONS
REVENUES
Revenues for the period June 21, 1999 (inception) through December 31, 1999
were $0.2 million, which consisted of $0.1 million of revenues generated from
commissions on trades completed on our trading exchange and $0.1 million of
subscriptions sold on our information resources web site.
COSTS AND EXPENSES
Technology Costs. Technology costs totaled $2.3 million for the period June
21, 1999 (inception) through December 31, 1999. These costs consisted of
expenses to maintain and upgrade our web sites.
Selling and Marketing. Selling and marketing costs totaled $2.4 million for
the period June 21, 1999 (inception) through December 31, 1999. These costs
consisted of expenses for direct advertising and costs related to the formation
and expansion of our sales and marketing department.
General and Administrative. General and administrative expenses totaled
$3.5 million for the period June 21, 1999 (inception) through December 31, 1999
and consisted primarily of costs for executive and administrative staff.
Stock-based Compensation. During the period June 21, 1999 (inception)
through December 31, 1999, we recorded $2.2 million of deferred stock
compensation expense in connection with certain stock options granted to
employees. We are amortizing deferred stock compensation expense over the
vesting periods of the related options, which is typically four years. For the
period June 21, 1999 (inception) through December 31, 1999 we recorded
stock-based compensation expense of $0.1 million related to deferred stock
compensation. We estimate annual stock-based compensation expense will be
approximately $0.6 million related to previously granted stock options.
Depreciation and Amortization. Depreciation and amortization expense
totaled $0.4 million for the period June 21, 1999 (inception) through December
31, 1999 and consisted primarily of $0.3 million goodwill amortization related
to the merger with PetroChemNet, Inc. and the acquisition of CheMatch, Inc. The
remaining expenses consisted of depreciation and amortization of computer
software, equipment and furniture and fixtures.
INTEREST INCOME
Interest income for the period June 21, 1999 (inception) through December
31, 1999 totaled $0.2 million as a result of cash and cash equivalents being
invested during the period.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed operations primarily from the sale of
convertible preferred stock and the issuance of common stock. As of December 31,
1999, CheMatch had $30.2 million in cash and cash equivalents and $28.1 million
in working capital.
Since inception, we have incurred significant negative cash flow from
operations. For the period June 21, 1999 (inception) through December 31, 1999,
cash used in operating activities was $5.5 million. Cash used in operating
activities was principally for marketing and development of our trading
exchange,
24
<PAGE> 28
development of a sales force and establishment of administrative and technology
staff to support our growth. We expect to continue to incur negative cash flows
in the future.
Cash used in investing activities during the period June 21, 1999
(inception) through December 31, 1999 was $2.6 million. Cash used in investing
activities consisted of $1.6 million in capital expenditures related to the
purchase and development of software and equipment related to upgrading our
system and opening of offices to support our growth.
Cash provided by financing activities during the period June 21, 1999
(inception) through December 31, 1999 was $38.3 million. This amount consisted
primarily of the proceeds from the sale of convertible preferred stock and
issuance of common stock. A summary of these transactions is as follows:
- On June 21, 1999, we sold 2,138,400 shares of Series A Convertible
Preferred Stock and warrants to purchase 1,603,800 shares of Series A
Convertible Preferred Stock for approximately $5 million.
- On September 27, 1999, we sold 2,032,200 shares of Series B Convertible
Preferred Stock and warrants to purchase 1,524,150 shares of Series B
Convertible Preferred Stock for approximately $5 million.
- On October 6, 1999, we sold 191,080 shares of common stock for
approximately $1 million to Computer Sciences Corporation in conjunction
with our entering into a strategic alliance.
- On November 24, 1999, we issued 636,943 shares of common stock for $6,369
to E.I. duPont de Nemours and Company in conjunction with our entering
into a strategic alliance, pursuant to which duPont agreed to provide
future goods and services with a value estimated by the Company of
approximately $3.3 million. Additionally, duPont purchased 891,716 shares
of Series C Convertible Preferred Stock and warrants to purchase 668,787
shares of Series C Convertible Preferred Stock for approximately $7
million.
- On November 24, 1999, we sold an additional 2,611,453 shares of Series C
Convertible Preferred Stock and warrants to purchase 1,958,591 shares of
Series C Convertible Preferred Stock for approximately $20.5 million.
Additionally, following December 31, 1999, we have issued a total of
929,523 shares of common stock to various strategic investors. A summary of
these transactions is as follows:
- On February 5, 2000, we sold 204,291 shares of our common stock to
Muehlstein Holding Corporation for approximately $1 million and a
promissory note in aggregate principal amount of approximately $1
million. The promissory note, which bears interest at the rate of eight
percent per year, is payable in eight consecutive quarterly installments,
commencing April 1, 2000.
- On February 11, 2000, we sold 153,218 shares of our common stock to
William Heinemann, Inc., a subsidiary of Reed Elsevier plc, for
approximately $1.5 million.
- On February 14, 2000, we sold 306,435 shares of our common stock to
General Electric Company for $3,064 and a promissory note in aggregate
principal amount of approximately $2 million in conjunction with our
entering into a strategic alliance, pursuant to which General Electric
agreed to provide future services with a value estimated by the Company
of approximately $1 million. The promissory note, which bears interest at
the rate of eight percent per year, is payable on or before December 31,
2001.
- On February 14, 2000, we sold 204,291 shares of our common stock to Bayer
AG for approximately $2 million.
- On February 16, 2000, we sold 61,288 shares of our common stock to
TownsendTarnell, Inc. for $613 and a promissory note in aggregate
principal amount of approximately $0.6 million. The promissory note,
which bears interest at the rate of eight percent per year, is payable in
twelve consecutive monthly installments, commencing February 1, 2000.
Pursuant to a management incentive agreement, a portion of the proceeds
from this offering will be paid to current and former members of our management
team and to current employees. The portion of
25
<PAGE> 29
the net proceeds payable to these individuals will be two percent of the average
daily closing price of our common stock for the 90 day period immediately
following the consummation of this offering, multiplied by the number of shares
of common stock outstanding on a fully diluted basis on the 90th day immediately
following the consummation of this offering. The maximum amount payable under
the management incentive agreement is $15 million.
We have generated only immaterial revenues to date and our ability to
generate significant revenues is uncertain. We have incurred significant losses
since our inception on June 21, 1999. We currently expect our losses to increase
in the future and we cannot assure that we will ever achieve or sustain
profitability.
We expect to experience significant growth in our costs and expenses,
particularly technology development and sales and marketing expenses, for the
foreseeable future in order to execute our business plan. As a result, we
anticipate that such costs and expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. In addition,
we may utilize cash resources to fund acquisitions or investments in
complementary businesses, technologies or product lines. We believe that our
current cash balance and the net proceeds from the sale of the common stock in
this offering will be sufficient to meet our working capital and operating
resource expenditure requirements for at least the next two years. Thereafter,
we may find it necessary to obtain additional equity or debt financing. We may
also be required to raise additional financing before such time to finance
acquisitions or operations. In the event additional financing is required, we
may not be able to raise it on acceptable terms or at all.
YEAR 2000
Our business may suffer as a result of defects relating to Year 2000
compliance issues that have not yet been detected. The hardware and software
systems that are central to our marketplace are vulnerable to interruption from
power failures, telecommunications outages, and network service outages. Our
trading exchange and information resource center could fail to function properly
in the event that third party service providers we rely upon encounter Year 2000
problems.
PETROCHEMNET, INC.
YEARS ENDED DECEMBER 31, 1997 AND 1998
RESULTS OF OPERATIONS
The following table sets forth statement of operations data for each of the
comparative periods indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------
1997 1998
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................... $ 841 $ 698
------ -------
Costs and expenses:
Technology costs.......................................... 901 631
Selling and marketing..................................... 222 176
General and administrative................................ 246 688
Stock-based compensation.................................. 239 1,577
Depreciation and amortization............................. 144 161
------ -------
Total costs and expenses.......................... 1,752 3,233
------ -------
Operating loss.............................................. (911) (2,535)
Interest expense............................................ (16) (14)
------ -------
Net loss.................................................... $ (927) $(2,549)
====== =======
</TABLE>
26
<PAGE> 30
REVENUES
Revenues decreased $0.1 million, or 17%, from $0.8 million in 1997 to $0.7
million in 1998. This decrease was due to lower third-party web site development
service revenue partially offset by higher subscription revenues. Subscription
revenues increased $0.1 million from $0.1 million in 1997 to $0.2 million in
1998 due to increased activity on PetroChemNet's information resource network.
PetroChemNet previously provided web site development service activities for
third parties, which was suspended in 1998. Web site development service revenue
decreased accordingly by $0.3 million from $0.8 million in 1997 to $0.5 million
in 1998.
COSTS AND EXPENSES
Technology Costs. Technology costs decreased $0.3 million, or 30%, from
$0.9 million in 1997 to $0.6 million in 1998. The decrease was due to lower
costs related to web site development service activities for third parties,
which was suspended in 1998.
Selling and Marketing. Selling and marketing expenses decreased $46,000, or
21%, from $0.2 million in 1997 to $0.2 million in 1998. The decrease was due to
lower costs related to web site development service activities partially offset
by higher expenses related to increased subscription activity in 1998 on our
information resource network.
General and Administrative. General and administrative expenses increased
$0.5 million, or 180%, from $0.2 million in 1997 to $0.7 million in 1998. The
increase was primarily due to higher labor-related costs and consulting costs
related to expanding PetroChemNet's information resource network.
Stock-based Compensation. Stock-based compensation expenses increased $1.4
million from $0.2 million in 1997 to $1.6 million in 1998. The $1.4 million
increase in compensation expense was due to PetroChemNet granting a greater
amount of stock options to employees and consultants during 1998.
Depreciation and Amortization. Depreciation and amortization expense
increased $0.1 million, or 12%, from $0.1 million in 1997 to $0.2 million in
1998. The increase was due to higher depreciation expense on equipment and
software purchased in 1997 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $0.2 million and $0.5 million in
1997 and 1998, respectively. Net cash flows from operating activities in each
period reflect increasing net losses offset by non-cash compensation charges
related to stock options granted to employees.
Net cash used in investing activities was $0.4 million and $20,000 in 1997
and 1998, respectively. Cash used in investing activities primarily reflects
capital expenditures for the purchase of property and equipment. Additionally,
in 1997, capital expenditures included the acquisition of a customer list for
$0.3 million.
Net cash provided by financing activities was $0.8 million and $0.4 million
in 1997 and 1998, respectively. Cash provided by financing activities consisted
primarily of proceeds from issuance of common stock, capital contributions and
debt.
27
<PAGE> 31
CHEMATCH, INC.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data for each of the
comparative periods indicated:
<TABLE>
<CAPTION>
MARCH 10, 1997 THREE MONTHS
(INCEPTION) ENDED
THROUGH YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, -------------
1997 1998 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues............................................. $ -- $ 84 $ 13 $ 33
----- ----- ---- ----
Costs and expenses:
Technology costs................................ 1 30 7 2
General and administrative...................... 107 104 28 45
Depreciation and amortization................... 2 41 10 11
----- ----- ---- ----
Total costs and expenses................... 110 175 45 58
----- ----- ---- ----
Operating loss....................................... (110) (91) (32) (25)
Interest expense..................................... (5) (18) (4) (4)
----- ----- ---- ----
Loss before income taxes............................. (115) (109) (36) (29)
Benefit of income taxes.............................. 30 -- -- --
----- ----- ---- ----
Net loss............................................. $ (85) $(109) $(36) $(29)
===== ===== ==== ====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1999
REVENUES
Revenues increased $20,000, or 154%, from $13,000 for the three months
ended March 31, 1998, to $33,000 for the three months ended March 31, 1999. The
increase was due to increased trading activity during the 1999 period as a
result of trading on the exchange commencing in February 1998.
COSTS AND EXPENSES
General and Administrative. General and administrative costs increased
$17,000, or 61%, from $28,000 for the three months ended March 31, 1998, to
$45,000 for the three months ended March 31, 1999. The increase was primarily
due to higher costs associated with increased activity on the exchange.
MARCH 10, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997 AND YEAR ENDED DECEMBER 31,
1998
REVENUES
Revenues increased $84,000 from $0 for the period March 10, 1997
(inception) through December 31, 1997, to $84,000 for 1998. The increase was due
to increased trading in 1998 as a result of trading on the exchange, which
commenced in February 1998.
COSTS AND EXPENSES
Technology Costs. Technology costs increased $29,000 from $1,000 for the
period March 10, 1997 (inception) through December 31, 1997 to $30,000 for 1998.
The increase was due to higher costs in 1998 to operate the exchange, which
commenced operations in February 1998.
General and Administrative. General and administrative costs decreased
$3,000, or 3%, from $0.1 million for the period March 10, 1997 (inception)
through December 31, 1997, to $0.1 million for 1998. These costs in 1998
remained consistent with the period March 10, 1997 (inception) through December
31, 1997.
28
<PAGE> 32
Depreciation and Amortization. Depreciation and amortization expense
increased $39,000 from $2,000 for the period March 10, 1997 (inception) through
December 31, 1997, to $41,000 for 1998 due to the full year impact of
depreciation of trading exchange development costs, which commenced operations
in February 1998.
INTEREST EXPENSE
Interest expense increased $13,000 from $5,000 for the period March 10,
1997 (inception) through December 31, 1997 to $18,000 in 1998 due to higher
outstanding balances on advances from DeWitt & Company, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The net cash used in operating activities was $24,000 and $29,000 for 1998
and the three months ended March 31, 1999, respectively. Net cash used in
operations for each period reflects net losses offset by non-cash charges for
depreciation. Additionally, cash receipts of $49,000 related to deferred revenue
that will be recognized in future periods favorably impacted 1998. The three
months ended March 31, 1999 was negatively impacted by $21,000 of deferred
revenue that was recognized during the period with the corresponding payment
being received in a prior period.
Net cash used in investing activities was $15,000 and $0 for 1998 and the
three months ended March 31, 1999, respectively. Cash used in investing
activities reflects purchases of software and equipment to support the trading
system.
Net cash provided by financing activities was $58,000 and $9,000 for 1998
and the three months ended March 31, 1999. Cash provided by financing activities
reflects advances received from DeWitt, partially offset by payments made to
DeWitt.
29
<PAGE> 33
BUSINESS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in such
forward-looking statements including the risk factors beginning on page 6.
OVERVIEW
CheMatch.com is a leading business-to-business Internet-based marketplace
for purchasers and sellers of commodity chemicals, plastics and fuel products.
Our marketplace is centered around a real-time, interactive trading exchange,
where our members bid, offer and negotiate online for the purchase and sale of
products 24 hours a day, seven days a week. Members of our secure, neutral
exchange trade products anonymously, utilizing real-time pricing and other
market information provided through our exchange. Members are pre-qualified by
us and pre-selected by each other before trading on our exchange. Our members
include more than 125 of the world's leading chemical companies and other
leading purchasers and sellers of commodity chemicals, plastics and fuel
products, including traders, distributors, brokers, manufacturers and other end
users.
Our trading exchange, located at www.chematch.com, was the first and is one
of the largest online exchanges serving the chemical industry. Over $125 million
in transactions have been traded on our exchange since February 1998, and over
$29 million in transactions were traded on our exchange in the quarter ended
December 31, 1999. In the fourth quarter of 1999, we averaged more than 35,000
metric tons of daily product bids and offers and the average transaction value
of completed trades exceeded $500,000. We generate revenues on our trading
exchange from commissions typically paid by each party to a completed
transaction.
Our strategic investors include Bayer AG, Computer Sciences Corporation,
E.I. duPont de Nemours and Company, General Electric Company, Millennium
Holdings Inc., Muehlstein Holding Corporation, Stolt-Nielsen Transportation
Group Ltd., TownsendTarnell, Inc. and William Heinemann Inc., a subsidiary of
Reed Elsevier plc. We have entered into strategic alliances with Bayer, CSC,
duPont, General Electric and Muehlstein to build our membership, to increase the
trading volume on our exchange and to generally enhance our trading exchange. In
addition, we have strategic relationships with Stolt-Nielsen to facilitate
logistics, with DeWitt & Company, Incorporated and Reed Elsevier to provide
information services, and with eCredit.com and TownsendTarnell to provide credit
and other services.
We maintain an extensive information resource center, located at
www.petrochem.net, providing over 5,000 users access to industry news, forums,
reference materials and more than 100 offerings from a number of the chemical
industry's most respected sources. We generate revenues through our information
resource center from subscription and other user fees. Users may subscribe to
market updates featuring chemical industry news, pricing information and related
statistics, over 40 product specific consulting reports containing summaries of
marketing and pricing trends and over 20 newsletters that detail market trends
in the chemical industry. In addition, the CheMatch trading screen integrates
relevant news, trends, commentaries and analyses from our information resource
center.
Our principal executive offices are located in Houston, Texas. We also
maintain domestic offices in San Ramon, California and Stamford, Connecticut and
international offices in Manchester, England, Singapore and Tokyo, Japan.
INDUSTRY BACKGROUND
GROWTH OF BUSINESS-TO-BUSINESS E-COMMERCE
The Internet has emerged as a global communications medium enabling
businesses worldwide to communicate, share information and transact business
electronically. As the use of the Internet has grown, businesses have
increasingly recognized the ability of the Internet to streamline complex
processes, lower costs and improve efficiency through the significant reduction
of the traditional business communication barriers of time, geography and number
of participants. Forrester Research predicts that business-to-business
e-commerce in the United States will grow from $109 billion in 1999 to over $1.3
trillion in 2003.
30
<PAGE> 34
The acceptance of the Internet as a communications platform for transacting
business has led to the development of web sites designed to provide users
access to electronic marketplaces and aggregated information. The creation of an
information based, electronic marketplace within a highly fragmented industry
offers substantial potential benefits, including:
- a global interactive marketplace;
- improved market liquidity;
- real-time market information;
- access to aggregated data as well as interactive content; and
- a more efficient, less labor and paper intensive transaction model.
THE CHEMICAL INDUSTRY: AN OPPORTUNITY FOR AN INTERNET-BASED SOLUTION
The commodity, specialty and life sciences chemical industry is a $1.6
trillion annual global market. The commodity chemicals -- including basic
industrial chemicals, petrochemicals and agrichemicals -- and plastics market is
the largest segment of the global chemical industry, representing more than $700
billion of products purchased and sold worldwide annually. Fuel products, an
additional market segment served by the CheMatch exchange, represents
approximately $100 billion of products purchased and sold annually worldwide.
Forrester Research estimates that by 2003, the petrochemical industry is
projected to be the third largest segment of the Internet economy in the United
States, growing from $4.7 billion in 1998 to in excess of $178 billion in 2003.
The traditional marketplace for commodity chemicals, plastics and fuel
products is characterized by the following:
- Fragmented Market. The industry is highly fragmented, with a large number
of industry participants who traditionally trade with a select number of
parties with whom they have pre-existing relationships.
- Lack of Real-Time Market Information. Purchasers and sellers in the
traditional marketplace generally discover pricing and other market
trends through third party reports that are based on telephone surveys
and may contain outdated or inaccurate information.
- Geographic Insularity. Trading between companies within the chemical
industry's traditional marketplace generally occurs between businesses in
the same geographic region due to various constraints, including time
zone limitations and established personal networks.
- Price Volatility and Cyclicality. The industry is subject to significant
price fluctuations based on changes in oil and other feedstock costs,
changes in supply and demand for different products.
- Lack of Market Liquidity. A substantial majority of commodity chemicals,
plastics and fuel products are purchased and sold under contracts. These
contracts, which vary in duration but are often one year or longer,
enable companies to satisfy their volumetric requirements for a given
product over a specified period of time. The balance of trading occurs on
the spot market, where companies can purchase or sell products based on
current market prices. Traditionally, the spot market for these products
has been relatively illiquid, volatile and unreliable. As a result,
purchasers and sellers have been reluctant to rely on the spot market to
satisfy their requirements.
- Low Trading Velocity. Velocity reflects the number of times a product
changes hands from production, through the supply chain, to ultimate end
use. The velocity of trading in the chemical industry's traditional
marketplace as estimated by management is approximately 1.8 times. This
low velocity is attributable, at least in part, to the chemical
industry's traditional reliance on the contract market.
- Highly Networked. Unlike most industries, companies within the chemical
industry are highly networked, simultaneously being competitors,
customers, suppliers and product development
31
<PAGE> 35
partners. Multiple transactions with numerous industry participants on a
regular basis make increased standardization and integration of
enterprise resource planning systems an important objective to facilitate
reduced processing costs.
LIMITATIONS OF TRADITIONAL PURCHASING AND SELLING METHODS IN THE CHEMICAL
INDUSTRY
We believe the traditional way of purchasing and selling commodity
chemicals, plastics and fuel products is inefficient. The process of initiating,
negotiating and completing a transaction is time consuming and subjects the
parties to market risk related to price fluctuations. Within this traditional
marketplace, real-time market information is limited and purchasers and sellers
typically transact business locally or regionally. Communications between
industry parties occur primarily by telephone and facsimile and require
significant paper documentation. In order to complete a transaction in the
traditional marketplace for purchasing and selling commodity chemicals, plastics
and fuel products, purchasers and sellers generally have to:
- identify their purchase or sale requirements;
- contact five to ten traders, brokers, customers, producers or other
industry participants;
- negotiate with two or more parties;
- finalize a trade with one or more parties;
- confirm the transaction;
- submit and complete paperwork necessary to document the transaction;
- determine the method of shipping and surveying the product that is the
subject of the transaction; and
- monitor the shipping, certification and delivery process.
THE CHEMATCH SOLUTION
We offer a secure, neutral marketplace for purchasers and sellers of
commodity chemicals, plastics and fuel products which is designed to reduce the
inefficiencies associated with the traditional methods of purchasing and selling
these products. Our Internet-based marketplace has the following key features:
- Real-Time, Interactive Exchange. Our members bid, offer and negotiate
online for the purchase and sale of commodity chemicals, plastics and
fuel products in real-time 24 hours a day, seven days a week utilizing
current market information, reducing the timing and information
inefficiencies associated with the chemical industry's traditional
transaction process.
- Market Intelligence. Through our trading exchange, we provide our members
with real-time pricing and other market information, including news,
trends, commentaries and analyses about the products eligible for trading
on our exchange. Additionally, we offer users of our information resource
center a wide variety of information related to the petroleum and
chemical industries. The content we provide enables our members to
transact on a more fully-informed basis.
- Global Reach. Unlike the geographical and temporal limitations presented
by the chemical industry's traditional marketplace, our trading exchange
is designed to facilitate a global marketplace that transcends time zones
and established personal networks. This global network will provide
purchasers and sellers with expanded market reach.
32
<PAGE> 36
- Qualified Traders and Products. We screen our members based on their
financial capabilities, market reputation and other criteria before they
are cleared to join and participate on our trading exchange. All of the
products traded on our exchange are required to meet defined
specifications.
- Pre-Selection of Trading Partners. Prior to their participation on our
exchange, our members pre-select the other members from whom they will
purchase and to whom they will sell products and the credit terms on
which they will transact with those members. Our members may refuse to
purchase from, sell to or offer credit to other members for any reason
and may update their trading criteria at any time.
- Anonymity. After pre-selecting the parties with whom they will trade, our
members bid, offer and negotiate online for the purchase and sale of
commodity chemicals, plastics and fuel products on our trading exchange
on an anonymous basis with respect to other exchange members. Only upon
matching of a trade is the identity of each party revealed and then only
to the other party to the transaction. We believe this anonymity builds
market efficiency by enabling our members to purchase and sell large
quantities of products discreetly, thereby minimizing the potential
effect on the larger market.
- Increased Liquidity and Velocity. We expect the efficiencies associated
with our marketplace to improve liquidity within the market for commodity
chemicals, plastics and fuel products, enabling our members to improve
their capacity utilization and inventory management. If these
efficiencies are achieved, we believe that the velocity of trading within
the chemical industry will increase, further enhancing liquidity in the
marketplace.
- Reduced Cost Structure. The comprehensive solution presented by our
trading exchange will allow our members to reduce the expense and process
steps associated with procurement, sales and marketing, administration
and logistics for the products represented on our trading exchange.
Furthermore, we intend to enable our exchange to be integrated with our
members' enterprise resource planning systems.
- Reliability and Confirmation. Our members' ability to pre-select the
parties with whom they will trade and our system's online documentation
and confirmation procedures bring greater certainty to the trading
process which we believe will lead to the increased adoption of our
exchange.
THE CHEMATCH STRATEGY
Our objective is to expand upon our position as a leading Internet-based
solution for purchasers and sellers of commodity chemicals, plastics and fuel
products. Our strategy to achieve this objective includes the following key
elements:
Increase Adoption of our Trading Exchange to Promote Liquidity. We have
initially targeted the 250 largest chemical companies worldwide and other
leading purchasers and sellers of commodity chemicals, plastics and fuel
products, including traders, brokers, distributors, manufacturers and other end
users, as prospective members of our trading exchange. As of February 15, 2000,
we had over 125 members on our exchange. Through our sales and marketing
efforts, we intend to continue to communicate to the remainder of our target
companies the benefits of our marketplace to encourage the industry's migration
to and our members' use of our Internet-based trading solution. We believe the
adoption of our exchange will improve liquidity within the market for commodity
chemicals, plastics and fuel products.
Expand Product Offerings. We intend to continue to expand the products
eligible for trading on our exchange and about which we provide information
based on evaluations of the market and input from our members. We will continue
to focus on high volume commodity chemicals, plastics and fuel products. As of
February 15, 2000, we permitted bids and offers on 17 products on our trading
exchange and provided information on over 50 products on our information
resource center.
33
<PAGE> 37
Enhance Functionality and Services. Many of the features and
functionalities of our exchange were added based on feedback generated from our
members. We intend to continue to enhance the content and functionality of our
marketplace by:
- integrating various interactive services, including broadcast and
personal messaging via e-mail, pagers and other portable devices,
specialized bulletin boards and other interactive features;
- offering our members a suite of integrated products to link commercial
transactions on our trading exchange with our members' back office
operations;
- providing enhanced pricing analytics, information feeds and other
interactive content; and
- introducing additional functionality, including on-line auction and
tender features designed to provide purchasers and sellers greater market
reach and to provide a market for branded products that are not actively
traded.
Expand our Marketplace through Strategic Relationships. Through strategic
relationships, including those we have entered into with Stolt-Nielsen, DeWitt,
Reed Elsevier, eCredit.com and TownsendTarnell, we intend to expand and enhance
our marketplace by:
- facilitating logistics for products offered and sold on our trading
exchange, including transportation with online tracking, inspection and
surveying, terminalling and storage and related services;
- expanding our information service offerings;
- offering our members a full complement of credit services; and
- providing financial risk management services, including a forward market
and unregulated financial derivatives.
Leverage Chemical Industry Expertise. In implementing our strategy, we
intend to leverage the collective knowledge and expertise of our management
team, which includes more than 30 employees with 10 or more years of experience
in the chemical industry. They provide strategic guidance, offer expertise in
commodities, finance, sales, marketing and information technology and have
significant industry contacts. In order to capitalize on this expertise, we have
located our headquarters in Houston, Texas, a hub for the chemical industry.
Maintain Integrity of Trading Exchange. We intend to maintain the
third-party neutral approach of our trading exchange to maximize the adoption of
our marketplace by all purchasers and sellers of commodity chemicals, plastics
and fuel products, including traders, distributors, brokers, manufacturers and
other end users. We believe that our neutral approach will ensure that these
market participants have access to an efficient and liquid marketplace with
unbiased product offerings and pricing and market information. As we enhance the
features and functionality of our exchange, we intend to continue to ensure this
third-party neutrality.
Expand Internationally. We believe that the international scope of the
Internet, the global presence of leading chemical companies and the worldwide
demand for commodity chemicals, plastics and fuel products present opportunities
to expand our international operations. We plan to leverage our technology
platform and our sales and marketing personnel to take advantage of this
international opportunity.
Maintain Technological Leadership. We will continue to utilize proven,
leading-edge technologies that will allow us to expand and enhance our
technology platform to improve the scalability, reliability and flexibility
necessary to meet the requirements of our members and the market.
CHEMATCH TRADING PROCESS
Initiation and Selection. Our trading exchange is a user-friendly,
comprehensive solution for industry participants. After executing a membership
agreement, new members to the exchange are provided with a unique user name and
password. Our members are required to input their user name and password each
34
<PAGE> 38
time they access our trading exchange. Individual users have either active
(eligible to trade) or passive (view only) accounts. On their first visit to our
trading exchange, new active members are presented with a list of all other
member companies. From this list, they decide to which companies they are
willing to offer credit. By refusing to offer another member credit, the active
member is either refusing to sell to that specific company or requiring that the
company provide a letter of credit if and when a sale is made. Using this same
list, new members also decide whether or not they will purchase from each member
and whether or not they will provide a letter of credit if required. Each time
members access the trading exchange, they may review and revise their selected
list of trading parties by including previously excluded parties or new members
or excluding previously agreed upon trading parties.
Review of Bids and Offers. Once the new active member has completed this
pre-selection process, the member is eligible to enter the trading exchange
where the identity of all parties remains anonymous throughout the trading
process. Within the trading exchange, members can view and submit current bids
and offers as well as view current market information related to the product or
products they desire to trade. All bids and offers are categorized by product.
Each bid or offer contains sufficient information to enable a member to decide
whether to purchase or sell, including the type of transaction, the name of the
product and its specifications, applicable freight terms, quantity, price and
delivery terms.
Negotiation and Confirmation. After locating a bid or offer of interest, an
active member can point and click to select that posting and will be taken to a
secure negotiation screen where the member may accept the offer as posted or
enter into one-on-one private, confidential counter negotiations with the other
party. If the parties desire to negotiate specific terms, they can send each
other information online, outlining proposed changes to the posted terms.
Transactions on our trading exchange are not self-executing, even if the parties
reach agreement on all terms. An accepting party must point and click on a
confirmation button to confirm that the offered terms have been matched.
After the offered terms are matched, the identity of each party to the
transaction is revealed to the other party to the transaction but not to other
members of our trading exchange. At the same time, the terms of the matched
trade are instantaneously removed from the active screen of the trading exchange
and appear on a matched transaction screen for the market to view. Concurrent
with this transfer from the active screen to the matched transaction screen,
CheMatch sends to each party to the transaction a summary of the negotiations
and principal terms of the agreed upon transaction. At this point, the parties
to the transaction must confirm and complete the transaction offline, and may
arrange, if necessary, for financial settlement, logistics and other details
necessary to complete the trade. From here, members can return to the trading
exchange to view the market offerings.
OUR MEMBERS
Our target members are the world's 250 leading chemical companies and other
leading purchasers and sellers of commodity chemicals, plastics and fuel
products. As of February 15, 2000, we had more than 125 members on our exchange.
The membership agreement is generally a standard form contract that sets forth
the terms and conditions upon which a member may access our trading exchange.
The standard membership agreement has an initial term of twelve months and is
automatically renewed for successive twelve month periods unless either party
provides written notice of termination thirty days prior to the expiration of
the applicable twelve month term. The agreement may be terminated by either
party for other specified reasons. The membership agreement is non-exclusive and
does not obligate our members to trade on our exchange.
35
<PAGE> 39
The following is a list of entities that had executed membership agreements
as of February 15, 2000:
Aectra S.A.
AllChem Industries, Inc.
ALPAC Marketing
Ameripol Synpol Corporation
Ashland Chemical
B F Goodrich Kalama, Inc.
BASF A.G. Europe
Bamberger Polymers, Inc.
Bayer A G
Bayer Corporation (US)
Beaumont Methanol
BP Amoco Chemicals
BP Chemicals Trading Ltd.
Celanese Ltd.
Chemcentral
Chemical Trading, S. L.
Chevron Chemical -- Geneva
Chevron Chemical LLC (U.S.)
Chevron Chemical -- Singapore
Clark Refining & Marketing, Inc.
Coastal Catalyst & Chemical Company
Deltech Corporation
Dow Europe S A
Dow Hydrocarbons & Resources
DSM
Duravin Chemicals
E. I. duPont de Nemours and Company
Eastman Chemical Company
EC Erdoelchemie
Enron Europe
Enron Petrochemicals Co.
Epsilon Products Company
Equistar Chemicals LP
ExxonMobil Chemical
Fenoquimia S.A.
Fernz Specialty Chemicals
FMC Corporation
Gadiv Petrochemical Industries Ltd.
Gantrade Corporation
General Electric Company
Georgia Gulf Corporation
Grupo Idesa
Gujarat Alkalies and Chemicals Limited
H. Muehlstein & Co., Inc.
Hedco Pakistan
Helm AG
Herdillia Chemicals Limited
Hunstman Petrochemical Corp.
Hyundai Corporation
Infineum USA LP
InterChem 2000, Ltd. (Europe)
InterChem Americas
JLM Chemicals Asia PTE Ltd
JLM Industries Holland BV
JLM International (US)
Koch Chemical International (US)
Koch Refining Intl. (Europe)
Koch Refining Intl. (Singapore)
Kolmar Petrochemicals Americas, Inc.
Landmark Chemicals (Far East) Pte Ltd.
Landmark Chemicals S A
LG International Corp.
Lyondell Chemical Company
Lyondell-Citgo Refining L.P.
M. Holland Company
Magnum Solvent, Inc.
Marathon Ashland Petroleum LLC
Marubeni America Corporation
Methanex Methanol Co.
Midland Petrochemical Ltd.
Millennium Inorganic Chemicals
Millennium Petrochemicals, Inc.
Multichem, Inc.
Neste Oxo AB
Neste Resins
Noble Americas Corp.
Occidental Chemical Corporation
Oceana Petrochemicals AG
Osterman & Company, Inc.
Peninsula Trading
Performance Polymers
Petrochem UK Ltd.
Phenolchemie Asia Pte Ltd.
Phenolchemie GmbH & Co. KG
Phenolchemie, Inc (US)
Phillips Chemical Company
Plaza Group
PPG Industries, Inc.
Proppet Reichhold Rhodia-ster S/A
Rapid Industrial Plastics Co., Inc.
Reichhold
Rhodia-Ster S/A
Sam Hyun Co., Ltd. Agent for Oceana
Samsung America, Inc.
Samsung Corporation (Korea)
Shell Chemical
Shell Chemicals Ltd. (Europe)
Siam Chemicals Trading Co., Ltd.
Sinochem Tianjim Imp & Exp Shezhen Corp.
SK Corporation (Korea)
SK Global Americas, Inc.
SK Global Co., Ltd. (Korea)
Southern Chemical Corp
SPP Agaprint
Sterling Chemicals, Inc.
Stylette
Sudamericana de Fibras SA
Sun Company, Inc.
Talichem S A
Tauber Petrochemicals
Texas Petrochemicals Corporation
Thornton and Company, Inc.
Trademark Plastics Corporation
Tradepaints
Trammochem (US)
Trammochem A. G.
Tricon Energy, Ltd.
Trump Chemical Corp.
Tuntex Petrochemical
U-Jin Chemical Co.
Ultramar Diamond Shamrock
Union Carbide Corporation
36
<PAGE> 40
VA-Singapore Pte Ltd
Valero Marketing & Supply
Veba Oel A. G.
Venro Chemical Corporation
Vinmar International, Ltd.
Voest Alpine A. G.
Voest-Alpine Intertrading USA
Westway Terminal Company, Inc.
Wilsonart
Windsor Chemicals, Inc.
Winsway (Group) Enterprise Ltd.
Some of our members are affiliated with each other. These affiliated
entities are precluded from trading with each other on our exchange. As of
February 15, 2000, 34 of our members had completed one or more transactions on
our exchange. During the quarter ended December 31, 1999, four of our members
accounted for 14%, 13%, 10% and 9% of the transactions on our exchange as
measured by metric tons traded.
PRODUCTS OFFERED
The following commodity chemicals, plastics and fuel products are presently
eligible to be traded on our exchange. We have indicated the approximate market
size as of April 1999 and typical end uses associated with these products.
<TABLE>
<CAPTION>
PRODUCTS MARKET SIZE TYPICAL END USES
(IN BILLIONS)
<S> <C> <C>
COMMODITY CHEMICALS
Benzene............................ $8.3 fibers, paints, plastics
Mixed Xylenes...................... 5.1 fibers, plasticizers, solvents
Toluene............................ 3.3 gasoline blending, resins, solvents
Acetone............................ 1.4 pharmaceuticals, resins, solvents
Cumene............................. 3.5 resins, solvents
Ortho Xylene....................... 1.1 plasticizers
Ethylbenzene....................... 11.5 plastics, synthetic rubber
Cyclohexane........................ 2.0 nylon fiber
Paraxylene......................... 7.2 fibers
Phenol............................. 4.5 fibers, resins
Styrene Monomer.................... 14.4 fiberglass, plastics, resins, synthetic rubber
FUELS
Methanol........................... 6.0 antifreeze, MTBE
MTBE............................... 5.2 gasoline blending, oxygenate
PLASTICS
Polyethylene....................... 34.8 injection molding, film, rigid containers
Polypropylene...................... 21.9 film, injection molding
Polystyrene........................ 12.7 packaging and shipping materials
PolyVinyl Chloride................. 18.2 doors, packaging, pipes, windows
</TABLE>
We expect to add various organic and inorganic chemicals, plastics, vinyls
and fuel products to our trading exchange during 2000. Benzene accounted for
approximately 69% of the physical trading volume on our exchange in fiscal 1999
and approximately 59% in the quarter ended December 31, 1999. Benzene, which was
the first product available on our exchange, was one of eight products eligible
for trading for all of fiscal year 1999.
37
<PAGE> 41
INFORMATION RESOURCES
In addition to the relevant product and market information our members view
while trading products on our exchange, we offer users of our information
resource center access to an extensive collection of industry related
information. The providers and types of information we offer include:
PLATT'S MARKET REPORTS
Platt's Petrochemical Alert
Platt's Petrochemical Report
Platt's Petrochemical Specifications
MOTOR FUELS INFORMATION
State and Federal Resources
Motor Fuels Data
News Forums
TECNON CONSULTING
23 Market Newsletters
44 Product Specific Reports
Investment and Strategy Appraisals
Global Market Overviews
OPIS ENERGY GROUP
OPIS News Alerts
OPIS Gas Liquids
OPIS Jet Fuel
OPIS West Coast
OPIS Refinery Feedstocks
OPIS Rack Prices
OPIS Center
CPI CONSULTING ASSOCIATES, INC.
CIMBal(TM)
Approach & Methodology
Competitive Analysis
Chemical Industry Analysis
Financial Analysis
Litigation Support
Product Analysis
STRATEGIC RELATIONSHIPS
We have entered into a number of strategic relationships to, among other
things, build our membership, increase the trading volume on our exchange and
enhance our trading exchange generally. We have also contracted with third
parties to provide credit services and to facilitate logistics for our members.
We believe these strategic relationships will help establish CheMatch as the
leading Internet-based exchange for the chemical industry.
BAYER AG
Bayer AG is a subsidiary of Bayer Group, an international, research-based
company with major businesses in life sciences, polymers, and specialty
chemicals. Bayer has agreed to use our trading exchange as its preferred
platform for e-commerce trading of the products offered on our trading exchange
through December 31, 2001. In connection with Bayer's cash payment of
approximately $2 million for our common stock, we have credited Bayer's trading
account in the same amount against which any commissions generated by Bayer as a
result of any trades on our exchange will be debited.
COMPUTER SCIENCES CORPORATION
Computer Sciences Corporation is a leading international provider of
information technology services to commercial and government markets. CSC has
agreed to market our trading exchange and information resource center to
companies we have targeted as prospective members in exchange for commissions
related to these efforts. CSC has a right of first negotiation to provide
consulting services required by us, including strategic consulting, marketing,
new product development, system development management, international pursuits,
logistics, letters of credit and credit enhancement. During the term of our
strategic relationship, we have also agreed that CSC will be our preferred
information technology systems integrator so long as CSC's rates are competitive
and its technology and performance are reasonably acceptable to us and we will
be CSC's preferred exchange for trading commodity products. CSC has also agreed
not to compete with us during the term of our strategic relationship and for a
period of one year after termination of the strategic relationship. The
strategic relationship may be terminated by either party upon 30 days' written
notice.
38
<PAGE> 42
DEWITT & COMPANY, INCORPORATED
DeWitt & Company, Incorporated is an international consulting and
information provider serving the petrochemical industry. We have agreed that
DeWitt will provide chemical industry trading analytics for our trading
exchange, and we have granted to DeWitt a right to a preferred display on our
trading screen for products and services offered by DeWitt. We have also agreed
to share development and other costs, and to share fees generated from the sale
of some of DeWitt's products and services offered on our trading exchange. We
have the right to terminate the Alliance Agreement at any time upon the payment
to DeWitt of $500,000. DeWitt may terminate the Agreement upon one year's prior
notice and the payment of $60,000.
E.I. DUPONT DE NEMOURS AND COMPANY
E.I. duPont de Nemours and Company is a global science company focused on
chemical and materials sciences and biological sciences. DuPont has agreed to
work with us to add an agreed upon list of parties to our trading exchange in
exchange for commissions related to these efforts. Dupont has agreed to use our
trading exchange exclusively through November 11, 2000 for trading bulk
chemicals and polymers and refined oil products over the Internet and use
reasonable efforts to trade an increasing amount of spot purchases on our
exchange for a four year period from January 1, 2001. DuPont has agreed through
November 11, 2000 to provide us at no cost with a full time employee with
relevant market knowledge to work on increasing the volume of trading on our
exchange. DuPont has also agreed for the same period not to invest in companies
that provide an on-line neutral marketplace with product offerings that
significantly overlap with those available on our trading exchange. DuPont has
also provided us with a $2 million credit towards the purchase of its products
and services. This credit will exist until December 1, 2002 and may be applied
to market development, advertising, safety, health, environmental, logistics and
other products and services that we mutually agree upon.
ECREDIT.COM
eCredit.com is a leader in the market for real-time credit, financing and
related services for e-businesses. We have contracted with eCredit.com to
provide online business verification services. eCredit.com's Global Financing
Network(TM) will enable us to offer real-time, online corporate verification of
potential business partners. The Global Financing Network provides web-enabled
access to Dun & Bradstreet and Experian information sources. Our trading
exchange is designed to provide our members the opportunity to transact with
other parties with whom they do not have pre-existing relationships. We are
working with eCredit.com to provide additional services from the Global
Financing Network that would enable our members to make credit and financing
decisions that can be processed in real time. These capabilities will allow our
members to transact with new business partners with greater confidence.
GENERAL ELECTRIC COMPANY
General Electric is a diversified services, technology and manufacturing
corporation whose products include plastics. General Electric has agreed to use
our trading exchange on a preferred, good faith basis for its e-commerce
purchasing, trading or auctioning of any bulk commodity petrochemicals offered
on our exchange through December 31, 2001. In addition, General Electric has
agreed to use reasonable business efforts to assist us in developing viable
e-commerce trading activity in specified contract-dominated markets where
General Electric is a significant buyer. General Electric has also agreed to
promote our trading exchange to a specified number of agreed upon potential
members of our trading exchange. We have agreed to negotiate in good faith with
General Electric regarding its ability to act as a supplier of credit insurance
to be used by us in the future and have provided General Electric the right to
match any third party offers relating to comparable services. Without the other
party's written consent, we and General Electric have agreed not to solicit each
other's employees through December 31, 2002.
39
<PAGE> 43
MUEHLSTEIN HOLDING CORPORATION
Muehlstein Holding Corporation is a subsidiary of H. Muehlstein & Co. Inc.,
an international marketer and reseller of plastic and rubber polymers.
Muehlstein has agreed to use good faith efforts to use our trading exchange on
an exclusive basis through December 31, 2001 for any chemicals and plastics that
it buys, sells, trades, auctions or otherwise transfers using e-commerce to the
extent those products are traded on our exchange. Nevertheless, Muehlstein may,
acting in good faith, use other platforms where suppliers require the use of
those platforms. We have agreed to credit Muehlstein's trading account on a
dollar-for-dollar basis in the amount of payments made under the promissory note
executed by Muehlstein in connection with its purchase of our common stock,
against which any commissions generated by Muehlstein through May 1, 2002 will
be debited.
STOLT-NIELSEN TRANSPORTATION GROUP LTD.
Stolt-Nielsen Transportation Group Ltd., a subsidiary of Stolt-Nielsen
S.A., is the world's leading provider of transportation services for bulk
chemicals, edible oils, acids and other specialty liquids. We have executed a
strategic alliance agreement with Stolt-Nielsen's affiliate, Optimum Logistics
Ltd., commonly known as ChemLink.com, an Internet-based logistics operating
system. We intend to integrate the ChemLink System into our trading exchange to
permit our members to procure transportation and other logistic services for
bulk chemicals from a variety of service providers, as well as manage and
monitor shipments through all phases of the supply chain. The services that we
expect to be offered through the ChemLink system include firm freight fixtures
and rate indications for liquid chemical products, shipping and customs
brokering, freight forwarding, cargo inspection and surveying, terminaling and
storage and inventory management and tracking services and related
documentation. The alliance has a term of three years, which may be extended if
agreed upon criteria are met. CheMatch and ChemLink have agreed to pay each
other fees equal to 20 percent of commission revenue earned by either CheMatch
or ChemLink from customers of the other company up to $5 million per year. The
parties have also agreed to assist each other in establishing commercial
relationships with certain target companies in exchange for 20 percent of the
gross revenues earned and received by the other party. ChemLink has agreed to
offer CheMatch the option to invest at least $1 million in a private offering of
securities of Optimum involving an aggregate amount of at least $5 million.
TOWNSENDTARNELL, INC.
TownsendTarnell, Inc. is a global consulting firm that specializes in
plastics and chemical market reports, end market analysis databases for the
automotive materials, pipe and construction industries, and benchmarking
studies. It provides industry-focused, confidential business information
reports, credit, marketing and sales lead generation services to qualifying
suppliers in the plastics and chemical industry. In connection with
TownsendTarnell's purchase of our common stock, we have entered into a
consulting agreement with TownsendTarnell. During the first six months of the
consulting agreement, TownsendTarnell's personnel are required to use their best
reasonable efforts to promote the use of our trading exchange by potential
buyers of thermoplastic resins in North America and Europe. TownsendTarnell's
efforts will be directed towards approximately 800 entities identified by us as
potential users of our trading exchange and related services. Additionally,
TownsendTarnell will provide us with various credit services. Under the
consulting agreement, we have agreed to pay TownsendTarnell $70,000 per month
for nine consecutive months, commencing February 1, 2000. The consulting
agreement is cancelable by mutual consent or upon six months notice.
Additionally, TownsendTarnell has agreed to provide us with a business plan
relating to the creation and development of TownsendTarnell.com. Assuming the
business plan is acceptable to us, we have agreed to extend TownsendTarnell a
$500,000 line of credit. TownsendTarnell has offered us an option to invest $1
million in any private offering of securities relating to TownsendTarnell.com
involving an aggregate amount of at least $5 million.
40
<PAGE> 44
WILLIAM HEINEMANN INC.
William Heinemann is a subsidiary of Reed Elsevier plc, an international
publisher and information provider with three primary business segments:
scientific, professional and business-to-business. Reed's publications include
Chemical News & Intelligence, Asian Chemical News, European Chemical News and
Chemical Insight. We have agreed to purchase information content, advertising
and other promotional material and services from William Heinemann or a designee
of William Heinemann in amounts totaling at least $500,000 between January 1,
2000 and January 1, 2002. The products and services we have agreed to purchase
will be priced from time to time as we mutually agree. We will integrate
information provided by Reed into our information resource center.
SALES, MARKETING AND SUPPORT
We market and sell our products and services through a direct sales force
that has initially targeted the world's 250 largest chemical companies and other
leading purchasers and sellers of commodity chemicals, plastics and fuel
products. Our sales process leverages our management expertise and is made
through a multi-tiered approach of:
- solicitations made by our senior executives;
- direct sales by industry specialists;
- proactive customer support representatives; and
- traditional presentations and participation at industry conferences and
trade events.
Our senior executives and other industry specialists are an important part
of the sales process due to their significant experience in the chemical
industry and personal contacts within their given area of expertise. Our sales
process is highly personal and interactive, targeting executive officers and key
decision makers within a prospective organization. To encourage trading on our
exchange, we often notify individual traders within companies who are active
purchasers or sellers of products that are the subject of an outstanding offer
or bid on our exchange. Our industry specialists will also notify these
individuals when significant trades are completed on our exchange that involve
the products frequently traded by those individuals.
Our customer service representatives complement our direct sales force.
Each new member is assigned a customer service representative who is responsible
for ensuring that the new member has received proper training and is fully adept
at transacting business on our exchange. In addition, these representatives
serve as day-to-day contacts for general and administrative inquiries that our
members may make and are responsible for building and maintaining relationships
with our members. With the recent openings of our international offices in
Manchester, England, Singapore and Tokyo, Japan, we have commenced the
deployment and execution of direct sales and customer service representatives
internationally to accommodate the specific needs of international markets. With
the opening of these new locations, we had 32 sales and marketing employees and
consultants as of February 15, 2000, with 27 individuals based domestically and
five based internationally.
Our marketing efforts have focused exclusively on establishing our
marketplace as the preferred online site for trading commodity chemicals,
plastics and fuel products. To increase critical mass and name awareness, we
utilize industry publication advertising, public relations, direct mail
campaigns, and presentations at industry trade shows and conferences. We also
utilize electronic communications and information on our web sites to market our
trading exchange.
OUR TECHNOLOGY
We have developed our Internet-based solution utilizing proprietary
programs and, where appropriate, commercially available, licensed technologies.
The technology platform currently underlying our trading exchange was developed
using a Microsoft architecture, including active server pages, running on an
41
<PAGE> 45
Internet information server and a SQL server database. We are continually adding
features and functionality to our existing platform to meet the requirements of
our members, the market and our expanding business model.
In 2000, we intend to transition a number of functions from our existing
platform to a new system architecture which is being designed by Computer
Sciences Corporation. This new architecture should allow us to quickly add
functions and features to support our rapidly evolving business goals and
directives. We have planned enhancements to our technology platform that will
enable our members to, among other things:
- participate in new exchange functions, including auctions;
- personalize information available on our exchange and information
resource center based on their user profile; and
- receive broadcast and individual messages via e-mail, pagers or other
similar devices regarding trading activity on the exchange.
When implemented, we expect our new architecture to be characterized by the
following key features:
Scalability. Our architecture will be scalable, enabling us to accommodate
our expanding business model as well as adding new members. This scalability
should permit us to quickly add members, products and services to our exchange
and increase trading volume without incurring significant infrastructure costs.
Speed and Capacity. Our new system will be designed to support hundreds of
trades per day, with sub-second response times for critical transactions. We are
developing our new system architecture to support more than 7,000 registered
traders and to have enough initial capacity to support ten to fifteen
transactions per second. With the appropriate hardware upgrades the transaction
throughput can be scaled up to 50 times this level. We expect to provide
logged-in users of our exchange a refreshed screen every 30 seconds.
Reliability and Availability. We expect our new system architecture to be
hosted by a first tier web hosting provider who will provide most key
infrastructure services, including Internet connectivity, hardware and software
support and performance monitoring. We intend to execute service level
agreements to provide support 24 hours a day, seven days a week and ensure the
operational availability our members require.
Security. Our new system architecture will be designed to include many
security features, including member passwords, user profiling and system
administration logs. Multiple layers of security, including secure sockets layer
technology, protect our application and data. Our application uses up to 128-bit
standard encryption technology, along with monitored firewalls and other
restrictions and physical or electronic separations to prevent harm to the
application and data.
PROPRIETARY RIGHTS
We rely on a combination of trademark, copyright and patent law, trade
secret protection license and confidentiality and non-competition agreements
with our employees, members and business allies to protect our proprietary
rights in products, services, know-how and information. We have filed a U.S.
patent application for certain of our business methods and procedures used in
our exchange. We have received federal trademark registrations for CHEMATCH
ONLINE (with stylized design), CM (with stylized design) and PETROCHEM.NET (with
stylized design). Our means of protecting our proprietary rights in the United
States or abroad may not be adequate and competitors may independently develop
similar technology. We cannot be certain that our services will not infringe
patents or other intellectual property rights that may relate to our services
although we are not aware of any such infringement. Like other technology and
Internet-based businesses, we face the risk that we will be unable to protect
all of our intellectual property and other proprietary rights, and the risk that
we will be found to have infringed the proprietary rights of others.
42
<PAGE> 46
COMPETITION
The market for business-to-business commerce on the Internet is new and
rapidly evolving, and competition exists and is expected to increase
significantly in the future. Barriers to entry are relatively insubstantial. We
believe that the success of companies seeking to create an Internet-based
solution for trading commodity chemicals and other products and providing
related services will depend on the following factors:
- the adoption of the solution by a significant number of users;
- the quality and reliability of the solution;
- the breadth and depth of product and service offerings; and
- the ease of use and convenience of the solution.
We presently face competition from a number of companies offering or
planning to offer Internet-based trading solutions to the chemical or related
industries. These competitors include Ariba, Inc., AutoBase Information Systems
Inc. (efuel.com), ChemConnect, Inc., Commerce One, Inc., Commerx, Inc.
(PlasticsNet.com), e-Chemicals Inc., fob.com, FreeMarkets, Inc.,
PurchasePro.com, Inc., VerticalNet, Inc. and their respective affiliates. We
face additional competition from large, established chemical companies and
others who offer Internet-based alternatives to the traditional methods of
purchasing and selling commodity chemicals and other products we currently offer
or intend to offer in the future. Some of these companies have longer operating
histories, greater name recognition, an established network of potential users
and significantly greater financial, technical and marketing resources than we
do. These potential competitors may be able to undertake more extensive
marketing campaigns for their Internet-based solution and adopt more aggressive
pricing policies in attracting potential users of their solution. For these
reasons, our ability to compete effectively against these enterprises is
uncertain. Any of these alternative solutions may gain greater market acceptance
than our marketplace.
GOVERNMENT REGULATION
As with many Internet-based businesses, we operate in an environment of
tremendous uncertainty as to potential government regulation. We believe that we
are not currently subject to direct regulation applicable to online commerce,
other than regulations applicable to businesses generally. However, the Internet
has rapidly emerged as a commerce medium, and governmental agencies have not yet
been able to adapt existing regulations to its use. Future laws, regulations and
court decisions may affect the Internet or other online services, covering
issues such as user pricing, user privacy, freedom of expression, access
charges, taxation, content and quality of products and services, advertising,
intellectual property rights and information security. In addition, because our
services are offered worldwide, and we facilitate sales of goods to clients
worldwide, foreign jurisdictions may claim that we are required to comply with
their laws. Any future regulation may have a negative impact on our business.
Because we are an Internet company, it is unclear in which jurisdictions we
are actually conducting business. Our failure to qualify to do business in a
jurisdiction that requires us to do so could subject us to fines and penalties
and could result in our inability to enforce agreements in that jurisdiction.
Numerous states have laws and regulations regarding the conduct of auctions
and the liability of auctioneers. We do not believe that these laws and
regulations, which were enacted for consumer protection many years ago, will
apply to the online auction services that we expect to introduce. However, one
or more jurisdictions may attempt to impose these laws and regulations on these
operations in the future.
Several telecommunications carriers are seeking to have telecommunications
over the Internet regulated by the Federal Communications Commission in the same
manner as other telecommunications services. Additionally, local telephone
carriers have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
long distance
43
<PAGE> 47
telephone carriers and to impose access fees on such providers. If either of
these petitions are granted, the costs of communicating on the Internet could
increase substantially. This, in turn, could slow the growth of use of the
Internet. Any such legislation or regulation could materially adversely affect
our business.
COMMODITIES REGULATION
Through our exchange, we facilitate trading in forward contracts and
financial derivatives known as swap agreements. Forward contracts, which are
contracts in physical commodities for deferred shipment or delivery, are not
subject to the Commodity Exchange Act or to CFTC rules and regulations. Swap
transactions are conducted on our exchange in reliance on the CFTC's exemption
for certain swap agreements.
We limit participation in forward contracts on our exchange to companies
and persons that are commercially active in the petrochemicals industry and
market and that normally take physical delivery of the commodity through
customary commercial channels. Further, transactions are not completed on our
exchange since, after matching offered terms on our exchange, participants must
enter into bilateral purchase and sale agreements offline in order to create
legally binding transactions.
We also facilitate trading in swap agreements, in which the parties
exchange cash payments with reference to changes in the price of a commodity or
another agreed benchmark. The Commodity Exchange Act requires that trading in
many instruments regulated by the CFTC must be confined to designated contract
markets. However, swap agreements that meet the CFTC's exemption standards may
be offered and entered into without using a designated contract market. While
these exemption standards are not free from ambiguity, we believe that our swap
program conforms with these standards. In particular, we believe that the
participants on our exchange meet the criteria of "eligible swap participants"
as defined by the CFTC. Further, after matching offered terms on our exchange,
participants must enter into bilateral swap agreements offline in order to
create legally binding swap transactions. If the CFTC were to challenge our
treatment of these transactions or take other actions that make the exemption
unavailable to us, or if Congress were to amend the Commodity Exchange Act in an
adverse manner, our ability to offer a swap program could be impaired or
foreclosed, and past transactions could become subject to rescission, possibly
resulting in claims against us and the counterparties to those transactions. The
occurrence of any of these events would adversely affect our business, results
of operations and financial condition.
The Commodity Exchange Act and existing CFTC policies currently provide
that, with certain exceptions, transactions in futures contracts and options
thereon must be conducted only on or through a board of trade that has been
designated by the CFTC as a contract market. The qualifications required for
such designation include features that are not found in our exchange, and we are
not eligible for contract market designation. Therefore, we are unable to offer
futures contracts or options thereon directly through our exchange.
FACILITIES
Our principal executive offices are located at 2900 North Loop West, Suite
1120, Houston, Texas 77092. We also maintain domestic offices in San Ramon,
California and Stamford, Connecticut and international offices in Manchester,
England, Singapore and Tokyo, Japan. We lease office space in each of these
cities.
EMPLOYEES
As of February 15, 2000, we had 56 employees. We are not subject to or
bound by any labor or collective bargaining agreements.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
44
<PAGE> 48
MANAGEMENT
OFFICERS AND DIRECTORS
The directors, executive officers and other officers of CheMatch, and their
respective ages and positions or responsibility as of February 15, 2000, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION -- RESPONSIBILITY
<S> <C> <C>
Carl McCutcheon............... 47 Chairman, President and Chief Executive Officer
Lawrance McAfee............... 45 Executive Vice President, Chief Financial Officer, Secretary
and Director
Fred Cook..................... 57 Senior Vice President and General Manager -- North America
John Sharum................... 53 Senior Vice President and General Manager -- International
Kevin Boyle................... 45 Vice President -- Information Services
Don Churchman................. 49 Vice President -- Polymers
Scott Creasman................ 34 Vice President -- Controller and Assistant Secretary
Clifton Currin................ 45 Vice President -- Olefins
Gerard Elias.................. 34 Vice President -- Communications and Investor Relations
Michael Ereli................. 38 Vice President -- Technology
Matthew Frye.................. 39 Vice President -- Sales and Marketing
Roberta Kowalishin............ 38 Vice President -- Technology Ventures
Roger Leedy................... 57 Vice President -- Aromatics
Simon Palmer.................. 37 Vice President -- Aromatics and Chemical Intermediates
Paul Pryzant.................. 43 Vice President -- Co-General Counsel and Assistant Secretary
Jim Rahe...................... 59 Vice President -- Olefins and Inorganics
Scott Shelton................. 53 Vice President -- Co-General Counsel and Assistant Secretary
Kevin Wenta................... 36 Vice President -- Business Development and e-Strategy
Earl Armstrong................ 55 Director
Bob Gower..................... 62 Director
Janet Hickey.................. 55 Director
James Saviano................. 57 Director
David Tabors.................. 28 Director
</TABLE>
CARL MCCUTCHEON joined CheMatch in June 1999 as President and Chief
Executive Officer and was elected Chairman in January 2000. Prior to joining
CheMatch, Mr. McCutcheon served as senior vice president of term marketing for
Koch Industrial and Utility Services from June 1997 to December 1998. Mr.
McCutcheon was a vice president for Enron Capital and Trade Resources from
February 1995 to May 1997. From November 1992 to February 1995, Mr. McCutcheon
was a vice president for Agricultural Minerals and Chemicals and its successor
company, Terra Industries. He served as vice president and general manager for
Williams Power Company and in various officer and management positions for
various subsidiaries of Williams from December 1979 to October 1992. Prior to
his service with Williams, Mr. McCutcheon was an auditor with Ernst & Young. Mr.
McCutcheon received a B.S. B.A. from the University of Tulsa in 1973 and an
M.B.A from Harvard in 1976. He is a member of the AICPA. Mr. McCutcheon also
served as a commissioner on the State of Oklahoma Natural Gas Policy Commission
from 1994 to 1996.
LAWRANCE MCAFEE joined CheMatch in September 1999 as Chief Financial
Officer and Secretary and was appointed Executive Vice President and Director in
February 2000. Prior to joining CheMatch, Mr. McAfee served as executive vice
president and chief financial officer, and was a member of the board of
directors of ITEQ, Inc. from March 1993 to September 1999. He served as chief
financial officer and a member of the board of directors for Waste Processor
Industries, Inc. from May 1991 to March 1993. Mr. McAfee was senior vice
president and chief financial officer of Stillbrooke Corporation from April 1989
to February 1991 and served as chief financial officer and held other financial
management positions
45
<PAGE> 49
with US Home Corporation from April 1982 to May 1989. Prior to joining US Home
Corporation, Mr. McAfee held financial management positions with Transco
Companies and First National Bank in Dallas. He received a B.B.A. from the
University of Texas at Austin in 1977 and an M.B.A. from Southern Methodist
University in 1978.
FRED COOK joined CheMatch, Inc. in April 1997. He was a founder of
CheMatch, Inc. and led the software design phase, market introduction, and
commercial launch of CheMatch, Inc. He is currently Senior Vice President and
General Manager of North America and is responsible for monitoring and expanding
our exchange. Prior to joining CheMatch, he was a special projects manager for
Enron focusing on new capital investments and joint ventures in the olefins
industry from October 1994 to March 1997. From February 1966 to May 1994, Mr.
Cook held a number of sales and marketing positions with the Dow Chemical
Company, including commercial director for the Hydrocarbons and Energy Group and
vice president in charge of monomers. He received a B.S. from Louisiana State
University in 1966.
JOHN SHARUM joined CheMatch in November 1999 as Vice
President -- International and was appointed Senior Vice President and General
Manager -- International in January 2000. Prior to joining CheMatch, Mr. Sharum
was a vice president in Chevron Chemical Corporation's international division
from February 1996 to September 1999. He received B.S. and B.S.E. degrees from
the University of Michigan in 1970 and a M.B.A. from Golden Gate University in
1984.
KEVIN BOYLE joined CheMatch in July 1999 as Vice President -- Information
Services. He is responsible for building our information resource, developing
new alliances and bringing new product offerings to our exchange. Prior to
joining CheMatch, Mr. Boyle was employed by Koch Chemical Company from July 1997
through July 1999 where he built the analysis function to guide trading,
financial derivatives and commercial development. Prior to his service with
Koch, he was responsible for market research of polymers and petrochemicals at
Occidental Chemical. Mr. Boyle received a B.S. in Chemistry from the University
of Wisconsin at Parkside in 1977 and an M.B.A. from State University of New York
at Buffalo in 1987.
DON CHURCHMAN joined CheMatch in July 1999 as Vice
President -- Polymers. Prior to joining CheMatch, Mr. Churchman was a senior
vice president and a co-founder of Performance Polymers where he was employed
from May 1989 to July 1998. While at Performance Polymers, he managed raw
material supply relationships and a joint venture with Prochem International, a
plastics and chemical international trading enterprise with commercial
relationships in the Pacific Rim, South America, Europe, Africa, India and the
Middle East. From January 1987 to May 1989, Mr. Churchman was vice president of
sales and marketing with Plastic Distributing Corporation. He was also a
director of sales and marketing for Polycom Huntsman from June 1985 to January
1987 which acquired Georgia Pacific's Polymer Materials Division where he was
business manager of plastics resins from January 1984 to June 1985. He also
served as marketing manager of polypropylene and held various product and sales
management positions with Rexene Polyolefins Co. from April 1977 to January
1984.
SCOTT CREASMAN joined CheMatch in September 1999 as Vice
President -- Controller. Prior to joining CheMatch, he served as vice
president -- controller of Chemical Logistics Corporation from June 1998 through
April 1999. From November 1997 through June 1998, Mr. Creasman was employed by
U.S. Legal Support, Inc. as vice president and corporate controller. From
October 1996 through August 1997, he served as controller of Brink's Home
Security, Inc. From July 1990 through October 1996, Mr. Creasman was with Texas
Eastern Products Pipeline Company, the operator of a publicly held petroleum
products pipeline company, most recently serving as their controller. He
received a B.B.A. from the University of Texas at Austin in 1987 and is a
registered Certified Public Accountant in the state of Texas.
CLIFTON CURRIN joined CheMatch in February 2000 as Vice
President -- Olefins. Prior to joining CheMatch, Mr. Currin was a vice president
of materials management with Equistar Chemicals LP from May 1998 to November
1999. Previously he served as a vice president of Lyondell Chemical Company from
October 1994 to May 1998. Prior to his service with Lyondell, Mr. Currin was
with ARCO. He
46
<PAGE> 50
received a B.S. and Masters from Cornell University in 1976 and 1977,
respectively, and an M.B.A. from the University of Houston in 1981.
GERARD ELIAS joined CheMatch in September 1999 as Vice
President -- Communications and Investor Relations. Prior to joining CheMatch,
Mr. Elias was a director for Burson-Marsteller from August 1995 to August 1999.
He received a C.A.M. from City University and the London School of Economics in
1986.
MICHAEL ERELI joined CheMatch in November 1999 and was appointed Vice
President -- Technology in January 2000. Prior to joining CheMatch, Mr. Ereli
was the Information Technology director for Koch Energy from February 1998 to
October 1999 where he helped transform Koch from an asset-focused enterprise to
a commodity trading organization. From September 1994 to January 1997, he worked
as a principal in the energy practice of CSC Consulting. Primarily in a business
development role, Mr. Ereli helped a number of energy companies develop
e-commerce strategies, implement gas and power trading systems and initiate
business process change. From August 1984 to August 1994, he worked for Andersen
Consulting, ultimately serving as a manager in their global energy practice. Mr.
Ereli received a B.A. from Harvard University in 1984.
MATTHEW FRYE joined CheMatch in July 1999 as Vice President -- Sales and
Marketing. Prior to joining CheMatch, Mr. Frye served as vice president of
electronic trading systems for Altra Energy Technologies from January 1996 to
March 1999. Prior to launching Altra Energy Technologies, he was employed by
Williams Energy Ventures from May 1993 to December 1995 where he served as a
business unit manager and was responsible for the development of the first
real-time, anonymous online commodity trading system. Mr. Frye also worked as a
senior marketing representative and business development representative for
Williams Energy Company from December 1988 to April 1993, and as a senior
financial analyst for Tenneco Oil Company from January 1988 to December 1988.
From June 1983 to December 1987, Mr. Frye was an accountant for Samson
Resources. He received a B.S. from Oklahoma State in 1983 and an M.B.A. from the
University of Tulsa in 1987.
ROGER LEEDY joined CheMatch in July 1999 as Vice
President -- Aromatics. Prior to joining CheMatch, he was general manager of JLM
International's Houston office from May 1998 to June 1999, where he specialized
in commodity aromatics trading. From March 1989 to April 1998, he directed all
domestic based purchasing activities and new market development for SentraChem
International. Prior to his service with SentraChem International, Mr. Leedy was
senior vice president for plastics at CT Chemicals, Inc. from April 1988 to
March 1989. Mr. Leedy received a B.S. from Parsons College in 1964 and a M.S. in
Business Administration from Kansas State University in 1968.
ROBERTA KOWALISHIN joined CheMatch in February 2000 as Vice
President -- Technology Ventures. Prior to joining CheMatch, Ms. Kowalishin was
a partner and lead strategist with Computer Sciences Corporation's e-business
practice from April 1996 to February 2000. While at CSC, she led several
e-business strategy projects in financial services, chemicals, auctions and
industrial products markets. From July 1994 to February 1996, she was a vice
president at JP Morgan, leading emerging markets infrastructure technologies.
She also held the position of information technology manager at Agrium, Inc.,
North America's largest producer of nitrogen fertilizers and a major producer of
potash and phosphate fertilizer, from December 1987 to August 1992. Ms.
Kowalishin received an M.S. from the MIT Sloan School of Management in 1994 and
a B.C. from McGill University in 1984.
SIMON PALMER joined CheMatch in August 1999 as Vice President -- Aromatics
and Chemical Intermediates. Prior to joining CheMatch, Mr. Palmer served as vice
president for DeWitt & Company's benzene and derivatives business from December
1996 to August 1999 and was responsible for management of all consulting
services to a global client base that included Exxon, Shell, BASF, Amoco, GE,
ICI plc, Fina and Equistar. Prior to his service with DeWitt & Company, he
worked for ICI plc from February 1981 to December 1996 in a variety of
management positions including product, distribution, customer service and
marketing of films, chemicals and polymers. Mr. Palmer received an honours
degree in Business Studies from the University of London in 1984.
47
<PAGE> 51
PAUL PRYZANT joined CheMatch in January 2000 as Vice
President -- Co-General Counsel. Prior to joining CheMatch, Mr. Pryzant was
senior vice president and general counsel of TransCom USA, a publicly traded
consolidator of the heavy duty truck parts industry, from April 1998 to January
2000. Prior to that, Mr. Pryzant had 17 years of experience with various law
firms, with a practice concentration in corporate/securities law and mergers and
acquisitions. Most recently, Mr. Pryzant was a shareholder with Snell & Smith,
P.C., Houston, Texas, from December 1994 to March 1998, and a partner with
Butler & Binion, Houston, Texas, from January 1990 to November 1994. He received
a B.S. from the University of Pennsylvania in 1978 and a J.D. from the
University of Texas School of Law in 1981.
JIM RAHE joined CheMatch in July 1999 as vice president--Olefins and
Unorganics. Prior to joining CheMatch, he was with the Jones Graduate School of
Management at Rice University from June 1994 to June 1999. He served as vice
president of petrochemical sales for Occidental Chemical Corporation from August
1990 to May 1994. Prior to his service with Occidental Chemical Corporation, he
held various sales and marketing positions at Cain Chemical Company, Imperial
Chemical Industries and Monsanto Company. He received a B.S. from Oklahoma State
University in 1963 and an M.B.A. in 1966.
SCOTT SHELTON joined CheMatch in September 1999 as Vice President and
General Counsel. Mr. Shelton held various officer level positions, including
vice president of Koch Gateway Pipeline Company within Koch Energy, Inc. from
September 1997 to April 1999. While with Koch, Mr. Shelton was involved in
marketing financial derivatives and in structuring natural gas gathering and
processing transactions. From April 1995 to August 1997, he served as vice
president of Energy for Terra Industries, Inc. and was responsible for purchase
and delivery of natural gas for fertilizer plants and natural gas financial
hedging operations. Previously, he held various management and officer level
positions with Williams, Fina, and Perry Gas and was engaged in the private
practice of law. He received a B.A. from Texas Christian University in 1969 and
a J.D. from the University of Texas School of Law in 1972. Mr. Shelton has
served as Chairman of the Oklahoma Industrial Energy Consumers and a member of
both the Oklahoma Natural Gas Policy Commission and the Oklahoma Joint
Legislative Committee for Electric Restructuring.
KEVIN WENTA joined CheMatch in July 1999 as vice president--Business
Development and e-Strategy. Prior to joining CheMatch, Mr. Wenta specialized in
e-commerce, business strategy formulation and channel strategy for the Global
Chemicals Practice of Andersen Consulting from March 1996 to July 1999. Prior to
his service with Andersen Consulting, Mr. Wenta was a general management
consultant at Towers Perrin from April 1994 to March 1996, a business planning
analyst for ARCO from August 1991 to March 1994 and a sales representative for
Shell Chemical from February 1987 to May 1991. Mr. Wenta received a B.S. from
the University of Texas at Austin in 1986 and an M.B.A. from the University of
Chicago in 1991.
EARL ARMSTRONG has served as a director of CheMatch since June 1999. He
currently serves as a principal and managing director at DeWitt & Company, Inc.,
an international petrochemical business-consulting group, where he has been
employed since March 1989. Prior to joining DeWitt, Mr. Armstrong held various
positions at Exxon Chemical from 1968 to 1987. He received a B.S. from the
University of Virginia in 1968.
BOB GOWER has served as a director of CheMatch since February 2000. He
currently serves as the Chairman of Specified Fuels & Chemicals, LLC and manages
several other investments. Mr. Gower served as chief executive officer of
Lyondell Petrochemical Company from April 1985 to December 1996, when he
retired. Prior to becoming chief executive officer, he held various positions
with Sinclair Oil Company and Atlantic Richfield before and after the merger of
these two companies. He is currently a director of Kirby Corporation and OmNova
Solutions, Inc. Mr. Gower received a B.A. and M.A. from Southern Illinois in
1958 and 1960, respectively, and a Ph.D. in organic chemistry from the
University of Minnesota in 1963.
JAMES SAVIANO has served as a director of CheMatch since February 2000. He
currently serves as Computer Sciences Corporation's global vice president of
e-business strategy. Mr. Saviano has held a variety of positions with CSC since
July 1986, including president and chief executive officer of its
48
<PAGE> 52
consulting unit. Prior to his service with CSC, he was a co-founder of Computer
Partners, a management consulting and systems integration company, and served as
a systems analyst for Keane Associates. He received a B.S. from the University
of Massachusetts in 1964 and has pursued graduate studies in computer science at
Worcester Polytechnic Institute.
JANET HICKEY has served as a director of CheMatch since December 1999. She
has served as a general partner of the Sprout Group, a division of DLJ Capital
Corporation, and a divisional senior vice president of DLJ Capital Corporation
since 1985. Ms. Hickey serves on the board of directors of Edison Schools, Inc.
and several private companies. The Sprout Group and DLJ Capital Corporation are
affiliated with Donaldson, Lufkin & Jenrette Securities Corporation, an
underwriter of this offering.
DAVID TABORS has served as a director of CheMatch since June 1999. He
currently serves as a principal of Battery Ventures where he has been employed
since October 1995. Prior to joining Battery Ventures, he was an associate with
Cambridge Associates from August 1993 to October 1995. Mr. Tabors received a
B.S. from Dartmouth College in 1993.
BOARD OF DIRECTORS
Our board of directors currently consists of seven members. Currently, each
director is elected for a period of one year at our annual meeting of
stockholders and serves until the next annual meeting or until his or her
successor is duly elected and qualified. There are no family relationships among
the directors and officers of CheMatch.
BOARD COMMITTEES
Our board of directors will have an audit committee and a compensation
committee. The audit committee will consist of Mr. Gower, Ms. Hickey and Mr.
Saviano. The audit committee will make recommendations to the board of directors
regarding the selection of independent accountants, will review the results and
scope of audit and other services provided by our independent accountants and
will review and evaluate our audit and control functions. The compensation
committee will consist of Ms. Hickey and Mr. Tabors. The compensation committee
will administer our stock plans and make decisions concerning salaries and
incentive compensation for our employees.
DIRECTOR COMPENSATION
Our employee directors do not receive any cash compensation from us for
their services as members of our board of directors. We reimburse our
non-employee directors for travel and lodging expenses in connection with their
attendance at board and committee meetings. Additionally, our non-employee
directors will be paid $2,500 for each board meeting they attend and $500 for
each committee meeting they attend. In February 2000, we granted two of our
non-employee directors, Mr. Gower and Mr. Saviano, 25,000 options, 50% of which
vested on the date of their grant and 50% of which vest ratably on a monthly
basis over a two year period. The exercise price for all of these options is
$9.79 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee is currently or has been
at any time since the formation of CheMatch, an officer or employee of CheMatch.
No member of our compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee.
INDEMNIFICATION
Prior to the closing of this offering, we intend to enter into
indemnification agreements with each of our directors and executive officers.
The form of indemnity agreement provides that we will indemnify our directors or
executive officers to the fullest extent permitted by Delaware law.
49
<PAGE> 53
CheMatch's certificate of incorporation and bylaws contain provisions
relating to the limitation of liability and indemnification of our directors and
officers. The certificate of incorporation provides that directors shall not be
personally liable to CheMatch or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability for:
- any breach of a director's duty of loyalty to CheMatch or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
- any transaction from which the director derives any improper personal
benefit.
Our certificate of incorporation also provides that if the Delaware General
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors after our stockholders approve the
certificate of incorporation, then the liability of our directors shall be
eliminated or limited to the fullest extent permitted by the amended Delaware
General Corporation Law. The foregoing provisions of our certificate of
incorporation are not intended to limit the liability of directors or officers
for any violation of applicable federal securities laws. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, our
certificate of incorporation provides that:
- we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law;
- we are required to advance all expenses incurred by our directors and
officers in connection with legal proceedings relating to their service
as an officer or director to the fullest extent permitted by the Delaware
General Corporation Law, subject to limited exceptions;
- the rights conferred in the certificate of incorporation are not
exclusive; and
- we may not retroactively amend the provisions in our certificate of
incorporation relating to indemnity in a way that would adversely affect
the rights of our directors or officers.
50
<PAGE> 54
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation for
the year ended December 31, 1999 earned by our Chairman and Chief Executive
Officer and our four other most highly compensated executive officers at the end
of fiscal 1999, collectively referred to in this prospectus as the "named
executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS--
ANNUAL COMPENSATION NUMBER OF
---------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION(5)
<S> <C> <C> <C> <C>
Carl McCutcheon(1).................. $130,769 $120,000 918,208 $3,923
Chairman, President and Chief
Executive Officer
Lawrance McAfee(2).................. 53,846 60,000 175,789 576
Executive Vice President, Chief
Financial Officer and Director
Fred Cook........................... 80,231 45,000 70,018 2,407
Senior Vice President and General
Manager-North America
John Bohn(3)........................ 114,423 58,500 385,716 1,010
Former Chairman
Karen Morgan(4)..................... 114,423 58,500 299,316 3,000
Former Executive Officer
</TABLE>
- ---------------
(1) Mr. McCutcheon joined CheMatch as President and Chief Executive Officer in
June 1999 and was appointed Chairman in January 2000.
(2) Mr. McAfee joined CheMatch as Senior Vice President and Chief Financial
Officer in September 1999 and was appointed Executive Vice President and
elected to our board of directors in February 2000.
(3) Mr. Bohn resigned his position as Chairman effective January 26, 2000. For a
discussion of Mr. Bohn's severance, please read "Severance Agreements"
below.
(4) Ms. Morgan resigned her position as an executive officer effective January
26, 2000. For a discussion of Ms. Morgan's severance, please read "Severance
Agreements" below.
(5) Represents matching contributions to the CheMatch.com Employee Savings Plan
on behalf of the named executive officers for 1999.
51
<PAGE> 55
STOCK OPTION GRANTS
The following table sets forth the stock options we granted during the
fiscal year ended December 31, 1999, to each of the named executive officers,
including the potential realizable value over the ten-year term of the options,
based on assumed rates of stock appreciation of 5% and 10%, compounded annually.
These assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock. In addition, the deemed value for the date of
grant was determined after the date of grant solely for financial accounting
purposes.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR POTENTIAL
---------------------------------------------------------------------- REALIZABLE
INDIVIDUAL GRANTS VALUE AT
---------------------------------------------------------------------- ASSUMED
PERCENT OF TOTAL ANNUAL RATES
OPTIONS GRANTED OF STOCK
NUMBER OF TO EMPLOYEES PRICE
SECURITIES DURING THE FISCAL DEEMED VALUE APPRECIATION
UNDERLYING YEAR ENDED EXERCISE PER SHARE FOR OPTION TERM
OPTIONS DECEMBER 31, PRICE ON DATE EXPIRATION -----------------------
NAME GRANTED 1999 ($/SHARE) OF GRANT DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Carl McCutcheon(1)..... 639,159 19.6% $1.34 $1.34 6/21/09 $538,631 $1,364,997
265,849 8.2 1.47 4.58 11/5/09 1,592,525 2,767,313
13,200 0.4 0.83 1.11 4/30/09 12,911 27,048
Lawrance McAfee........ 159,789 4.9 1.34 1.34 9/20/09 134,657 341,248
16,000 0.5 1.47 4.58 11/5/09 95,845 166,549
Fred Cook.............. 57,018 1.7 1.34 1.34 6/21/09 48,050 121,768
13,000 0.4 1.47 4.58 11/5/09 77,874 135,321
John Bohn.............. 266,316 8.2 1.34 1.34 6/21/09 224,429 568,748
19,800 0.6 1.47 4.58 11/5/09 118,609 206,105
86,400 2.7 0.83 1.11 3/1/09 84,506 177,038
13,200 0.4 0.83 1.11 4/30/09 12,911 27,048
Karen Morgan........... 266,316 8.2 1.34 1.34 6/21/09 224,429 568,748
6,600 0.2 1.47 4.58 11/5/09 39,536 68,702
6,600 0.2 0.83 1.11 1/31/09 6,455 13,524
6,600 0.2 0.83 1.11 2/28/09 6,455 13,524
6,600 0.2 0.83 1.11 3/31/09 6,455 13,524
6,600 0.2 0.83 1.11 4/30/09 6,455 13,524
</TABLE>
- ------------------------------
(1) Includes 523,778 stock options held for the benefit of Mr. McCutcheon and
his family in the name of ADCAP Investments, L.P., a family limited
partnership.
AGGREGATED STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the named executive officers
options exercised during the fiscal year ended December 31, 1999, and the number
and value of securities underlying unexercised options that were held by the
named executive officers at December 31, 1999. The numbers in the column
entitled "Value Realized" are equal to the fair market value of the purchased
shares on the option exercise date, less the exercise price paid for those
shares. The numbers in the column entitled "Value of Unexercised In-the-Money
Options at December 31, 1999" are based on the fair market value of our common
stock at December 31, 1999 as determined by our board of directors, $7.85, less
the exercise price payable for such shares. The fair market value of our common
stock at December 31, 1999 was estimated by our board of directors based on an
evaluation of our revenues, operating history and prospects. The initial public
offering price is expected to be higher than the estimated fair market value at
December 31, 1999. Consequently, the value of unexercised options could be
higher than the numbers shown in the table if the values were calculated by
subtracting the option's exercise price from the initial public offering price.
52
<PAGE> 56
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS OPTIONS AT
SHARES AT DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------- ----------------------
NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
<S> <C> <C> <C> <C> <C> <C>
Carl McCutcheon(1)............ 319,580 $42,824 598,628 -- $3,869,240 $--
Lawrance McAfee............... -- -- 175,789 -- 1,142,306 --
Fred Cook..................... -- -- 70,018 -- 454,127 --
John Bohn(2).................. 133,158 17,843 341,808 -- 2,223,285 --
Karen Morgan(3)............... 133,158 17,843 321,258 -- 1,995,597 --
</TABLE>
- ------------------------------
(1) Mr. McCutcheon exercised 319,580 stock options in September 1999 that are
subject to repurchase rights by the Company. The repurchase rights expire
with respect to 25% of the option shares in equal quarterly installments
during the one year period following the date of grant. With respect to 75%
of the option shares, the repurchase rights expire in equal monthly
installments over the thirty-six month period following the first
anniversary of the date of grant.
(2) Mr. Bohn exercised 133,158 stock options in October 1999 that are subject to
repurchase rights by the Company. The repurchase rights expire with respect
to 25% of the option shares in equal quarterly installments during the one
year period following the date of grant. With respect to 75% of the option
shares, the repurchase rights expire in equal monthly installments over the
thirty-six month period following the first anniversary of the date of
grant. Mr. Bohn resigned his position as Chairman effective January 26,
2000. For a discussion of Mr. Bohn's severance, please read "Severance
Agreements" below.
(3) Ms. Morgan exercised 133,158 stock options in September 1999 that are
subject to repurchase rights by the Company. The repurchase rights expire
with respect to 25% of the option shares in equal quarterly installments
during the one year period following the date of grant. With respect to 75%
of the option shares, the repurchase rights expire in equal monthly
installments over the thirty-six month period following the first
anniversary of the date of grant. Ms. Morgan resigned her position as an
executive officer effective January 26, 2000. For a discussion of Ms.
Morgan's severance, please read "Severance Agreements" below.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS
CheMatch has entered into the following employment agreements with its
named executive officers:
<TABLE>
<CAPTION>
OFFICER TERM BASE SALARY POSITION
<S> <C> <C> <C>
Carl McCutcheon............ May 1999-April 2001 $200,000 Chairman, President and Chief
Executive Officer
Lawrance McAfee............ Not specified 200,000 Executive Vice President, Chief
Financial Officer and Director
Fred Cook.................. June 1999-May 2001 140,000 Senior Vice President and General
Manager -- North America
</TABLE>
The employment agreements for each of these named executive officers
provide for a discretionary, cash bonus to be determined by the compensation
committee of the board of directors. In connection with their execution of these
employment agreements, Mr. McCutcheon was granted 639,159 stock options on June
21, 1999, Mr. McAfee was granted 159,789 stock options on September 20, 1999,
and Mr. Cook was granted 57,018 stock options on June 21, 1999. The option
shares granted to each of the named executive officers have a ten-year term and
are exercisable immediately but are subject to a repurchase right over a four
year period. CheMatch has the right to repurchase the option shares at the
exercise price. This repurchase right expires in installments over the four-year
period as follows:
- with respect to 25% of the option shares, the repurchase right is
released in equal quarterly installments during the one-year period
commencing on the date of grant and expiring on the first anniversary of
the date of grant; and
53
<PAGE> 57
- with respect to the remaining 75% of the option shares, the repurchase
right is released in equal monthly installments over the thirty-six month
period commencing on the first anniversary of the date of grant.
The employment agreements for Mr. McCutcheon and Mr. Cook each provide that
CheMatch may terminate their employment relationship for cause. In this event,
CheMatch will be required to pay accrued but unpaid salary and vacation as of
the date of termination. No unvested option shares held by these officers will
become vested and all unexercised vested option shares will terminate 30 days
following the date of termination. If the employment relationship of these
officers is terminated by CheMatch without cause prior to a change of control,
CheMatch will be obligated to, among other things:
- pay to the named executive officer a sum equal to the greater of (i) the
named executive officer's base salary through the end of the officer's
current employment term, or (ii) the annual base salary in effect
immediately prior to termination of the officer's employment;
- pay accrued but unpaid salary, bonus, vacation and other benefits; and
- cause 50% of all unvested option shares held by the officer on the date
of termination to become vested option shares.
If the employment relationship of Mr. McCutcheon or Mr. Cook is terminated
by CheMatch without cause or is constructively terminated by CheMatch without
cause, in either case following a change of control, CheMatch will be obligated
to make the payments described in the first two bullet points above.
Additionally, all of the unvested option shares held by the officer will become
vested option shares.
If the employment relationship Mr. McCutcheon or Mr. Cook is terminated by
reason of the resignation, death or disability of any of these officers, all
accrued but unpaid salary and other benefits owing to the officer as of the date
of the resignation, death or disability will be paid by CheMatch.
The employment agreements for Mr. McCutcheon and Mr. Cook automatically
renew for a term of one year, unless CheMatch or the employee provide written
notice at least 90 days prior to the expiration of the prior term.
Mr. McAfee is an "at will" employee. In the event that CheMatch terminates
Mr. McAfee without cause within the first two years of his employment, Mr.
McAfee will be entitled to a severance payment equal to six months of base
salary.
The named executive officers' employment agreements contain confidentiality
obligations that survive following the termination of their employment
relationship (for two years in the case of Mr. McCutcheon and Mr. Cook) and
non-competition and non-solicitation obligations that survive for one year
following the termination of their employment relationship (or six months in the
case of Mr. McAfee). Additionally, the employment agreements of Mr. McCutcheon
and Mr. Cook obligate CheMatch to indemnify them in specified circumstances.
MANAGEMENT INCENTIVE AGREEMENT
We have executed an amended and restated management incentive agreement
which obligates us to make an incentive payment to current and former members of
CheMatch's management team and current employees in the event of a fundamental
change. For purposes of the letter agreement, a "fundamental change" means:
(i) the sale or transfer in one or more related transactions, of equity
securities representing in excess of 50% of the voting power of CheMatch's
capital stock, or all or substantially all of the assets of the Company, and in
both cases based on a valuation of CheMatch of at least $200 million; or (ii) a
public offering of CheMatch's securities in which the aggregate net proceeds
from such offering to CheMatch are at least $25 million and the price per share
paid by the public is at least $9.87.
54
<PAGE> 58
This offering will constitute a fundamental change under the management
incentive agreement, under which we will be obligated to pay current and former
members of our management team and current employees a specified portion of the
proceeds attributable to the fundamental change. The portion of the net proceeds
of this offering payable to these individuals will be two percent of the average
daily closing price of our common stock for the ninety day period immediately
following the consummation of this offering, multiplied by the number of shares
of common stock outstanding on a fully diluted basis on the 90th day immediately
following the consummation of this offering. The maximum amount payable under
the management incentive agreement is $15 million. Sixty percent of the total
amount payable, or a maximum of $9 million, will be paid to current officers and
employees. Carl McCutcheon, our Chairman, President and Chief Executive Officer,
will receive 20% of the total payment up to a maximum of $3 million, Lawrance
McAfee, our Executive Vice President, Chief Financial Officer and Director, will
receive 15% of the total payment up to a maximum of $2.25 million, and the
remaining 25% up to a maximum of $3.75 million will be paid to other current
employees in management's discretion. John Bohn, our former Chairman, and Karen
Morgan, a former executive and the founder of PetroChemNet, will each receive
20% of the total payment up to a maximum of $3 million each.
Additionally, in connection with the amendment of the management incentive
agreement, options for the purchase of common stock of the Company were granted
on February 8, 2000, as set forth below:
<TABLE>
<CAPTION>
NUMBER OF
NAME OPTIONS EXERCISE PRICE
<S> <C> <C>
Carl McCutcheon............................................. 168,000 $27.28
John Bohn................................................... 168,000 27.28
Karen Morgan................................................ 168,000 27.28
Lawrance McAfee............................................. 126,000 27.28
Other Employees............................................. 210,000 27.28
-------
Total............................................. 840,000
=======
</TABLE>
These options are vested, and will expire on February 8, 2005. One-half of these
options will become exercisable on February 8, 2001, and the remaining options
will become exercisable on February 8, 2002. In all other respects, the options
will be issued under the terms and conditions of the Company's 1999 Stock Plan
with the exception that the options will not terminate if the above person's
employment or other relationship with the Company terminates.
SEVERANCE AGREEMENTS
John Bohn resigned as Chairman of our board of directors effective January
26, 2000. In connection with his resignation, Mr. Bohn and CheMatch entered into
a Consultant and Release Agreement which entitles him to receive a total of
$218,750 in equal installments over a fifteen month period beginning in February
2000 for services to be rendered by him as our consultant. There is no minimum
number of hours of service required of Mr. Bohn under the agreement. Mr. Bohn is
also entitled to a bonus of $87,500 for the fiscal year ending December 31, 2000
and a bonus of $29,167 for the fiscal year ending December 31, 2001. As a result
of the agreement, all of Mr. Bohn's unvested options under our 1997 Stock Plan
became vested and all of Mr. Bohn's options under our 1999 Stock Plan were
released from repurchase rights held by CheMatch. Mr. Bohn was awarded a total
of 188,850 options under our 1997 Stock Plan and 286,116 options under our 1999
Stock Plan. Mr. Bohn has executed a general release in favor of CheMatch.
Prior to April 30, 2001, Mr. Bohn has agreed not to engage in any business,
investment or activity that is contrary to the interests of CheMatch or its
affiliates. Additionally, through April 30, 2002, Mr. Bohn is prohibited from
competing with CheMatch or soliciting any person engaged by CheMatch. He is also
required to maintain CheMatch's confidential information until April 30, 2003.
Mr. Bohn had served as our Chairman from July 1997 until his resignation.
Prior to joining CheMatch, Mr. Bohn served as the president of Moody's Investors
Service from 1989 to 1996. Mr. Bohn
55
<PAGE> 59
served a three-year term as president and chairman of the Export Import Bank of
the United States from 1986 to 1989. Prior to his service with the Export Import
Bank, as chairman, he served two years as vice chairman. Mr. Bohn was special
assistant to the Secretary of the Treasury from 1981 to 1984, and served
concurrently as U.S. Ambassador and executive director at the Asian Development
Bank in Manila from Sept. 1981 to 1984. Prior to joining the government he spent
13 years in international banking in Asia.
Karen Morgan resigned as Executive Vice President effective January 26,
2000. In connection with her resignation, Ms. Morgan and CheMatch entered into a
Consultant and Release Agreement which entitles her to receive a total of
$218,750 in equal installments over a fifteen month period beginning in February
2000 for services to be rendered by her as our consultant. There is no minimum
number of hours of service required of Ms. Morgan under the agreement. Ms.
Morgan is also entitled to a bonus of $87,500 for the fiscal year ending
December 31, 2000 and a bonus of $29,167 for the fiscal year ending December 31,
2001. As a result of the agreement, all of Ms. Morgan's unvested options under
our 1997 Stock Plan became vested and all of Ms. Morgan's options under our 1999
Stock Plan were released from repurchase rights held by CheMatch. Ms. Morgan was
awarded a total of 181,500 options under our 1997 Stock Plan and 272,916 options
under our 1999 Stock Plan. Ms. Morgan has executed a general release in favor of
CheMatch.
Ms. Morgan has agreed not to engage in any business, investment or activity
prior to April 30, 2001 that is contrary to the interests of CheMatch or its
affiliates. Additionally, through April 30, 2002, Ms. Morgan is prohibited from
competing with CheMatch or soliciting any person engaged by CheMatch. She is
also required to maintain CheMatch's confidential information until April 30,
2003.
Ms. Morgan founded T3 Technologies, a web technology company, which later
became PetroChemNet Inc. in 1997. She served as President and Chief Executive
Officer of PetroChemNet until 1998, developing strategic relationships,
technology and infrastructure applications. In 1999, she facilitated the merger
of CheMatch Inc. into CheMatch.
EMPLOYEE STOCK PLANS
1997 STOCK PLAN
Our 1997 Employee, Director and Consultant Stock Option Plan provides for
the granting of stock options to eligible employees, officers, directors,
including non-employee directors, and consultants of CheMatch. Stock options
granted under the 1997 Stock Plan may be either "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, which are options not intended to qualify as
incentive stock options. Incentive stock options may be granted only to
employees of CheMatch and nonstatutory stock options may be granted to
employees, officers, directors and consultants.
As of February 16, 2000, 1,086,150 shares of common stock were issuable
upon the exercise of outstanding options granted under the 1997 Stock Plan at a
weighted average exercise price of $1.93, and with remaining terms ranging from
seven to nine years. The 1997 Stock Plan, which was adopted by PetroChemNet,
Inc. and its stockholders in November 1997, was assumed by us and immediately
terminated in connection with our acquisition of PetroChemNet in June 1999 and
no additional options may be issued thereunder. The 1997 Stock Plan is
administered by the Compensation Committee of our board of directors.
In the event of a merger or consolidation of CheMatch with or into another
corporation or upon the sale of all or substantially all of CheMatch's assets,
the successor corporation must make appropriate provision for the outstanding
options by substituting for the shares then subject to the options either
securities of the successor entity or the consideration payable with respect to
the outstanding shares of common stock in connection with the acquisition. Upon
written notice to the optionees, the successor may require that optionees
exercise their options within a specified number of days at the end of which,
the options shall terminate. The successor may also elect to terminate the
outstanding options in exchange for a cash payment equal to the excess of the
fair market value of the shares subject to the options over their
56
<PAGE> 60
exercise price. In the event of a proposed dissolution or liquidation of
CheMatch, each outstanding option or stock purchase right granted under the 1997
Stock Plan will terminate.
1999 STOCK PLAN
Our 1999 Stock Plan provides for the granting of stock options, stock
awards and stock purchase rights to eligible employees, officers, directors,
including non-employee directors, and consultants of CheMatch. Stock options
granted under the 1999 Stock Plan may be either "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, which are options not intended to qualify as
incentive stock options. Stock purchase rights granted under the 1999 Stock Plan
allow a recipient to purchase shares of common stock directly from CheMatch.
Incentive stock options may be granted only to employees of CheMatch and
nonstatutory stock options, stock awards and stock purchase rights may be
granted to employees, officers, directors and consultants.
A maximum of 4,500,000 shares are authorized for issuance under the 1999
Stock Plan. As of February 16, 2000, 3,396,406 shares of common stock were
issuable upon the exercise of outstanding options granted under the 1999 Stock
Plan at a weighted average exercise price of $8.74. 612,896 shares of common
stock have been issued under this plan, leaving 490,698 authorized shares not
subject to outstanding options. The 1999 Stock Plan was adopted by our Board of
Directors in June 1999 and was approved by our stockholders in June 1999. Unless
terminated earlier by our Board of Directors, the 1999 Stock Plan will terminate
in June 2009.
The 1999 Stock Plan may be administered by the Board of Directors or a
committee appointed by the Board of Directors to administer the 1999 Stock Plan.
The administrator has the authority to grant options, stock awards and stock
purchase rights and to determine the terms of these awards, provided these
grants are not inconsistent with the terms of the 1999 Stock Plan. In no event,
however, may an individual receive option grants for more than 1,000,000 shares
under the 1999 Stock Plan in any fiscal year.
Stock options granted under the 1999 Stock Plan may not have a term of more
than ten years and generally remain exercisable for a period of three months
following termination of the optionee's employment or consulting relationship
with CheMatch, with longer periods applying in the event this termination occurs
as a result of death or disability. The exercise price of all incentive stock
options must be at least equal to the fair market value of the common stock at
the time of grant, except in the case of incentive stock options granted to
persons owning stock that represents more than 10% of the total combined voting
power of all classes of the outstanding capital stock of CheMatch, in which case
the exercise price must equal at least 110% of the fair market value of the
common stock at the time of grant. The exercise price of nonstatutory stock
options may be less than the fair market value of the common stock at the time
of grant, however, the exercise price must be at least 100% of the fair market
value if the option is intended to qualify as performance-based compensation
under tax rules. Options granted under the 1999 Stock Option Plan are either
fully exercisable on the date of grant or will become exercisable in such
installments as the administrator may specify. Only $100,000 in incentive stock
options (determined at the time the incentive stock options were granted) may
become exercisable by an employee for the first time in any one calendar year.
Incentive stock options granted under the 1999 Stock Plan are generally not
transferable, although the administrator has the discretion to allow
transferability of nonstatutory stock options.
In the event of a merger or consolidation of CheMatch with or into another
corporation where the successor corporation issues its securities to CheMatch
stockholders and holders of our common stock before the event hold, as a group,
less than a majority of the voting securities of the survivor or upon the sale
of all or substantially all of CheMatch's assets, each outstanding option or
stock purchase right must be assumed or an equivalent option or stock purchase
right shall be substituted by the successor corporation. Upon written notice to
the optionees, the successor may require that optionees exercise their options
within a specified number of days at the end of which, the options shall
terminate. The successor may also elect to terminate the outstanding options in
exchange for a cash payment equal to the excess of
57
<PAGE> 61
the fair market value of the shares subject to the options over their exercise
price. In the event of a proposed dissolution or liquidation of CheMatch, each
outstanding option or stock purchase right granted under the 1999 Stock Plan
shall terminate. The administrator has the authority to amend or terminate the
1999 Stock Plan provided that no action that impairs the rights of any holder of
an outstanding option may be taken without the holders' consent. In addition,
stockholder approval will be obtained for any amendment to the extent required
by applicable law.
In addition to stock options, the administrator may issue stock awards and
stock purchase rights under the 1999 Stock Plan to employees, directors and
consultants. The administrator determines the number of shares, price, term and
condition and restrictions related to a grant of stock awards and stock purchase
rights.
58
<PAGE> 62
RELATED PARTY TRANSACTIONS
The following is a discussion of transactions between us and our executive
officers, directors and stockholders owning more than five percent of any class
of our voting securities.
INVESTMENTS IN CHEMATCH
Since our inception, our executive officers, directors and 5% stockholders
have invested cash and other property in CheMatch in exchange for shares of our
convertible preferred stock and our common stock. The following table summarizes
the shares of our convertible preferred stock and our common stock acquired from
us by our executive officers, directors and 5% stockholders since our inception.
See "Principal Stockholders" for a summary of the affiliations of each of the
persons and entities described below.
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON CONVERTIBLE PREFERRED
COMMON STOCK PREFERRED STOCK
STOCK WARRANTS STOCK WARRANTS
<S> <C> <C> <C> <C>
5% STOCKHOLDERS:
Entities Affiliated with Donaldson, Lufkin & Jenrette,
Inc.(1).............................................. -- -- 1,518,463 1,146,490
Battery Ventures Entities(2)............................ -- -- 4,807,540 3,605,655
E.I. duPont de Nemours and Company(3)................... 636,943 -- 891,716 668,787
DIRECTORS AND EXECUTIVE OFFICERS:
Earl Armstrong(4)....................................... 154,440 115,830 -- --
Fred Cook(5)............................................ 115,830 86,873 -- --
Lawrance McAfee(6)...................................... -- -- 8,785 6,589
Carl McCutcheon(7)...................................... 107,100 -- 8,785 6,589
John Sharum(6).......................................... -- -- 8,785 6,589
FORMER DIRECTORS AND EXECUTIVE OFFICERS:
John Bohn(8)............................................ 272,400 4,500 -- --
Karen Morgan(9)......................................... 196,200 3,000 -- --
</TABLE>
- ------------------------------
(1) Represents shares of Series C convertible preferred stock and warrants to
purchase additional shares of Series C convertible preferred stock at an
exercise price of $7.85 per share purchased by the Entities Affiliated with
Donaldson, Lufkin & Jenrette, Inc. on November 24, 1999. One of our
directors, Janet Hickey, is affiliated with Donaldson, Lufkin & Jenrette,
Inc. Please see "Principal Stockholders" for a description of Ms. Hickey's
affiliation with Donaldson, Lufkin & Jenrette, Inc.
(2) Represents 2,138,400 shares of Series A convertible preferred stock and
warrants to purchase 1,603,800 additional shares of Series A convertible
preferred stock at an exercise price of $2.3484 per share purchased by the
Battery Ventures Entities on June 21, 1999 for approximately $5 million;
2,032,200 shares of Series B convertible preferred stock and warrants to
purchase 1,524,150 additional shares of Series B convertible preferred stock
at an exercise price of $2.4673 per share purchased by the Battery Ventures
Entities on September 27, 1999 for approximately $5 million; and 636,940
shares of Series C convertible preferred stock and warrants to purchase
477,705 additional shares of Series C convertible preferred stock at an
exercise price of $7.85 per share purchased by the Battery Ventures Entities
on November 24, 1999 for a total consideration of approximately $5 million.
One of our directors, R. David Tabors, is affiliated with the Battery
Ventures Entities. Please see "Principal Stockholders" for a description of
Mr. Tabor's affiliation with the Battery Ventures Entities.
(3) Represents shares of common stock purchased by duPont on November 24, 1999
for $6,369 and shares of Series C convertible preferred stock and warrants
to purchase additional shares of Series C convertible preferred stock at an
exercise price of $7.85 per share purchased on the same date for
approximately $7 million.
(4) Represents shares of common stock and warrants to purchase shares of common
stock at an exercise price of $1.336 per share, in each case received by Mr.
Armstrong, together with $237,800 in return for his interests in CheMatch,
Inc. in connection with our acquisition of CheMatch, Inc. shortly after our
incorporation.
(5) Represents shares of common stock and warrants to purchase shares of common
stock at an exercise price of $1.336 per share, in each case received by Mr.
Cook, together with $202,000, in return for his interests in CheMatch, Inc.
in connection with our acquisition of CheMatch, Inc. shortly after our
incorporation.
59
<PAGE> 63
(6) Represents shares of Series C convertible preferred stock and warrants to
purchase additional shares of Series C convertible preferred stock at an
exercise price of $7.85 per share purchased on November 24, 1999.
(7) Represents shares of common stock received by Mr. McCutcheon in return for
his interest in PetroChemNet, Inc. in connection with our acquisition of
PetroChemNet, Inc. shortly after our incorporation; shares of Series C
convertible preferred stock and warrants to purchase additional shares of
Series C convertible preferred stock at an exercise price of $7.85 per share
purchased on November 24, 1999; and does not include shares obtained upon
the exercise of options granted to Mr. McCutcheon pursuant to the 1999 Stock
Option Plan. 53,700 shares of the common stock and all of the shares of
Series C convertible preferred stock are held in the name of ADCAP
Investments, L.P., a family limited partnership for the benefit of Mr.
McCutcheon and his family. Additionally, 12,740 shares of the common stock
are held in trusts in the name of Mr. McCutcheon's minor children.
(8) Represents shares of common stock and warrants to purchase shares of common
stock at an exercise price of $3.33 per share, in each case received by Mr.
Bohn in return for his interest in PetroChemNet, Inc. in connection with our
acquisition of PetroChemNet, Inc. shortly after our incorporation.
(9) Represents shares of common stock and warrants to purchase shares of common
stock at an exercise price of $3.33 per share, in each case received by Ms.
Morgan in return for her interest in PetroChemNet, Inc. in connection with
our acquisition of PetroChemNet, Inc. shortly after our incorporation.
Each share of our convertible preferred stock is convertible into one share
of common stock. Each of the persons named in the table above will convert all
of their warrants to purchase additional shares of convertible preferred stock
into shares of convertible preferred stock and convert all of their shares of
convertible preferred stock into shares of common stock prior to the
consummation of this offering.
DIRECTOR AND OFFICER LOANS
The following table illustrates the amount of debt of our current and
former executive officers and directors owed to us and outstanding and the rate
of interest charged on the debt owed.
<TABLE>
<CAPTION>
DEBT OUTSTANDING RATE OF INTEREST
<S> <C> <C>
Carl McCutcheon............................................. $426,959 5.42%
Chairman, President and Chief Executive Officer
John Bohn................................................... 177,899 5.54
Former Chairman
Karen Morgan................................................ 177,899 5.42
Former Executive Officer
</TABLE>
In each case, the debt of these individuals was incurred in connection with
their exercise of stock options. Each of these individuals has executed one or
more promissory notes in September or October 1999 in respect of their
indebtedness secured by the common stock underlying the exercised stock options.
The amount of debt outstanding for each of them represents the entire principal
amount of these secured promissory notes and the largest aggregate amount of
debt outstanding for each of these individuals since our inception. The
principal of Mr. McCutcheon's note is payable upon the earlier of three years
from the issuance date, the date Mr. McCutcheon ceases employment with CheMatch,
or upon the sale or transfer of the shares of common stock securing the note,
with interest payable on June 30 of each year and at maturity. The principal of
the notes of Mr. Bohn and Ms. Morgan is payable upon the earlier of January 26,
2001 or the sale or transfer of the shares securing the notes, with interest
payable on June 30 of each year and at maturity.
ALLIANCE WITH DEWITT & COMPANY, INCORPORATED
We executed an Alliance Agreement on June 21, 1999 with DeWitt & Company,
Incorporated ("DeWitt"), which is 50% owned by Earl H. Armstrong and of which he
is the Managing Director. Under the Alliance Agreement, we have agreed that
DeWitt will provide chemical industry trading analytics for our trading
exchange, and we have granted to DeWitt a right to a preferred display on our
trading screen for products and services offered by DeWitt. We have also agreed
to share development and other costs, and to share fees generated from the sale
of some of DeWitt's products and services offered on our trading exchange. We
have the right to terminate the Alliance Agreement at any time upon the payment
to
60
<PAGE> 64
DeWitt of $500,000. DeWitt may terminate the Agreement upon one year's prior
notice and the payment of $60,000. During the year ended December 31, 1999, we
paid DeWitt approximately $70,836 for services rendered and for reimbursement of
various expenses. In addition, we reimbursed $146,400 to DeWitt for legal fees
and expenses incurred in June 1999 in connection with DeWitt's sale of CheMatch,
Inc. to us.
REGISTRATION RIGHTS AGREEMENT
We have entered into a registration rights agreement with the Entities
Affiliated with Donaldson, Lufkin & Jenrette, Inc., the Battery Ventures
Entities, E.I. duPont de Nemours and Company, Earl Armstrong, Fred Cook,
Lawrance McAfee, Carl McCutcheon, John Sharum and other holders of our common
and convertible preferred stock. This registration rights agreement is described
under "Description of Capital Stock -- Registration Rights Agreement."
INDEMNIFICATION AGREEMENTS
We expect to enter into indemnification agreements with our directors and
executive officers containing provisions requiring us to, among other things,
indemnify them against liabilities that may arise by reason of their status or
service, other than liabilities arising from willful misconduct of a culpable
nature, and to advance expenses they incur as a result of any proceeding against
them as to which they could be indemnified.
61
<PAGE> 65
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 16, 2000, information with
respect to shares beneficially owned by:
- each person who we know to be the beneficial owner of more than five
percent of our outstanding shares of common stock;
- each of the named executive officers;
- each of our directors; and
- all current directors and executive officers as a group.
We have determined beneficial ownership in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. Applicable percentage ownership in the
following table is based on 19,146,150 shares of common stock outstanding as of
February 16, 2000, as adjusted to reflect the conversion of all outstanding
shares of convertible preferred stock and all warrants to purchase shares of
common stock and convertible preferred stock that would otherwise expire upon
consummation of this offering.
Unless otherwise indicated, the address for each listed stockholder is: c/o
CheMatch.com, Inc., 2900 North Loop West, Suite 1120, Houston, Texas 77092. To
our knowledge, except as indicated in the footnotes to this table or pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to the shares of common stock
indicated.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
SHARES --------------------------
5% STOCKHOLDERS, NAMED OFFICERS, DIRECTORS, BENEFICIALLY BEFORE AFTER
AND DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP OWNED OFFERING OFFERING
<S> <C> <C> <C>
Battery Ventures Entities(1).............................. 8,413,195 43.9%
20 Williams Street
Wellesley, MA 02481
Entities Affiliated with Donaldson, Lufkin & Jenrette,
Inc.(2)................................................. 2,664,953 13.9%
c/o The Sprout Group
277 Park Avenue
New York, NY 10172
E.I. duPont de Nemours and Company(3)..................... 2,197,446 11.5%
1007 Market Street, D-9000
Wilmington, DE 19898
Earl Armstrong(4)......................................... 270,270 1.4%
John Bohn(5).............................................. 751,866 3.9%
Fred Cook(6).............................................. 292,703 1.5%
Bob Gower(7).............................................. 13,040 *
Janet Hickey(8)........................................... 2,664,953 13.9%
Lawrance McAfee........................................... 191,163 *
Carl McCutcheon(9)........................................ 1,031,002 5.2%
Karen Morgan(10).......................................... 689,029 3.5%
James Saviano(7).......................................... 13,040 *
David Tabors(11).......................................... 8,413,195 43.9%
Directors and Executive Officers as a group a total of
12(12).................................................. 13,161,950 64.9%
</TABLE>
- ------------------------------
* Less than one percent
(1) The entities listed above as Battery Ventures Entities include Battery
Ventures V, L.P., Battery Investment Partners V L.L.C. and Battery Ventures
Convergence Fund, L.P.
(2) The entities listed above as Entities Affiliated with Donaldson, Lufkin &
Jenrette, Inc., a subsidiary of The Equitable Life Assurance Society of the
United States (the "DLJ Entities"), include Sprout Capital VIII, L.P.,
Sprout Venture Capital, L.P., DLJ ESC II, L.P. and DLJ Capital Corporation.
DLJ ESC II, L.P. is an Employees' Securities Corporation as defined in the
Investment Company Act of 1940. The general partner of DLJ ESC II, L.P. is
DLJ LBO Plans Management Corporation and the limited partners of DLJ ESC
II, L.P.
62
<PAGE> 66
are current or former employees of Donaldson, Lufkin & Jenrette, Inc. and
its affiliates. DLJ Capital Corporation is a wholly-owned subsidiary of
Donaldson, Lufkin & Jenrette, Inc. Sprout Capital VIII, L.P. is a Delaware
limited partnership of which DLJ Capital Corporation is the managing
general partner. Sprout Venture Capital, L.P. is a Delaware limited
partnership of which DLJ Capital Corporation is the managing general
partner. The DLJ Entities will place a sufficient number of their shares in
a voting trust so that upon the consummation of this offering, the DLJ
Entities will exercise voting control over less than five percent of the
outstanding shares of common stock. The shares subject to the voting trust
are held and voted by an independent third party, Norwest Bank Indiana,
N.A., as voting trustee. DLJ Capital Corporation has the power to dispose
of the shares subject to the voting trust that were formerly held by DLJ
Capital Corporation, Sprout Capital VIII, L.P. and Sprout Venture Capital,
L.P. DLJ LBO Plans Management Corporation has the power to dispose of the
shares subject to the voting trust that were formerly held by DLJ ESC II,
L.P. DLJ Capital Corporation has the power to vote and dispose of the
shares held by Sprout Capital VIII, L.P. that are not subject to the voting
trust.
(3) Pursuant to its strategic alliance with CheMatch, duPont can earn up to
$2.0 million in commissions through December 31, 2000 from trades by
customers it brings to our exchange and who meet specified trading
thresholds. These commissions are payable in shares of common stock valued
at their market price at the time of issuance.
(4) Includes 115,830 shares of common stock issuable upon the exercise of
warrants exercisable within 60 days.
(5) Includes 346,308 shares of common stock issuable upon the exercise of
warrants and options exercisable within 60 days.
(6) Includes 176,873 shares of common stock issuable upon the exercise of
warrants and options exercisable within 60 days.
(7) Represents shares issuable upon the exercise of director stock options. In
each case, 520 of such shares are exercisable within 60 days.
(8) Ms. Hickey, a director of CheMatch, is a general partner of the Sprout
Group, a division of DLJ Capital Corporation, and a divisional senior vice
president of DLJ Capital Corporation. She may be deemed to be a beneficial
owner of these shares, but she disclaims beneficial ownership of these
shares.
(9) Includes 8,785 shares of Series C convertible preferred stock, 6,589
warrants to purchase shares of Series C convertible preferred stock,
360,540 shares of common stock and 523,778 options to purchase shares of
common stock held in the name of ADCAP Investments, L.P., a family limited
partnership for the benefit of Mr. McCutcheon and his family. This total
does not include 12,740 shares of common stock held in trusts for the
benefit of Mr. McCutcheon's minor children, the trustee of which is Mr.
McCutcheon's brother, Richard McCutcheon. Mr. McCutcheon disclaims
beneficial ownership of the shares held in these trusts.
(10) Includes 324,258 shares of common stock issuable upon the exercise of
warrants and options exercisable within 60 days.
(11) Mr. Tabors, a director of CheMatch, is an employee of Battery Ventures V,
L.P. and Battery Ventures and a limited member of Battery Investment
Partners V, LLC. He may be deemed to be a beneficial owner of these shares,
but he disclaims beneficial ownership of these shares.
(12) This group consists of 12 persons. Includes 8,413,195 shares of common
stock beneficially owned by Battery Ventures Entities, see Note (2) above,
and 2,664,953 shares of common stock beneficially owned by the DLJ
Entities, see Note (4) above. Mr. Tabors and Ms. Hickey disclaim beneficial
ownership of the shares held by Battery Ventures Entities and the DLJ
Entities, respectively.
63
<PAGE> 67
DESCRIPTION OF CAPITAL STOCK
Immediately following the consummation of this offering, the authorized
capital stock of CheMatch will consist of 50,000,000 shares of common stock, par
value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01
per share, the rights and preferences of which may be established from time to
time by our board of directors. Upon completion of this offering, there will be
outstanding shares of common stock, no outstanding shares of preferred
stock, options to purchase 4,482,556 shares of common stock and outstanding
warrants to purchase 397,440 shares of common stock.
The following discussion summarizes the material provisions of our capital
stock and the anti-takeover provisions that will be contained in our certificate
of incorporation and bylaws upon consummation of this offering. This summary is
qualified by our certificate of incorporation and bylaws, copies of which have
been filed as exhibits to the registration statement of which this prospectus is
a part and by Delaware law.
COMMON STOCK
As of February 16, 2000, there were 5,234,482 shares of common stock
outstanding that were held of record by more than 50 stockholders. Assuming no
exercise of the underwriters' over-allotment option and assuming no exercise of
outstanding options after February 16, 2000, there will be shares of
common stock outstanding following the sale of shares of common stock to the
public contemplated by this offering and the conversion of our outstanding
preferred stock into common stock at a one-to-one ratio. Holders of common stock
are entitled to one vote per share on all matters to be voted upon by the
stockholders. Because holders of common stock do not have cumulative voting
rights, the holders of a majority of the shares of common stock can elect all of
the members of the board of directors standing for election. Subject to
preferences of any preferred stock that may be issued in the future, the holders
of common stock are entitled to receive such dividends as may be declared by the
board of directors. The common stock is entitled to receive pro rata all of the
assets of CheMatch available for distribution to its stockholders. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
PREFERRED STOCK
The board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rates, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of that series, which may be superior to those of the common stock,
without further vote or action by the stockholders. There will be no shares of
preferred stock outstanding upon the closing of the offering and we have no
present plans to issue any preferred stock.
One of the effects of undesignated preferred stock may be to enable the
board of directors to render more difficult or to discourage an attempt to
obtain control of us by means of a tender offer, proxy contest, merger or
otherwise, and as a result to protect the continuity of our management. The
issuance of shares of the preferred stock by the board of directors as described
above may adversely affect the rights of the holders of common stock. For
example, preferred stock issued by us may rank prior to the common stock as to
dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of common stock. Accordingly, the
issuance of shares of preferred stock may discourage bids for the common stock
or may otherwise adversely affect the market price of the common stock.
OPTIONS
As of February 16, 2000, options to purchase a total of 4,482,556 shares of
common stock were outstanding, and up to 490,698 shares of common stock may be
subject to options granted in the future under our existing stock option plans.
64
<PAGE> 68
WARRANTS
As of February 16, 2000, there were 397,440 warrants outstanding and
exercisable to purchase shares of our common stock at an exercise price of $3.33
per share, assuming the expiration or earlier exercise of all outstanding
warrants to purchase common or preferred stock that expire upon consummation of
this Offering. These warrants expire at various dates between 2002 and 2004.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
WRITTEN CONSENT OF STOCKHOLDERS
Our certificate of incorporation provides that any action by our
stockholders must be taken at an annual or special meeting of stockholders.
Special meetings of the stockholders may be called only by the board of
directors. This provision, which requires a vote of at least 50% of the voting
power of the outstanding shares of common stock to be amended, could have the
effect of deterring hostile takeovers or delaying changes in control.
ADVANCE NOTICE PROCEDURE FOR STOCKHOLDER PROPOSALS
Our bylaws establish an advance notice procedure for the nomination of
candidates for election as directors as well as for stockholder proposals to be
considered at annual meetings of stockholders. In general, notice of intent to
nominate a director must be delivered to or mailed and received at our principal
executive offices as follows:
- With respect to an election to be held at the annual meeting of
stockholders, not later than 90 days nor earlier than 120 days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders.
- With respect to an election to be held at a special meeting of
stockholders for the election of directors, not earlier than 120 days
prior to the special meeting nor later than 90 days prior to the special
meeting or 10 days after the first public announcement of the special
meeting.
Notice of stockholders' intent to raise business at an annual meeting
generally must be delivered to or mailed and received at our principal executive
offices not later than 90 days nor earlier than 120 days prior to the
anniversary date of the preceding annual meeting of stockholders. These
procedures may operate to limit the ability of stockholders to bring business
before a stockholders meeting, including with respect to the nomination of
directors of considering any transaction that could result in a change in
control.
LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
Our certificate of incorporation provides that no director shall be
personally liable to CheMatch or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability as follows:
- for any breach of the director's duty of loyalty to CheMatch or its
stockholders
- for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of laws
- for unlawful payment of a dividend or unlawful stock purchase or stock
redemption
- for any transaction from which the director derived an improper personal
benefit
The effect of these provisions is to eliminate the rights of CheMatch and its
stockholders, through stockholders' derivative suits on behalf of CheMatch, to
recover monetary damages against a director for breach of fiduciary duty as a
director, including breaches resulting from grossly negligent behavior, except
in the situations described above.
65
<PAGE> 69
DELAWARE TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation law which
regulates corporate acquisitions. This law provides that specified persons who,
together with affiliates and associates, own, or within three years did own, 15%
or more of the outstanding voting stock of a corporation may not engage in
certain business combinations with the corporation for a period of three years
after the date on which the person became an interested stockholder. The law
does not include interested stockholders prior to the time our common stock is
authorized for quotation on the Nasdaq National Market. The law defines the term
"business combination" to encompass a wide variety of transactions with or
caused by an interested stockholder, including mergers, asset sales and other
transactions in which the interested stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders. This provision
has an anti-takeover effect with respect to transactions not approved in advance
by our Board of Directors, including discouraging takeover attempts that might
result in a premium over the market price for the shares of our common stock.
With approval of our stockholders, we could amend our certificate of
incorporation in the future to avoid the restrictions imposed by this
anti-takeover law.
REGISTRATION RIGHTS
The holders of 12,988,418 shares of our common stock that will be
outstanding after this offering are entitled to require us to register the sales
of their shares under the Securities Act, under the terms of an Amended and
Restated Registration Rights Agreement between us and the holders of these
securities. Subject to limitations specified in this agreement, these
registration rights include the following:
- two demand registration rights that holders of the requisite number of
shares may exercise no sooner than 180 days after our initial public
offering, which require us to register sales of a holder's shares,
subject to the discretion of the managing underwriter of the offering to
decrease the amount that holders may register;
- an unlimited number of piggyback registration rights that require us to
register sales of a holder's shares when we undertake a public offering,
subject to the discretion of the managing underwriter of the offering to
decrease the amount that holders may register; and
- an unlimited number of rights to require us to register sales of shares
on Form S-3, a short form of registration statement permitted to be used
by some companies, which holders may exercise if they request
registration of the sale of more than $1 million of common stock
following the time we first qualify for the use of this form of
registration with the Securities and Exchange Commission.
We will bear all registration expenses if these registration rights are
exercised, other than underwriting discounts and selling commissions. These
registration rights terminate four years after the completion of our initial
public offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is Harris Trust and
Savings Bank, and its telephone number is (800) 577-5042.
66
<PAGE> 70
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Sales of substantial amounts of
our common stock in the public market after any restrictions on sale lapse could
adversely affect the prevailing market price of the common stock and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares
of common stock, outstanding options to purchase shares of common
stock and outstanding warrants to purchase shares of common stock,
assuming no exercise of the underwriters' over-allotment option and no
additional option or warrant grants or exercises after , 2000. Of
the shares sold in the offering, shares will be subject to
the lock-up agreements described below assuming that we sell all shares reserved
under our directed share program to the entities or persons for whom these
shares have been reserved. We expect that the remaining shares, plus
any shares issued upon exercise of the underwriters' over-allotment option, will
be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates" as that term is defined in Rule 144 under the
Securities Act.
The remaining shares outstanding and shares subject to
outstanding options and warrants are "restricted securities" within the meaning
of Rule 144. Restricted securities may be sold in the public market only if the
sale is registered or if it qualifies for an exemption from registration, such
as under Rule 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of restricted securities in the public market, or the
availability of such shares for sale, could adversely affect the market price of
the common stock.
LOCK-UP AGREEMENTS
Our directors, officers, employees and various other stockholders, who
together hold substantially all of our securities, have entered into lock-up
agreements in connection with this offering. These lock-up agreements generally
provide that these holders will not offer, pledge, sell, contract to sell or
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend or otherwise transfer
or dispose of, directly or indirectly, any shares of our common stock owned by
them for a period of 180 days after the date of this prospectus without the
prior written consent of the representatives of the underwriters of this
offering. The lock-up agreements executed by our employees and directors also
cover any shares they may acquire through our directed share program. However,
25% of the shares of common stock subject to the restrictions described above
(other than shares owned by directors or officers) will be released from these
restrictions if the reported last sale price of the common stock on the Nasdaq
National Market is at least twice the initial public offering price for 20 of
the 30 consecutive trading days ending on the last trading day of the 90 day
period after the date of this prospectus. These shares will be released on the
later to occur of the 90 day period after the date of this prospectus and the
second trading day after the first public release of our quarterly results. An
additional 25% of the shares subject to the restrictions described above will be
released from these restrictions if the reported last sale price of the common
stock on the Nasdaq National Market is at least twice the initial public
offering price for 20 of the 30 consecutive trading days ending on the last
trading day of the 135 day period after the date of this prospectus.
Notwithstanding possible earlier eligibility for sale under the provisions
of Rules 144, 144(k) and 701, shares subject to lock-up agreements may not be
sold until these agreements expire or are waived by the representatives of the
underwriters of this offering. Assuming that the early release provisions
described in the previous paragraph are not applicable and that the
representatives of the underwriters of this offering do not release any security
holders from the lock-up agreements, the following shares will be eligible for
sale in the public market at the following times:
- Beginning on the effective date of the registration statement of which
this prospectus forms a part, of the shares sold in
this offering, and additional shares not subject
67
<PAGE> 71
to lock-up agreements and eligible for sale under Rule 144(k), will be
immediately available for sale in the public market.
- Beginning 90 days after the effective date, an additional
shares not subject to lock-up agreements will be eligible for sale
pursuant to Rule 144 and Rule 701.
- Beginning 180 days after the effective date, an additional
shares will be eligible for sale pursuant to Rule 144, Rule 144(k) and
Rule 701.
RULE 144
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding; and
- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner of
sale, notice and the availability of current public information about us.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, may sell these
shares without complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.
RULE 701
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell such shares in reliance upon Rule 144, but without
compliance with certain restrictions. Rule 701 provides that affiliates may sell
their Rule 701 shares under Rule 144 ninety days after effectiveness without
complying with the holding period requirement and that non-affiliates may sell
such shares in reliance on Rule 144 ninety days after effectiveness without
complying with the holding period, public information, volume limitation or
notice requirements of Rule 144.
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 1997 Stock Plan and 1999 Stock Plan within 180 days after the date of this
prospectus, thus permitting the resale of such shares by nonaffiliates in the
public market without restriction under the Securities Act.
In addition, after this offering, the holders of approximately 6,567,861
shares of common stock will be entitled to rights with respect to registration
of such shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares, except for shares purchased by
affiliates of CheMatch, becoming freely tradable without restriction under the
Securities Act immediately on the effectiveness of such registration.
68
<PAGE> 72
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, the underwriters named below, who are
represented by Donaldson, Lufkin & Jenrette Securities Corporation, Deutsche
Bank Securities Inc., Salomon Smith Barney Inc., SG Cowen Securities Corporation
and DLJdirect Inc., have severally agreed to purchase from us the number of
shares of common stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Deutsche Bank Securities Inc................................
Salomon Smith Barney Inc....................................
SG Cowen Securities Corporation.............................
DLJdirect Inc. .............................................
------
Total.............................................
======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock in
this offering are subject to approval of certain legal matters and certain other
conditions. The underwriters are obligated to purchase and accept delivery of
all the shares of common stock in this offering, other than those shares covered
by the over-allotment option described below, if any are purchased.
The underwriters initially propose to offer some of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and some of the shares to dealers at the
initial public offering price less a concession not in excess of $ per
share. The underwriters may allow, and those dealers may re-allow, a concession
not in excess of $ per share on sales to other dealers. After the initial
offering of the shares of common stock to the public, the representatives may
change the public offering price and concessions at any time without notice. The
underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by us in connection with this offering. This information is
presented assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of our common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
<S> <C> <C>
Per share................................................... $ $
Total.......................................................
</TABLE>
We will pay the offering expenses, estimated to be approximately $
million. An underwriter has agreed to reimburse us for certain offering
expenses. We will pay to the underwriters underwriting discounts and commissions
in an amount equal to the initial public offering price per share of common
stock less the amount the underwriters pay to us for each share of common stock
sold by us.
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation, is facilitating the distribution of the shares sold in this
offering over the Internet. An electronic prospectus will be available on the
web sites maintained by DLJdirect. Other than the prospectus in electronic
format, the information on these web sites relating to the offering is not part
of this prospectus and has not been approved or endorsed by us or the
underwriters, and should not be relied on by prospective investors.
We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the initial public offering price less the
underwriting discounts and commissions. The underwriters may exercise this
option solely to cover over-allotments, if any, made in connection with this
offering. To the extent the underwriters exercise this option, each underwriter
will be obligated, upon satisfaction of certain conditions,
69
<PAGE> 73
to purchase a number of additional shares approximately proportionate to that
underwriter's initial purchase commitments.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriters may be required to make for these liabilities. We and our
executive officers, directors, employees and various other stockholders, who
together hold substantially all of our securities have agreed for a 180 day
lock-up period not to, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation:
- offer, pledge, sell, contract to sell or sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, whether any such transaction described above is to be settled by
delivery of common stock or other securities, in cash, or otherwise.
However, we may:
- grant stock options pursuant to our 1999 Stock Plan; and
- issue shares of our common stock upon the exercise of our options,
warrants or rights or the conversion of currently outstanding securities
on the date of the underwriting agreement.
In addition, during the lock-up period, we have agreed not to file any
registration statement relating to, and each of our executive officers,
directors, employees and various other stockholders, who together hold
substantially all of our securities have agreed not to make any demand for, or
exercise any right relating to, the registration of any shares of common stock
or any securities convertible into or exercisable or exchangeable for common
stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
However, 25% of the shares of common stock subject to the restrictions
described above (other than shares owned by directors or officers) will be
released from these restrictions if the reported last sale price of the common
stock on the Nasdaq National Market is at least twice the initial public
offering price for 20 of the 30 consecutive trading days ending on the last
trading day of the 90 day period after the date of this prospectus. These shares
will be released on the later to occur of the 90 day period after the date of
this prospectus and the second trading day after the first public release of our
quarterly results.
An additional 25% of the shares subject to the restrictions described above
will be released from these restrictions if the reported last sale price of the
common stock on the Nasdaq National Market is at least twice the initial public
offering price for 20 of the 30 consecutive trading days ending on the last
trading day of the 135 day period after the date of this prospectus.
Prior to this offering, no public market has existed for our common stock.
We will negotiate the initial public offering price for our common stock offered
by this prospectus with the representatives of the underwriters, but the
negotiated price may not reflect the market price for our common stock after
this offering. The factors considered in determining the initial public offering
price include:
- the history of and prospects for the industry in which we compete;
- our past and present operations;
- our historical results of operations;
- our prospects for future earnings;
70
<PAGE> 74
- the recent market prices of securities of generally comparable companies;
and
- the general conditions of the securities market at the time of this
offering.
We intend to apply for quotation of our common stock on the Nasdaq National
Market under the symbol "CHEM." Other than in the United States, no action has
been taken by us or the underwriters that would permit a public offering of the
shares of common stock included in this offering in any jurisdiction where
action for that purpose is required. The shares included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisement in connection with the offer and sale
of these shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of that jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
this offering and the distribution of this prospectus. This prospectus is not an
offer to sell or a solicitation of an offer to buy any shares of our common
stock in any jurisdiction where that would not be permitted or legal.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock. Specifically, the underwriters may over-allot this offering,
creating a syndicate short position. The underwriters may bid for and purchase
shares of our common stock in the open market to cover syndicate short positions
or to stabilize the price of our common stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members and selected
dealers if they repurchase previously distributed common stock in syndicate
covering transactions, in stabilizing transactions or otherwise, or if
Donaldson, Lufkin & Jenrette Securities Corporation receives a report which
indicates that the clients of such syndicate members have "flipped" our common
stock. These activities may stabilize or maintain the market price of our common
stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to five percent of the shares of common stock offered
by this prospectus for sale to our officers, directors, employees and their
family members and to business associates of CheMatch, including clients,
consultants and other friends. These persons must commit to purchase these
reserved shares after the registration statement has become effective but before
the open of business on the following business day. The number of shares
available for sale to the general public will be reduced to the extent these
persons purchase the reserved shares. Any reserved shares not purchased by those
persons will be offered to the general public on the same basis as the other
shares offered hereby.
DLJ Capital Corporation, DLJ ESC II, L.P., Sprout Capital VIII, L.P. and
Sprout Venture Capital, L.P., collectively referred to as the "DLJ Entities,"
are affiliates of Donaldson, Lufkin & Jenrette Securities Corporation, one of
the underwriters. As described under "Principal Stockholders," the DLJ Entities
beneficially own an aggregate of 2,664,953 shares of our common stock, which
represent more than 10% of our outstanding common stock. The DLJ Entities will
place a sufficient number of their shares in a voting trust so that upon the
closing of this offering, the DLJ Entities will exercise voting control over
less than five percent of our outstanding common stock. The shares subject to
the voting trust will be held and voted by an independent third party, Norwest
Bank Indiana, N.A., as voting trustee.
Because the DLJ Entities affiliated with Donaldson, Lufkin & Jenrette
Securities Corporation beneficially own more than 10% of our outstanding common
stock, this offering is being conducted in accordance with Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc., which
provides that the public offering price of an equity security be no higher than
that recommended by a "qualified independent underwriter" meeting certain
standards. In accordance with this requirement, Salomon Smith Barney will assume
the responsibilities of acting as qualified independent underwriter and will
recommend a price in compliance with the requirements of Rule 2720.
71
<PAGE> 75
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by this
prospectus will be passed on for us by Vinson & Elkins L.L.P., Houston, Texas.
Certain legal matters relating to the common stock offered by this prospectus
will be passed on for the underwriters by Fulbright & Jaworski L.L.P., Houston,
Texas.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective October 26, 1999, Arthur Andersen LLP was engaged as our
independent auditors and replaced other auditors who were dismissed as our
independent accountants on the same date. The decision to change auditors was
approved by our Board of Directors on October 26, 1999. On December 9, 1999, our
former auditors issued a report on PetroChemNet, Inc. for the two years ended
December 31, 1998. The report of our former auditors did not contain an adverse
opinion or disclaimer of opinion nor was it qualified or modified as to any
uncertainty, audit scope or accounting principle. In connection with the audit
for two years ended December 31, 1998, there were no disagreements with our
former auditors on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of our former auditors, would have caused them to
make reference thereto in their report on the financial statements for such
period. Our former auditors have not audited or reported on any of the financial
statements or information included in this prospectus. Prior to October 26,
1999, we had not consulted with Arthur Andersen LLP on items that involved our
accounting principles or the form of audit opinion to be issued on our financial
statements. Our former auditors have furnished us with a letter dated February
25, 2000 and addressed to the SEC stating that they agree with the above
statements.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act relating to the common stock
being sold in this offering. This prospectus constitutes a part of that
registration statement. This prospectus does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the
registration statement because some parts have been omitted in accordance with
the rules and regulations of the Commission. For further information about us
and the common stock being sold in this offering, you should refer to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. Statements contained in this prospectus regarding the
contents of any agreement, contract or other document referred to are not
necessarily complete. Reference is made in each instance to the copy of the
contract or document filed as an exhibit to the registration statement. Each
statement is qualified by reference to the exhibit. The registration statement,
including related exhibits and schedules, may be inspected without charge at the
Commission's principal office in Washington, D.C. Copies of all or any part of
the registration statement may be obtained after payment of fees prescribed by
the Commission from:
- the Commission's Public Reference Room at the Commission's principal
office, 450 Fifth Street, N.W., Washington, D.C. 20549; or
72
<PAGE> 76
- the Commission's regional offices in:
- New York, located at 7 World Trade Center, Suite 1300, New York, New
York 10048; or
- Chicago, located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
You may obtain information regarding the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. The Commission maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants, including us, that file electronically with
the Commission. The address of the web site is www.sec.gov.
We intend to furnish holders of our common stock with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports containing unaudited condensed financial
information for the first three quarters of each fiscal year. We intend to
furnish other reports as we may determine or as may be required by law.
73
<PAGE> 77
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CHEMATCH.COM, INC.
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statement of Operations...................... F-4
Consolidated Statement of Preferred Stock and
Stockholders' Deficit.................................. F-5
Consolidated Statement of Cash Flows...................... F-6
Notes to Consolidated Financial Statements................ F-7
PETROCHEMNET, INC.
Report of Independent Public Accountants.................. F-19
Balance Sheets............................................ F-20
Statements of Operations.................................. F-21
Statements of Shareholders' Equity (Deficit).............. F-22
Statements of Cash Flows.................................. F-23
Notes to Financial Statements............................. F-24
CHEMATCH, INC. (A DEVELOPMENT STAGE COMPANY)
Report of Independent Public Accountants.................. F-29
Balance Sheets............................................ F-30
Statements of Operations.................................. F-31
Statements of Shareholders' Deficit....................... F-32
Statements of Cash Flows.................................. F-33
Notes to Financial Statements............................. F-34
</TABLE>
F-1
<PAGE> 78
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CheMatch.com, Inc.:
We have audited the accompanying consolidated balance sheet of
CheMatch.com, Inc. (a Delaware corporation), as of December 31, 1999, and the
related consolidated statements of operations, preferred stock and stockholders'
deficit and cash flows for the period from June 21, 1999 (inception) through
December 31, 1999. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CheMatch.com, Inc., as of December 31, 1999, and the results of its operations
and its cash flows for the period from June 21, 1999 (inception) through
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Houston, Texas
February 4, 2000
F-2
<PAGE> 79
CHEMATCH.COM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31,
1999 1999
(UNAUDITED)
(NOTE 6)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $30,170 $30,170
Accounts receivable, net of allowance of $20.............. 73 73
Other current assets...................................... 1,045 1,045
------- -------
Total current assets................................... 31,288 31,288
Property and equipment, net................................. 1,692 1,692
Other assets................................................ 2,228 2,228
Goodwill, net of accumulated amortization of $272........... 5,560 5,560
------- -------
Total assets........................................... $40,768 $40,768
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities.................. $ 3,106 $ 3,106
Deferred revenue.......................................... 34 34
------- -------
Total current liabilities.............................. 3,140 3,140
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series A convertible preferred stock, $.01 par value,
3,742,200 shares authorized; 2,138,400 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma................................. 17,488 --
Series B convertible preferred stock, $.01 par value,
3,556,350 shares authorized; 2,032,200 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma................................. 16,809 --
Series C convertible preferred stock, $.01 par value,
6,130,547 shares authorized; 3,503,169 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma................................. 32,654 --
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value, 25,000,000 shares
authorized; 4,304,959 shares issued and outstanding,
actual; 11,978,728 shares issued and outstanding, pro
forma.................................................. 43 120
Additional paid-in capital................................ 11,416 78,290
Notes receivable from employees........................... (822) (822)
Deferred stock compensation............................... (2,130) (2,130)
Accumulated deficit....................................... (37,830) (37,830)
------- -------
Total stockholders' equity (deficit)................... (29,323) 37,628
------- -------
Total liabilities and stockholders' equity (deficit)... $40,768 $40,768
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 80
CHEMATCH.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
JUNE 21, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
REVENUES:
Trading................................................... $ 108
Subscriptions............................................. 74
----------
Total revenues.................................... 182
COSTS AND EXPENSES:
Technology costs.......................................... 2,302
Selling and marketing..................................... 2,381
General and administrative................................ 3,536
Stock-based compensation.................................. 93
Depreciation and amortization............................. 431
----------
Total costs and expenses.......................... 8,743
----------
Operating loss.............................................. (8,561)
Interest income............................................. 236
----------
Net loss.................................................... $ (8,325)
==========
Net loss attributable to common stockholders................ $ (37,830)
Net loss per common share, basic and diluted................ $ (11.61)
==========
Pro forma net loss per common share, basic and diluted...... $ (1.19)
==========
Shares used to compute net loss per common share:
Basic and diluted......................................... 3,258,966
Pro forma basic and diluted............................... 6,980,833
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 81
CHEMATCH.COM, INC.
CONSOLIDATED STATEMENT OF PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
JUNE 21, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK STOCKHOLDERS' DEFICIT
--------------------------------------------------------------- -------------------------------
SERIES A SERIES B SERIES C COMMON STOCK ADDITIONAL
------------------- ------------------- ------------------- ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
convertible preferred stock
and warrants at inception,
net of offering costs....... 2,138,400 $4,977 -- $ -- -- $ -- -- $-- $ --
Issuance of common stock in
connection with
acquisitions.............. -- -- -- -- -- -- 2,762,940 28 4,052
Issuance of Series B
convertible preferred
stock and warrants, net of
offering costs............ -- -- 2,032,200 4,990 -- -- -- -- --
Exercise of common stock
options................... -- -- -- -- -- -- 713,996 7 899
Issuance of common stock.... -- -- -- -- -- -- 191,080 2 998
Issuance of Series C
convertible preferred
stock and warrants, net of
offering costs............ -- -- -- -- 3,503,169 27,479 -- -- --
Issuance of common stock for
future goods and
services.................. -- -- -- -- -- -- 636,943 6 3,244
Deferred compensation
related to common stock
options................... -- -- -- -- -- -- -- -- 2,223
Compensation expense related
to stock options.......... -- -- -- -- -- -- -- -- --
Accretion of redeemable
stock to redemption
value..................... -- 12,511 -- 11,819 -- 5,175 -- -- --
Net loss.................... -- -- -- -- -- -- -- -- --
--------- ------- --------- ------- --------- ------- --------- --- -------
December 31, 1999............. 2,138,400 $17,488 2,032,200 $16,809 3,503,169 $32,654 4,304,959 $43 $11,416
========= ======= ========= ======= ========= ======= ========= === =======
<CAPTION>
STOCKHOLDERS' DEFICIT
--------------------------------------------------
NOTES
RECEIVABLE DEFERRED
FROM STOCK ACCUMULATED
EMPLOYEES COMPENSATION DEFICIT TOTAL
<S> <C> <C> <C> <C>
Issuance of Series A
convertible preferred stock
and warrants at inception,
net of offering costs....... $ -- $ -- $ -- $ --
Issuance of common stock in
connection with
acquisitions.............. -- -- -- 4,080
Issuance of Series B
convertible preferred
stock and warrants, net of
offering costs............ -- -- -- --
Exercise of common stock
options................... (822) -- -- 84
Issuance of common stock.... -- -- -- 1,000
Issuance of Series C
convertible preferred
stock and warrants, net of
offering costs............ -- -- -- --
Issuance of common stock for
future goods and
services.................. -- -- -- 3,250
Deferred compensation
related to common stock
options................... -- (2,223) -- --
Compensation expense related
to stock options.......... -- 93 -- 93
Accretion of redeemable
stock to redemption
value..................... -- -- (29,505) (29,505)
Net loss.................... -- -- (8,325) (8,325)
----- ------- -------- --------
December 31, 1999............. $(822) $(2,130) $(37,830) $(29,323)
===== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 82
CHEMATCH.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
JUNE 21, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (8,325)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization.......................... 431
Non-cash technology costs.............................. 55
Compensation expense related to stock options.......... 93
Changes in operating assets and liabilities --
Increase in accounts receivable, net................. (88)
Decrease in other assets............................. 187
Increase in accounts payable and accrued
liabilities......................................... 2,168
Decrease in deferred revenue......................... (55)
--------
Net cash used in operating activities............. (5,534)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (1,560)
Acquisitions, net of cash acquired........................ (1,080)
--------
Net cash used in investing activities............. (2,640)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock, net
of offering costs...................................... 37,446
Proceeds from issuance of common stock.................... 1,006
Exercise of common stock options.......................... 84
Payment of advances from shareholders..................... (125)
Payment of line of credit................................. (67)
--------
Net cash provided by financing activities......... 38,344
--------
Net increase in cash and cash equivalents................... 30,170
Cash and cash equivalents at beginning of period............ --
--------
Cash and cash equivalents at end of period.................. $ 30,170
========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Non-cash consideration in acquisitions.................... $ 4,227
Notes receivable for stock option exercises............... 822
Prepaid goods and services received for the issuance of
common stock........................................... 3,238
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 83
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
CheMatch.com, Inc. (CheMatch), formerly known as PetroChemNet Holdings,
Inc., was incorporated as a Delaware corporation on June 21, 1999. CheMatch is a
leading business-to-business Internet-based marketplace for purchasers and
sellers of commodity chemicals, plastics and fuel products. CheMatch's
marketplace is centered around a real-time, interactive trading exchange, where
members bid, offer and negotiate online for the purchase and sale of products 24
hours a day, seven days a week. Members of CheMatch's secure, neutral exchange
trade products anonymously, utilizing real-time pricing and other market
information provided through the exchange.
On June 21, 1999 PetroChemNet, Inc. and CheMatch, Inc. merged into
CheMatch. CheMatch has been identified as the accounting acquiror in accordance
with Securities and Exchange Commission Staff Accounting Bulletin No. 97, which
states that the combining company that receives the largest portion of voting
rights in the combined corporation is presumed to be the acquiror for accounting
purposes. These acquisitions were accounted for using the purchase method of
accounting. These financial statements and accompanying notes present CheMatch's
consolidated financial results from June 21, 1999 (inception), through December
31, 1999. PetrochemNet, Inc. has been determined to be the Predecessor Entity of
CheMatch.
CheMatch has a limited operating history, which includes substantial losses
since its inception. CheMatch's future success is dependent upon a number of
factors which include, among other things, a proven business model, critical
mass of purchasers and sellers, increased transaction volume, functionality and
reliability of the trading exchange, generation of sufficient revenue,
technological innovation, diversity of products traded on the exchange,
management of growth and attraction and retention of key personnel.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include CheMatch and its
wholly owned subsidiaries; PetroChemNet, Inc. and CheMatch, Inc. All significant
intercompany account balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Estimates are used for, but not limited to, the allowance for doubtful
accounts, depreciation and amortization, deferred compensation, and
contingencies. Actual results could differ from those estimates.
Cash and Cash Equivalents
CheMatch considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Fair Value of Financial Instruments
CheMatch has the following financial instruments: cash and cash
equivalents, accounts receivable and accounts payable. Management believes that
the carrying values of these financial instruments approximate their respective
fair value due to their short-term nature.
F-7
<PAGE> 84
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Lived Assets
Management reviews its long-lived assets and certain identifiable
intangibles to be held and used by CheMatch for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If the sum of the expected future cash flows from the use of the
asset and its eventual disposition is less than the carrying amount of the
asset, an impairment loss is recognized based on the fair value of the asset. No
such losses have been recognized.
Prepaid Goods and Services
Prepaid goods and services are expensed as the goods and services are
provided over one to five years.
Revenue Recognition
CheMatch generates revenue from its Internet-based trading exchange.
Trading revenues consist of commissions typically paid by each party to a
completed transaction. Commissions are based on the volume of chemicals traded
on the exchange and are recognized upon confirmation of a trade.
CheMatch's subscription revenues are derived from subscription fees for
Internet-based information resources. Revenue from subscription fees is
recognized ratably over the term of the subscription, which is normally one
year. The unearned revenue from subscription fees is reflected as deferred
revenue in the accompanying balance sheets. CheMatch pays fees to third parties
who provide and maintain the Internet-based information resources. Certain of
the subscription revenues received are commissions from third parties who
provide and maintain the Internet-based information resources. The commissions
earned are recorded net in the accompanying statement of operations as CheMatch
does not bear the risk of loss.
Technology Costs
Technology costs include expenses incurred by CheMatch to maintain and
enhance CheMatch's Internet-based trading exchange and information resource web
sites.
Advertising Costs
Advertising costs included in selling and marketing costs and expenses in
the accompanying consolidated statement of operations are charged to expense
when incurred. Advertising expenses for the period from June 21, 1999
(inception) to December 31, 1999 were $1.1 million.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss, adjusted for
periodic adjustments to the carrying amount of redeemable convertible preferred
stock, by the weighted average number of shares of CheMatch's common stock
outstanding. Shares associated with stock options, warrants and convertible
preferred stock are not included because they are antidilutive.
Pro Forma Net Loss Per Common Share (Unaudited)
Pro forma net loss per common share is computed using the weighted average
number of shares outstanding, including the pro forma effects of the automatic
conversion of outstanding convertible preferred stock into shares of common
stock upon the effectiveness of CheMatch's initial public offering as if such
conversion occurred on the dates of original issuance.
F-8
<PAGE> 85
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the computation of the basic and diluted net
loss per common share for the period from June 21, 1999 (inception), through
December 31, 1999 (in thousands, except per share data):
<TABLE>
<S> <C>
Numerator:
Net loss.................................................. $ (8,325)
==========
Accretion of redeemable convertible preferred stock to
redemption value....................................... (29,505)
----------
Net loss attributable to common stockholders.............. $ (37,830)
==========
Denominator:
Weighted average common shares............................ 3,258,966
Weighted average effect of redeemable convertible
preferred stock........................................ 3,721,867
----------
Shares used to compute pro forma basic and diluted........ 6,980,833
==========
Net loss per common share:
Basic and diluted......................................... $ (11.61)
==========
Pro forma basic and diluted............................... $ (1.19)
==========
</TABLE>
Segment Information
CheMatch operates through one segment, an Internet-based trading exchange
and information resource for purchasers and sellers of commodity chemicals,
plastics and fuel products, across domestic and international markets.
International revenues represented approximately one percent of revenues for the
period from June 21, 1999 (inception) through December 31, 1999. All domestic
operating results and identifiable assets are in the United States.
3. ACQUISITIONS:
On June 21, 1999, PetroChemNet, Inc. and CheMatch, Inc. merged into
CheMatch in a transaction accounted for using the purchase method. The purchase
price of PetroChemNet, Inc. and CheMatch, Inc. has been allocated based on the
estimated fair value of assets acquired and liabilities assumed on the
acquisition date.
PetroChemNet, Inc.
The purchase price of PetroChemNet, Inc. of $3.2 million consisted of
2,119,440 shares of common stock, warrants and options to purchase 397,440 and
1,187,250 shares of common stock, respectively.
The purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired........................................... $ 498
Liabilities assumed....................................... (1,193)
Goodwill.................................................. 3,870
-------
$ 3,175
=======
</TABLE>
CheMatch, Inc.
CheMatch, Inc. was acquired through a series of corporate transactions for
a net purchase price of $2 million, which consisted of $983,600 in cash, 643,500
shares of common stock and warrants to purchase 482,571 shares of common stock.
F-9
<PAGE> 86
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired............................................ $ 97
Liabilities assumed........................................ (24)
Goodwill................................................... 1,962
------
$2,035
======
</TABLE>
Goodwill is amortized using the straight-line method over a 10-year period.
The following unaudited pro forma financial information for the year ended
December 31, 1999, represents the consolidated results of operations of CheMatch
as if the acquisition of PetroChemNet, Inc. and CheMatch, Inc. had occurred at
the beginning of 1999 and does not purport to be indicative of what would have
occurred had the acquisition been made as of that date or the results which may
occur in the future (in thousands):
<TABLE>
<S> <C>
Revenues.................................................. $ 373
Costs and expenses........................................ 10,113
-------
Operating loss............................................ (9,740)
Interest income........................................... 222
-------
Pro forma net loss........................................ $(9,518)
=======
Pro forma net loss per share, basic and diluted........... $(12.89)
=======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated depreciation.
Maintenance, repairs and minor replacements are charged to expense as incurred;
significant renewals and betterments are capitalized. CheMatch computes
depreciation over the estimated useful life of the assets using the
straight-line method. Leasehold improvements are amortized over the lesser of
five years or the lease term.
Property and equipment consist of the following as of December 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
ESTIMATED
LIFE
<S> <C> <C>
Computer software and equipment................ 3-5 years $1,549
Furniture and fixtures......................... 7 years 209
Leasehold improvements......................... 5 years 23
------
1,781
Less -- Accumulated depreciation and
amortization................................. (89)
------
Property and equipment, net.......... $1,692
======
</TABLE>
5. DETAIL OF OTHER BALANCE SHEET ACCOUNTS:
Other assets consist of the following as of December 31, 1999 (in
thousands):
<TABLE>
<S> <C>
Prepaid goods and services................................ $ 3,169
Other..................................................... 104
-------
3,273
Less: current portion........................... (1,045)
-------
Other assets.............................................. $ 2,228
=======
</TABLE>
F-10
<PAGE> 87
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounts payable and accrued liabilities consist of the following as of
December 31, 1999 (in thousands):
<TABLE>
<S> <C>
Accounts payable........................................... $ 366
Accrued payroll-related costs.............................. 951
Accrued technology costs................................... 1,457
Accrued other.............................................. 332
------
Accounts payable and accrued liabilities......... $3,106
======
</TABLE>
6. PREFERRED STOCK AND STOCKHOLDERS' DEFICIT:
Series A Convertible Preferred Stock
In connection with the inception of CheMatch in June 1999, CheMatch issued
2,138,400 Series A units, at a price of $2.3484 per unit, for net proceeds of
$4,977,000. Each Series A unit consists of one share of Series A convertible
preferred stock (Series A) and the right to purchase 0.75 shares of Series A.
Each purchaser of Series A units also received the right to purchase a Series B
unit at $2.4673 prior to September 15, 1999, which was mutually extended to and
exercised on September 27, 1999.
The Series A is convertible at the option of the holder into common stock
on a one-to-one basis, as adjusted for certain events. The Series A will
automatically convert into common stock upon the effectiveness of a public
offering with net proceeds in excess of $25 million for which the offering price
per share is at least two times the original purchase price of the Series C. The
holders of the Series A vote on an as-converted basis. The holders of Series A
are entitled to participate in dividends declared and paid to common
stockholders on an as-converted basis. No dividends have been declared to date.
After June 21, 2004, upon approval of 66 percent of the holders of the
Series A, these shares are redeemable in cash at the greater of the preferred
stock fair market value or the original purchase price per share plus any
dividends declared but unpaid (the Redemption Value) in three equal installments
beginning 120 days after notice, and annually thereafter. CheMatch has no right
to call or redeem the Series A shares.
In the event of the liquidation, dissolution or winding up of CheMatch,
whether voluntary or involuntary, the holders of Series A are entitled to
receive preference over any distribution to the holders of Common Stock, in the
amount of $2.3484 per share plus accrued and unpaid dividends (the Liquidation
Preference Payment).
Series B Convertible Preferred Stock
In September 1999, CheMatch issued 2,032,200 Series B units, at a price of
$2.4673 per unit, for net proceeds of $4,990,000. Each Series B unit consists of
one share of Series B convertible preferred stock (Series B) and the right to
purchase 0.75 shares of Series B.
Series C Convertible Preferred Stock
In November 1999, CheMatch issued 3,503,169 Series C units, at a price of
$7.85 per unit, for net proceeds of $27,479,000. Each Series C unit consists of
one share of Series C convertible preferred stock (Series C) and the right to
purchase 0.75 shares of Series C.
The rights, restrictions and preferences of the Series B and Series C are
consistent with those for the Series A, except that the per share price
associated with determining the respective Series B and Series C conversion
ratio and the Liquidation Preference Payment is $2.4673 and $7.85, respectively.
F-11
<PAGE> 88
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Generally accepted accounting principles require the periodic accretion of
redeemable preferred stock to its Redemption Value when redemption is outside of
the control of the issuer. Since the Redemption Value of the Series A, Series B
and Series C convertible preferred stock exceeds its carrying value as of
December 31, 1999, the carrying value has been accreted to its fair market value
as of December 31, 1999, in the accompanying consolidated statement of
redeemable stock and stockholders' deficit.
Pro Forma Information
As discussed above, CheMatch's convertible preferred stock will convert
into common stock upon the closing of a public offering (as defined). The
accompanying balance sheets include unaudited pro forma stockholders' equity as
of December 31, 1999 which assumes the conversion of outstanding preferred stock
into common stock.
Notes Receivable From Employees
At December 31, 1999, CheMatch held promissory notes receivable from
certain employees and former employees totaling $822,000, representing amounts
owed to CheMatch for the exercise of stock options plus accrued interest. These
notes bear interest at rates ranging from 5.42 to 5.57 percent annually and are
presented in stockholders' equity. They are secured by the common stock issued.
Accrued interest for each note is due and payable annually on June 30 of each
year until maturity. The terms of these notes provide that paid interest is
nonrefundable and accrued interest is a recourse obligation. Principal and any
final interest payments are due at the earlier of (a) three years from date of
execution, (b) the date the respective employee should cease employment with
CheMatch (or January 26, 2001 for the notes of two former employees), or (c)
upon the sale or transfer of any of the underlying shares of common stock
representing collateral.
Warrants
At December 31, 1999, CheMatch had warrants outstanding to purchase 482,571
shares of common stock at an exercise price of $1.336 per share. The warrants
expire on the earlier of June 21, 2004 or the date CheMatch consummates a public
offering for which the net proceeds exceed $25 million. Also at December 31,
1999, CheMatch had additional warrants outstanding to purchase 397,440 shares of
common stock at an exercise price of $3.33 per share. These warrants expire at
various dates between 2002 and 2004. The fair value ascribed to the common stock
warrants was $212,000 in the accompanying consolidated balance sheet. At
December 31, 1999, CheMatch had warrants outstanding of 1,603,800, 1,524,150 and
2,627,378, to purchase Series A, Series B and Series C, respectively, at
exercise prices of $2.3484, $2.4673 and $7.85 per share, respectively. These
Series A, Series B and Series C warrants expire on the earlier of June 21, 2004
or a public offering for which the net proceeds exceed $25 million. The fair
value ascribed to the Series A, Series B and Series C warrants was $701,000,
$856,000 and $5,154,000, respectively in the accompanying consolidated balance
sheets.
REGISTRATION RIGHTS
Some of CheMatch's shareholders are entitled to require registration for
the sale of their shares. CheMatch will bear all registration expenses if these
registration rights are exercised, other than underwriting discounts and selling
commissions.
7. STOCK OPTION PLANS:
In October 1997, PetroChemNet, Inc. adopted the 1997 Employee, Director and
Consultant Stock Option Plan (the 1997 Plan) which provides for the granting of
incentive and nonqualified stock options to
F-12
<PAGE> 89
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
employees, directors and consultants. Stock options granted under the 1997 Stock
Plan have a term of ten years from the date of grant, with some vesting
immediately, and others vesting over periods ranging from two to three years. As
of December 31, 1999, 1,086,150 options were outstanding under the 1997 Stock
Plan. The 1997 Stock Plan, which was adopted by PetroChemNet, Inc. and its
stockholders in November 1997, was assumed by CheMatch and immediately
terminated in connection with the acquisition of PetroChemNet, Inc. in June 1999
and no additional options may be issued thereunder.
The 1999 Stock Plan, which was adopted by the board of directors in June
1999, provides for the granting of incentive and nonqualified stock options,
stock and stock purchase rights to employees, officers, directors and
consultants. A maximum of 4,500,000 shares are authorized for issuance under the
1999 Stock Plan.
Stock options granted under the 1999 Stock Plan have a term of ten years
from date of grant and are either fully exercisable, subject to repurchase
rights, or vest over four years, with 25 percent of the shares vesting 12 months
from date of grant and the remaining shares vesting ratably on a monthly basis
thereafter. In certain circumstances involving a change in control, as defined,
or termination of the employer without cause, the vesting of options is
accelerated. Certain of the options granted under the 1999 option plan are
subject to repurchase rights, at the exercise price, by CheMatch. The repurchase
rights expire over a four year period.
The following is a summary of CheMatch's option activity through December
31, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
<S> <C> <C>
Outstanding, June 21, 1999 (inception)...................... 1,187,250 $ 1.84
Granted..................................................... 2,779,320 1.38
Exercised................................................... (713,996) 1.27
--------- -------
Outstanding, December 31, 1999.............................. 3,252,574 1.56
=========
</TABLE>
CheMatch records deferred compensation for the difference between the grant
price and the deemed fair value for financial statement presentation purposes
related to options. The balance at December 31, 1999, was $2,130,000. In 1999,
$93,000 in related expense was recorded. The balance will be amortized to
expense over the remaining vesting periods of the options.
The number and weighted average fair value of options granted in 1999 is as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES FAIR VALUE
<S> <C> <C>
Option price greater than fair market value................. 1,824,569 $3.22
Option price less than fair market value.................... 954,751 0.37
</TABLE>
F-13
<PAGE> 90
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------- -----------------------------
WEIGHTED
AVERAGE
OUTSTANDING REMAINING EXERCISABLE
RANGE OF AS OF CONTRACTUAL WEIGHTED AS OF WEIGHTED
EXERCISE DECEMBER 31, LIFE AVERAGE DECEMBER 31, AVERAGE
PRICES 1999 (IN YEARS) EXERCISE PRICE 1999 EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$ 0.83 606,900 9.4 $0.83 606,900 $0.83
1.34-1.47 2,162,824 10.0 $1.37 1,944,057 $1.37
3.33 479,250 9.0 $3.33 119,850 $3.33
7.85 3,600 10.0 $7.85 -- $ --
--------- ---------
0.83-7.85 3,252,574 9.5 $1.56 2,670,807 $1.33
========= =========
</TABLE>
The fair values of each stock option grant are estimated using the minimum
value method with the following weighted average assumptions for 1999: expected
life of five years, no expected dividends and a risk-free interest rate of six
percent.
Had the compensation cost for the option plans been determined pursuant to
the alternative method under SFAS No. 123, CheMatch's net loss for the period
ended December 31, 1999, would have been increased to the following pro forma
amounts (in thousands except per share data):
<TABLE>
<S> <C>
Net loss:
As reported............................................. $ (8,325)
Pro forma............................................... (11,378)
Net loss per common share, basic and diluted:
As reported............................................. $ (11.61)
Pro forma............................................... (12.54)
</TABLE>
8. INCOME TAXES:
Deferred income taxes are recorded using the liability method of accounting
for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Deferred
tax assets are evaluated for realization based on a more-likely-than-not
criteria in determining if a valuation allowance should be provided.
CheMatch has had net operating losses since June 21, 1999 (inception),
accordingly, there is no provision for income taxes for the period from
inception, through December 31, 1999.
At December 31, 1999, CheMatch has a net operating loss carryforward of
approximately $6.5 million which begins to expire in 2020. The net operating
loss for federal income tax purposes is subject to annual limitations under
Section 382 of the Internal Revenue Code. A valuation allowance has been
established to fully offset any net deferred tax asset after considering
deferred tax liabilities.
F-14
<PAGE> 91
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of CheMatch's deferred tax assets as of December 31, 1999,
are as follows (in thousands):
<TABLE>
<S> <C>
Federal net operating loss carryforwards................. $ 2,225
Depreciation and amortization............................ 124
Accruals not currently deductible........................ 1,033
----------
3,382
Less -- Valuation allowance.............................. (3,382)
----------
Net deferred tax assets........................ $ --
==========
</TABLE>
A reconciliation of the statutory federal income tax rate to CheMatch's
effective income tax rate for the period from June 21, 1999 (inception), through
December 31, 1999, is as follows (in thousands):
<TABLE>
<S> <C>
U.S. tax at statutory rate.................................. (2,831)
Other....................................................... 130
Adjustment to deferred tax valuation allowance.............. 2,701
------
--
======
</TABLE>
9. EMPLOYEE RETIREMENT SAVINGS PLAN:
CheMatch has an employee retirement savings plan (the Plan) which qualifies
under Section 401(k) of the Internal Revenue Code. The Plan is designed to
provide eligible employees with an opportunity to make regular voluntary
contributions into a long-term investment and savings program. Employees are
eligible to participate in the Plan after three months of employment. Employer
matching contributions are made solely at CheMatch's discretion. CheMatch
contributed approximately $31,000 to the Plan during the period from June 21,
1999 (inception), to December 31, 1999. Three CheMatch officers are Plan
trustees.
10. ALLIANCES:
Pursuant to an Alliance Agreement dated as of June 21, 1999 between
CheMatch and DeWitt & Company, Incorporated (DeWitt), DeWitt will provide
chemical industry trading analytics for the trading exchange, and CheMatch has
granted to DeWitt certain preferential rights for future products and services
offered by DeWitt. CheMatch has also agreed to share certain development and
other costs, and to share fees generated from the sale of certain of DeWitt's
products and services offered on the trading exchange. CheMatch has the right to
terminate the Alliance Agreement at any time upon the payment to DeWitt of
$500,000. DeWitt may terminate the Alliance Agreement upon one year's prior
notice and the payment of $60,000. During the year ended December 31, 1999,
CheMatch paid DeWitt approximately $70,836 for services rendered and for
reimbursement of various expenses.
In September 1999, CheMatch entered into a strategic alliance and
subsequently issued 191,080 shares of common stock in exchange for $1.0 million
to Computer Sciences Corporation (CSC). CSC will be CheMatch's preferred
information technology systems integrator, and has agreed not to compete with
CheMatch for one year after termination of the strategic alliance. CSC will
market CheMatch's services to agreed upon customers in exchange for commissions
equal to 20 percent of the cash realized by CheMatch from sales of its services
to those customers. The related commission expense will be recognized by
CheMatch upon completion of the related trade.
In November 1999, CheMatch entered into a strategic alliance with E.I.
duPont de Nemours and Company (duPont). The strategic alliance included the sale
of $7.0 million of Series C convertible preferred stock, the sale of 636,943
shares of common stock in exchange for $6,369 in cash. DuPont also
F-15
<PAGE> 92
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreed to provide goods and services valued by the Company at approximately $3.3
million. The future goods and services include use of the CheMatch platform for
trading, reasonable efforts to trade an increasing amount of spot purchases on
the exchange, assistance in the design of the CheMatch platform, one full time
employee for one year and a $2 million credit towards the purchase of the
partner's products and services over a three year period. These future goods and
services have been recorded at the fair value of the common stock in the
accompanying balance sheet as prepaids and other current assets. Additionally,
the alliance provides that for each agreed upon customer brought to CheMatch by
duPont, duPont can earn commissions through December 31, 2000 up to an aggregate
maximum of $2 million payable in shares of common stock valued at the then fair
market value. The related commission expense will be recognized when earned by
duPont. As of December 31, 1999, no commissions had been earned under this
agreement.
11. SIGNIFICANT CUSTOMERS:
For the period from June 21, 1999 (inception), through December 31, 1999,
one customer accounted for approximately 10 percent of CheMatch's revenue.
12. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
CheMatch has noncancelable operating leases expiring in 2000, 2002 and
2003. Minimum future lease payments as of December 31, 1999 on these leases are
as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
2000...................................................... $ 407
2001...................................................... 292
2002...................................................... 260
2003...................................................... 82
------
$1,041
======
</TABLE>
Rental expense was approximately $110,000 for the period ended December 31,
1999.
Litigation
At certain times, CheMatch is involved in legal actions arising in the
ordinary course of business. CheMatch currently is not engaged in any legal
proceedings that are expected to have a material adverse effect on CheMatch's
results of operations or financial position.
Management Incentive Agreement
CheMatch executed a letter agreement on June 21, 1999, as amended on
October 26, 1999, which obligates CheMatch to make an incentive payment to
CheMatch's management and former employees in the event of a fundamental change.
The agreement provides that in the case of a public offering, the portion of the
net proceeds payable to the management team and former employees will be two
percent of the average daily closing price of CheMatch for the 90 day period
immediately following the consummation of a public offering, multiplied by the
number of shares of common stock outstanding on a fully diluted basis on the
90th day immediately following the consummation of a public offering. The
maximum amount payable under the agreement is $15 million. The incentive payment
will be recorded as compensation expense upon the closing of the initial public
offering.
F-16
<PAGE> 93
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consultant Agreements
In January 2000, the Company entered into agreements with two former
employees. The agreements changed the employees status to consultants,
accelerated vesting of their options, extended term of the options to June 20,
2009 and provided for approximately $671,000 to be paid over 15 months
commencing in February 2000. The compensation expense associated with the
accelerated vesting of the options and the cash payment was recorded in January
2000.
13. EVENTS SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):
Stock Options
In February 2000, CheMatch granted 840,000 options to certain employees and
former executives pursuant to the Management Incentive Agreement as amended on
February 8, 2000. The options, vest immediately, expire on February 8, 2005 and
have an exercise price of $27.28. One-half of these options will become
exercisable on February 8, 2001, and the remaining options will become
exercisable on February 8, 2002. The options were issued under the terms and
conditions of the 1999 Stock Plan with the exception that the options will not
terminate if the employment or other relationship with CheMatch terminates.
Strategic Alliances
In February, 2000, CheMatch sold 204,291 shares of common stock to Bayer AG
for $2 million in cash. Bayer has agreed to use the trading exchange as its
preferred platform for e-commerce trading of the products offered on CheMatch's
trading exchange through December 31, 2001. In connection with this agreement,
CheMatch agreed to provide a $2 million credit to Bayer's trading account
against which any commissions generated by Bayer as a result of trades completed
on the exchange will be debited.
In February 2000, CheMatch sold 306,435 shares of common stock to General
Electric Company for $3,064 in cash and a promissory note in aggregate principal
amount of approximately $2 million in conjunction with entering into a strategic
alliance, pursuant to which General Electric agreed to provide future services
with a value estimated by the Company of approximately $1 million. The future
services will be recorded at the fair value of the common stock. If the parties
agree that the value of the future services is in excess of $1 million, CheMatch
will either pay the excess, up to a maximum amount equal to the outstanding
amount of the promissory note, in cash to General Electric or forgive a
comparable amount of the promissory note. The promissory note, which bears
interest at the rate of eight percent per year, is payable in eight consecutive
quarterly installments, commencing April 1, 2000. General Electric has agreed to
use the trading exchange on a preferred, good faith basis for its e-commerce
purchasing, trading or auctioning of any bulk commodity petrochemicals offered
on the exchange through December 31, 2001. In addition, General Electric has
agreed to use reasonable business efforts to assist CheMatch in developing
viable e-commerce trading activity in specified contract-dominated markets where
General Electric is a significant buyer. General Electric has also agreed to
promote the trading exchange to a specified number of agreed upon potential
members of our trading exchange. CheMatch agreed to negotiate in good faith with
General Electric regarding its ability to act as a supplier of credit insurance
to be used by CheMatch in the future and have provided General Electric the
right to match any third party offers relating to comparable services.
In February 2000, CheMatch sold 204,291 shares of our common stock to
Muehlstein Holding Corporation for approximately $1 million in cash and a
promissory note in aggregate principal amount of approximately $1 million. The
promissory note, which bears interest at the rate of eight percent per year, is
payable in eight consecutive quarterly installments, commencing April 1, 2000.
Muehlstein has agreed to use good faith efforts to use the trading exchange on
an exclusive basis through December 31, 2001 for any chemicals and plastics that
it buys, sells, trades, auctions or otherwise transfers using e-commerce to
F-17
<PAGE> 94
CHEMATCH.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the extent those products are traded on the exchange. In connection with the
agreement, CheMatch agreed to credit Muehlstein's trading account on a
dollar-for-dollar basis in the amount of payments made under the promissory note
executed by Muehlstein in connection with its purchase of common stock against
which any commissions generated by Muehlstein will be debited.
In February 2000, CheMatch entered into an agreement with Stolt-Nielsen
Transportation Group Ltd. affiliate, Optimum Logistics Ltd., commonly known as
ChemLink.com, an Internet-based logistics operating system. CheMatch intends to
integrate the trading exchange with the ChemLink system to permit members to
procure transportation and other logistic services for bulk chemicals from a
variety of service providers, as well as manage and monitor shipments through
all phases of the supply chain. The services that CheMatch expects to be offered
through the ChemLink system include firm freight fixtures and rate indications
for liquid chemical products, shipping and customs brokering, freight
forwarding, cargo inspection and surveying, terminaling and storage and
inventory management and tracking services and related documentation. The
alliance has a term of three years, which may be extended if agreed upon
criteria are met. CheMatch and ChemLink have agreed to pay each other fees equal
to 20 percent of commission revenue earned by either CheMatch or ChemLink from
customers of the other company up to $5 million per year. The parties have also
agreed to assist each other in establishing commercial relationships with
certain target companies in exchange for 20 percent of the gross revenues earned
and received by the other party. ChemLink has agreed to offer CheMatch the
option to invest at least $1 million in a private offering of securities of
Optimum involving an aggregate amount of at least $5 million.
In February 2000, CheMatch sold 61,288 shares of our common stock to
TownsendTarnell, Inc. for $612 in cash and a promissory note in aggregate
principal amount of approximately $599,297. The promissory note, which bears
interest at the rate of eight percent per year, is payable in twelve consecutive
monthly installments, commencing February 1, 2000. CheMatch also entered into a
consulting agreement with TownsendTarnell. During the first six months of the
consulting agreement, TownsendTarnell's personnel are required to use their best
reasonable efforts to promote the use of the trading exchange by potential
buyers of thermoplastic resins in North America and Europe. Additionally,
TownsendTarnell will provide CheMatch with various credit services. Under the
consulting agreement, CheMatch agreed to pay TownsendTarnell $70,000 per month
for a nine consecutive months, commencing February 1, 2000. The consulting
agreement is cancelable by mutual consent or upon six months notice.
Additionally, TownsendTarnell has agreed to provide CheMatch with a
business plan relating to the creation and development of TownsendTarnell.com.
Assuming the business plan is acceptable CheMatch has agreed to extend
TownsendTarnell a $500,000 line of credit. TownsendTarnell has offered CheMatch
an option to invest $1 million in any private offering of securities relating to
TownsendTarnell.com involving an aggregate amount of at least $5 million.
In February 2000, CheMatch sold 153,218 shares of common stock to William
Heinemann, Inc., for $1.5 million. CheMatch agreed to purchase information
content, advertising and other promotional material and services from William
Heinemann or a designee of William Heinemann in amounts totaling at least
$500,000 between January 1, 2000 and January 1, 2002.
F-18
<PAGE> 95
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PetroChemNet, Inc.:
We have audited the accompanying balance sheets of PetroChemNet, Inc. (a
Delaware corporation), as of December 31, 1997 and 1998 and June 20, 1999, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 1997 and 1998, and for the period from
January 1, 1999 to June 20, 1999. 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 in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PetroChemNet, Inc., as of
December 31, 1997 and 1998, and June 20, 1999, and the results of its operations
and its cash flows for the years ended December 31, 1997 and 1998, and for the
period from January 1, 1999, to June 20, 1999, in conformity with accounting
principles generally accepted in the United States.
Houston, Texas
February 4, 2000
F-19
<PAGE> 96
PETROCHEMNET, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 20,
1997 1998 1999
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 210 $ 2 $ 49
Accounts receivable, net of allowance of $1, $5 and $20,
respectively........................................... 149 56 17
Prepaids and other current assets......................... 59 60 40
------- ------- -------
Total current assets................................... 418 118 106
Property and equipment, net................................. 194 153 138
Other assets................................................ 206 106 56
Deferred offering costs..................................... -- -- 198
------- ------- -------
Total assets........................................... $ 818 $ 377 $ 498
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit............................................ $ 67 $ 67 $ 67
Accounts payable and accrued liabilities.................. 382 568 825
Deferred revenue.......................................... 104 89 80
Payable to shareholders and employee...................... 127 85 221
------- ------- -------
Total current liabilities.............................. 680 809 1,193
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, no par value, 20,000 shares authorized;
5,533, 5,935 and 7,065 shares issued and outstanding,
respectively........................................... 1,388 3,367 4,007
Accumulated deficit....................................... (1,250) (3,799) (4,702)
------- ------- -------
Total stockholders' equity (deficit)................... 138 (432) (695)
------- ------- -------
Total liabilities and stockholders' equity (deficit)... $ 818 $ 377 $ 498
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 97
PETROCHEMNET, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 JANUARY 1, 1999
---------------- THROUGH
1997 1998 JUNE 20, 1999
<S> <C> <C> <C>
REVENUES:
Web site services....................................... $ 775 $ 542 $ 56
Subscriptions........................................... 66 156 55
------ ------- ------
Total revenues.................................. 841 698 111
COSTS AND EXPENSES:
Technology costs........................................ 901 631 149
Selling and marketing................................... 222 176 70
General and administrative.............................. 246 688 657
Stock-based compensation................................ 239 1,577 50
Depreciation and amortization........................... 144 161 82
------ ------- ------
Total costs and expenses........................ 1,752 3,233 1,008
------ ------- ------
Operating loss............................................ (911) (2,535) (897)
Interest expense.......................................... (16) (14) (6)
------ ------- ------
Net loss.................................................. $ (927) $(2,549) $ (903)
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 98
PETROCHEMNET, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
<S> <C> <C> <C> <C>
Balance, December 31, 1996......................... 5,000 $ 451 $ (323) $ 128
Capital contributions............................ -- 165 -- 165
Issuance of common stock......................... 533 533 -- 533
Compensation expense related to stock options.... -- 239 -- 239
Net loss......................................... -- -- (927) (927)
----- -------- ------- --------
Balance, December 31, 1997......................... 5,533 1,388 (1,250) 138
Issuance of common stock......................... 402 402 -- 402
Compensation expense related to stock options.... -- 1,577 -- 1,577
Net loss......................................... -- -- (2,549) (2,549)
----- -------- ------- --------
Balance, December 31, 1998......................... 5,935 3,367 (3,799) (432)
Issuance of common stock......................... 1,130 410 -- 410
Stock options exercised.......................... 180 -- 180
Compensation expense related to stock options.... -- 50 -- 50
Net loss......................................... -- -- (903) (903)
----- -------- ------- --------
Balance, June 20, 1999............................. 7,065 $ 4,007 $(4,702) $ (695)
===== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 99
PETROCHEMNET, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 JANUARY 1, 1999
----------------- THROUGH
1997 1998 JUNE 20, 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(927) $(2,549) $(903)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization......................... 144 161 82
Stock-based compensation expense...................... 239 1,577 50
Non-cash consulting expense........................... -- -- 150
Changes in operating assets and liabilities --
Decrease in accounts receivable..................... 67 93 39
(Increase) decrease in prepaids and other........... (59) (1) 20
Increase in accounts payable and accrued
liabilities...................................... 240 186 59
Increase (decrease) in deferred revenue............. 104 (15) (9)
----- ------- -----
Net cash used in operating activities............ (192) (548) (512)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....................... (139) (20) (18)
Purchase of customer list................................ (300) -- --
Security deposit paid.................................... (1) -- --
----- ------- -----
Net cash used in investing activities............ (440) (20) (18)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit............................. 67 -- --
Proceeds from shareholder loans.......................... 17 8 2
Payments of shareholder loans............................ -- (50) (15)
Proceeds from issuance of common stock................... 533 402 410
Exercise of common stock options......................... -- -- 180
Capital contributions from shareholders.................. 165 -- --
----- ------- -----
Net cash provided by financing activities........ 782 360 577
----- ------- -----
Net increase (decrease) in cash............................ 150 (208) 47
Cash at beginning of period................................ 60 210 2
----- ------- -----
Cash at end of period...................................... $ 210 $ 2 $ 49
===== ======= =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................... $ 16 $ 7 $ 6
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 100
PETROCHEMNET, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
PetroChemNet, Inc. (PetroChemNet), was originally incorporated as a
Connecticut corporation in March 1996 and commenced operations in January 1997.
In June 1998, PetroChemNet became a Delaware corporation. PetroChemNet provides
Internet-based information resources in the chemical industry. In 1997,
PetroChemNet merged with T3 Technologies, Inc. (T3). PetroChemNet and T3 were
entities under common control. Accordingly, the merger has been recorded in a
manner similar to a pooling of interests accounting.
On June 21, 1999, PetroChemNet merged into CheMatch.com, Inc. (CheMatch) in
exchange for the issuance of 2,119,440 shares of CheMatch common stock. In
conjunction with this transaction, CheMatch, Inc. (a Texas corporation), was
also acquired by CheMatch.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Estimates are used for, but not limited to, the allowance for doubtful
accounts, depreciation and amortization, deferred compensation and
contingencies. Actual results could differ from those estimates.
Fair Value of Financial Instruments
PetroChemNet has the following financial instruments: cash, accounts
receivable and accounts payable. Management believes that the carrying values of
these financial instruments approximate their respective fair value due to their
short-term nature.
Revenue Recognition
PetroChemNet's Web site services revenues are derived from projects in
which PetroChemNet designs, develops and implements Web site applications. In
addition, PetroChemNet provides ongoing Web site maintenance and administrative
services for its customers. Revenue from Web site services is recognized when
all of the following have occurred: a contract has been entered into with a
customer, services have been rendered, the fee amount has been determined and
collectibility is reasonably assured. PetroChemNet suspended its web site
service activities in 1998.
PetroChemNet's subscription revenues are derived from fees for access to
Internet-based information resources. Revenue from subscription fees is
recognized ratably over the term of the subscription, which is normally one
year. The unearned revenue from subscription fees is reflected as deferred
revenue in the accompanying balance sheets. PetroChemNet pays fees to third
parties who provide and maintain the Internet-based information resources.
Certain of the subscription revenues received are commissions from third parties
who provide and maintain the Internet-based information resources. The
commissions earned are recorded net in the accompanying statement of operations
as CheMatch does not bear the risk of loss.
Technology Cost
Technology costs include expenses incurred by PetroChemNet to maintain and
enhance PetroChemNet's Internet-based information resource web site.
F-24
<PAGE> 101
PETROCHEMNET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment are carried at cost, less accumulated depreciation.
Maintenance, repairs and minor replacements are charged to expense as incurred;
significant renewals and betterments are capitalized. PetroChemNet computes
depreciation and amortization over the estimated useful life of the assets
utilizing a straight-line method. Leasehold improvements are amortized over the
lesser of five years or the lease term. Property and equipment consist of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED --------------------- JUNE 20,
LIFE 1997 1998 1999
<S> <C> <C> <C> <C>
Computer software and equipment........... 3-5 years $230 $ 238 $ 256
Furniture and fixtures.................... 7 years 18 20 20
Leasehold improvements.................... 5 years 15 20 20
---- ----- -----
263 278 296
Less -- Accumulated depreciation and
amortization............................ (69) (125) (158)
---- ----- -----
Property and equipment, net..... $194 $ 153 $ 138
==== ===== =====
</TABLE>
4. DETAIL OF OTHER BALANCE SHEET ACCOUNTS:
PetroChemNet purchased a customer list on January 6, 1997, at a cost of
$300,000, which is being amortized over three years (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 20,
1997 1998 1999
<S> <C> <C> <C>
Customer list......................................... $ 300 $ 300 $ 300
Less -- Accumulated amortization...................... (100) (200) (250)
----- ----- -----
Intangible assets, net...................... $ 200 $ 100 $ 50
----- ----- -----
Other assets.......................................... 6 6 6
----- ----- -----
Other assets................................ $ 206 $ 106 $ 56
===== ===== =====
</TABLE>
Accounts payable and accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 20,
1997 1998 1999
<S> <C> <C> <C>
Accounts payable...................................... $ 364 $ 524 $ 766
Other accruals........................................ 18 44 59
----- ----- -----
Accounts payable and accrued liabilities.... $ 382 $ 568 $ 825
===== ===== =====
</TABLE>
5. LINE OF CREDIT:
PetroChemNet obtained a line of credit in May 1997 under which it could
borrow up to $100,000 at an interest rate of prime plus 2 percent. The line of
credit terminated in August 1997; however, the outstanding balance of $67,000
was not repaid. PetroChemNet was current on all interest payments. All assets of
PetroChemNet are collateral for the loan. In conjunction with the merger of
PetroChemNet into CheMatch, the line of credit was repaid in July 1999.
F-25
<PAGE> 102
PETROCHEMNET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. PAYABLE TO STOCKHOLDERS:
As of December 31, 1997 and 1998, and June 20, 1999, PetroChemNet had an
outstanding balance of $127,000, $85,000 and $72,000, respectively, due to the
chief executive officer and president who are also stockholders. The notes
accrue interest at 6 percent and are payable on demand. In conjunction with the
merger of PetroChemNet into CheMatch in June 1999, the notes payable were
repaid. Also, at December 31, 1999, PetroChemNet owed $149,000 to a shareholder
pursuant to a consulting agreement.
7. STOCKHOLDERS' EQUITY:
PetroChemNet sold 1,325 shares of common stock with detachable warrants to
various investors during 1997, 1998 and 1999. The warrants have an exercise
price of $1,000 and an exercise period ranging from four to five years. The
values of these warrants are included in common stock on the accompanying
balance sheets. Each warrant was converted into 300 warrants to purchase shares
of CheMatch common stock on June 21, 1999.
In connection with the purchase of T3, one of the stockholders of
PetroChemNet granted an option to purchase an aggregate of up to 250 shares of
his common stock of PetroChemNet to two T3 shareholders at a price equal to the
greater of (a) $2,000 per share or (b) 50 percent of the price per share of
common stock in a public offering. The option expires on March 13, 2007. This
option was converted into an option to purchase 75,000 shares of CheMatch common
stock on June 21, 1999.
8. STOCK OPTION PLAN:
On October 27, 1997, the board of directors approved the adoption of the
1997 Employee, Director and Consultant Stock Plan (the Stock Plan) which
provides for the granting of incentive or nonqualified stock options to
employees, directors and consultants to purchase up to 2,000 shares of common
stock. In November 1998, the number of shares issuable under the Plan was
increased to 6,000 by approval of the board of directors. Stock options granted
under the Plan have a term of ten years from date of grant, with some vesting
immediately, and other vesting over periods ranging from two to three years.
Each option was converted into 300 options to purchase shares of CheMatch common
stock on June 21, 1999.
The following is a summary of PetroChemNet's option activity through June
20, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
<S> <C> <C>
Outstanding, December 31, 1996.............................. -- $ --
Granted..................................................... 748 694
------ ------
Outstanding, December 31, 1997.............................. 748 694
Granted..................................................... 3,226 511
Forfeited................................................... (220) 1,000
------ ------
Outstanding, December 31, 1998.............................. 3,754 577
Granted..................................................... 1,511 265
Forfeited................................................... (587) 263
Exercised................................................... (720) 250
------ ------
Outstanding, June 20, 1999.................................. 3,958 553
======
</TABLE>
PetroChemNet records compensation expense for the difference between the
grant price and the deemed fair value for financial statement presentation
purposes related to options. During 1997, 1998 and
F-26
<PAGE> 103
PETROCHEMNET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1999, PetroChemNet recorded $239,000, $1,577,000, and $50,000, respectively, for
compensation expense in the accompanying statements of operations.
The fair values of each stock option grant were estimated using the minimum
value method with the following weighted average assumptions for 1997 and 1998:
expected life of four years, no expected dividends and a risk-free interest rate
of six percent. The following weighted average assumptions were used for 1999;
expected life of five years, no expected dividends and a risk-free interest rate
of 5.23 percent.
The number and weighted average fair value of options granted in 1997, 1998
and 1999 is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES FAIR VALUE SHARES FAIR VALUE SHARES FAIR VALUE
<S> <C> <C> <C> <C> <C> <C>
Option price equals fair market value....... 443 $213 1,123 $213 -- $ --
Option price greater than fair market
value..................................... -- -- -- -- 273 --
Option price less than fair market value.... 305 803 2103 803 1,238 139
</TABLE>
The following table summarizes information about stock options outstanding
at June 20, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------- ----------------------------
WEIGHTED
AVERAGE
OUTSTANDING REMAINING EXERCISABLE
RANGE OF AS OF CONTRACTUAL WEIGHTED AS OF WEIGHTED
EXERCISE JUNE 20, LIFE AVERAGE JUNE 20 AVERAGE
PRICES 1999 (IN YEARS) EXERCISE PRICE 1999 EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$ 250 2,360 9.8 $ 250 2,360 $ 250
100 1,598 9.6 $1,000 517 $1,000
----- -----
250-1,000 3,958 9.8 $ 548 2,877 $ 281
===== =====
</TABLE>
Had the compensation cost for this plan been determined consistent with
SFAS No. 123, "Accounting for Stock-Based Compensation" PetroChemNet's net loss
would have increased to the following pro forma amounts (in thousands, except
per share data):
<TABLE>
<CAPTION>
DECEMBER 31
--------------- JUNE 20,
1997 1998 1999
<S> <C> <C> <C>
Net loss:
As reported............................................. $(927) $(2,549) $ (903)
Pro forma............................................... (938) (2,600) (1,025)
</TABLE>
9. INCOME TAXES:
PetroChemNet records taxes under the liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
At June 20, 1999, PetroChemNet had a net operating loss carryforward of
approximately $1,100,000 which begins expiring in 2013. The net operating loss
for federal income tax purposes is subject to annual limitations under Section
382 of the Internal Revenue Code. A valuation allowance has been recognized to
fully offset the deferred tax assets after considering deferred tax liabilities.
F-27
<PAGE> 104
PETROCHEMNET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of PetroChemNet's deferred tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 21,
1997 1998 1999
<S> <C> <C> <C>
Federal net operating loss carryforwards.............. $ 122 $ 373 $ 378
Accruals not currently deductible..................... -- -- 189
Depreciation and amortization......................... (6) (43) 52
----- ----- -----
116 330 619
Less -- Valuation allowance........................... (116) (330) (619)
----- ----- -----
Net deferred tax assets..................... $ -- $ -- $ --
===== ===== =====
</TABLE>
A reconciliation of the statutory federal income tax rate to PetroChemNet's
effective tax rate for the years ended December 31, 1997 and 1998, and the
period from January 1, 1999, to June 20, 1999, is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
U.S. statutory rate...................................... $(315) $(867) $(307)
Nondeductible expense.................................... 81 536 18
Other.................................................... 118 117 --
Adjustment to deferred tax valuation allowance........... 116 214 289
----- ----- -----
$ -- $ -- $ --
===== ===== =====
</TABLE>
10. COMMITMENTS AND CONTINGENCIES:
Lease Agreement
PetroChemNet has a noncancelable operating lease, expiring in 2002. Minimum
future lease payments on this lease are as follows (in thousands):
<TABLE>
<S> <C>
Period ending December 31:
1999..................................................... $ 42
2000..................................................... 86
2001..................................................... 90
2002..................................................... 63
----
$281
====
</TABLE>
Rental expense was approximately $33,000, $78,000 and $40,000 for the years
ended December 31, 1997 and 1998, and the period from January 1, 1999, to June
20, 1999, respectively.
Litigation
At certain times, PetroChemNet is involved in legal actions arising in the
ordinary course of business. PetroChemNet currently is not engaged in any legal
proceedings that are expected to have a material adverse effect on
PetroChemNet's results of operations or financial position.
11. SIGNIFICANT CUSTOMERS
During 1997, 1998 and the period from January 1, 1999 through June 20, 1999
three, four and one customers in the aggregate represented 86 percent, 86
percent and 32 percent of PetroChemNet's total revenues, respectively.
F-28
<PAGE> 105
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CheMatch, Inc.:
We have audited the accompanying balance sheets of CheMatch, Inc. (a Texas
corporation in the development stage), as of December 31, 1997 and 1998, and the
related statements of operations, shareholders' deficit and cash flows for the
period from March 10, 1997 (inception) through December 31, 1997, and for the
year ended December 31, 1998. 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 in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CheMatch, Inc., as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from March 10, 1997 (inception), through December 31, 1997, and
for the year ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States.
Houston, Texas
February 4, 2000
F-29
<PAGE> 106
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1998 MARCH 31, 1999
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1 $ 20 $ --
Accounts receivable....................................... -- 19 13
----- ----- -----
Total current assets................................... 1 39 13
Property and equipment, net................................. 131 105 94
----- ----- -----
Total assets........................................... $ 132 $ 144 $ 107
===== ===== =====
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Advances from related party............................... $ 203 $ 261 $ 270
Accounts payable and accrued liabilities.................. 11 25 29
Deferred revenue.......................................... -- 49 28
----- ----- -----
Total current liabilities.............................. 214 335 327
Commitments and contingencies
SHAREHOLDERS' DEFICIT:
Common stock, $0.01 par, 10,000 shares authorized; 3,750
shares issued and outstanding.......................... -- -- --
Additional paid-in capital................................ 3 3 3
Deficit accumulated in development stage.................. (85) (194) (223)
----- ----- -----
Total shareholders' deficit............................ (82) (191) (220)
----- ----- -----
Total liabilities and shareholders' deficit............ $ 132 $ 144 $ 107
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 107
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 10, 1997 THREE
(INCEPTION), MONTHS ENDED MARCH 10, 1997
THROUGH YEAR ENDED MARCH 31, (INCEPTION)
DECEMBER 31, DECEMBER 31, ------------ THROUGH
1997 1998 1998 1999 MARCH 31, 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:.................................. $ -- $ 84 $ 13 $ 33 $ 117
----- ----- ---- ---- -----
COSTS AND EXPENSES:
Technology costs......................... 1 30 7 2 33
General and administrative............... 107 104 28 45 256
Depreciation............................. 2 41 10 11 54
----- ----- ---- ---- -----
Total costs and expenses......... 110 175 45 58 343
----- ----- ---- ---- -----
Operating loss............................. (110) (91) (32) (25) (226)
Interest expense........................... (5) (18) (4) (4) (27)
----- ----- ---- ---- -----
Loss before income taxes................... (115) (109) (36) (29) (253)
Benefit of income taxes.................... 30 -- -- -- 30
----- ----- ---- ---- -----
Net loss................................... $ (85) $(109) $(36) $(29) $(223)
===== ===== ==== ==== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 108
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ADDITIONAL ACCUMULATED
--------------- PAID-IN IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
<S> <C> <C> <C> <C> <C>
Issuance of common stock at inception, March
1997 ($1.00 per share).................... 4,750 $ -- $ 4 $ -- $ 4
Repurchase of common stock, August 1997
($1.00 per share)...................... (1,000) -- (1) -- (1)
Net loss.................................. -- -- -- (85) (85)
------ ---- --- ----- -----
Balance, December 31, 1997.................. 3,750 -- 3 (85) (82)
Net loss.................................. -- -- -- (109) (109)
------ ---- --- ----- -----
Balance, December 31, 1998.................. 3,750 -- 3 (194) (191)
Net loss (unaudited)...................... -- -- -- (29) (29)
------ ---- --- ----- -----
Balance, March 31, 1999 (unaudited)......... 3,750 $ -- $ 3 $(223) $(220)
====== ==== === ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 109
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 10, 1997 THREE
(INCEPTION), MONTHS ENDED MARCH 10, 1997
THROUGH YEAR ENDED MARCH 31, (INCEPTION),
DECEMBER 31, DECEMBER 31, ------------- THROUGH
1997 1998 1998 1999 MARCH 31, 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $ (85) $(109) $(36) $(29) $(223)
Adjustments to reconcile net loss to net
cash used in operating activities --
Depreciation............................. 2 41 10 11 54
Changes in operating assets and
liabilities --
(Increase) decrease in accounts
receivable.......................... -- (19) (13) 6 (13)
Increase (decrease) in accounts payable
and accrued liabilities............. 11 14 (2) 4 29
Increase (decrease) in deferred
revenue............................. -- 49 -- (21) 28
----- ----- ---- ---- -----
Net cash used in operating
activities........................ (72) (24) (41) (29) (125)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........ (133) (15) (8) -- (148)
----- ----- ---- ---- -----
Net cash used in investing
activities........................ (133) (15) (8) -- (148)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related party................ 203 111 50 23 337
Payments of advances from related party.... -- (53) -- (14) (67)
Issuance of common stock................... 4 -- -- -- 4
Repurchase of common stock................. (1) -- -- -- (1)
----- ----- ---- ---- -----
Net cash provided by financing
activities........................ 206 58 50 9 273
----- ----- ---- ---- -----
Net increase (decrease) in cash.............. 1 19 1 (20) --
Cash at beginning of period.................. -- 1 1 20 --
----- ----- ---- ---- -----
Cash at end of period........................ $ 1 $ 20 $ 2 $ -- $ --
===== ===== ==== ==== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest..................... $ -- $ 9 $ -- $ -- $ 9
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 110
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
CheMatch, Inc., was incorporated as a Texas corporation on March 10, 1997.
The accompanying financial statements and related notes reflect the historical
results of operations and financial position of CheMatch, Inc., until June 21,
1999, a subsidiary of DeWitt & Company, Inc. (DeWitt), a consulting firm serving
the petrochemical industry. CheMatch, Inc. operates an Internet-based trading
exchange for the purchase and sale of bulk commodity chemicals which became
operational in February 1998.
CheMatch, Inc. was a development stage company that devoted substantially
all of its efforts in developing an Internet-based trading exchange and building
a customer base and had not generated significant revenues from operations prior
to 1999.
CheMatch, Inc. has experienced negative cash flows from operations and has
incurred net losses since inception. CheMatch, Inc.'s operations have been
funded to date primarily through advances from DeWitt. In 1999, CheMatch, Inc.
completed the transition from a development stage company to an operating
company. On June 21, 1999, CheMatch, Inc., was acquired by CheMatch.com, Inc.
(CheMatch).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Statements
The accompanying balance sheet as of March 31, 1999, the statements of
operations and cash flows for the three months ended March 31, 1998 and 1999,
and the statements of shareholders' deficit for the three months ended March 31,
1999, are unaudited. In the opinion of management, these unaudited financial
statements include all adjustments of a normal and recurring nature and
necessary for a fair presentation of results for the interim periods. Results
for the three months ended March 31, 1999, are not necessarily indicative of
expected future results.
Use of Estimates
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
CheMatch, Inc. has the following financial instruments: cash, accounts
receivable and accounts payable. Management believes that the carrying values of
these financial instruments approximate their respective fair value due to their
short-term nature.
Revenue Recognition
CheMatch, Inc. generates revenue from its Internet-based trading exchange.
Trading revenues typically consist of commissions paid by each party to a
completed transaction. Commissions are based on the volume of chemicals traded
on the exchange and are recognized upon confirmation of a trade. Prior to 1999,
CheMatch charged sign-on fees for new members. In 1999, CheMatch suspended
sign-on fees. Sign-on fees were recognized ratably over the initial term of the
contract.
CheMatch, Inc. records deferred revenue when amounts are collected under
terms of the contract in advance of satisfying revenue recognition criteria. The
amounts deferred as of each balance sheet date are
F-34
<PAGE> 111
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expected to be recognized as revenue within 12 months of the respective balance
sheet dates and, accordingly, are classified as current liabilities.
Technology Costs
Technology costs include expenses incurred by CheMatch to maintain and
enhance CheMatch's Internet-based trading exchange.
3. PROPERTY AND EQUIPMENT:
Property and equipment are carried at cost, less accumulated depreciation.
Maintenance, repairs and minor replacements are charged to expense as incurred;
significant renewals and betterments are capitalized. CheMatch, Inc. computes
depreciation over the estimated useful life of the assets using the
straight-line method. Property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED ----------------
LIFE 1997 1998
<S> <C> <C> <C>
Computer software and equipment......................... 3-5 years $132 $147
Furniture and fixtures.................................. 7 years 1 1
---- ----
133 148
Less -- Accumulated depreciation........................ (2) (43)
---- ----
Property and equipment, net................... $131 $105
==== ====
</TABLE>
4. ADVANCES FROM RELATED PARTY:
During 1997 and 1998, CheMatch, Inc. received cash advances totaling
$203,000 and $111,000, respectively, from DeWitt primarily to fund operations of
CheMatch. The advances accrue interest at 7 percent per annum. In 1998,
CheMatch, Inc. made payments totaling $53,000 to DeWitt on the outstanding
balance of the advances. The advances were payable on demand and are classified
as current. At December 31, 1997 and 1998, accrued interest of $5,000 and
$22,000, respectively, is included in accrued liabilities.
5. SHAREHOLDERS' EQUITY:
In August 1997, CheMatch, Inc. entered into an agreement with a shareholder
(Shareholder Agreement) to repurchase and retire 1,000 shares of common stock
for $1,000 cash. The Shareholder Agreement also granted an option to the
shareholder to purchase 20 percent of CheMatch, Inc's common stock on or before
December 31, 2002. If the option was not exercised or terminated by the
shareholder by December 31, 2002, then the shareholder was entitled to receive
the option payment amount determined as of December 31, 2002. In accordance with
the Shareholder Agreement, the shareholder also was entitled to cash payments
based on the achievement by CheMatch, Inc. of certain revenue targets each
fiscal year for a four-year period ending November 30, 2002. In conjunction with
the acquisition by CheMatch, the Shareholder Agreement was terminated by
issuance of 64,350 shares of CheMatch common stock, and a cash payment of
$70,000, all of which was included in the purchase price of CheMatch, Inc.
6. INCOME TAXES:
Deferred income taxes are recorded using the liability method of accounting
for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial
F-35
<PAGE> 112
CHEMATCH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Deferred tax assets are evaluated for realization based on
a more-likely-than-not criteria in determining if a valuation allowance should
be provided.
During these periods, CheMatch, Inc. was a wholly owned subsidiary of
DeWitt, CheMatch Inc. files its tax return as a member of the DeWitt
consolidated group. CheMatch, Inc. has incurred net operating losses since
inception that were funded by DeWitt. Therefore, the tax benefits generated in
1997 were utilized by DeWitt.
Management has established a full valuation allowance against the net
deferred tax assets at December 31, 1997 and 1998, since realization of these
assets in the future periods is uncertain.
The components of CheMatch, Inc.'s deferred tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1998
<S> <C> <C>
Federal net operating loss carryforwards.................... $ 8 $ 21
Accruals not currently deductible........................... 2 27
Depreciation and amortization............................... (1) (2)
---- ----
9 46
Less -- Valuation allowance................................. (9) (46)
---- ----
Net deferred tax assets........................... $ -- $ --
==== ====
</TABLE>
A reconciliation of the statutory federal income tax rate to CheMatch,
Inc.'s effective income tax rate for the period from March 10, 1997 (inception),
through December 31, 1997, and for the year ended December 31, 1998, is as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 10, 1997
(INCEPTION)
THROUGH
DECEMBER 31, DECEMBER 31,
1997 1998
<S> <C> <C>
U.S. statutory rate.................................... $(39) $(37)
Adjustment to deferred tax valuation allowance......... 9 37
---- ----
$(30) $ --
==== ====
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
Litigation
At certain times CheMatch, Inc. is involved in legal actions arising in the
ordinary course of business. CheMatch, Inc. currently is not engaged in any
legal proceedings that are expected to have a material adverse effect on
CheMatch, Inc.'s results of operations or financial position.
8. SIGNIFICANT CUSTOMERS:
For the year ended December 31, 1998, CheMatch, Inc.'s three leading
customers accounted for 13 percent, 12 percent and 11 percent of CheMatch,
Inc.'s revenues, respectively.
F-36
<PAGE> 113
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
CHEMATCH.COM, INC.
SHARES OF COMMON STOCK
---------------------------------
PROSPECTUS
---------------------------------
DONALDSON, LUFKIN & JENRETTE
DEUTSCHE BANC ALEX. BROWN
SALOMON SMITH BARNEY
SG COWEN
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of
CheMatch.com, Inc. have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................ $13,306
NASD fee.................................................... $ 5,540
Nasdaq National Market initial listing fee.................. $95,000
Printing and engraving...................................... *
Legal fees and expenses of the Company...................... *
Accounting fees and expenses................................ *
Transfer agent fees......................................... *
Miscellaneous expenses...................................... *
Total............................................. *
</TABLE>
- ------------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may 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 he 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 him in connection
with such action, suit or proceeding 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. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity 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 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 in connection with the defense or settlement of such action or suit 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 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 Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
CheMatch's certificate of incorporation provides that indemnification shall
be to the fullest extent permitted by the DGCL for all current or former
directors or officers of CheMatch.
As permitted by the DGCL, the certificate of incorporation provides that
directors of CheMatch shall have no personal liability to CheMatch or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the director's duty of loyalty to CheMatch or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or
II-1
<PAGE> 115
knowing violation of law, (3) under Section 174 of the DGCL or (4) for any
transaction from which a director derived an improper personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
CheMatch has not sold any securities, registered or otherwise, within the
past three years, except as set forth below.
- On June 21, 1999, we sold 2,138,400 shares of Series A Convertible
Preferred Stock and warrants to purchase 1,603,800 shares of Series A
Convertible Preferred Stock for approximately $5 million to the Battery
Ventures Entities.
- On September 27, 1999, we sold 2,032,200 shares of Series B Convertible
Preferred Stock and warrants to purchase 1,524,150 shares of Series B
Convertible Preferred Stock for approximately $5 million to the Battery
Ventures Entities.
- On October 6, 1999, we sold 191,080 shares of common stock for
approximately $1 million to Computer Sciences Corporation in conjunction
with our entering into a strategic alliance.
- On November 24, 1999, we sold 636,943 shares of common stock for $6,369
to E.I. duPont de Nemours and Company in conjunction with our entering
into a strategic alliance. Additionally, duPont purchased 891,716 shares
of Series C Convertible Preferred Stock and warrants to purchase 668,787
shares of Series C Convertible Preferred Stock for approximately $7
million.
- On November 24, 1999, we sold an additional 2,611,453 shares of Series C
Convertible Preferred Stock and warrants to purchase 1,958,591 shares of
Series C Convertible Preferred Stock for approximately $20.5 million to
the DLJ Entities, the Battery Ventures Entities, Marquette Venture
Partners III, L.P., Stolt-Nielsen Transportation Group Ltd., Millennium
Holdings Inc., Don Churchman, Chris Davis, Roger Leedy, Larry McAfee,
Carl McCutcheon, Jim Rahe, John Sherman and Gerry Elias.
- On February 5, 2000, we sold 204,291 shares of our common stock to
Muehlstein Holding Corporation for approximately $1 million and a
promissory note in aggregate principal amount of approximately $1
million. The promissory note, which bears interest at the rate of eight
percent per year, is payable in eight consecutive quarterly installments,
commencing April 1, 2000.
- On February 11, 2000, we sold 153,218 shares of our common stock to
William Heinemann, Inc., a subsidiary of Reed Elsevier plc, for
approximately $1.5 million.
- On February 14, 2000, we sold 306,435 shares of our common stock to
General Electric Company for $3,064 and a promissory note in aggregate
principal amount of approximately $2 million. The promissory note, which
bears interest at the rate of eight percent per year, is payable on or
before December 31, 2001.
- On February 14, 2000, we sold 204,291 shares of our common stock to Bayer
AG for approximately $2 million.
- On February 16, 2000, we sold 61,288 shares of our common stock to
TownsendTarnell, Inc. for $613 and a promissory note in aggregate
principal amount of approximately $599,000. The promissory note, which
bears interest at the rate of eight percent per year, is payable in
twelve consecutive monthly installments, commencing February 1, 2000.
There were no underwriters involved in connection with any transaction set
forth above. The issuances of the securities described above were deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering. In all of such transactions, the recipients of securities
represented their intention to acquire the securities for investment purposes
only and not with a view to or for sale in connection with any distribution
thereof, and appropriate legends were affixed to the securities issued.
II-2
<PAGE> 116
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
1.1** -- Form of Underwriting Agreement
2.1* -- Agreement and Plan of Reorganization, dated June 21,
1999, by and among CheMatch, PetroChemNet, Inc., PCN
Merger Sub, Inc. and Earl Armstrong, Teresa Acosta,
William Barry and Fred Cook
3.1** -- Amended and Restated Certificate of Incorporation
3.2** -- Amended and Restated Bylaws
4.1** -- Form of Common Stock Certificate
5.1** -- Opinion of Vinson & Elkins L.L.P.
10.1* -- 1997 Employee, Director and Consultant Stock Option Plan
10.2* -- 1999 Stock Plan
10.3* -- Amended and Restated Management Incentive Agreement,
dated as of February 8, 2000, by and among CheMatch and
Carl McCutcheon, Lawrance McAfee, John Bohn and Karen
Morgan.
10.4* -- Employment Agreement, dated June 21, 1999, by and between
CheMatch and Carl McCutcheon
10.5* -- Letter of Employment, dated September 7, 1999, by and
between CheMatch and Lawrance McAfee
10.6* -- Employment Agreement, dated June 1, 1999, by and between
CheMatch and Fred Cook
10.7* -- Employment Agreement, dated May 1, 1999, by and between
CheMatch and John Bohn
10.8* -- Consultant and Release Agreement, dated January 26, 2000,
by and between CheMatch and John Bohn
10.9* -- Employment Agreement, dated May 1, 1999, by and between
CheMatch and Karen Morgan
10.10* -- Consultant and Release Agreement, dated January 26, 2000,
by and between CheMatch and Karen Morgan
10.11** -- Form of Indemnification Agreement
10.12* -- Amended and Restated Registration Rights Agreement dated
as of November 24, 1999
10.13* -- Alliance Agreement, dated June 21, 1999 between the
CheMatch and DeWitt & Company, Incorporated
10.14* -- Letter Agreement relating to a strategic alliance, dated
September 30, 1999, by and between CheMatch and Computer
Sciences Corporation
10.15* -- Letter Agreement relating to a strategic alliance, dated
November 11, 1999, by and between CheMatch and E.I.
duPont de Nemours and Company
10.16* -- Letter Agreement relating to a strategic alliance, dated
January 19, 2000, by and between CheMatch and Bayer AG
10.17* -- Letter Agreement relating to a strategic alliance, dated
January 22, 2000, by and between CheMatch and Muehlstein
Holding Corporation
10.18* -- Master Outsourced Services Agreement, dated January 27,
2000, by and between CheMatch and eCredit.com, Inc.
10.19* -- Letter Agreement relating to a strategic alliance, dated
February 2, 2000, by and between CheMatch and William
Heinemann, Inc.
10.20* -- Strategic Alliance Agreement, dated February 7, 2000, by
and between CheMatch and Optimum Logistics Ltd.
</TABLE>
II-3
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.21* -- Letter Agreement relating to a strategic alliance, dated
February 11, 2000, by and between CheMatch and General
Electric Company
10.22* -- Letter Agreement relating to a strategic alliance, dated
February 11, 2000, by and between CheMatch and Townsend
Tarnell, Inc.
16.1* -- Letter regarding change in certifying accountant
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Arthur Andersen LLP, independent public
accountants
23.2** -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1).
24.1 -- Power of Attorney (included on the signature page of this
registration statement)
27.1* -- Financial Data Schedule
</TABLE>
- ------------------------------
* Filed herewith.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULE
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
in Item 14, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) To provide to the underwriter(s) at the closing specified in the
underwriting agreements, certificates in such denominations and registered
in such names as required by the underwriter(s) to permit prompt delivery
to each purchaser.
(c) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the 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.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on March 1, 2000.
CheMatch.com, Inc.
By: /s/ CARL D. MCCUTCHEON
----------------------------------
Carl D. McCutcheon
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of CheMatch.com, Inc. ("CheMatch")
do hereby constitute and appoint Lawrance W. McAfee, Paul E. Pryzant and Scott
C. Shelton, and each of them, with full power of substitution, our true and
lawful attorneys-in-fact and agents to do any and all acts and things in our
name and behalf in our capacities as directors and officers, and to execute any
and all instruments for us and in our names in the capacities indicated below
which such person may deem necessary or advisable to enable CheMatch to comply
with the Securities Act of 1933, as amended (the "Act") and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for us, or any of us, in the capacities
indicated below and any and all amendments (including pre-effective and post-
effective amendments or any other registration statement filed pursuant to the
provision of Rule 462(b) under the Act) hereto; and we do hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ CARL D. MCCUTCHEON Chairman, President and Chief March 1 , 2000
- ----------------------------------------------------- Executive Officer
Carl D. McCutcheon (Principal Executive
Officer)
/s/ LAWRANCE W. MCAFEE Executive Vice President, March 1, 2000
- ----------------------------------------------------- Chief Financial Officer,
Lawrance W. McAfee Secretary and Director
(Principal Financial
Officer)
/s/ SCOTT R. CREASMAN Vice President -- Controller March 1, 2000
- ----------------------------------------------------- (Principal Accounting
Scott R. Creasman Officer)
/s/ EARL H. ARMSTRONG Director March 1, 2000
- -----------------------------------------------------
Earl H. Armstrong
/s/ BOB G. GOWER Director March 1, 2000
- -----------------------------------------------------
Bob G. Gower
</TABLE>
II-5
<PAGE> 119
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ JANET A. HICKEY Director March 1, 2000
- -----------------------------------------------------
Janet A. Hickey
/s/ JAMES SAVIANO Director March 1, 2000
- -----------------------------------------------------
James Saviano
/s/ R. DAVID TABORS Director March 1, 2000
- -----------------------------------------------------
R. David Tabors
</TABLE>
II-6
<PAGE> 120
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
1.1** -- Form of Underwriting Agreement
2.1* -- Agreement and Plan of Reorganization, dated June 21,
1999, by and among CheMatch, PetroChemNet, Inc., PCN
Merger Sub, Inc. and Earl Armstrong, Teresa Acosta,
William Barry and Fred Cook
3.1** -- Amended and Restated Certificate of Incorporation
3.2** -- Amended and Restated Bylaws
4.1** -- Form of Common Stock Certificate
5.1** -- Opinion of Vinson & Elkins L.L.P.
10.1* -- 1997 Employee, Director and Consultant Stock Option Plan
10.2* -- 1999 Stock Plan
10.3* -- Amended and Restated Management Incentive Agreement,
dated as of February 8, 2000, by and among CheMatch and
Carl McCutcheon, Lawrance McAfee, John Bohn and Karen
Morgan.
10.4* -- Employment Agreement, dated June 21, 1999, by and between
CheMatch and Carl McCutcheon
10.5* -- Letter of Employment, dated September 7, 1999, by and
between CheMatch and Lawrance McAfee
10.6* -- Employment Agreement, dated June 1, 1999, by and between
CheMatch and Fred Cook
10.7* -- Employment Agreement, dated May 1, 1999, by and between
CheMatch and John Bohn
10.8* -- Consultant and Release Agreement, dated January 26, 2000,
by and between CheMatch and John Bohn
10.9* -- Employment Agreement, dated May 1, 1999, by and between
CheMatch and Karen Morgan
10.10* -- Consultant and Release Agreement dated January 26, 2000,
by and between CheMatch and Karen Morgan
10.11** -- Form of Indemnification Agreement
10.12* -- Amended and Restated Registration Rights Agreement dated
as of November 24, 1999
10.13* -- Alliance Agreement, dated June 21, 1999 between the
CheMatch and DeWitt & Company, Incorporated
10.14* -- Letter Agreement relating to a strategic alliance, dated
September 30, 1999, by and between CheMatch and Computer
Sciences Corporation
10.15* -- Letter Agreement relating to a strategic alliance, dated
November 11, 1999, by and between CheMatch and E.I.
duPont de Nemours and Company
10.16* -- Letter Agreement relating to a strategic alliance, dated
January 19, 2000, by and between CheMatch and Bayer AG
10.17* -- Letter Agreement relating to a strategic alliance, dated
January 22, 2000, by and between CheMatch and Muehlstein
Holding Corporation
10.18* -- Master Outsourced Services Agreement, dated January 27,
2000, by and between CheMatch and eCredit.com, Inc.
10.19* -- Letter Agreement relating to a strategic alliance, dated
February 2, 2000, by and between CheMatch and William
Heinemann, Inc.
10.20* -- Strategic Alliance Agreement, dated February 7, 2000, by
and between CheMatch and Optimum Logistics Ltd.
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.21* -- Letter Agreement relating to a strategic alliance, dated
February 11, 2000, by and between CheMatch and General
Electric Company
10.22* -- Letter Agreement relating to a strategic alliance, dated
February 11, 2000, by and between CheMatch and Townsend
Tarnell, Inc.
16.1* -- Letter regarding change in certifying accountant
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Arthur Andersen LLP, independent public
accountants
23.2** -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1).
24.1 -- Power of Attorney (included on the signature page of this
registration statement)
27.1* -- Financial Data Schedule
</TABLE>
- ------------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 21st day of June, 1999
by and between
PETROCHEMNET, INC.,
PETROCHEMNET HOLDINGS, INC.,
PCN MERGER SUB, INC.
and
EARL H. ARMSTRONG,
TERESA A. ACOSTA,
WILLIAM P. BARRY
and
FRED B. COOK
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of the 21st day of June, 1999, by and among PETROCHEMNET, INC., a Delaware
corporation ("PetroChemNet"), PETROCHEMNET HOLDINGS, INC., a Delaware
corporation ("Holdings"), PCN MERGER SUB, INC., a Delaware corporation and
wholly-owned subsidiary of Holdings ("MergerCo"), the stockholders of Holdings,
Earl H. Armstrong, Teresa A. Acosta, and William P. Barry (the "Stockholders"),
and Fred B. Cook ("Cook").
W I T N E S S E T H:
WHEREAS, PetroChemNet wishes to acquire all of the outstanding
capital stock of CheMatch, Inc. ("CheMatch"), all of the outstanding capital
stock of which is owned by Cook and Holdings; and
WHEREAS, for various business reasons, the parties wish to enter into
certain transactions that are described herein in order to facilitate such
acquisition; and
WHEREAS, in connection with these various transactions, the Board of
Directors of each of PetroChemNet, Holdings, and MergerCo deem it advisable and
in the best interests of that company and that company's stockholders that
MergerCo merge with and into PetroChemNet pursuant to this Agreement, the Plan
of Merger set forth as Exhibit A hereto (the "Plan of Merger") and the
applicable provisions of the laws of the State of Delaware, with PetroChemNet as
the surviving corporation, such transaction sometimes being herein called the
"Merger," and that, following the Merger, certain shares of capital stock of
Holdings held by the Stockholders be repurchased by Holdings in exchange for
cash, substantially all of the assets and liabilities of Holdings, subject to
certain exceptions as provided herein, and certain other consideration, such
assets and liabilities to be distributed to a newly-formed company owned or
controlled by the Stockholders ("New DeWitt"), together with certain cash
payments to be made by Holdings to those
<PAGE> 3
Stockholders (the transactions involving the repurchase of shares of capital
stock of Holdings from the Stockholders by the Company being referred to herein
as the "Stock Repurchase Transactions"); and
WHEREAS, the Boards of Directors of each of PetroChemNet and MergerCo
(the "Constituent Corporations") have approved and adopted this Agreement as a
plan of reorganization (a "tax-free reorganization") within the provisions of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. PLAN OF REORGANIZATION
1.1 THE MERGER.
(a) THE MERGER. At the Effective Time (as defined in
Section 2 below), MergerCo shall be merged with and into PetroChemNet pursuant
to this Agreement and the Plan of Merger and the separate corporate existence of
MergerCo shall cease. PetroChemNet, as it exists from and after the Effective
Time, is sometimes hereinafter referred to as the "Surviving Corporation," and
PetroChemNet and MergerCo, as they exist prior to the Effective Time, are
sometimes referred to as the "Constituent Corporations."
(b) EFFECTS OF THE MERGER. The Merger shall have the
effects provided therefor by the provisions of the Delaware General Corporation
Law ("DGCL"). Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time (i) all the rights, privileges, powers and
franchises, of a public as well as of a private nature, and all property, real,
personal and
-2-
<PAGE> 4
mixed, and all debts due on whatever account, including without limitation
subscriptions to shares, and all other choses in action, and all and every other
interest of or belonging to or due to the Constituent Corporations shall be
taken and deemed to be transferred to, and vested in, the Surviving Corporation
without further act or deed; (ii) all property, rights and privileges, powers
and franchises and all and every other interest of the Constituent Corporations
shall be thereafter as effectively the property of the Surviving Corporation as
they were of the Constituent Corporations; and (iii) all debts, liabilities,
duties and obligations of the Constituent Corporations shall become the debts,
liabilities and duties of the Surviving Corporation and the Surviving
Corporation shall thenceforth be responsible and liable for all the debts,
liabilities, duties and obligations of the Constituent Corporations and neither
the rights of creditors nor any liens upon the property of the Constituent
Corporations shall be impaired by the Merger, and may be enforced against the
Surviving Corporation.
(c) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS. The Certificate of Incorporation of the Surviving Corporation from and
after the Effective Time shall be the Certificate of Incorporation of
PetroChemNet as in effect immediately prior to the Effective Time until
thereafter amended in accordance with the provisions therein and as provided by
the DGCL. The Bylaws of the Surviving Corporation from and after the Effective
shall be the Bylaws of MergerCo as in effect immediately prior to the Effective
Time, continuing until thereafter amended in accordance with their terms and the
Articles of Incorporation of the Surviving Corporation and as provided by the
DGCL. The initial directors of the Surviving Corporation shall be the directors
of Holdings in office immediately prior to the Effective Time, in each case
until their successors are duly elected and qualified, and the initial officers
of the Surviving Corporation shall be the officers of PetroChemNet in office
immediately prior to the Effective Time, in each case until their successors are
duly elected and qualified.
-3-
<PAGE> 5
1.2 CONVERSION OF SECURITIES IN THE MERGER. At the Effective Time, by
virtue of the Merger and without any action on the part of PetroChemNet,
Holdings, or any Stockholder, the shares of capital stock of each of the
Constituent Corporations shall be converted as follows:
(a) Capital Stock of PetroChemNet. Each issued and
outstanding share of common stock, no par value per share, of PetroChemNet
("PetroChemNet Common Stock") shall be converted into and exchanged for three
hundred (300) shares of validly issued, fully paid and non-assessable common
stock, $0.01 par value per share, of Holdings (the "Holdings Common Stock").
Each outstanding option, right, warrant or other similar security of
PetroChemNet shall be converted into one option, right, warrant or similar
security of Holdings with the same rights, preferences and other characteristics
of such PetroChemNet option, right, warrant or similar security, except that
each such option, right, warrant or similar security shall be exercisable or
convertible into such number of shares of Holdings Common Stock as equals the
number of shares of PetroChemNet Common Stock into which it was exercisable or
convertible immediately prior to the Effective Time multiplied by three hundred
(300). Each stock certificate or other instrument of PetroChemNet evidencing
ownership of outstanding shares of capital stock or other securities of
PetroChemNet shall, from and after the Effective Time, evidence ownership of an
appropriate number of shares of the type of capital stock or other securities or
rights of Holdings as is contemplated in this subsection (a). The shares of
Holdings Common Stock and/or other securities, as appropriate, to be received by
the holder of shares of capital stock and other securities of PetroChemNet
pursuant to the Merger are referred to as the "Merger Consideration." All such
shares of capital stock or other securities of PetroChemNet that were
outstanding immediately prior to the Merger, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and
-4-
<PAGE> 6
each holder of a certificate or other instrument representing any such shares or
other securities shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration to be issued or paid in consideration
therefor upon the surrender of such certificates or instruments in accordance
with Section 1.3 of this Agreement.
(b) Conversion of Shares of Capital Stock of MergerCo.
Each issued and outstanding share of common stock, $0.01 par value per share, of
MergerCo shall be converted into and exchanged for one share of validly issued,
fully paid and non-assessable common stock, no par value per share, of the
Surviving Corporation. All such shares of capital stock of MergerCo that were
outstanding immediately prior to the Merger, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and Holdings, as the sole holder of certificates representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the number and class of shares of capital stock of the Surviving
Corporation to be issued or paid in consideration therefor upon the surrender of
such certificate in accordance with Section 1.3 of this Agreement.
(c) Dissenter's Rights. Notwithstanding anything in this
Agreement to the contrary, shares of PetroChemNet Common Stock that are issued
and outstanding immediately prior to the Effective Time and which are held by
any stockholder of PetroChemNet who has the right (to the extent such right is
available by law) to demand and receive payment of the fair value of his, her or
its shares of PetroChemNet Common Stock (the "Dissenting Shares") pursuant to
the provisions of Section 262 of the DGCL (the "Appraisal Statute"), shall not
be converted into or be exchangeable for the right to receive the Merger
Consideration, but shall be governed by the Appraisal Statute unless and until
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right under the Appraisal Statute (holders of shares of PetroChemNet
Common Stock who
-5-
<PAGE> 7
demand appraisal of such shares under the Appraisal Statute and who have not (i)
failed to perfect, (ii) withdrawn or (iii) lost such appraisal rights shall be
referred to as "Dissenting Stockholders"). If any such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's shares of PetroChemNet Common Stock shall thereupon be deemed at the
Effective Time to have been converted into and to have become exchangeable for
the right to receive the applicable Merger Consideration without any interest
thereon. If any Dissenting Stockholders shall become entitled to receive payment
for their Dissenting Shares pursuant to the Appraisal Statute, such payment
shall be made by the Surviving Corporation. PetroChemNet shall give the other
parties prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other documents delivered and/or received by it
pursuant to the Appraisal Statute, which parties shall jointly agree on all
negotiations and proceedings with respect to demands for appraisal under the
Appraisal Statute. The parties acknowledge that, pursuant to the Appraisal
Statute, PetroChemNet shall be required to deliver to each of its stockholders
who do not waive their rights under the Appraisal Statute notice of the
availability of such rights within 10 days after the Effective Time, and each of
the parties agrees to take all such actions as may be required to effect such
delivery and otherwise comply with the provisions of the Appraisal Statute.
1.3 EXCHANGE OF CERTIFICATES IN CONNECTION WITH THE MERGER.
(a) Surviving Corporation to Provide Common Stock.
Promptly after the Effective Time, Holdings shall cause to be made available the
shares of Holdings Common Stock and other securities issuable pursuant to
Section 1.2 and the Plan of Merger in exchange for outstanding shares of capital
stock and other securities of PetroChemNet.
(b) Certificate Delivery Requirements. At the Effective
Time, the PetroChemNet stockholders shall deliver to the Surviving Corporation
the certificates (the "Certificates")
-6-
<PAGE> 8
representing PetroChemNet Common Stock, duly endorsed in blank by the holder
thereof, or accompanied by blank stock powers, and with all necessary transfer
tax and other revenue stamps, acquired at the holder's expense, affixed and
canceled. Each holder promptly shall cure all deficiencies with respect to the
endorsement of the Certificates or other documents of conveyance with respect to
the stock powers accompanying such Certificates. The Certificates so delivered
shall forthwith be canceled. Until delivered as contemplated by this Section
1.3(b), each Certificate shall be deemed at all times after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration as provided by this Section 1 and the provisions of the DGCL.
(c) No Further Ownership Rights in Capital Stock of
PetroChemNet and MergerCo. (i) All Holdings Common Stock, and other Holdings
securities delivered upon the surrender for exchange of shares of PetroChemNet
capital stock and securities in accordance with the terms hereof shall be deemed
to have been delivered in full satisfaction of all rights pertaining to such
PetroChemNet capital stock and securities, and following the Effective Time, the
Certificates or other instruments representing shares of PetroChemNet Common
Stock or other PetroChemNet securities existing prior to the Merger shall have
no further rights to, or ownership in, shares of capital stock, warrants or
other securities of PetroChemNet. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of capital stock of PetroChemNet which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates or other instruments
representing shares of capital stock or other securities of PetroChemNet are
presented to Holdings for any reason, they shall be canceled and exchanged as
provided in this Section 1.3.
(ii) All shares of capital stock of the Surviving
Corporation delivered upon the surrender for exchange of shares of capital stock
of MergerCo in accordance with the terms hereof
-7-
<PAGE> 9
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of capital stock of MergerCo, and following the
Effective Time, the certificates representing shares of capital stock of
MergerCo existing prior to the Merger shall have no further rights to, or
ownership in, shares of capital stock, warrants or other securities of MergerCo.
There shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of capital stock of MergerCo which
were outstanding immediately prior to the Effective Time, and there shall be no
further registrations of transfers on the stock transfer books of MergerCo or
the Surviving Corporation of the shares of capital stock of MergerCo which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates or other instruments representing shares of capital stock or
other securities of either of the Constituent Corporations are presented to
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 1.3.
(d) Lost, Stolen or Destroyed Certificates. If any
certificates or other instruments evidencing shares of capital stock or other
securities of PetroChemNet or MergerCo shall have been lost, stolen or
destroyed, Holdings or the Surviving Corporation, as the case may be, shall
cause one or more appropriate certificates or instruments to be issued
representing shares of capital stock or other securities of the Surviving
Corporation or Holdings, in accordance with the provisions of Section 1.2 and
this Section 1.3, upon the making of an affidavit of that fact by the holder
thereof; provided, however, that the corporation issuing those certificates or
instruments may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond or other indemnity in such sum or form as it may reasonably
direct as indemnity against any claim that may be made against the issuing
corporation with respect to the certificates and/or instruments alleged to have
been lost, stolen or destroyed.
-8-
<PAGE> 10
(e) No Liability. Notwithstanding anything to the contrary
in this Section 1.3, neither the Surviving Corporation nor any other party
hereto shall be liable to a holder of shares of PetroChemNet or MergerCo capital
stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.4 STOCK REPURCHASE TRANSACTIONS. Immediately following the
consummation of the Merger, at the Closing, Holdings shall repurchase from each
Stockholder, and each Stockholder shall sell to Holdings, that number of shares
of Holdings Common Stock held by such Stockholder as is set forth on Annex II
hereto, in exchange for (a) the cash, shares of Holdings Common Stock and
warrants to acquire Holdings Common Stock detailed on such Annex, and (b)
substantially all of the business assets that Holdings held immediately prior to
the Closing (other than (i) the rights of Holdings arising under this Agreement
and the other agreements and instruments executed in connection with the
transactions contemplated hereby, (ii) the outstanding shares of capital stock
and other securities of CheMatch, (iii) the intra-company advances from Holdings
to CheMatch as in effect as of the Effective Time; (iv) the CheMatch On-line
domain name and any and all trademark registration involving the CheMatch name
or registered marks, and (v) the other assets, if any, identified in the DeWitt
Stock Repurchase Agreement as being retained by Holdings or otherwise not being
transferred pursuant thereto) (the "DeWitt Business Assets"), subject to the
assumption by New DeWitt of all liabilities of Holdings as in effect immediately
prior to the Effective Time, or at any time prior thereto, excluding only those
liabilities identified on Schedule 1.4 hereto which are to be retained by
Holdings (which retained liabilities shall include, without limitation, the
liabilities of Holdings arising out of or in connection with this Agreement and
the transactions contemplated hereby) (the "Assumed Liabilities"), as
contemplated by the DeWitt Stock Repurchase Agreement (the "DeWitt Stock
Repurchase Agreement"), substantially in the form of Exhibit C hereto. The
-9-
<PAGE> 11
warrants shall be issued to each of the Stockholders pursuant to separate
warrant agreements (the "Warrant Agreements"), substantially in the form of
Exhibit B hereto, between the Company, on the one hand, and each such
Stockholder, on the other hand, and the DeWitt Business Assets shall be assigned
to, and the Assumed Liabilities shall be assumed by, New DeWitt, all as
contemplated by the DeWitt Stock Repurchase Agreement. The transactions
described in this Section 1.4 are sometimes referred to in this Agreement as the
"Stock Repurchase Transactions."
2. CLOSING
The consummation of the Merger, the Stock Repurchase Transactions and
the other transactions contemplated by this Agreement (hereinafter referred to
as the "Closing") shall take place at the offices of Mintz Levin, Cohn, Ferris,
Glovsky & Popeo, P.C., One Financial Center, Boston, Massachusetts 02110, as
soon as practicable after all conditions to the Closing shall have been
satisfied or waived, or at such other time and date as PetroChemNet, Holdings,
the Stockholders and Cook may mutually agree, which date shall be referred to as
the "Closing Date." On the Closing Date, a Certificate of Merger shall be filed
with the Secretary of the State of Delaware in accordance with the provisions of
the DGCL, and the Merger shall become effective upon the date of such filing or
at such later time on or after the Closing Date as may be specified in the
Certificate of Merger (the "Effective Time"). Promptly following the Effective
Time, the parties shall consummate the Stock Repurchase Transactions in
accordance with the provisions of the DeWitt Stock Repurchase Agreement. The
parties agree that the transactions contemplated hereby and by the Battery
Documents will occur in the order set forth in the charts attached as Appendix
A.3 hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND
HOLDINGS
To induce PetroChemNet to enter into this Agreement and consummate
the transactions
-10-
<PAGE> 12
contemplated hereby and by the Plan of Merger, each of Holdings, the
Stockholders and Cook, jointly and severally (except as otherwise provided
therein), represents and warrants to PetroChemNet as set forth in Section A.1 of
Appendix A hereto, which representations and warranties are incorporated in this
Section 3 by reference and are deemed to be part of this Agreement.
4. REPRESENTATIONS OF PETROCHEMNET
To induce Holdings, the Stockholders and Cook to enter into this
Agreement and consummate the transactions contemplated hereby and by the Plan of
Merger, PetroChemNet represents and warrants to Holdings, the Stockholders and
Cook as set forth in Section A.2 of Appendix A hereto, which representations and
warranties are incorporated in this Section 4 by reference and are deemed to be
part of this Agreement.
5. COVENANTS PRIOR TO CLOSING
5.1 ACCESS AND COOPERATION; DUE DILIGENCE.
(a) Between the date of this Agreement and the Closing Date, Holdings
shall, and shall cause CheMatch to, afford to the officers and authorized
representatives of PetroChemNet full and free access to, and the right to
inspect, all of the sites, properties, books, records, documents and contracts
of Holdings and CheMatch of any kind, shall permit them to consult with the
officers, employees, accountants, counsel, agents, customers and suppliers of
Holdings for the purpose of making such due diligence investigation of Holdings
and CheMatch as PetroChemNet may wish to make, and shall furnish PetroChemNet
with such additional financial and operating data and other information as to
the business and properties of Holdings and CheMatch as PetroChemNet may from
time to time reasonably request. The Stockholders and Holdings shall, and shall
cause CheMatch to, cooperate with PetroChemNet, its representatives, engineers,
auditors and counsel in the preparation
-11-
<PAGE> 13
of all documents or other material which may be required or which PetroChemNet
reasonably may request in connection with the transactions contemplated by this
Agreement. PetroChemNet, Holdings and the Stockholders shall, and Holdings shall
cause CheMatch to, treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect hereto as confidential in accordance with
the provisions of Section 11 hereof. Notwithstanding the foregoing, no
information or access, inspection or consultation rights or other related rights
shall be required to be given to PetroChemNet, its officers or representatives
pursuant to this Agreement to the extent the same would disclose the customer
data base, customer lists, attendees at conferences, pricing lists, invoices,
petrochemical data bases, the so-called "Annuals" or studies, payroll records
with respect to specific employees, or reasonably related information of
Holdings or its predecessor DeWitt & Company Incorporated ("Old DeWitt").
(b) Between the date of this Agreement and the Closing Date,
PetroChemNet shall afford to the officers and authorized representatives of
Holdings and Cook full and free access to, and the right to inspect, all of the
sites, properties, books, records, documents and contracts of PetroChemNet of
any kind, shall permit them to consult with the officers, employees,
accountants, counsel, agents, customers and suppliers of PetroChemNet for the
purpose of making such due diligence investigation of PetroChemNet as Holdings
or Cook may wish to make, and shall furnish them with such additional financial
and operating data and other information as to the business and properties of
PetroChemNet as they may from time to time reasonably request. PetroChemNet
shall cooperate with Holdings and Cook, and their representatives, engineers,
auditors and counsel in the preparation of all documents or other material which
may be required or which they reasonably may request in connection with the
transactions contemplated by this Agreement.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and
the Effective
-12-
<PAGE> 14
Time, Holdings shall, and shall cause CheMatch to, and PetroChemNet shall:
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held
under leases, conditional sales or similar agreements in as good working order
and condition as at present, ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all reasonable commercial efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and agents and maintain its relationships and goodwill with suppliers, customers
and others having business relations with it;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, and maintain in effect
all existing permits, rights, easements, and other authorizations necessary or
desirable for the conduct of its business;
(g) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments; and
(h) maintain or reduce present salaries and commission levels for all
officers, directors, employees and agents, except for ordinary and customary
bonuses and salary increases for employees (other than the Stockholders) in
accordance with past practice.
5.3 PROHIBITED ACTIVITIES. Except as contemplated by this Agreement
or disclosed in
-13-
<PAGE> 15
writing to the other parties hereto on or before the date of this Agreement, (x)
between the Holdings Balance Sheet Date and the Closing Date, Holdings and
CheMatch have not and from the date hereof, without prior written consent of
PetroChemNet, shall not, and (y) between the PetroChemNet Balance Sheet Date and
the Closing Date, PetroChemNet has not and from the date hereof, without the
prior written consent of Holdings, shall not:
(a) make any change in their Articles of Incorporation or By-laws, or
authorize or propose the same, in any event without the prior written consent of
PetroChemNet (in the case of changes relating to Holdings or CheMatch) and
without the prior written consent of Holdings (in the case of changes relating
to PetroChemNet);
(b) issue, sell, pledge, dispose of or encumber, or authorize or
propose the issuance, sale, pledge, disposal or encumbrance of, any securities,
options, warrants, calls, conversion rights or commitments relating to its
securities of any kind, authorize or propose any other change in its equity
capitalization, or issue or authorize the issuance of any debt securities (other
than, in the case of Holdings, as contemplated by the Werlang Transactions, the
Cook Transactions and the Battery Ventures Transactions, as those terms are
defined in this Agreement);
(c) (i) declare, set aside or pay any dividend, or make any
distribution (whether in cash, stock or property) in respect of its stock
whether now or hereafter outstanding, (ii) split, combine or reclassify any of
its capital stock, (iii) issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for any shares of its capital
stock, or (iv) purchase, redeem or otherwise acquire directly or indirectly or
retire for value any shares of its stock;
(d) enter into any contract or commitment, including contracts to
provide services or goods to customers, or incur or agree to incur any liability
or make any capital expenditures, except contracts, commitments or expenditures
made or entered into in the ordinary course of business
-14-
<PAGE> 16
(consistent with past practice) or which involve an amount not in excess of
$10,000;
(e) increase the compensation payable or to become payable to any
officer, director, stockholder, employee or agent, or make or agree to make any
bonus or management fee payment to any such person except ordinary and customary
bonuses and regularly scheduled periodic salary increases to non-stockholder
employees;
(f) grant any severance or termination pay to, or enter into any
employment or severance agreement with any of its employees, officers or
directors;
(g) establish, adopt, enter into, make any new grants or awards under
or amend, any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, employee
stock ownership, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any
Holdings or CheMatch employee, officer or director;
(h) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(i) make any material Tax election (as defined in Section A.1.22 of
Appendix A) other than in the ordinary course of business and consistent with
past practice, change any material Tax election, adopt any material Tax
accounting method other than in the ordinary course of business and consistent
with past practice, change any material Tax accounting method, file any material
Tax return (other than any estimated tax returns, payroll tax returns or sale
tax returns) or any amendment to a material Tax return, enter into any closing
agreement, settle any Tax claim or assessment, or consent to any Tax claim or
assessment;
(j) guarantee the obligation of any other person or entity except by
the endorsement of
-15-
<PAGE> 17
negotiable instruments for deposit or collection in the ordinary and usual
course of business;
(k) purchase or sell any securities for investment;
(l) extend credit to customers departing from its normal and
customary trade, discount and credit policies, consistent with past practices;
(m) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any of its assets or properties whether now owned or
hereafter acquired;
(n) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business (consistent with
past practice);
(o) negotiate for the acquisition of any business or the start-up of
any new business or enter into any partnership, joint venture or similar
business arrangement;
(p) merge or consolidate or agree to merge or consolidate with or
into any other corporation, except for the merger of Old DeWitt with and into
Holdings;
(q) waive any of its material rights or claims, provided that such
party may negotiate and adjust bills in the course of good faith disputes with
customers and suppliers in a manner consistent with past practice;
(r) initiate any litigation, arbitration, mediation or other
proceeding other than for routine collection of bills;
(s) commit a material breach of, or amend or terminate any, material
agreement, permit, license or other right;
(t) enter into any other transaction that is (i) not negotiated at
arm's length, (ii) outside the ordinary course of business consistent with past
practice or (iii) prohibited hereunder;
(u) take any action of the character described in Section 1.25 of
Appendix A which would have been required to be disclosed pursuant thereto had
such action been taken after the Holdings
-16-
<PAGE> 18
Balance Sheet Date (in the case of Holdings or CheMatch) or the PetroChemNet
Balance Sheet Date (in the case of PetroChemNet) and before the date of this
Agreement; or
(v) authorize or enter into an agreement to do any of the foregoing.
5.4 NO SHOP. None of the Stockholders, Holdings, CheMatch, nor any
agent, officer, director or any representative of any of them shall, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing or the termination of this Agreement in accordance with its
terms, directly or indirectly:
(a) solicit, encourage or initiate the submission of
proposals or offers from any person for;
(b) participate in any discussions pertaining to; or
(c) furnish any information to any person other than
PetroChemNet relating to; any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, Holdings or CheMatch or a
merger, consolidation or business combination of Holdings or CheMatch with or
into any other person or entity. The Stockholders promptly shall notify
PetroChemNet orally (to be confirmed in writing as soon as practicable
thereafter) if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with any Stockholder, Holdings or CheMatch, such
notification to include the identity of the party making such offer, proposal or
contact and the specific terms of such offer or proposal.
5.5 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other parties hereto of (a) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of it, him, or her contained
herein to be untrue or inaccurate at or prior to the Closing; (b) any failure of
it, him, or her
-17-
<PAGE> 19
to comply with or satisfy, any covenant, condition or agreement to be complied
with or satisfied by such person hereunder; (c) the filing of any suit, or the
initiation of any other action or proceeding, or if, to any party's knowledge,
any person or entity overtly threatens any suit, action or proceeding, (i)
seeking to restrain or prohibit the consummation of any of the transactions
contemplated hereby, or (ii) which reasonably could be expected to materially
and adversely affect the properties, assets, business, operations, or financial
condition of Holdings, CheMatch or PetroChemNet; or (d) the initiation, or, to a
party's knowledge, overt threat to initiate, by a governmental entity or agency
any investigation that may result in any such suit, action or proceeding. The
delivery of any notice pursuant to this Section 5.5 shall not, without the
express written consent of the other parties, be deemed to (x) modify the
representations or warranties hereunder of the party delivering such notice, (y)
modify the conditions set forth in Sections 6 and 7, or (z) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.6 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS. Each
party hereto shall cooperate in obtaining all consents and approvals required by
Sections 6.4 (which shall nonetheless continue to be the responsibility of the
Stockholders and Holdings) and 7.4 (which shall nonetheless continue to be the
responsibility of PetroChemNet).
5.7 ACTIONS WITH RESPECT TO CLOSING. Holdings, the Stockholders and
Cook shall use their best efforts to bring about the satisfaction of the
conditions precedent to the Closing contained in Section 6 and to cause the
covenants and agreements of Holdings, the Stockholders and Cook contained in
this Section 5 to be satisfied and performed by it, him and her. PetroChemNet
shall use its best efforts to bring about the satisfaction of the conditions
precedent to the Closing contained in Section 7 and to cause its covenants and
agreements contained in this Section 5 to be satisfied and performed by it.
-18-
<PAGE> 20
5.8 TAX MATTERS.
(a) Indemnification for Taxes.
(i)The Stockholders shall indemnify and hold
PetroChemNet and Holdings harmless from, and shall be entitled to any refund of,
any and all Taxes (i) imposed on the Stockholders, New DeWitt or any other
member of the affiliated group that includes New DeWitt or the Stockholders
(other than Holdings and CheMatch) for any taxable year, and (ii) imposed on
Holdings or CheMatch in respect of its income, business, property or operations
or for which Holdings or CheMatch may otherwise be liable for any taxable period
that ends before the effective time of the merger of Old DeWitt into Holdings
and, with respect to any taxable period beginning before and ending after that
effective time, the portion of such taxable period ending before that Effective
Time (hereinafter, the "Interim Period") (the Interim Period and any taxable
period that ends before that effective time being collectively hereinafter, the
"Pre-Closing Period"), but only to the extent (x) with respect to CheMatch, that
such Tax liability exceeds the sum of (i) the amount of the provision for Taxes
for such period reflected on the CheMatch May Balance Sheet and (ii) the amount
of any liability reflected on the CheMatch May Balance Sheet as a reserve for
future Tax disputes, or (y) such Tax refund exceeds the amount of any deferred
Tax asset reflected on the Holdings or CheMatch May Balance Sheet, as
applicable. Holdings shall indemnify and hold the Stockholders harmless from,
and shall be entitled to any refund of, any and all Taxes imposed on Holdings or
CheMatch (or any successor thereto) in respect of its income, business, property
or operations for any taxable period that begins on or after the effective time
of the merger of Old DeWitt with and into Holdings (except to the extent any
such liability is expressly assumed by or allocated to New DeWitt in accordance
with the provisions hereof or the other documents executed in connection with
the transactions contemplated hereby) and, with respect to any taxable period
-19-
<PAGE> 21
beginning before and ending after the Effective Time, the portion of such
taxable period commencing on or after the effective time of the merger of Old
DeWitt with and into Holdings (hereinafter, the "Post-Closing Period") (except
to the extent any such liability is expressly assumed by or allocated to New
DeWitt in accordance with the provisions hereof or the other documents executed
in connection with the transactions contemplated hereby). The amount of any
indemnity payment required to be made by an indemnifying party pursuant to this
Section 5.8 shall be determined after giving effect to the present value of any
tax benefit realized or realizable by the indemnified party in connection with
or as a result of the incurrence of the tax liability for which the indemnity
payment is to be made. Holdings shall calculate such present value by using the
applicable federal rates (as defined in Section 1274(d) of the Code) in effect
as of the twentieth (20th) day preceding the date of the indemnification
payment. Upon a refund or credit with respect to a Tax for which an indemnity
payment has been made pursuant to this Section, the indemnified party shall
promptly pay to the indemnifying party the amount of such refund (plus any
interest received with respect to such refund) or shall promptly pay to the
indemnifying party the amount of such credit at the time such credit reduces the
Tax liability of the indemnified party. In all other respects, the
indemnification provided for in this Section shall be effected in accordance
with the provisions of Section 9 hereof. To the extent that the Stockholders are
responsible for the payment of any Tax on income of Holdings (or its
predecessor) for the Pre-Closing Period beginning on December 1, 1998 pursuant
to the provisions of this Agreement, Holdings agrees to take all steps
reasonably requested by the Stockholders in connection therewith, subject to
receipt of either (x) evidence reasonably satisfactory to Holdings that the
taking of such steps will not subject Holdings to any additional Taxes or other
liability or (y) an indemnification from the Stockholders from and against all
such additional Taxes and other liabilities.
-20-
<PAGE> 22
(b) Tax Audits. In connection with an audit by any taxing
authority for any taxable period ending on or prior to the Effective Time, with
respect to Taxes for which the Stockholders may be required to make
indemnification pursuant to subsection (a) of this Section, Holdings shall, and
shall cause CheMatch to, make available to the Stockholders and its
representatives such records and documents in their possession as may be legally
requested by such taxing authority or reasonably requested by the Stockholders
in order to defend against matters affecting Holdings and CheMatch involved in
such audit. Holdings will, at the Stockholders' expense, cause the employees of
Holdings or CheMatch or those assigned to Holdings or CheMatch to cooperate with
and assist such taxing authority, as required by such taxing authority in the
completion of such audit, and will advise the Stockholders of the commencement
and progress of any such audit, following receipt of notice thereof by Holdings.
Holdings will, at the Stockholders' expense, cause the employees of Holdings or
CheMatch or those assigned to Holdings or CheMatch to cooperate with and assist
tax personnel and tax counsel of the Stockholders, as may be reasonably
requested by the Stockholders: (i) in the conduct of all tax audits of Tax
returns, including a claim for refund or amended return for any taxable period
ending on or prior to the Effective Time to the extent that such audit may
involve the operations of Holdings or CheMatch; (ii) in connection with any
claim for refund or amended return; and (iii) in the collection and assembly of
data necessary for the filing of any Tax return, to the extent that such data is
based on the operations of Holdings or CheMatch. The Stockholders upon request
will furnish to PetroChemNet and Holdings copies of all returns filed for
Holdings or CheMatch which cover any portion or all of any taxable period prior
to the Closing.
(c) Preparation of Tax Returns; Payment of Taxes.
(i) The parties agree to file all Tax returns
from and after the Effective
-21-
<PAGE> 23
Time in a manner consistent with the provisions of this Agreement, unless a
contrary treatment is required by law.
(ii) Following the Closing, Holdings shall have
all responsibilities for filing all federal, state and local returns and paying
all the Taxes due with respect thereto required to be filed by Holdings or
CheMatch on a separate return basis, whether due with respect to taxable periods
ending prior to or subsequent to the Effective Time (except for the filing of a
Form 1120 of Old DeWitt with respect to the year ended November 30, 1998, which
the Stockholders shall cause to be filed after the Effective Time); provided,
however, that nothing contained in the foregoing clause shall in any manner
terminate, limit or adversely affect any right of PetroChemNet or Holdings to
receive indemnification pursuant to any provision in this Agreement.
(iii) Except as otherwise provided in this
Section, Holdings shall be responsible for filing all tax returns required to be
filed by or on behalf of Holdings or CheMatch after the Effective Time. Holdings
shall file the tax returns of Holdings and CheMatch required for periods
beginning before and ending after the Effective Time in a manner consistent with
past practices, unless a contrary treatment is required by law. For purposes of
the preceding sentence, a determination by Holdings' auditors that a contrary
treatment is required by law shall be binding and conclusive. The Stockholders,
on the one hand, and Holdings, on the other hand, shall, subsequent to the
Effective Time, provide written notice to the other party of the filing of any
amended tax return or claim for refund that, in the reasonable opinion of the
person making such filing, will materially and adversely affect the other party
(or parties) or their affiliates, taking into account the provisions of this
Agreement.
(iv) Cooperation. The Stockholders and Holdings
shall cooperate fully with each other and make available to each other in a
timely fashion such Tax data and other
-22-
<PAGE> 24
information as may be reasonably required for the preparation of any Tax returns
required to be prepared and filed or on behalf of Stockholders, New DeWitt, Old
DeWitt, Holdings or CheMatch hereunder, or in connection with the preparation or
filing of any election, consent or certification.
(d) Effective Period. The agreements contained, and
indemnification provided for, in this Section shall remain in effect for a
period of one year past the statute of limitations governing the duration of
either party's rights or liabilities in any particular instance.
5.9 AGREEMENT TO VOTE IN FAVOR OF MERGER. Each of the Stockholders,
Cook, and each of the directors of PetroChemNet hereby covenants and agrees to
vote all shares of Holdings and PetroChemNet Common Stock owned by them in favor
of the transactions contemplated hereby at any meeting of such stockholders
called to approve such transactions, or on any resolution of the stockholders by
written consent adopted to approve such transactions, and to take all such other
actions as may be consistent with their fiduciary duties to cause such
transactions to be approved by Holdings and PetroChemNet respectively.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PETROCHEMNET
The obligation of PetroChemNet to effect the Merger and the other
transactions to which it is a party that are contemplated to occur as provided
in this Agreement at or before the Closing is subject to the satisfaction, at or
before the Effective Time, of the following conditions, any or all of which may
be waived by PetroChemNet in its sole discretion:
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of the Stockholders, Holdings and Cook
contained in this Agreement shall be true, correct and complete in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; all of the
terms, covenants, agreements and conditions of this Agreement, and the other
agreements
-23-
<PAGE> 25
entered into by the parties in connection with the transactions contemplated
hereby, in each case to be complied with, performed or satisfied by Holdings,
the Stockholders and Cook on or before the Closing Date shall have been duly
complied with, performed or satisfied in all material respects; and a
certificate dated the Closing Date and signed by each of the Stockholders and
Cook, certifying as to the fulfillment of the foregoing conditions, shall have
been delivered to PetroChemNet.
6.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
Merger, the Stock Repurchase Transactions or the other transactions contemplated
to occur at or before the Closing, or limiting or restricting conduct or
operation of the business of Holdings, the Surviving Corporation or CheMatch
following the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened, against PetroChemNet, Holdings, CheMatch, the Stockholders or Cook,
their respective properties or any of their officers or directors, that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of Holdings, the Surviving
Corporation or CheMatch after the Closing.
6.3 OPINION OF COUNSEL. PetroChemNet shall have received an opinion
from counsel to the Stockholders, dated the Closing Date, in substantially the
form annexed hereto as Exhibit E.
6.4 CONSENTS AND APPROVALS. All necessary consents of and filings
with any (i) governmental authority or (ii) agency or third party (with respect
to Material Contracts, as defined in Section A.1.16 of Appendix A.1 hereto),
relating in any instance to (A) the consummation by PetroChemNet, Holdings, the
Stockholders, Cook and New DeWitt of the transactions contemplated
-24-
<PAGE> 26
herein or the agreements executed in connection herewith or (B) the continuation
by Holdings after the Closing of the business and operations, including those
currently contemplated to occur at or before the Closing, of each of the
Surviving Corporation and CheMatch as contemplated by this Agreement, shall have
been obtained and made, all applicable waiting periods, if any, shall have
expired, and no such approval or consent shall have imposed any condition or
requirement which, in the sole judgment of PetroChemNet, makes consummation of
the Merger and the other transactions contemplated hereby inadvisable.
Notwithstanding the foregoing, neither CheMatch, the Stockholders, Cook nor any
of their affiliates or representatives shall be required to take any action
prior to the Closing other than that taken on or before the date of this
Agreement, regarding or involving the U.S. Commodities Futures Trading
Commission (the "CFTC") or any law, rule or regulation with respect to which the
CFTC has any jurisdiction.
6.5 CHARTER DOCUMENTS. Holdings shall have delivered to PetroChemNet
(a) copies of the Articles of Incorporation of Holdings and CheMatch, certified
by the Secretaries of State of the States of Texas and Delaware, as applicable,
and (b) copies of the By-laws of Holdings and CheMatch, certified by the
Secretary of Holdings or CheMatch, as applicable.
6.6 SHARING AND RELATED AGREEMENT. CheMatch and New DeWitt shall have
entered into a Sharing and Related Agreement in substantially the form of
Exhibit I hereto.
6.7 DUE DILIGENCE REVIEW. PetroChemNet shall be fully satisfied in
its sole discretion with the results of its review of, and its other due
diligence investigations with respect to, the business, operations, affairs,
prospects, properties, assets, existing and potential liabilities, obligations,
profits or condition (financial or otherwise) of Holdings and CheMatch.
6.8 STOCK REPURCHASE AGREEMENT. The DeWitt Stock Repurchase Agreement
shall have been executed by Holdings, the Stockholders and New DeWitt, and such
DeWitt Stock Repurchase
-25-
<PAGE> 27
Agreement shall be in full force and effect, with consummation of the Stock
Repurchase Transactions scheduled to occur on the Closing Date immediately after
the Effective Time.
6.9 BATTERY AGREEMENT. The "Initial Closing" (the "Battery Ventures
Transactions") contemplated to take place on or prior to the Closing Date,
pursuant to the Preferred Stock and Warrant Purchase Agreement, dated as of June
21, 1999, by and between Holdings, Battery Ventures V, LLC ("Battery") and the
other parties named therein (the "Battery Agreement"), shall have closed prior
to the transactions contemplated hereby to take place at the Closing.
6.10 MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise) of Holdings or CheMatch, shall have occurred, and PetroChemNet shall
have received a certificate signed by the Stockholders dated the Closing Date to
such effect.
6.11 FRED COOK TRANSACTIONS.
(a) Holdings and Cook shall have entered into that certain Share
Exchange Agreement (the "Cook Share Exchange Agreement"), substantially in the
form of Exhibit E hereto, pursuant to which (i) Holdings shall have purchased
from Cook and Cook shall have sold to Holdings at the Closing and immediately
prior to the Merger, all of Cook's shares of capital stock of CheMatch in
exchange for the consideration set forth on Annex II hereto and (ii) Cook shall
be made a party to the Stockholders Agreement and Reg Rights Agreement (as those
terms are defined in Section 6.13) and granted the rights contemplated to be
granted to him thereby.
(b) In addition, Holdings and Fred Cook shall have entered into an
employment agreement (the "Cook Employment Agreement"), in substantially the
form of Exhibit F hereto, pursuant to which Holdings shall have agreed to employ
Fred Cook from and after the Closing on the terms and conditions set forth
therein. The transactions contemplated by this Section 6.11 are sometimes
referred to as the "Cook Transactions."
-26-
<PAGE> 28
6.12 BENEFIT PLANS. New DeWitt, Holdings and PetroChemNet shall have
reached agreement on the transfer to, and assumption by, New DeWitt of all of
Holdings' and CheMatch's assets and liabilities under all of Holdings' and
CheMatch's Benefit Plans (as defined in Section A.1.20 of Appendix A).
6.13 STOCKHOLDER AGREEMENTS. Each of Holdings, Battery, the
Stockholders and Cook shall have entered into (i) a stockholders agreement in
substantially the form of Exhibit 2.01B(v) to the Battery Agreement (the
"Stockholders Agreement") and (ii) a registration rights agreement in
substantially the form of Exhibit 2.01B(viii) to the Battery Agreement (the "Reg
Rights Agreement").
6.14 WERLANG TRANSACTIONS. Holdings, CheMatch and Jorge Werlang
("Werlang") shall have entered into that certain Termination and Settlement
Agreement (the "Werlang Agreement"), substantially in the form of Exhibit G
hereto, and shall have consummated the transactions contemplated to occur
pursuant thereto at the Closing (as defined therein) (the "Werlang
Transactions").
6.15 OFFICERS AND DIRECTORS. All of the officers and directors of
Holdings and CheMatch prior to the Effective Time shall have resigned in writing
effective as of the Effective Time except one nominee of the Stockholders on the
Board of Directors of Holdings, and except that Cook shall be appointed to the
position set forth in the Cook Employment Agreement.
6.16 VALUATION. PetroChemNet shall have received a written valuation
of Old DeWitt, the predecessor in interest of Holdings, in form and substance
satisfactory to it in its sole discretion.
6.17 TAX TREATMENT. PetroChemNet shall be satisfied in its sole
discretion as to the likely tax consequences of the Merger, the Stock Repurchase
Agreement and the other transactions contemplated to occur at the Closing.
-27-
<PAGE> 29
6.18 PALMER AGREEMENT. The Palmer Agreement (as defined in Section
A.1.3 of Appendix A) shall have been terminated with respect to the securities
of, and other rights and interests in and to, Holdings and CheMatch, and
PetroChemNet shall have received evidence, in form and substance satisfactory to
it in its sole discretion, of such termination.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS, HOLDINGS AND
COOK
The obligation of the Stockholders, Holdings and Cook to effect the
Merger and/or the other transactions to which such party is a party that are
contemplated to occur as provided in this Agreement at or before the Closing is
subject to the satisfaction, at or before the Effective Time, of the following
conditions, any or all of which may be waived by such party:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of PetroChemNet contained in this
Agreement shall be true, correct and complete in all material respects on and as
of the Closing Date as though such representations and warranties had been made
as of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by PetroChemNet on or
before the Closing Date shall have been duly complied with, performed or
satisfied in all material respects; and a certificate to the foregoing effect
dated the Closing Date and signed by the President or any Vice President of
PetroChemNet, certifying as to the fulfillment of the foregoing conditions,
shall have been delivered to Holdings, the Stockholders and Cook.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
Merger, the Stock Repurchase Transactions or the other transactions contemplated
to occur at or before the Closing, or limiting or restricting the conduct or
operation of
-28-
<PAGE> 30
the business of Holdings, CheMatch or New DeWitt following the Closing shall be
in effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action,
suit, claim or proceeding of any nature pending or threatened, against
PetroChemNet, Holdings, CheMatch, the Stockholders or Cook, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of Holdings, CheMatch or New DeWitt.
7.3 OPINION OF COUNSEL. The Stockholders shall have received an
opinion from counsel for PetroChemNet, dated the Closing Date, in substantially
the form attached hereto as Exhibit H.
7.4 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency or third party relating to the
consummation by PetroChemNet and Holdings of the transactions contemplated
herein shall have been obtained and made, all applicable waiting periods, if
any, shall have expired, and no such approval or consent shall have imposed any
condition or requirement which, in the sole judgment of the Stockholders, makes
consummation of the Merger and the other transactions contemplated hereby
inadvisable.
7.5 CHARTER DOCUMENTS. PetroChemNet shall have delivered to Holdings
(a) a copy of its Certificate of Incorporation, certified by the Secretary of
State of Delaware, and (b) a copy of its By-laws, certified by its Secretary.
7.6 STOCK REPURCHASE TRANSACTIONS. The Stock Repurchase Agreement
shall have been executed by Holdings, and such Stock Repurchase Agreement shall
be in full force and effect, with consummation of the Stock Repurchase
Transactions scheduled to occur on the Closing Date.
7.7 FRED COOK EMPLOYMENT AGREEMENT. The Cook Transactions
contemplated to take place at or prior to the Closing Date pursuant to the Cook
Exchange Agreement and the Cook
-29-
<PAGE> 31
Employment Agreement shall have closed simultaneously with or prior to the
transactions contemplated to take place at the Closing.
7.8 STOCKHOLDER AGREEMENTS. Each of Holdings, Battery and certain of
PetroChemNet's stockholders shall have entered into the Stockholders Agreement
and the Reg Rights Agreement.
7.9 BATTERY AGREEMENT. The Battery Ventures Transactions contemplated
to take place on or prior to the Closing Date pursuant to the Battery Agreement
shall have closed prior to the transactions contemplated hereby to take place at
the Closing.
7.10 VALUATION. The Stockholders shall have received a written
valuation of Old DeWitt in form and substance satisfactory to them in their sole
discretion.
7.11 DUE DILIGENCE REVIEW. Holdings shall be fully satisfied in its
sole discretion with the results of its review of, and its other due diligence
investigations with respect to, the business, operations, affairs, prospects,
properties, assets, existing and potential liabilities, obligations, profits or
condition (financial or otherwise ) of PetroChemNet.
7.12 WERLANG TRANSACTIONS. The Werlang Transactions contemplated to
take place at or prior to the Closing Date pursuant to the Werlang Agreement
shall have closed simultaneously with or prior to the transactions contemplated
to take place at the Closing.
7.13 TAX TREATMENT. Each of the Stockholders, Holdings and Cook shall
be satisfied in its sole discretion as to the likely tax consequences of the
Merger, the Stock Repurchase Agreement and the other transactions contemplated
to occur at the Closing.
7.14 SHARING AND RELATED AGREEMENT. CheMatch and New DeWitt shall
have entered into a Sharing and Related Agreement in substantially the form of
Exhibit I hereto.
8. INFORMATION RIGHTS.
-30-
<PAGE> 32
For so long as each Stockholder and Cook holds capital stock of
Holdings representing not less than 50% of the total voting capital stock of
Holdings that he or she will own upon completion of the transactions
contemplated hereby, including the DeWitt Stock Repurchase Agreement, Holdings
shall provide to each such Stockholder and/or to Cook the following:
(a) Monthly Reports: as soon as available and in any event
within 30 days after the end of each calendar month, consolidated and
consolidating balance sheets of Holdings and its subsidiaries as of the end of
such month and consolidated and consolidating statements of income and retained
earnings of Holdings and its subsidiaries for such month and for the period
commencing at the end of the previous fiscal year and ending with the end of
such month, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and including
comparisons to monthly budgets, a cash flow analysis for such month, a schedule
showing each expenditure of a capital nature exceeding $50,000 during such
month, and a summary discussion of Holdings' principal functional areas, all in
reasonable detail and duly certified by the chief financial officer of Holdings
as having been prepared in accordance with generally accepted accounting
principles consistently applied; provided, however, that such financial
statements (i) need not include footnotes which are not customarily included in
such financial statements; (ii) shall be subject to year-end adjustments; and
(iii) until the first anniversary of the date hereof, shall be prepared by
Holdings' management (not necessarily including a chief financial officer) in a
manner consistent with financial statements of Holdings delivered pursuant to
Section 3.07 of the Battery Agreement, provided that such financial statements
shall be subject to certain other adjustments which in the aggregate are not
material to such financial statements;
(b) Quarterly Reports: to the extent not otherwise provided to
any Person, as soon as available and in any event within 45 days after the end
of each of the first three quarters of
-31-
<PAGE> 33
each fiscal year of Holdings, consolidated balance sheets of Holdings and its
subsidiaries as of the end of such quarter and consolidated statements of income
and cash flows of Holdings and its subsidiaries for such quarter and for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
and including comparisons to quarterly budgets and a summary discussion of
Holdings' principal functional areas, all in reasonable detail and duly
certified by the chief financial officer of Holdings as having been prepared in
accordance with generally accepted accounting principles consistently applied;
provided, however, that such financial statements (i) need not include footnotes
which are not customarily included in such financial statements; (ii) shall be
subject to year-end adjustments; and (iii) until the first anniversary of the
date hereof, shall be prepared by Holdings' management (not necessarily
including a chief financial officer) in a manner consistent with financial
statements of Holdings delivered pursuant to Section 3.07 of the Battery
Agreement, provided that such financial statements shall be subject to certain
other adjustments which in the aggregate are not material to such financial
statements;
(c) Annual Reports: as soon as available and in any event
within 90 days after the end of each fiscal year of Holdings, a copy of the
annual audit report for such year for Holdings and its subsidiaries, including
therein consolidated balance sheets of Holdings and its subsidiaries as of the
end of such fiscal year and consolidated statements of income and of Holdings
and its subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all
such consolidated statements to be duly certified by the chief financial officer
of Holdings (if Holdings has a chief financial officer) and by such independent
public accountants of recognized national standing approved by a majority of the
Board of Directors;
-32-
<PAGE> 34
(d) Budgets: as soon as available after approval by the
Board of Directors, a business plan and monthly operating budgets for the
forthcoming fiscal year;
(e) Notice of Adverse Changes: promptly after the
occurrence thereof and in any event within 10 days after each occurrence, notice
of any material adverse change in the operations or financial condition of
Holdings or any material default in any other material agreement to which
Holdings is a party;
(f) Written Reports: promptly upon receipt or publication
thereof, any written reports submitted to Holdings by independent public
accountants in connection with an annual or interim audit of the books of
Holdings and its subsidiaries made by such accountants or by consultants or
other experts in connection with such consultant's or other expert's review of
Holdings' operations or industry, and written reports prepared by Holdings to
comply with other investment or loan agreements;
(g) Notice of Proceedings: promptly after the commencement
thereof, notice of all actions, suits and proceedings of the type described in
Section 3.04 of the Battery Agreement before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting Holdings or any subsidiary;
(h) Stockholders' and SEC Reports: promptly upon sending,
making available, or filing the same, such reports and financial statements as
Holdings or any subsidiary shall send or make available to the stockholders of
Holdings or file with the Securities and Exchange Commission; and
(i) Other Information: such other information respecting
the business, properties or the condition or operations, financial or other, of
Holdings or any of its subsidiaries as any such holder may from time to time
reasonably request.
-33-
<PAGE> 35
9. INDEMNIFICATION
9.1 GENERAL INDEMNIFICATION.
(a) Stockholder's Indemnification. The Stockholders and Cook jointly
and severally covenant and agree to indemnify, defend, protect and hold harmless
Holdings, PetroChemNet, CheMatch and the Surviving Corporation and their
respective officers, directors, employees, stockholders, assigns, successors and
affiliates (other than Cook and the Holdings director nominee of the
Stockholders) (individually, a "PetroChemNet Indemnified Party") from, against
and in respect of:
(i) all liabilities, losses, claims, damages, punitive
damages, causes of actions, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
interest (including interest from the date of such damages) and costs and
expenses (including without limitation reasonable attorneys' fees and
disbursements of every kind, nature and description) (collectively, "Damages")
suffered, sustained, incurred or paid by any PetroChemNet Indemnified Party in
connection with, resulting from or arising out of, directly or indirectly:
(A) any breach of any representation or warranty
of the Stockholders or Cook set forth in this Agreement or any of the other
Transaction Documents (as defined in Section A.1.2 hereof) or any certificate,
document or instrument delivered (i) prior to the effective time of the merger
of Old DeWitt with and into Holdings, by or on behalf of Holdings or (ii) at any
time by or on behalf of the Stockholders or Cook in connection with the
transactions contemplated hereby or thereby;
(B) any breach or nonfulfillment of any covenant
or agreement on the part of the Stockholders, Cook or, prior to the effective
time of the merger of Old DeWitt with and
-34-
<PAGE> 36
into Holdings, Holdings in this Agreement or any other Transaction Document; or
(C) the business, operations or assets of (1)
Old DeWitt prior to the effective time of the merger of Old DeWitt with and into
Holdings or (2) CheMatch prior to the Closing Date, or the actions or omissions
of (i) the Stockholders, (ii) Cook, (iii) the directors, officers, shareholders,
employees or agents of Old DeWitt prior to the effective time of the merger of
Old DeWitt with and into Holdings, and (iv) CheMatch's directors, officers,
shareholders, employees or agents prior to the Effective Time;
(D) the business, operations or assets of New
DeWitt from and after the Effective Time; and
(ii) any and all Damages incident to any of the foregoing
or to the enforcement of, or any appeal in any judgment arising out of, this
Section 9.1(a); provided, however, that Cook shall not be liable for any Damages
resulting from (x) the breach of a representation or warranty relating
exclusively to Holdings or its predecessors (as opposed to a representation or
warranty relating to CheMatch) or the business, operations or assets of New
DeWitt, (y) any breach or nonfulfillment of any covenant or agreement on the
part of the Stockholders or Holdings in this Agreement or (z) the business,
operations or assets of Holdings, the actions or omissions of the Stockholders
(as they relate exclusively to Holdings) or Holdings' directors, officers,
shareholders, employees or agents prior to the Effective Time; and provided
further, that the Stockholders shall not be liable for any Damages resulting
from any breach or nonfulfillment of any covenant or agreement on the part of
Cook in this Agreement or the acts or omissions of Cook after the Effective
Time.
(b) PetroChemNet Indemnification. Holdings and PetroChemNet hereby
covenant and agree to indemnify, defend, protect and hold harmless the
Stockholders, Cook, New DeWitt (and its officers, directors, employees,
stockholders) and their respective successors, assigns and affiliates
-35-
<PAGE> 37
(individually, a "Stockholder Indemnified Party") from, against and in respect
of:
(i) all Damages suffered, sustained, incurred or paid by
any Stockholder Indemnified Party in connection with, resulting from or arising
out of, directly or indirectly:
(A) any breach of any representation or warranty
of PetroChemNet set forth in this Agreement or any certificate, document or
instrument delivered by or on its behalf in connection herewith; or
(B) any breach or nonfulfillment of any covenant
or agreement on the part of PetroChemNet in this Agreement, or any breach or
nonfulfillment of any covenant or agreement on the part of PetroChemNet, the
Surviving Corporation, CheMatch or Holdings after the Effective Time; or
(C) the business, operations or assets of
PetroChemNet prior to the Closing Date, or the actions or omissions of
PetroChemNet's directors, officers, shareholders, employees or agents prior to
the Effective Time; and
(ii) any and all Damages incident to any of the foregoing
or to the enforcement of, or any appeal in any judgment arising out of, this
Section 9.1(b).
9.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under
Section 9.1 unless, and solely to the extent that, the aggregate amount of
Damages exceeds, in the aggregate with respect to all claims for Damages,
$10,000 (the "Indemnification Threshold");
(b) the aggregate amount of any one Stockholder's or
Cook's liability under this Section 9 shall not exceed, with respect to Cook,
$180,000, and with respect to each of the other Stockholders, $300,000;
provided, however, that there shall be no limitation of liability with respect
to Damages arising out of or in connection with a breach of the representations
and warranties
-36-
<PAGE> 38
contained in Sections A.1.4, A.1.5 or A.1.22 of Appendix A or in connection with
the indemnification obligations set forth in Section 5.8 hereof;
(c) the indemnification obligations under this Section 9
shall terminate, with respect to all indemnification obligations other than
those arising under Sections A.1.4, A.1.5 or A.1.22 of Appendix A and the
covenants set forth in Section 10 hereof or Section 5.8 hereof, (i), on the
later of (x) thirty-six (36) months after the Effective Time (the "Third
Anniversary") or (y) the final resolution of any and all claims or demands
("Claims") under this Agreement pending as of the Third Anniversary. The term
"Indemnification Deadline Date" refers to the dates specified in clauses (x)
above, and the term "Pending Claims" refers to the Claims referred to in (y)
above. From and after the applicable Indemnification Deadline Date, the
indemnification obligations under this Section 9 shall survive only to the
extent of Pending Claims.
9.3 INDEMNIFICATION PROCEDURES. All Claims for indemnification under
this Section 9 shall be asserted and resolved as follows:
(a) If an Indemnified Party has a Claim against another
party hereunder (an "Indemnifying Party") which does not involve a Claim being
asserted against or sought to be collected by a third party, the Indemnified
Party shall with reasonable promptness send a Claim Notice (as defined below)
with respect to such Claim to the Indemnifying Party. If the Indemnifying Party
does not notify the Indemnified Party within the Notice Period (as defined
below) that it disputes such Claim, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party. If the Indemnifying
Party shall object in writing to any Claim made in accordance with this Section
9.3(a), the Indemnified Party shall have thirty (30) days to respond in a
written statement to the objection of the Indemnifying Party. If after such
thirty (30) day period there remains a dispute as to any Claims, the parties
shall attempt in good faith for sixty (60) days to agree
-37-
<PAGE> 39
upon the rights of the respective parties with respect to each of such Claims.
If the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties. If no such agreement can be reached
after good faith negotiation, either the Indemnified Party or the Indemnifying
Party may initiate a proceeding to have their respective obligations hereunder
determined.
(b) If any Claim for which an Indemnifying Party would be
liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party, the Indemnified Party shall with reasonable promptness
notify the Indemnifying Party of such Claim, specifying the nature of such Claim
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such Claim) (the
"Claim Notice"). The Indemnifying Party shall have 30 days from the receipt of
the Claim Notice (the "Notice Period") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the Stockholder liability to the
Indemnified Party hereunder with respect to such Claim and (ii) if the
Indemnifying Party does not dispute such liability, whether or not it wishes, at
the sole cost and expense of the Indemnifying Party, to defend against such
Claim, provided that the Indemnifying Party is hereby authorized (but not
obligated) prior to and during the Notice Period to file any motion, answer or
other pleading and to take any other action which the Indemnifying Party shall
deem necessary or appropriate to protect the Stockholders' interests. If the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
the Indemnifying Party does not dispute its obligation to indemnify hereunder
and wishes to defend the Indemnified Party against such Claim, then, except as
hereinafter provided, the Indemnifying Party shall have the right to defend by
appropriate proceedings, which proceedings shall be promptly settled or
prosecuted by it to a final conclusion; provided that, unless the Indemnified
Party otherwise agrees in writing, the Indemnifying
-38-
<PAGE> 40
Party may not settle any matter (in whole or in part) unless such settlement
includes a complete and unconditional release of the Indemnified Party. If the
Indemnified Party wishes to participate in, but not control, any such defense or
settlement, the Indemnified Party may do so at the Indemnified Party's sole cost
and expense. If the Indemnifying Party elects not to defend the Indemnified
Party against such Claim, whether by failure of the Indemnifying Party to give
the Indemnified Party timely notice as provided above or otherwise, then the
Indemnified Party, without waiving any rights against the Indemnifying Party,
may settle or defend against any such Claim in the Indemnified Party's sole
discretion, and the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified Party with
respect thereto, including interest from the date such costs and expenses were
incurred.
(c) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any such Claim seeks material prospective relief which could have a
materially adverse effect on the assets, liabilities, financial condition,
results of operations or business prospects of any Indemnified Party, Holdings
or any subsidiary thereof (with respect to the PetroChemNet Indemnified
Parties), or New DeWitt (with respect to the Stockholder Indemnified Parties),
the Indemnified Party shall have the right to control or assume (as the case may
be) the defense of any such Claim and the amount of any judgment or settlement
and the reasonable costs and expenses of defense shall be included as part of
the indemnification obligations of the Indemnifying Party hereunder. If the
Indemnified Party should elect to exercise such right, the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
claim or demand at the sole cost and expense of the Indemnifying Party.
(d) Nothing herein shall be deemed to prevent the
Indemnified Party from making
-39-
<PAGE> 41
a Claim, and an Indemnified Party may make a claim hereunder, for potential or
contingent Claims or demands provided the Claim Notice sets forth the specific
basis for any such potential or contingent Claim or demand to the extent then
feasible and the Indemnified Party has reasonable grounds to believe that such a
claim or demand may be made.
(e) An Indemnified Party's failure to give reasonably
prompt notice to an Indemnifying Party of any actual, threatened or possible
Claim or demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which the Indemnifying
Party may have to the Indemnified Party unless the failure to give such notice
materially and adversely prejudiced the Indemnifying Party.
(f) The parties will make appropriate adjustments for any
Tax benefits, Tax detriments or insurance proceeds in determining the amount of
any indemnification obligation under Section 9, provided that the Indemnifying
Party shall not be obligated to seek any payment pursuant to the terms of any
insurance policy.
9.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. For the
purposes of asserting Claims under this Section 9, all representations and
warranties made by the parties in or pursuant to this Agreement or in any
document delivered pursuant hereto will survive the Closing and will remain in
effect until, and will expire upon, the Third Anniversary, provided, however,
that the indemnification obligations with respect to any Pending Claim (and the
related representations, warranties and covenants) will survive until the final
resolution of such Pending Claim.
Each party shall be entitled to rely upon the representations and
warranties of the other party or parties set forth herein regardless of any
investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing.
10. NONCOMPETITION
-40-
<PAGE> 42
10.1 PROHIBITED ACTIVITIES.
(a) As additional consideration for PetroChemNet's consummation of
the transactions contemplated hereby, if the Closing occurs, each of the
Stockholders covenants and agrees with and for the benefit of Holdings, CheMatch
and the Surviving Corporation that such Stockholder shall not, for a period of
four years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself or herself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) call upon any person who is, at that time, an employee
of Holdings, CheMatch or the Surviving Corporation in a managerial capacity or
other key position for the purpose or with the intent of enticing such employee
away from or out of the employ of his or her employer; or
(ii) own an interest in or operate any Internet-based
trading platform that deals in petrochemicals or products relating to
petrochemicals unless neither Holdings, CheMatch, the Surviving Corporation or
any of their respective successors or assigns (including any subsequent direct
or indirect purchaser of the CheMatch On-Line system) (collectively, a
"Holding-related Party") no longer owns or operates such an Internet-based
trading system. The restrictions in this clause (ii) shall in no event restrict
the ability of the restricted parties, among other things, from providing verbal
counseling and advice, single client or group conferences in person (and related
written materials for those conferences) regarding the information described in
the preceding sentence, as well as providing any written advice regarding the
same in its newsletters, periodicals and other specific client-based special
reports, studies or advice. Notwithstanding the foregoing, the provisions of
this subsection (ii) shall not be deemed to prohibit the Stockholders from
holding, or acquiring additional, securities of Holdings or acquiring as an
investment not more than one percent
-41-
<PAGE> 43
(1%) of the capital stock of a competing business, the stock of which is traded
on a national securities exchange or over-the-counter market.
(b) As additional consideration for the Stockholders' consummation of
the transactions contemplated hereby, each of Holdings and PetroChemNet
covenants and agrees with and for the benefit of the Stockholders that neither
Holdings, the Surviving Corporation nor any other Holdings-related Party under
the direct or indirect control of Holdings or the Surviving Corporation shall
for a period of four (4) years after the Closing Date, for any reason
whatsoever, either directly or indirectly, for itself or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature, call upon any person who is at that time an employee of New DeWitt in a
managerial capacity or other key position for the purpose or with the intent of
enticing such employee away from or out of the employ of New DeWitt.
10.2 DAMAGES. Each of the parties hereto who are subject to the
covenants set out above acknowledges and agrees that (i) because the beneficiary
of those covenants would not have entered into this Agreement but for the grant
by such party of the covenants contained in this Section, (ii) because of the
difficulty of measuring economic losses to such party or their affiliates as a
result of a breach of the foregoing covenants, and (iii) because of the
immediate and irreparable damage that could be caused to such party for which it
would have no other adequate remedy, the foregoing covenant may be enforced by
the beneficiary of those covenants in the event of any threatened or actual
breach thereof, by injunctions and restraining orders. The foregoing shall be in
addition to and without prejudice to or in limitation of any other rights the
party enforcing such covenants may have in law or equity as a result of any such
threatened or actual breach.
10.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Section 10 impose a reasonable restraint on the
parties bound thereby in light of the activities
-42-
<PAGE> 44
and business of the beneficiaries thereof and their affiliates on date of the
execution of this Agreement and the current plans of such parties and their
affiliates; but it is also the intent of the parties that such covenants be
construed and enforced in accordance with the changing activities and business
of those parties throughout the term of this covenant.
10.4 SEVERABILITY; REFORMATION. The covenants in this Section 10 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. If any provision of this
Section 10 is determined by a court of competent jurisdiction to be
unenforceable, void or invalid in whole or in part, this Agreement shall be
deemed amended to delete or modify, as necessary, the offending provisions or
portions thereof and to alter the bounds thereof, including specifically, any
time, place and manner restrictions contained in any of the restrictive
covenants contained herein, in order to render it valid and enforceable, and the
Agreement shall thereby be reformed. In any event, the balance of this Section
and this Agreement shall be enforced to the fullest extent possible without
regard to such unenforceable, void or invalid provisions or part thereof.
10.5 INDEPENDENT COVENANT. All of the covenants in this Section 10
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the party or
parties bound by the covenants against the party enforcing the same or any other
party, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants. The covenants contained in Section
10 shall not be affected by any breach of any other provision hereof by any
party hereto and shall have no effect if the transactions contemplated by this
Agreement are not consummated.
10.6 MATERIALITY. Holdings, PetroChemNet and the Stockholders hereby
agree that this covenant is a material and substantial part of this transaction.
-43-
<PAGE> 45
10.7 OTHER NEW DEWITT SERVICES. Notwithstanding anything in this
Section 10 to the contrary, New DeWitt retains the right to offer or deliver its
consulting services via other alternative marketing and/or delivery modes as may
best fit its business objectives that do not involve a violation of an express
provision in this Section.
10.8 LIMITATION ON INDEMNITY OBLIGATIONS. Notwithstanding any
provision of this Agreement to the contrary (including without limitation the
indemnity provisions set out in Section 9), no Stockholder shall be personally
liable for a breach of the covenants set out in this Section 10, nor for the
breach of any covenants to which the Stockholder has personally agreed to in the
Alliance Agreement included in the Transaction Documents, nor shall he or she be
obligated for any indemnity or contribution for a breach of those covenants,
unless that Stockholder either alone or with any other person, persons, company,
partnership, corporation or business of whatever nature, engaged (whether for
himself or herself or on behalf of any such other person or party, and whether
directly or indirectly) in the activity that resulted in that breach of such
covenants.
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 STOCKHOLDERS AND COOK. The Stockholders and Cook recognize and
acknowledge that they have had in the past, currently have, and in the future
may possibly have, access to certain confidential information of CheMatch, the
Surviving Corporation and/or PetroChemNet, such as lists of customers,
operational policies, and pricing and cost policies, that are valuable, special
and unique assets of CheMatch's and/or PetroChemNet's respective businesses. The
Stockholders and Cook agree that they shall not disclose confidential
information with respect PetroChemNet, and
-44-
<PAGE> 46
additionally that, if the Closing occurs, they shall not disclose confidential
information with respect to CheMatch, the Surviving Corporation or Holdings
(other than with respect to the DeWitt Business Assets, as to which only Cook
shall have such obligation, and such obligation with respect to Cook may be
enforced only by any of the Stockholders or their assigns) to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except to authorized representatives of the party or its assigns to which such
information relates, and to counsel and other advisers, provided that such
advisers (other than counsel) agree in writing to the confidentiality provisions
of this Section 11.1 prior to such disclosure, unless (a) such information
becomes known to the public generally through no fault of the disclosing party,
(b) disclosure is required by law or the order of any governmental authority of
competent jurisdiction under color of law, or (c) the disclosing party
reasonably believes, on the advice of counsel, that such disclosure is required
in connection with a lawsuit involving the disclosing party (or its successors)
as to which such information relates, provided, that prior to disclosing any
information pursuant to clause (a), (b) or (c) above, the disclosing party
shall, if possible, give prior written notice thereof to the party (or its
successors) as to which such information relates and provide such other party
with the opportunity to contest such disclosure, and, with respect to
disclosures made pursuant to clauses (b) and (c), shall only make such
disclosures as specifically shall be required by such law or order or the
reasonable dictates of such lawsuit. In the event of a breach or threatened
breach by a Stockholder or Cook of the provisions of this Section, the party as
to whom such information relates (or its successors) shall be entitled to an
injunction restraining the disclosure, in whole or in part, of such confidential
information. Nothing herein shall be construed as prohibiting the enforcing
party from pursuing any other available remedy for such breach or threatened
breach, including without limitation the recovery of Damages.
-45-
<PAGE> 47
11.2 PETROCHEMNET AND, AFTER THE CLOSING, HOLDINGS, THE SURVIVING
CORPORATION AND CHEMATCH. PetroChemNet recognizes and acknowledges that it had
in the past, currently has, and in the future may possibly have, access to
certain confidential information of Holdings, its predecessors, and CheMatch,
such as lists of customers, operational policies, and pricing and cost policies
that are valuable, special and unique assets of that party's business.
PetroChemNet agrees that, prior to the Closing, or if there shall not be a
Closing, it shall not disclose confidential information with respect to
Holdings, its predecessors or CheMatch, and if there is a Closing, Holdings, the
Surviving Corporation and CheMatch jointly and severally agree that none of them
shall disclose confidential information with respect to the DeWitt Business
Assets, to any person, firm, corporation, association or other entity for any
purpose or reason whatsoever, except to authorized representatives of the party
to whom such information relates and to counsel and other advisers, provided
that such advisers (other than counsel) agree in writing to the confidentiality
provisions of this Section 11.2 prior to such disclosure, unless (a) such
information becomes known to the public generally through no fault of the
disclosing party or, if there is a Closing, through no fault of Holdings, the
Surviving Corporation or CheMatch, (b) disclosure is required by law or the
order of any governmental authority under color of law, or (c) the disclosing
party reasonably believes that such disclosure is required in connection with a
lawsuit to which it is a party, provided, that prior to disclosing any
information pursuant to clause (a), (b) or (c) above, the disclosing party
shall, if possible, give prior written notice thereof to the party as to whom or
which such information relates (and in the case of the Dewitt Business Assets,
also to the Stockholders) and provide that party with the opportunity to contest
such disclosure, and, with respect to disclosures made pursuant to clauses (b)
and (c), shall only make such disclosure as specifically shall be required by
such law, order or the reasonable dictates of such lawsuit. In the event of a
breach or threatened breach by any such disclosing party
-46-
<PAGE> 48
of the provisions of this Section, the party to whom or which such information
relates (and in the case of disclosure relating to the Dewitt Business Assets,
also the Stockholders) shall be entitled to an injunction restraining the
disclosure, in whole or in part, of such confidential information. Nothing
herein shall be construed as prohibiting the enforcing party from pursuing any
other available remedy for such breach or threatened breach, including without
limitation the recovery of damages.
11.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 11.1 and 11.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the covenant
may be enforced against them by injunctions and restraining orders.
11.4 SURVIVAL. The obligations of the parties under this Article 11
shall survive the termination of this Agreement.
12. FEDERAL SECURITIES ACT REPRESENTATIONS
12.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder, Cook and
PetroChemNet represents and warrants to the others that such party has not
relied on any purchaser representative, on any other party to this Agreement or
any other person, in connection with the acquisition of shares of Holdings
Common Stock as contemplated by this Agreement. Each such party represents to
and warrants that the others that such party (a) has such knowledge,
sophistication and experience in business and financial matters that such party
is capable of evaluating the merits and risks of an investment in the shares of
Holdings Common Stock, (b) fully understands the nature, scope and duration of
the limitations on transfer of the Holdings Common Stock contained in this
Agreement and the other agreements executed in connection herewith and (c) can
bear the economic risk of an
-47-
<PAGE> 49
investment in the shares of Holdings Common Stock and can afford a complete loss
of such investment. Each such party further represents to and warrants that such
party had an adequate opportunity to ask questions and receive answers from the
persons who will be officers of Holdings after the Effective Time concerning any
and all matters relating to the transactions described herein including without
limitation the background and experience of the persons who will be officers and
directors of Holdings after the Closing, the plans for the operations of the
business of Holdings, the Surviving Corporation and CheMatch, the business,
operations and financial condition of Holdings, the Surviving Corporation and
CheMatch, and any plans for additional acquisitions and the like. Each party has
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to that party's satisfaction.
12.2 SALES OF STOCK. By his or her execution and delivery of this
Agreement, Cook and each Stockholder represents and warrants to PetroChemNet and
Holdings that such party does not have any contract, undertaking, agreement or
arrangement, written or oral, with any other person to sell, transfer or grant
participations in any shares of Holdings Common Stock or its predecessors other
than pursuant to the Werlang Agreement (as defined in Appendix A.1 hereto) and
the Palmer Agreement (as defined in Appendix A.1 hereto). By its execution and
delivery of this Agreement, PetroChemNet represents and warrants to each
Stockholder, Cook and Holdings that, to the best knowledge of PetroChemNet, none
of its shareholders has any contract, undertaking, agreement or arrangement,
written or oral, with any other person to sell, transfer or grant participations
in any shares of Holdings Common Stock.
13. TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
-48-
<PAGE> 50
(a) by mutual consent of the boards of directors of PetroChemNet and
Holdings;
(b) by the Stockholders and Holdings as a group, on the one hand, or
by PetroChemNet, on the other hand, if the Closing shall not have occurred on or
before the date that is 10 days after the date of this Agreement; provided that
the right to terminate this Agreement under this Section 13.2(b) shall not be
available to either party (with the Stockholders, Cook and Holdings deemed to be
a single party for this purpose) whose misrepresentation, breach of warranty or
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date;
(c) by the Stockholders and Holdings as a group, on the one hand, or
by PetroChemNet, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholders, Cook and Holdings deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before date then set as the
Closing Date; or
(d) by the Stockholders and Holdings as a group, on the one hand, or
by PetroChemNet, on the other hand, if there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger or the Stock Repurchase Agreement; or there shall be any action taken, or
any statute, rule regulation or order enacted, promulgated or issued or deemed
applicable to the Merger or the Stock Repurchase Agreement by any governmental
entity which would make the consummation of the Merger or the Stock Repurchase
Transactions illegal.
13.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 13.1 hereof, this Agreement shall forthwith become void and there
shall be no liability or obligation on the
-49-
<PAGE> 51
part of any party hereto or its officers, directors or stockholders.
Notwithstanding the foregoing, (i) the provisions of this Section 13.2 and
Section 9 (indemnification), Section 11 (confidentiality) and the provisions of
Section 14 (including without limitation Sections 14.5 and 14.7), shall remain
in full force and effect and survive any termination of this Agreement; (ii)
each party shall remain liable for any breach of this Agreement prior to its
termination; and (iii) in the event of termination of this Agreement pursuant to
Section 13.1(c) above, then notwithstanding the provisions of Section 14 below,
the breaching party (with the Stockholders, Cook and Holdings deemed to be a
single party for purposes of this Section 13.2), shall be liable to the other
party to the extent of the expenses incurred by such other party in connection
with this Agreement and the transactions contemplated hereby, as well as any
Damages in accordance with applicable law, subject to the provisions of this
Agreement regarding the payment of and limitations on expenses and Damages.
14. GENERAL
14.1 COOPERATION. Holdings, the Stockholders, Cook and PetroChemNet
shall each deliver or cause to be delivered to the other on the Closing Date,
and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out the transactions contemplated by this Agreement. The Stockholders
and Cook shall also cooperate and use their best efforts to have the present
officers, directors and employees of New DeWitt cooperate with Holdings and
CheMatch on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any Return (as such term is
defined in Section A.l.22 of Appendix A.1) filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date. Holdings shall also
cooperate and use its best efforts to have those who become officers, directors
and employees of Holdings after the Merger cooperate with the Stockholders on
-50-
<PAGE> 52
and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any Return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods after the Closing Date that may relate either to
Holdings, its predecessors or CheMatch with respect to prior to the Closing or
New DeWitt with respect to periods after the Closing.
14.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of PetroChemNet and the Surviving Corporation, and the heirs and
legal representatives of the Stockholders and Cook.
14.3 ENTIRE AGREEMENT. This Agreement (which includes the Appendices,
Exhibits, Schedules and Annexes hereto) sets forth the entire understanding of
the parties hereto with respect to the transactions contemplated hereby. It
shall not be amended or modified except by a written instrument duly executed by
each of the parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement including without limitation
the letter of intent dated March 19, 1999, by and among PetroChemNet, CheMatch,
the Stockholders and Cook, as the same may have been amended or modified on
before the date hereof.
14.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
-51-
<PAGE> 53
14.5 BROKERS AND AGENTS. Except as provided in the next sentence,
PetroChemNet, Holdings, CheMatch, the Stockholders (as a group) and Cook each
represents and warrants to the others that the representing party has not
employed any broker or agent in connection with the transactions contemplated by
this Agreement and agrees to indemnify the others against all loss, cost,
damages or expense relating to arising out of claims for fees or commission of
any broker or agent employed or alleged to have been employed by such
indemnifying party. Notwithstanding the foregoing, the Stockholders and Cook
have engaged Dewey Investment Partnership, Ltd. or an affiliate thereof
("Dewey") to provide certain financial advisory and related services in
connection with the transactions that are the subject of this Agreement, and the
compensation to be paid to Dewey for such services shall be included in the
costs to be paid as provided in Section 14.7 below.
14.6 [INTENTIONALLY OMITTED]
14.7 EXPENSES. PetroChemNet and, after the Closing, Holdings, shall
pay in cash at the Closing (or, if acceptable to the Stockholders in their sole
discretion, promptly thereafter) the fees, expenses and disbursements of the
Stockholders, Cook and their agents, representatives, accountants, financial
advisors and counsel incurred in connection with the negotiation, preparation,
execution, delivery and consummation of the transactions contemplated by of this
Agreement, any preliminary letter or letters of intent, confidentiality
agreements and the related transactions, which shall include among others the
fees, costs and expenses of Dewey, Theodore J. Lee, Attorney at Law, the law
firm of Winstead, Sechrest & Minick and the appraisal firm of Howard, Frazier,
Barker, Elliot, Inc., in connection with the valuation referenced in Section
6.16 hereof, and all filing and related fees and expenses relating to the
creation of Holdings, New DeWitt and MergerCo (including, without limitation,
the merger of Old DeWitt into Holdings) (collectively, "Stockholder Costs and
-52-
<PAGE> 54
Expenses"); provided, however, that the aggregate liability of PetroChemNet
pursuant to this Section 14.7 shall be the sum of (a) the first $70,000 of
Stockholder Costs and Expenses, and 50% of all Stockholder Costs and Expenses
above $70,000. Except as otherwise provided in the preceding sentence, each
party hereto shall pay its own fees, costs and expenses incurred in connection
with negotiation, preparation, execution, delivery and consummation of the
transactions contemplated by this Agreement.
14.8 [INTENTIONALLY OMITTED].
14.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to PetroChemNet, the Surviving Corporation or (if after
to the Merger) Holdings to:
PetroChemNet, Inc.
1281 Main Street
Stamford, CT 06902
Attn:
(Fax: 203-357-7011)
with a required copy to:
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, PC
One Financial Center
Boston, MA 02111
Attn: Andrew Merken
(Fax: 617-542-2241)
If to Holdings prior to the Merger to:
PetroChemNet Holdings, Inc.
c/o DeWitt & Company, Incorporated
Attn: Earl H. Armstrong
16800 Greenspoint Park, North Atrium, Suite 120
-53-
<PAGE> 55
Houston, Texas 77060-2386
(Fax: 281.774.7210)
with a required copy to:
Theodore J. Lee, Attorney at Law
3104 Edloe, Suite 204
Houston, Texas 77027
(Fax: 713.623.0990)
If to the Stockholders to:
[insert name of the Stockholder]
c/o DeWitt & Company, Incorporated [if the
notice is sent before or at the Closing, and to
DeWitt & Company Incorporated, if the notice is
sent after the Closing]
16800 Greenspoint Park, North Atrium, Suite 120
Houston, Texas 77060-2386
(Fax: 281.774.7210)
with a required copy to:
Theodore J. Lee, Attorney at Law
3104 Edloe, Suite 204
Houston, Texas 77027
(Fax: 713.623.0990)
If to Cook to:
Fred B. Cook
5842 Cinnamon Creek
Houston, Texas 77084
(Fax: 281.774.7210)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
-54-
<PAGE> 56
14.10 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware, without regard to its conflicts of laws provisions. Except as
expressly set forth in Section 9, all disputes arising out of, in connection
with or with respect to this Agreement, the subject matter hereof, the
performance or non-performance of any obligation hereunder, or any of the
transactions contemplated hereby shall be adjudicated in a court of competent
civil jurisdiction sitting in the City of Houston, Texas and nowhere else. Each
of the parties hereto hereby irrevocably submits to the jurisdiction of such
court for the purposes of any suit, civil action or other proceeding arising out
of, in connection with or with respect to this Agreement, the subject matter
hereof, the performance or non-performance of any obligation hereunder, or any
of the transactions contemplated hereby (collectively, "Suit"). Each of the
parties hereto hereby waives and agrees not to assert by way of motion, as a
defense or otherwise in any such Suit, any claim that it is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum, or that the venue of such Suit is improper.
14.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstance in any other jurisdiction or to
other persons or circumstances in any jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 10.4.
14.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner of any party hereto or any
other person or entity.
-55-
<PAGE> 57
14.13 MUTUAL DRAFTING. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto.
14.14 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
14.15 AMENDMENT; WAIVER. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in writing
signed on behalf of each of the parties hereto. Any extension or waiver by any
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
[INTENTIONALLY LEFT BLANK]
-56-
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
PETROCHEMNET, INC.
By /s/ KAREN MORGAN
----------------------------------
Name: Karen Morgan
Title:
PETROCHEMNET HOLDINGS, INC.
By /s/ JOHN A. BOHN
----------------------------------
Name: John A. Bohn
Title:
PCN MERGER SUB, INC.
By /s/ JOHN A. BOHN
----------------------------------
Name: John A. Bohn
Title:
STOCKHOLDERS:
/s/ EARL H. ARMSTRONG
--------------------------------
Earl H. Armstrong
/s/ TERESA A. ACOSTA
--------------------------------
Teresa A. Acosta
/s/ WILLIAM P. BARRY
--------------------------------
William P. Barry
COOK:
/s/ FRED B. COOK
--------------------------------
Fred B. Cook
-57-
<PAGE> 59
APPENDIX A
A.1 REPRESENTATIONS AND WARRANTIES OF HOLDINGS, THE STOCKHOLDERS AND
COOK
Notwithstanding anything in this Appendix A.1 or the Agreement to the
contrary, Cook makes no representation or warranty as to the matters set forth
in this Appendix A.1 that relate to Holdings or MergerCo.
A.1.1 DUE ORGANIZATION. (a) Neither the Stockholders nor Cook has taken
any action that would cause either of Holdings and MergerCo not to be a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a material
adverse effect on the business, operations, affairs, prospects, properties,
assets, profits or condition (financial or otherwise) of Holdings (a "Holdings
Material Adverse Effect"). Holdings is the successor by merger to the assets,
business and liabilities of Old DeWitt. True, complete and correct copies of
the Certificate of Incorporation and By-laws, each as amended to date, of Old
DeWitt have been provided to PetroChemNet on or before the date hereof. The
Certificate of Incorporation and By-laws of Old DeWitt are referred to herein as
the "DeWitt Charter Documents." The minute books of Old DeWitt, as heretofore
made available to PetroChemNet (and as shall be delivered to PetroChemNet at
Closing), are correct and complete in all material respects, and reflect all
resolutions adopted by its incorporators, stockholders and directors (including
by any committees of the board of directors of each such corporation). Neither
the Stockholders nor Cook has taken any actions with respect to Holdings or
MergerCo that is not reflected in the minute books of Old DeWitt as heretofore
made available to PetroChemNet.
(b) CheMatch is a corporation duly organized, validly existing and is
in good standing under the laws of the State of Texas and is duly authorized and
qualified to do business under all applicable laws, regulations, ordinances and
orders of public authorities to carry on its business in the places and in the
manner as now conducted except where the failure to be so authorized or
qualified would not have a material adverse effect on the business, operations,
affairs, prospects, properties, assets, profits or condition (financial or
otherwise) of CheMatch (a "CheMatch Material Adverse Effect"). Notwithstanding
anything in this clause (b) or any other provision of this Appendix A, the
representations and warranties included in this Appendix A regarding CheMatch as
they relate to matters that are within the jurisdiction of the U.S. Commodities
Futures Trading Commission (the "CFTC") are limited in all respects to those
matters, and only those matters, set out in clause (c) of this Section A.1.1.,
and Holdings, the Stockholders and CheMatch expressly disclaim any other express
or implied representation or warranty regarding CheMatch as it relates to
matters that are within such jurisdiction, except as provided in that clause
(c). Texas is the only jurisdiction in which CheMatch is authorized or qualified
to do business. True, complete and correct copies of the Articles of
Incorporation and By-laws, each as amended to date, of CheMatch have been
provided to PetroChemNet on or before the date hereof. Such Articles of
Incorporation and By-laws are referred to herein as the "CheMatch Charter
Documents." The minute books of CheMatch, as heretofore made available to
PetroChemNet (and as shall be delivered to PetroChemNet at Closing), are correct
and complete in all material respects, and reflect all resolutions adopted by
its incorporators, stockholders and directors (including by any committees of
its board of directors).
A-2
<PAGE> 60
(c) CheMatch is not aware that its activities, including its
ownership and operation of the CheMatch On-Line system, violate any provision of
the U.S. Commodity Exchange Act, or any law, rule or regulation administered by
the CFTC (the "Commodities Laws, Rules and Regulations"). CheMatch has provided
to PetroChemNet a copy of the letters submitted to the CFTC on its behalf by
Theodore J. Lee, Attorney at Law, regarding the proposed or actual activities of
CheMatch. Although subsequent discussions between various staff members and Mr.
Lee have occurred, to the best knowledge of CheMatch, the CFTC has neither
responded definitively in writing to those letters regarding the matters that
are the subject of those letters nor taken a definitive position with respect to
the matters that are the subject of those letters.
A.1.2 AUTHORIZATION; VALIDITY.
(a) Neither the Stockholders nor Cook has taken any action
that could cause the representatives of Holdings and MergerCo executing this
Agreement and each of the other agreements and instruments executed and
delivered by either or both of them in connection with the transactions
contemplated hereby (collectively, the "Transaction Documents") not to have the
full legal right, corporate power and authority to enter into and bind Holdings
and MergerCo to the terms of this Agreement and the other Transaction Documents.
Cook and each of the Stockholders has the full legal right, corporate or other
power and authority to enter into this Agreement and the other Transaction
Documents and to consummate the transactions contemplated hereby and thereby.
Neither the Stockholders nor Cook has taken any action that could cause the
execution and delivery of this Agreement by Holdings and MergerCo and the
performance by Holdings and MergerCo of the transactions contemplated herein and
therein not to have been duly and validly authorized by the respective Boards of
Directors of such corporations or this Agreement and each of the other
Transaction Documents not to have been duly and validly authorized by all
necessary corporate action. This Agreement is, and when executed, each of the
other Transaction Documents will be, a legal, valid and binding obligation of
Cook and the Stockholders, enforceable against each of them in accordance with
its terms.
(b) Neither the Stockholders nor Cook has taken any action that could
cause the shares of Holdings Common Stock to be delivered to the stockholders of
PetroChemNet at the Closing in connection with the Merger not to be duly
authorized, validly issued shares of common stock of Holdings, fully paid and
nonassessable, or issued in violation of the preemptive rights of any persons.
A.1.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the other Transaction Documents, the consummation of any
transactions herein or therein referred to or contemplated and the fulfillment
of the terms hereof and thereof shall not:
(a) conflict with, or result in a breach or violation of any
Old DeWitt or CheMatch Charter Documents;
(b) materially conflict with, or result in a material default
(or an event which would constitute a default but for any requirement
of notice or lapse of time or both) under any document, agreement or
other instrument to which Old DeWitt was, or CheMatch is, a party, or
result in the creation or imposition of any lien, charge or encumbrance
on any of
A-3
<PAGE> 61
Holdings', MergerCo's or CheMatch's properties pursuant to (i) any law
or regulation to which Holdings or CheMatch or any of its or their
property is subject (provided, however, that no representation is made
with respect to the Commodities Laws, Rules and Regulations), or (ii)
any judgment, order or decree to which Old DeWitt or CheMatch is bound
or any of its or their property is or was subject. Notwithstanding the
foregoing, the provisions of an Agreement, entered into in August 1997
between CheMatch and Jorge Werlang (the "Werlang Agreement"), may
require a payment to be paid to Werlang by the Stockholders in
connection with the transactions contemplated hereby if the
transactions contemplated by the Werlang Agreement are not consummated
concurrently with the transactions contemplated hereby, and the
provisions of a Stock Option Agreement, dated as of December 1, 1996
(the "Palmer Agreement"), by and between William P. Barry and Simon J.
Palmer, includes certain rights in favor of Mr. Palmer to purchase
shares of common stock of Old DeWitt from Mr. Barry, which Palmer
Agreement shall not be in effect with respect to the shares of Old
DeWitt, Holdings or CheMatch as of the Effective Time. Copies of the
Werlang Agreement and the Palmer Agreement, as in effect on the date
hereof, have been provided or made available to PetroChemNet on or
before the date of this Agreement;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
CheMatch; or
(d) violate any law, order, judgment, rule or regulation to
which Old DeWitt or CheMatch is or was subject or by which old DeWitt
or CheMatch is or was bound (provided, however, that no representation
is made with respect to the Commodities Laws, Rules and Regulations or
with respect to the Hart-Scott-Rodino Antitrust Improvements Act of
1976).
A.1.4 CAPITAL STOCK. (a) The authorized capital stock of Old DeWitt
consists of 1,000,000 shares of common stock, $0.01 par value per share, of
which 150,000 shares are issued and outstanding (not including any shares that
may be held in its treasury or otherwise have been canceled prior to the date
hereof). Neither the Stockholders nor Cook has taken any action to affect or
alter in any manner the authorized or issued capital stock of Holdings or
MergerCo except as expressly contemplated by this Agreement. All of the issued
and outstanding shares of the capital stock of Old DeWitt have been duly
authorized and validly issued, are fully paid and nonassessable and are owned of
record and beneficially by the Stockholders in the amounts set forth in Annex I
hereto free and clear of all liens, encumbrances and claims of every kind
(except as may be contemplated by the Palmer Agreement as it relates to shares
of capital stock of Old DeWitt held by William P. Barry, all of which
encumbrances shall be terminated prior to the Closing Date). Neither the
Stockholders nor Cook has taken any action that could cause any of the shares of
capital stock of Holdings or MergerCo not to be duly authorized and validly
issued, fully paid and nonassessable or owned of record and beneficially by the
Stockholders in the amounts set forth in Annex II hereto free and clear of all
liens, encumbrances and claims of every kind (except as may be contemplated by
the Palmer Agreement as it relates to shares of capital stock of Old DeWitt held
by William P. Barry, all of which encumbrances shall be terminated prior to the
Closing Date). All of the outstanding shares of the capital stock of Old DeWitt
that were issued on or before the date hereof were offered, issued, sold and
delivered by Old DeWitt in compliance with all applicable state and federal laws
concerning the issuance of securities, and neither the Stockholders nor Cook has
taken any action that could
A-4
<PAGE> 62
cause any of the shares of capital stock to be issued by Holdings to be issued
other than in compliance with all applicable state and federal laws concerning
the issuance of securities. None of the shares of capital stock of Old DeWitt
was issued in violation of the preemptive rights of any person or entity, and
neither the Stockholders nor Cook has taken any action that could cause any of
the shares of capital stock to be issued by Holdings to be issued in violation
of the preemptive rights of any person or entity.
(b) The authorized capital stock of CheMatch consists of
10,000 shares of common stock, par value $.01 per share, of which 3,750 shares
are issued and outstanding. All of the issued and outstanding shares of the
capital stock of CheMatch have been duly authorized and validly issued, are
fully paid and nonassessable and are owned of record by Holdings or Cook, and
beneficially by Holdings and Cook, free and clear of all liens, encumbrances and
claims of every kind. All of the issued and outstanding shares of the capital
stock of CheMatch were offered, issued, sold and delivered by CheMatch in
compliance with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares was issued in violation of the
preemptive rights of any persons or entities.
A.1.5 TRANSACTIONS IN CAPITAL STOCK. No option, warrant, call,
subscription right, preemptive right, conversion right or other contract or
commitment of any kind exists which may obligate Holdings, MergerCo or CheMatch
to issue, sell or otherwise cause to become outstanding any shares of capital
stock or other equity securities of Holdings, MergerCo or CheMatch, other than
the Werlang Agreement and the Battery Agreement and other than as contemplated
by this Agreement. Neither Holdings, MergerCo nor CheMatch has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof, other than as provided in the Werlang Agreement
and except as contemplated by this Agreement; provided, however, that the
representations in this Section relating to Holdings (from and after the
effective time of the incorporation of Holdings) and MergerCo are limited to the
best knowledge of the Stockholders and Cook.
A.1.6 [INTENTIONALLY OMITTED.]
A.1.7 SUBSIDIARIES. Holdings has no subsidiaries other than CheMatch
and MergerCo, and does not presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity other than CheMatch, nor is Holdings or CheMatch, directly or indirectly,
a participant in any joint venture, partnership or other noncorporate entity
other than indirect investments via mutual funds and similar professionally
managed investment vehicles, the investment policies of which are not controlled
by Holdings, CheMatch or the Stockholders.
A.1.8 [INTENTIONALLY OMITTED.]
A.1.9 INTELLECTUAL PROPERTY
(a) Set forth on SCHEDULE A.1.9 and SCHEDULE A.1.13 is a true, complete
and correct list of all intellectual property CheMatch owns, or has the right to
use, sell or license and which is utilized in its business as presently
conducted and as presently contemplated to be conducted after
A-5
<PAGE> 63
the Merger (such intellectual property and the rights thereto are collectively
referred to herein as the "CheMatch IP Rights"). Except as set forth on SCHEDULE
A.1.9, CheMatch owns all such CheMatch IP Rights. Neither Holdings nor CheMatch
has granted, nor to the Stockholders' and CheMatch's knowledge after good faith
inquiry, does there exist by implication or operation of law, any license,
interest or other right in respect thereof which does or which will, subsequent
to the Closing, permit or enable anyone other than CheMatch to use any of the
CheMatch IP Rights except (i) for those CheMatch IP Rights, if any, that are
included in the DeWitt Business Assets and (ii) each customer of the CheMatch
On-Line service is granted a non-exclusive license, without the right of
sublicense, to use the CheMatch On-Line software in connection with such
customer's use of such service.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any CheMatch IP Rights (the
"CheMatch IP Rights Agreements"), will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of any CheMatch IP Rights
or impair the right of CheMatch or Holdings to use, sell or license any CheMatch
IP Rights or portion thereof, except for the occurrence of any such breach,
forfeiture, termination or impairment that would not singly or in the aggregate,
result in a Material Adverse Effect on CheMatch or Holdings and except with
respect to the CheMatch IP Rights, if any, that are transferred to New DeWitt as
part of the DeWitt Business Assets.
(c) Except as set forth SCHEDULE 1.9 (i) neither the marketing,
license, sale or use or intended use of any product, service or technology
currently used, licensed or sold or under development by CheMatch violates any
license or agreement between CheMatch and any third party or, to the knowledge
of CheMatch, infringes any intellectual property right of any other party; and
(ii) there is no pending or, to the knowledge of CheMatch, threatened claim or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any CheMatch IP Rights, nor has CheMatch received any written notice
asserting that any CheMatch IP Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party.
(d) CheMatch has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in the United States in, all CheMatch IP rights.
(e) To CheMatch's knowledge, none of the computer software, computer
firmware, computer hardware (whether general or special purpose) or similar or
related items of automated, computerized or software systems that are used or
relied on by CheMatch or sub-licensed to CheMatch in the conduct of its business
will malfunction, will cease to function, will generate incorrect data or will
product incorrect results when processing, providing or receiving (i)
date-related data from, into and between the Twentieth (20th) and Twenty-First
(21st) centuries or (ii) date-related data in connection with any valid date in
the Twentieth (20th) and Twenty-First (21st) centuries, causing a material
adverse effect on CheMatch. No representation is made, however, as to any
Microsoft software or ZetaFax software used by CheMatch in connection with the
operation of its business.
A.1.10 FINANCIAL STATEMENTS. (a) Holdings has provided to PetroChemNet
(a) true, complete and correct copies of Old DeWitt's unaudited Consolidated
Balance Sheets as of November 30 of each of the years 1996, 1997 and 1998 (the
end of each of its three most recent completed fiscal years), unaudited
Consolidated Statements of Income, unaudited Consolidated Statements of
A-6
<PAGE> 64
Changes in Shareholders' Equity, and unaudited Consolidated Statements of Cash
Flows for each of Old DeWitt's three most recent completed fiscal years, in each
case, together with the Accountant's Review Report of Cole & Trumbla, P.C.,
certified public accountants, Houston, Texas (collectively, the "Reviewed
Holdings Financials") and (b) true, complete and correct copies of Old DeWitt's
Balance Sheet (the "Holdings May Balance Sheet") as of May 31, 1999 (hereinafter
referred to as the "Holdings Balance Sheet Date") and Statements of Income for
the six-month period then ended (collectively, the "Holdings Interim
Financials"; and together with the Reviewed Holdings Financials, the "Holdings
Financial Statements"). The Holdings Financial Statements have been prepared
from the books and records of Old DeWitt and CheMatch. The Reviewed Holdings
Financials were reviewed in accordance with the Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. The Holdings Interim Financials do not include normal
year-end adjustments, which in the aggregate would not be material in amount or
effect, do not include footnote information and may not accurately reflect the
ownership of shares of capital stock of CheMatch by Cook. Except as provided
above, each of the Consolidated Balance Sheets included in Holdings Financial
Statements presents fairly the financial condition of Holdings as of the dates
indicated thereon, and each of the Statements of Income, Cash Flows and Retained
Earnings included in Holdings Financial Statements presents fairly the results
of its operations for the periods indicated thereon, subject in the case of the
Holdings Interim Financials, to normal year-end adjustments, which in the
aggregate would not be material in amount or effect, and to customary footnote
information which, if included might affect the interpretation of the
information included thereon.
(b) Holdings has provided to PetroChemNet on or before the
date hereof true, complete and correct copies of CheMatch's Balance Sheet (the
"CheMatch May Balance Sheet") as of the Holdings Balance Sheet Date and Income
Statement for the six-month period then ended (collectively, the "CheMatch
Financial Statements"). The CheMatch Financial Statements have been prepared
from the books and records of CheMatch, and do not include normal year-end audit
adjustments, which in the aggregate would not be material in amount or effect,
and do not include footnote information and may not accurately reflect the
ownership of shares of capital stock of CheMatch by Cook. Except as provided
above, each of the Balance Sheets included in the CheMatch Financial Statements
presents fairly the financial condition of CheMatch as of the dates indicated
thereon, and each of the Income Statements included in the CheMatch Financial
Statements presents fairly the results of its operations for the periods
indicated thereon, subject to normal year-end adjustments, which in the
aggregate would not be material in amount or effect, and to customary footnote
information which, if included might affect the interpretation of the
information included thereon.
A.1.11 LIABILITIES AND OBLIGATIONS.
(a) Except as disclosed on SCHEDULE A.1.11(A) attached hereto,
and except for (i) liabilities of Holdings arising as a result of the
transactions contemplated hereby, to the extent such liabilities arise
other than by reason of a breach by the Stockholders or Cook of any of
their representations, warranties or covenants set forth herein, and
(ii) liabilities arising as a result of actions of the officers and
directors of Holdings other than those actions of the officers and
directors of Old DeWitt taken prior to the effective time of the merger
of Old Dewitt with and for Holdings for which Holdings becomes liable
by
A-7
<PAGE> 65
operation of law upon consummation of the merger of Old DeWitt with and
into Holdings, Holdings is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Holdings May
Balance Sheet and not heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course
of its business consistent with past practice under any
contract, commitment or agreement specifically disclosed in
this Agreement or not required to be disclosed in this
Agreement because of the term or amount involved or otherwise;
and
(iii) those liabilities incurred, consistent with
past practice, in the ordinary course of business and either
not required to be shown on the Holdings May Balance Sheet or
arising since the Holdings Balance Sheet Date, which
liabilities in the aggregate are of a character and magnitude
consistent with past practice.
Except as otherwise expressly provided in the DeWitt Stock Repurchase
Agreement, all of such liabilities are included as part of the Assumed
Liabilities that New DeWitt is assuming in connection with the Stock Repurchase
Transactions. For purposes of this Section A.1.11 and Section 9.1 of this
Agreement, the term "liabilities" shall include without limitation any direct or
indirect liability, indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, either accrued,
absolute, contingent or otherwise and whether known or unknown, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured;
provided, however, that no representation or warranty is made in this Section
A.1.11 as to any Tax related liability, all of which are limited exclusively to
those representations and warranties set out in Section A.1.22 hereof.
(b) Except as disclosed on SCHEDULE A.1.11(b) or any other
Schedule attached hereto or as otherwise expressly contemplated by the
Transaction Documents, CheMatch is not liable for or subject to any
liabilities except for:
(i) those liabilities reflected on the CheMatch May
Balance Sheet and not heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course
of its business consistent with past practice under any
contract, commitment or agreement specifically disclosed in
this Agreement or not required to be disclosed in this
Agreement because of the term or amount involved or otherwise;
and
(iii) those liabilities incurred, consistent with
past practice, in the ordinary course of business and either
not required to be shown on the CheMatch May Balance Sheet or
arising since the Holdings Balance Sheet Date, which
liabilities in the aggregate are of a character and magnitude
consistent with past practice.
A-8
<PAGE> 66
A.1.12 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE A.1.12 hereto sets forth
an accurate list, as of June 16, 1999, of the accounts and notes receivable of
CheMatch (including without limitation receivables from and advances to
employees and the Stockholders), which includes an aging of all accounts and
notes receivable showing amounts due in 30-day aging categories.
A.1.13 PERMITS AND INTANGIBLES. Each of Holdings and CheMatch owns or
holds all licenses, franchises, permits and other governmental authorizations,
including without limitation permits, titles (including without limitation motor
vehicle titles and current registrations), fuel permits, licenses, franchises,
certificates, or any United States trademarks, trade names, patents, patent
applications and copyrights, the absence of any of which could have a Holdings
or CheMatch Material Adverse Effect (the "Material Permits"), except that
Holdings and CheMatch do not currently own or hold, but have applied for,
certain Material Permits identified on SCHEDULE A.1.13 as having been applied
for, with respect to which the failure of CheMatch to own or hold such Material
Permits as of an earlier time than they will issue upon approval of such
application will not have a CheMatch Material Adverse Effect. SCHEDULE A.1.13
hereto sets forth an accurate list and summary description, as of the date
hereof, of all Material Permits of Holdings and CheMatch. To the knowledge of
the Stockholders those Material Permits are valid, and neither Holdings nor
CheMatch has received any notice that any governmental authority intends to
modify, cancel, terminate or not renew any of those Material Permits. Each of
Holdings and CheMatch has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth in those
Material Permits and other applicable orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Holdings or CheMatch Material
Adverse Effect. The transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to Holdings and/or CheMatch by, any of its respective
Material Permits. Notwithstanding anything in this Section A.1.13 to the
contrary, no representation or warranty is made with respect to the matters
described in this Section as they are affected by the Commodity Laws, Rules and
Regulations.
A.1.14 ENVIRONMENTAL MATTERS. (a) (i) Holdings has complied with and is
in compliance with all federal, state, local and foreign laws, statutes (civil
and criminal), common laws, ordinances, codes, regulations, rules, notices,
permits, judgments, requirements, standards, guidelines, judicial and
administrative orders and decrees applicable to it and its properties, assets,
operations and businesses relating to pollution, worker and public health and
safety, and/or environmental protection (collectively "Environmental Laws"),
including without limitation Environmental Laws relating to air, water, land and
the generation, release, storage, use, handling, transportation, treatment,
discharge, disposal or other handling of Wastes, Hazardous Wastes and Hazardous
Substances (as such terms are currently defined in any applicable Environmental
Law), except to the extent that noncompliance with any Environmental Law, either
singly or in the aggregate, does not and would not have a Holdings Material
Adverse Effect; (ii) Holdings has obtained and adhered to all necessary permits
and other approvals necessary to treat, transport, store, dispose of and
otherwise handle Wastes, Hazardous Wastes and Hazardous Substances and has
reported, to the extent required by all Environmental Laws, all past and present
sites owned and operated by Holdings where Hazardous Wastes or Hazardous
Substances have been treated, stored, disposed of or otherwise handled, except
to the extent that a failure to do so, either singly or in the aggregate, does
not and would not have a Holdings Material Adverse Effect; (iii) there have been
no emissions, spills, discharges, releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned, leased
A-9
<PAGE> 67
or operated by Holdings except as permitted by Environmental Laws or where such
emissions, spills, discharges, and releases do not and could not have a Holdings
Material Adverse Effect; (iv) Holdings knows of no on-site or off-site location
to which Holdings has transported or disposed of Wastes, Hazardous Wastes and/or
Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against Holdings or CheMatch for any clean-up cost, remedial work, damage
to natural resources or personal injury, including without limitation any claim
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (CERCLA); and (v) Holdings neither has nor will have any
liability in connection with any release of any Hazardous Waste or Hazardous
Substance into the environment, except to the extent that such liability does
not and would not have a Holdings Material Adverse Effect. For purposes of this
Appendix A, the term Environmental Laws includes, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. '9601 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. '6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. '1251 et seq., the Clean Air Act, 42 U.S.C. '1857 et
seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. '651 et seq.,
and the Toxic Substances Control Act, 15 U.S.C. '2601 et seq.
(b) (i) CheMatch has complied with and is in compliance with
all Environmental Laws, including without limitation Environmental Laws relating
to air, water, land and the generation, release, storage, use, handling,
transportation, treatment, discharge, disposal or other handling of Wastes,
Hazardous Wastes and Hazardous Substances (as such terms are currently defined
in any applicable Environmental Law), except to the extent that noncompliance
with any Environmental Law, either singly or in the aggregate, does not and
would not have a CheMatch Material Adverse Effect; (ii) CheMatch has obtained
and adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Wastes, Hazardous Wastes and
Hazardous Substances and has reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by CheMatch
where Hazardous Wastes or Hazardous Substances have been treated, stored,
disposed of or otherwise handled, except to the extent that a failure to do so,
either singly or in the aggregate, does not and would not have a CheMatch
Material Adverse Effect; (iii) there have been no emissions, spills, discharges,
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned, leased or operated by CheMatch except as permitted by
Environmental Laws or where such emissions, spills, discharges, and releases do
not and could not have a CheMatch Material Adverse Effect; (iv) CheMatch knows
of no on-site or off-site location to which Holdings has transported or disposed
of Wastes, Hazardous Wastes and/or Hazardous Substances or arranged for the
transportation of Hazardous Wastes and Hazardous Substances, which site is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against CheMatch or Holdings for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including without limitation any claim under CERCLA; and (v) CheMatch neither
has nor will have any liability in connection with any release of any Hazardous
Waste or Hazardous Substance into the environment, except to the extent that
such liability does not and would not have a CheMatch Material Adverse Effect.
A.1.15 REAL AND PERSONAL PROPERTY. (a) SCHEDULE A.1.15(a) hereto sets
forth an accurate list of all owned and leased real property, all personal
property included in "depreciable plant, property and equipment" on the Holdings
May Balance Sheet and all other personal property owned
A-10
<PAGE> 68
or leased by Holdings with a value in excess of $25,000 (i) as of the Holdings
Balance Sheet Date and (ii) acquired since the Holdings Balance Sheet Date,
including in each case true, complete and correct copies of leases for material
equipment and all real properties on which are situated buildings, warehouses,
workshops, garages and other structures used in the operation of the business of
Holdings and also including an indication as to which assets are currently
owned, or were formerly owned, by the Stockholders or any other person or entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with Holdings ("Affiliates"). All fixed
assets used by Holdings that are material to the operation of its business are
either owned by Holdings or leased under an agreement which is listed on
SCHEDULE A.1.15(a).
(b) SCHEDULE A.1.15(b) hereto sets forth an accurate list of
all owned and leased real property, all personal property included in
"depreciable plant, property and equipment" on the CheMatch May Balance Sheet
and all other personal property owned or leased by CheMatch with a value in
excess of $25,000 (i) as of the Holdings Balance Sheet Date and (ii) acquired
since the Holdings Balance Sheet Date, including in each case true, complete and
correct copies of leases for material equipment and all real properties on which
are situated buildings, warehouses, offices and other structures used in the
operation of the business of CheMatch and also including an indication as to
which assets are currently owned, or were formerly owned, by the Stockholders or
business or personal Affiliates of CheMatch or the Stockholders. Except as
otherwise set forth on SCHEDULE A.1.15(b), all of the material machinery and
equipment of Holdings listed on SCHEDULE A.1.15(b) are in good working order and
condition, and fit for the purposes for which they were intended, ordinary wear
and tear excepted. All leases set forth on SCHEDULE A.1.15(b) are in full force
and effect and constitute valid and binding agreements of Holdings and, to the
knowledge of Holdings, the other parties thereto in accordance with their
respective terms. All fixed assets used by Holdings that are material to the
operation of its business are either owned by Holdings or leased under an
agreement which is listed on SCHEDULE A.1.15(b), other than the DeWitt Business
Assets to be conveyed pursuant to the Stock Repurchase Transactions none of
which will CheMatch or Holdings, after the Effective Time, have any ownership,
leasehold or other right or interest in or to except as contemplated by the
Sharing and Related Agreement between New DeWitt and CheMatch. SCHEDULE
A.1.15(b) includes without limitation true, complete and correct copies of all
title reports and title in effect. CheMatch has no plans or projects involving
the opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, to which management of
CheMatch has made any material expenditure in the two-year period prior to the
date of this Agreement, which if pursued by CheMatch, would require additional
expenditures of capital.
A.1.16 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
SCHEDULE A.1.16 hereto contains an accurate list of (a) all significant
customers (i.e. those customers representing 5% or more of CheMatch's revenues
for the 12 months ending on the Holdings Balance Sheet Date, or who have paid to
CheMatch $25,000 or more in any of the past four fiscal quarters) and (b) all
material contracts, commitments, leases, instruments, agreements, licenses or
permits to which Old DeWitt or CheMatch is or was a party or to or by which it
or its properties are or were subject or bound (including without limitation
contracts with significant customers, joint venture or partnership agreements,
contracts with any labor organizations, loan agreements, indemnity or guaranty
agreements, bonds, mortgages, options to purchase land, liens, pledges or other
security agreements) (i) as of the Holdings Balance Sheet Date and (ii) entered
into since the Holdings Balance Sheet Date (collectively, the "Holdings/CheMatch
Material Contracts"). Holdings has made
A-11
<PAGE> 69
available to PetroChemNet on or before the date hereof true, complete and
correct copies of the Holdings/CheMatch Material Contracts. Except to the extent
set forth on SCHEDULE A.1.16 hereto, (x) none of CheMatch's significant
customers have canceled or substantially reduced or, to the knowledge of the
Stockholders, are currently attempting or threatening to cancel or substantially
reduce service or commitments, (y) each of Old DeWitt and CheMatch has complied
with all of its material commitments and obligations and are not in default
under any of the Holdings/CheMatch Material Contracts and no notice of default
has been received or threatened with respect to any thereof and (z) there are no
Holdings/CheMatch Material Contracts that were not negotiated at arm's length
with third parties not Affiliated with Old DeWitt or CheMatch or any officer,
director or Stockholder, other than the intercompany transactions between Old
DeWitt and CheMatch themselves.
A.1.17 TITLE TO REAL PROPERTY. Neither Holdings nor CheMatch owns any
real property.
A.1.18 INSURANCE. SCHEDULE A.1.18 hereto sets forth an accurate list,
as of the Holdings Balance Sheet Date, of all insurance policies carried by Old
DeWitt and CheMatch, all of which will be assigned to New DeWitt in connection
with the Stock Repurchase Transactions. Holdings has made available to
PetroChemNet on or before the date hereof true, complete and correct copies of
all current insurance policies, all of which are in full force and effect.
Except as set forth on SCHEDULE A.1.18, neither Old DeWitt nor CheMatch has been
denied any insurance coverage which it has requested or which has been requested
on its behalf.
A.1.19 COMPENSATION; EMPLOYMENT AGREEMENTS. SCHEDULE A.1.19 hereto sets
forth an accurate list, as of the date hereof, of all officers, directors and
key employees of CheMatch, listing all employment agreements with such officers,
directors and key employees as of (a) the Holdings Balance Sheet Date and (b)
the date hereof. CheMatch has no written employment contracts, commitments or
arrangements with any person, and no oral arrangements with any party other than
Cook, which oral arrangement has been completely and accurately described to
PetroChemNet on or before the date hereof and which arrangement shall be
terminated without liability to CheMatch or Holdings on or prior to the
Effective Time except for salary and benefit payments unpaid and accrued through
the Effective Time in customary amounts. Holdings has no contracts, commitments
or arrangements with any person, whether written or oral, which is not included
as part of the Assumed Liabilities.
A.1.20 EMPLOYEE BENEFIT PLANS; LABOR MATTERS. All employee benefit
plans, programs and policies (whether formal or informal, and whether maintained
for the benefit of a single individual or more than one individual) maintained
or contributed to by Holdings for the benefit of any current or former employee
of Old DeWitt or CheMatch or in which such employees are entitled to participate
are listed in SCHEDULE A.1.20 (the "Benefit Plans"), and copies of all such
written plans and policies, written descriptions of all such oral plans and
policies, and all other documentation relating to such plans and policies
previously have been delivered or made available in writing to PetroChemNet. All
rights and interests of Old DeWitt, Holdings and CheMatch in and to the Benefit
Plans will be included in the DeWitt Business Assets, and all liabilities of Old
DeWitt Holdings and CheMatch under the Benefit Plans, including all liabilities,
if any, which may arise from the assignment thereof without the prior consent of
the insurers thereunder, will be assumed by New DeWitt in connection with the
Stock Repurchase Transactions. Except as disclosed on SCHEDULE A.1.20: (a) each
Benefit Plan and the administration thereof complies, and has at all times
complied,
A-12
<PAGE> 70
in all material respects with the requirements of all applicable law, including
without limitation the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the
"Code"), and each Benefit Plan intended to qualify under section 401(a) of the
Code so qualifies, and each trust which forms a part of any such plan is
tax-exempt under section 501(a) of the Code; (b) no Benefit Plan subject to Part
3 of Title I of ERISA has incurred any "accumulated funding deficiency" within
the meaning of section 302 of ERISA or section 412 of the Code; (c) no liability
has been incurred or is expected to be incurred under Title IV of ERISA to any
party with respect to any Benefit Plan, or any other plan presently or
heretofore maintained or contributed to by Holdings or CheMatch, any predecessor
to Holdings or CheMatch, or any entity that is or at any time was a member of a
controlled group, as defined in Section 412(n)(6)(B) of the Code, which includes
or included Holdings or CheMatch ("Controlled Group Member"); (d) neither
Holdings, CheMatch nor any Controlled Group Member has incurred any liability
for any tax imposed under section 4971 through 4980B of the Code or civil
liability under section 502(i) or (l) of ERISA; (e) the "amount of unfunded
benefit liabilities" within the meaning of section 4001(a)(18) of ERISA does not
exceed zero with respect to any Benefit Plan subject to Title IV of ERISA; (f)
no Benefit Plan is a multiemployer plan within the meaning of section 3(37) of
ERISA; (g) no Benefit Plan provides health or death benefit coverage beyond the
termination of an employee's employment, except as required by Part 6 of Title I
of ERISA or section 4980B of the Code, (h) no material "reportable event"
(within the meaning of section 4043 of ERISA) has occurred with respect to any
Benefit Plan or any plan maintained by a Controlled Group Member since the
effective date of said section 4043; (i) no suit, actions or other litigation
(excluding claims for benefits incurred in the ordinary course of plan
activities) have been brought against or with respect to any Benefit Plan; (j)
all contributions to Benefit Plans that were required to be made under such
Benefit Plans have been made as of the Holdings Balance Sheet Date, and all
benefits accrued under any unfunded Benefit Plan will have been paid, accrued or
otherwise adequately reserved in accordance with generally accepted accounting
principles as of such date and Holdings and CheMatch will have performed by the
Closing Date all material obligations required to be performed as of such date
under Benefit Plans, and (k) no employee of Holdings or CheMatch is represented
by a labor union or organization, no labor union or organization has been
certified or recognized as a representative of any such employee, there are no
pending or, to the knowledge of the Stockholders, threatened representation
campaigns concerning union representation involving any employee or efforts of
any labor union or organization (or representatives thereof) to organize any
employees. Neither Holdings nor CheMatch is bound by or subject to (and none of
its respective assets or properties is bound by or subject to) any arrangement
with any labor union. No employees of Holdings or CheMatch are represented by
any labor union or covered by any collective bargaining agreement and, to the
best of the Stockholders' knowledge, no campaign to establish such
representation is in progress. There is no pending or, to the best of the
Stockholders' knowledge, threatened labor dispute involving Holdings or CheMatch
and any group of its or their employees nor has Holdings or CheMatch experienced
any labor interruptions over the past three years, and each of Holdings and
CheMatch considers its relationship with its employees to be good. If reasonably
requested by PetroChemNet, Holdings and/or CheMatch shall terminate any Benefit
Plan substantially contemporaneously with the Closing.
A.1.21 CONFORMITY WITH LAW; LITIGATION. Neither Old DeWitt nor CheMatch
has violated any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it, which violations individually or in
the aggregate could have a CheMatch or Holdings
A-13
<PAGE> 71
Material Adverse Effect; and except to the extent set forth on SCHEDULE A.1.21,
there are no material claims, actions, suits or proceedings, pending or, to the
best of the Stockholders' knowledge, threatened, against or affecting Holdings
or CheMatch, at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received.
Notwithstanding anything in this Section A.1.21 to the contrary, no
representation or warranty is made in this Section with respect to the matters
described in this Section as they are affected by the Commodity Laws, Rules and
Regulations or the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
A.1.22 TAXES. . Except as set forth on SCHEDULE A.1.22, (a) each of
Holdings (including without limitation its predecessor, DeWitt & Company,
Incorporated, a Texas corporation) and CheMatch has timely filed or shall timely
file all requisite federal, state and other Tax (as defined below) returns,
reports and forms ("Returns") for all periods ended on or before the Closing
Date, and all such Returns are timely and complete in all material respects;
provided, however, that an extension has been filed for with respect to the tax
year beginning December 1, 1997, and ending November 30, 1998 return for DeWitt
& Company, Incorporated and CheMatch, and any Tax due with respect to that
period has not been paid; (b) there are no examinations in progress or claims
against Holdings or CheMatch for Taxes for any period or periods and no notice
of any claim for Taxes, whether pending or threatened, has been received; (c)
each of Holdings and CheMatch has a taxable year ended on November 30 in each
year; (d) each of Holdings and CheMatch currently utilizes the cash method of
accounting for income Tax purposes and such method of accounting has not changed
in the past five years; (e) each of Holdings and CheMatch has made (or there has
been made on its behalf) all current estimated Tax payments required to have
been paid on or before the Closing Date in an amount sufficient to avoid any
underpayment penalties; and (f) copies of (i) any Tax examinations, (ii)
extensions of statutory limitations for the collection or assessment of Taxes
and (iii) the Returns of Holdings and CheMatch (without the schedules thereto)
with respect to the tax years ended November 30, 1996 and 1997 have been made
available to PetroChemNet on or before the date hereof.
For purposes of this Agreement, the term "Tax" shall be
understood to include any tax or similar governmental charge, impost or levy
(including without limitation income taxes, franchise taxes, transfer taxes or
fees, sales taxes, use taxes, gross receipts taxes, value added taxes,
employment taxes, excise taxes, ad valorem taxes, property taxes, withholding
taxes, payroll taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest imposed by the United
States or any state, county, local or foreign government or subdivision or
agency thereof; provided, however, that, subject to the accuracy in all material
respects of the representations and warranties of the Stockholders and Cook set
forth herein, the term Tax shall not include any Tax arising out of or relating
to any of the following: the merger of DeWitt & Company, Incorporated, a Texas
corporation with and into Holdings, the repurchase of shares of capital stock of
Holdings from the Stockholders as contemplated by this Agreement, the issuance
of shares of CheMatch to Cook, the exchange of shares of capital stock of
CheMatch owned by Cook, the transactions contemplated by this Agreement related
to Jorge A. Werlang or the other transactions contemplated by this Agreement to
occur at the Closing.
A.1.23 NO VIOLATIONS. Neither Holdings nor CheMatch is in violation of
any Charter Document, and neither Holdings nor CheMatch, nor to the best
knowledge of the Stockholders, is
A-14
<PAGE> 72
any other party thereto, in default under any Holdings/CheMatch Material
Contract (the Holdings/CheMatch Material Contracts, together with the Charter
Documents of those two companies, being referred to herein as the
"Holdings/CheMatch Material Documents"); and, except as set forth in this
Agreement, including without limitation the Schedules hereto, (i) the rights and
benefits of Holdings and CheMatch under the Holdings/CheMatch Material Documents
will not be materially and adversely affected by the transactions contemplated
hereby and (ii) the execution of this Agreement and the agreements executed and
to be executed pursuant hereto and the performance of the obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby will not result in any violation or breach or constitute a default
under, any of the terms or provisions of the Holdings/CheMatch Material
Documents or the Holdings/CheMatch Charter Documents. None of the
Holdings/CheMatch Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party to any of the
transactions contemplated hereby to remain in full force and effect or give rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit.
A.1.24 GOVERNMENT CONTRACTS. Neither Holdings nor CheMatch is a party
to any governmental contract subject to price redetermination or renegotiation.
A.1.25 ABSENCE OF CHANGES. Since the Holdings Balance Sheet Date,
except as contemplated herein or as set forth on SCHEDULE A.1.25 there has not
been:
(a) any damage, destruction or loss (whether or not covered by
insurance) that would have a Holdings or CheMatch Material Adverse
Effect;
(b) any change in the authorized capital of Old DeWitt or
CheMatch or in their outstanding securities or any change in their
ownership interests or any grant of any options, warrants, calls,
conversion rights or commitments;
(c) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of Old DeWitt
or CheMatch;
(d) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by Old DeWitt or
CheMatch to any of its officers, directors, stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with past practice, and
except that Old DeWitt paid certain bonuses to certain of its officers;
(e) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, materially
adversely affecting the business or future prospects of Holdings or
CheMatch;
(f) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of CheMatch to any
person, including without limitation the Stockholders and their
Affiliates;
A-15
<PAGE> 73
(g) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to CheMatch, including without limitation any
indebtedness or obligation of the Stockholders or any Affiliate
thereof, not including, however, the negotiation and adjustment of
bills in the course of good faith disputes with customers and suppliers
in a manner consistent with past practice;
(h) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, property or rights of CheMatch or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
(i) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets with
a value in excess of $20,000 or outside of the ordinary course of
business of CheMatch;
(j) any waiver of any material rights or claims of CheMatch;
(k) any material breach, amendment or termination of any
Holdings/CheMatch Material Contract, license, permit or other right to
which Holdings or CheMatch is a party;
(l) any other change that by itself or together with other
changes, has had a CheMatch or Holdings Material Adverse Effect; or
(m) any other action by Holdings or CheMatch outside the
ordinary course of businesses.
A.1.26 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE A.1.26 hereto sets
forth an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which Holdings
or CheMatch has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
SCHEDULE A.1.26 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from Old
DeWitt or CheMatch and a description of the terms of such power.
A.1.27 RELATIONS WITH GOVERNMENTS. Neither Holdings nor CheMatch has
made, offered or agreed to offer anything of value to any governmental official,
political party or candidate for government office nor has it otherwise taken
any action that would cause Holdings or CheMatch to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect.
A-16
<PAGE> 74
A.1.28 APPRAISAL. The valuation of Old DeWitt referred to in Section
6.16 of the Agreement has been prepared by a third party independent of, and not
affiliated with, Old DeWitt, CheMatch and each of the Stockholders and, to the
knowledge of the Stockholders, such valuation is complete and accurate in all
material respects and accurately reflects the value of Old DeWitt as of the
date(s) set forth in such valuation.
A.1.29 DISCLOSURE. No representation or warranty by Holdings or the
Stockholders contained in this Agreement, and no representation, warranty or
statement contained in any list, certificate, Schedule or other instrument,
document, agreement or writing furnished or to be furnished to, or made with,
PetroChemNet pursuant hereto or in connection with the negotiation, execution or
performance hereof, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make any
statement herein or therein not misleading.
A.1.30 ABSENCE OF CLAIMS AGAINST COMPANY. None of the Stockholders has
any Claims against Holdings or CheMatch except for (a) items specifically
identified on SCHEDULES A.1.11 and A.1.16 as being Claims of or obligations to
the Stockholders and (b) continuing obligations to the Stockholders as employees
of Holdings relating to his or her employment thereby. Cook has no Claims
against Holdings or CheMatch except for (a) items specifically identified on
SCHEDULES A.1.11 and A.1.16 as being Claims of or obligations to Cook and (b)
continuing obligations to Cook as an employee of CheMatch relating to his
employment thereby.
A.1.31 COMPLETE COPIES OF MATERIALS. Each of Holdings and CheMatch has
delivered or made available in writing to PetroChemNet true and complete copies
of each agreement, contract, commitment or other document (or summaries of same)
that is referred to in the Schedules attached as part of this Appendix A or that
has been requested by PetroChemNet or its counsel, except for certain
proprietary information of Holdings that, by the terms of this Agreement,
expressly is not required to be delivered to PetroChemNet.
A-17
<PAGE> 75
A.2 REPRESENTATIONS OF PETROCHEMNET
A.2.1 DUE ORGANIZATION. PetroChemNet is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
for where the failure to be so authorized or qualified would not have a material
adverse effect on the business, operations, affairs, prospects, properties,
assets, profits or condition (financial or otherwise) of PetroChemNet (a
"PetroChemNet Material Adverse Effect"). True, correct and complete copies of
the Certificate of Incorporation and the By-laws, each, as amended,
(collectively, the "PetroChemNet Charter Documents") of PetroChemNet have been
delivered to Holdings. PetroChemNet is not in violation of any PetroChemNet
Charter Document. The minute books of PetroChemNet as heretofore made available
to the Stockholders and Cook, are correct and complete in all material respects,
and reflect all resolutions adopted by its incorporators, stockholders and
directors (including by any committees of its board of directors).
A.2.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of
PetroChemNet executing this Agreement have the corporate power and authority to
enter into and bind PetroChemNet to the terms of this Agreement. PetroChemNet
has the full legal right, corporate or other power and authority to enter into
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by PetroChemNet and the performance by PetroChemNet
of the transactions contemplated herein have been duly and validly authorized by
the Board of Directors of PetroChemNet and, to the extent required by law or the
PetroChemNet Charter Documents, by the shareholders of PetroChemNet, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of PetroChemNet
enforceable against PetroChemNet in accordance with its terms. Subject to the
accuracy in all material respects of the representations and warranties of the
Stockholders as they relate to Holdings and Old DeWitt contained herein, this
Agreement is, and each of the documents contemplated to be executed and
delivered by Holdings to the Stockholders and/or Cook in connection with the
transactions contemplated hereby will be, upon such execution and delivery
thereof by Holdings, enforceable against Holdings in accordance with its and
their terms.
A.2.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the
Certificate of Incorporation or By-laws of PetroChemNet;
(b) materially conflict with, or result in a material default
(or an event which would constitute a default but for any requirement
of notice or lapse of time or both) under any document, agreement or
other instrument to which PetroChemNet is a party, or result in the
creation or imposition of any lien, charge or encumbrance on any of
PetroChemNet's properties pursuant to (i) any law or regulation to
which either PetroChemNet or any of its property is subject, or (ii)
any judgment, order or decree to which PetroChemNet is bound or any of
its property is subject;
A-18
<PAGE> 76
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
PetroChemNet; or
(d) violate any law, order, judgment, rule or regulation to
which PetroChemNet is subject or by which PetroChemNet is bound, except
that no representation or warranty is made with respect to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
A.2.4 CONFORMITY WITH LAW. PetroChemNet has not violated any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either it which would have a Material Adverse Effect on
PetroChemNet, except that no representation or warranty is made with respect to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976. There are no material
claims, actions, suits or proceedings, pending or, to the knowledge of
PetroChemNet, threatened, against or affecting PetroChemNet, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received which, if decided adversely to
PetroChemNet could have a Material Adverse Effect on PetroChemNet.
A.2.5 CAPITALIZATION OF PETROCHEMNET AND OWNERSHIP OF COMPANY COMMON
STOCK. The authorized capital stock of PetroChemNet consists of 20,000 shares of
PetroChemNet Common Stock, of which 7,032 shares are issued and outstanding as
of the date hereof, and (ii) warrants, options and other rights to purchase
securities convertible into 5,277 shares of PetroChemNet Common Stock. All of
the issued and outstanding shares of capital stock of PetroChemNet have been
duly authorized and validly issued, are fully paid and nonassessable and are
owned of record and beneficially in the amounts set forth on Annex III hereto
free and clear of all liens, encumbrances and claims of every kind. All of the
outstanding shares of capital stock of PetroChemNet have been offered, issued,
sold and delivered by it in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any stockholders.
A.2.6 TRANSACTIONS IN CAPITAL STOCK. Except as set forth in Section
A.2.5, no option, warrant, call, subscription right, preemptive right,
conversion right or other contract or commitment of any kind exists which may
obligate PetroChemNet to issue, sell or otherwise cause to become outstanding
any shares of capital stock or other equity securities of PetroChemNet. Except
as disclosed on SCHEDULE 2.6 hereto, PetroChemNet has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
A.2.7 FINANCIAL STATEMENTS. PetroChemNet has provided to the
Stockholders and Cook true, complete and correct copies of PetroChemNet's
Balance Sheet (the "PetroChemNet March Balance Sheet") as of March 31, 1999
(hereinafter referred to as the "PetroChemNet Balance Sheet Date") and
Statements of Income for the three-month period then ended (collectively, the
"PetroChemNet Financial Statements"). The PetroChemNet Financial Statements have
been prepared from the books and records of PetroChemNet and present fairly the
financial position of PetroChemNet as of the dates thereof and the results of
operations for the periods covered thereby,
A-19
<PAGE> 77
subject to normal year-end adjustments, which in the aggregate would not be
material in amount or effect, and to customary footnote information which, if
included might affect the interpretation of the information included thereon.
A.2.8 LIABILITIES AND OBLIGATIONS.
(a) Except as disclosed on SCHEDULE A.2.8(a) attached hereto,
PetroChemNet is not liable for or subject to any liabilities except
for:
(i) those liabilities reflected on the PetroChemNet
March Balance Sheet and not heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course
of its business consistent with past practice under any
contract, commitment or agreement specifically disclosed in
this Agreement or not required to be disclosed in this
Agreement because of the term or amount involved or otherwise;
and
(iii) those liabilities incurred, consistent with
past practice, in the ordinary course of business and either
not required to be shown on the PetroChemNet March Balance
Sheet or arising since the PetroChemNet Balance Sheet Date,
which liabilities in the aggregate are of a character and
magnitude consistent with past practice.
For purposes of this Section A.2.8, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent or otherwise
and whether known or unknown, fixed or unfixed, choate or inchoate, liquidated
or unliquidated, secured or unsecured.
A.2.9 NO VIOLATIONS. PetroChemNet is not in violation of any Charter
Document, and to the best knowledge of PetroChemNet, neither PetroChemNet nor
any other party thereto, is in default under any material contracts,
commitments, leases, instruments, agreements, licenses or permits to which
PetroChemNet is a party or to or by which it or its properties are subject or
bound (including without limitation contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements) (collectively, the
"PetroChemNet Material Contracts"); and except as set forth in this Agreement,
including without limitation the Schedules hereto, (i) the rights and benefits
of PetroChemNet under the Material Contracts will not be materially and
adversely affected by the transactions contemplated hereby and (ii) the
execution of this Agreement and the agreements executed and to be executed
pursuant hereto and the performance of the obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby will
not result in any violation or breach or constitute a default under, any of the
terms or provisions of the Material Contracts or the Charter Documents of
PetroChemNet. None of the Material Contracts of PetroChemNet requires notice to,
or the consent or approval of, any governmental agency or other third party to
any of the transactions contemplated hereby to remain in full force and effect
or give rise to any right to termination, cancellation or acceleration or loss
of any right or benefit.
A-20
<PAGE> 78
A.2.10 ABSENCE OF CHANGES. Since the PetroChemNet Balance Sheet Date,
except as contemplated herein, in the Battery Documents, or as set forth on
SCHEDULE A.2.10 there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance) that would have a PetroChemNet Material Adverse Effect;
(b) any change in the authorized capital of PetroChemNet or in
its outstanding securities or any change in its ownership interest or
any grant of any options, warrants, calls, conversion rights or
commitments;
(c) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of
PetroChemNet;
(d) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of PetroChemNet to
any person, including without limitation its officers, directors,
stockholders and their respective Affiliates;
(e) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to PetroChemNet, including without limitation
any indebtedness or obligation of any of its officers, directors,
stockholders or their respective Affiliates, not including, however,
the negotiation and adjustment of bills in the course of good faith
disputes with customers and suppliers in a manner consistent with past
practice;
(f) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, property or rights of PetroChemNet or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
(g) any waiver of any material rights or claims of
PetroChemNet;
(h) any other change that by itself or together with other
changes, has had a PetroChemNet Material Adverse Effect; or
(i) any other action by PetroChemNet outside the ordinary
course of businesses.
A.2.11 DISCLOSURE. No representation or warranty by PetroChemNet
contained in this Agreement, and no representation, warranty or statement
contained in any list, certificate, Schedule or other instrument, document,
agreement or writing furnished or to be furnished to, or made with, the
Stockholders, Cook, Holdings or CheMatch pursuant hereto or in connection with
the negotiation, execution or performance hereof, contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make any statement herein or therein not misleading.
A-21
<PAGE> 79
A.2.12 ABSENCE OF CLAIMS AGAINST COMPANY. None of the stockholders of
PetroChemNet has any Claims against PetroChemNet except for (a) items
specifically identified on SCHEDULE A.2.8 as being Claims of or obligations to
the stockholders and (b) continuing obligations to the stockholders as employees
of PetroChemNet relating to his or her employment thereby.
A.2.13 COMPLETE COPIES OF MATERIALS. PetroChemNet has delivered or made
available in writing to the Stockholders and Cook true and complete copies of
each agreement, contract, commitment or other document (or summaries of same)
that is referred to in the Schedules attached as part of this Appendix A or that
has been requested by the Stockholders or Cook or their counsel.
A-22
<PAGE> 1
EXHIBIT 10.1
PETROCHEM NET, INC.
1997 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise
requires, the following terms, as used in this PETROCHEM
NET, INC. 1997 Employee, Director and Consultant Stock Option
Plan, have the following meanings:
Administrator means the Board of Directors, unless it
has delegated power to act on its behalf to the
Committee, in which case the Administrator means the
Committee.
Affiliate means a corporation which, for purposes of
Section 424 of the Code, is a parent or subsidiary of
the Company, direct or indirect.
Board of Directors means the Board of Directors of the
Company.
Code means the United States Internal Revenue Code of
1986, as amended.
Committee means the committee of the Board of
Directors to which the Board of Directors has
delegated power to act under or pursuant to the
provisions of the Plan.
Common Stock means shares of the Company's common
stock, no par value per share.
Company means PETROCHEM NET, INC., a Connecticut
corporation.
Disability or Disabled means permanent and total
disability as defined in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national
securities exchange or traded in the over-the-counter
market and sales prices are regularly reported for the
Common Stock, the closing or last price of the Common
Stock on the Composite Tape or other comparable
reporting system for the trading day immediately
preceding the applicable date;
(2) If the Common Stock is not traded on a national
securities exchange but is traded on the
over-the-counter market, if sales prices are not
regularly reported for
<PAGE> 2
the Common Stock for the trading day referred to in
clause (1), and if bid and asked prices for the Common
Stock are regularly reported, the mean between the bid
and the asked price for the Common Stock at the close
of trading in the over-the-counter market for the
trading day on which Common Stock was traded
immediately preceding the applicable date; and
(3) If the Common Stock is neither listed on a
national securities exchange nor traded in the
over-the-counter market, such value as the
Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive
stock option under Section 422 of the Code.
Key Employee means an employee of the Company or of an
Affiliate (including, without limitation, an employee
who is also serving as an officer or director of the
Company or of an Affiliate), designated by the
Administrator to be eligible to be granted one or more
Options under the Plan.
Non-Qualified Option means an option which is not
intended to qualify as an ISO.
Option means an ISO or Non-Qualified Option granted
under the Plan.
Option Agreement means an agreement between the
Company and a Participant delivered pursuant to the
Plan, in such form as the Administrator shall approve.
Participant means a Key Employee, director or
consultant to whom one or more Options are granted
under the Plan. As used herein, "Participant" shall
include "Participant's Survivors" where the context
requires.
Plan means this PETROCHEM NET, INC. 1997 Employee,
Director and Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which
Options have been or may be granted under the Plan or
any shares of capital stock into which the Shares are
changed or for which they are exchanged within the
provisions of Paragraph 3 of the Plan. The Shares
issued upon exercise of Options granted under the Plan
may be authorized and unissued shares or shares held
by the Company in its treasury, or both.
Survivors means a deceased Participant's legal
representatives and/or any person or persons who
acquired the Participant's rights to an Option by will
or by the laws of descent and distribution.
2
<PAGE> 3
2. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key
Employees and directors of and certain consultants to the Company in
order to attract such people, to induce them to work for the benefit
of the Company or of an Affiliate and to provide additional incentive
for them to promote the success of the Company or of an Affiliate.
The Plan provides for the granting of ISOs and Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
The number of Shares which may be issued from time to time
pursuant to this Plan shall be 2,000 or the equivalent of such number
of Shares after the Administrator, in its sole discretion, has
interpreted the effect of any stock split, stock dividend,
combination, recapitalization or similar transaction in accordance
with Paragraph 16 of the Plan.
If an Option ceases to be "outstanding", in whole or in part,
the Shares which were subject to such Option shall be available for
the granting of other Options under the Plan. Any Option shall be
treated as "outstanding" until such Option is exercised in full, or
terminates or expires under the provisions of the Plan, or by
agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
The Administrator of the Plan will be the Board of Directors,
except to the extent the Board of Directors delegates its authority
to the Committee, in which case the Committee shall be the
Administrator. Subject to the provisions of the Plan, the
Administrator is authorized to:
a. Interpret the provisions of the Plan or of any
Option or Option Agreement and to make all rules and
determinations which it deems necessary or advisable
for the administration of the Plan;
b. Determine which employees of the Company or of an
Affiliate shall be designated as Key Employees and
which of the Key Employees, directors and
consultants shall be granted Options;
c. Determine the number of Shares for which an Option
or Options shall be granted; and
d. Specify the terms and conditions upon which an
Option or Options may be granted;
provided, however, that all such interpretations, rules,
determinations, terms and conditions shall be made and prescribed in
the context of preserving the tax status under Section 422 of the
Code
3
<PAGE> 4
of those Options which are designated as ISOs. Subject to the
foregoing, the interpretation and construction by the Administrator
of any provisions of the Plan or of any Option granted under it shall
be final, unless otherwise determined by the Board of Directors, if
the Administrator is the Committee.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the
Participants in the Plan, provided, however, that each Participant
must be a Key Employee, director or consultant of the Company or of
an Affiliate at the time an Option is granted. Notwithstanding the
foregoing, the Administrator may authorize the grant of an Option to
a person not then an employee, director or consultant of the Company
or of an Affiliate; provided, however, that the actual grant of such
Option shall be conditioned upon such person becoming eligible to
become a Participant at or prior to the time of the delivery of the
Option Agreement evidencing such Option. ISOs may be granted only to
Key Employees. Non-Qualified Options may be granted to any Key
Employee, director or consultant of the Company or an Affiliate. The
granting of any Option to any individual shall neither entitle that
individual to, nor disqualify him or her from, participation in any
other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be set forth in writing in an Option
Agreement, duly executed by the Company and, to the extent required
by law or requested by the Company, by the Participant. The
Administrator may provide that Options be granted subject to such
terms and conditions, consistent with the terms and conditions
specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.
A. Non-Qualified Options: Each Option intended to be a
Non-Qualified Option shall be subject to the terms
and conditions which the Administrator determines to
be appropriate and in the best interest of the
Company, subject to the following minimum standards
for any such Non-Qualified Option:
a. Option Price: Each Option Agreement shall
state the option price (per share) of the
Shares covered by each Option, which option
price shall be determined by the
Administrator but shall not be less than the
par value per share of Common Stock;
b. Each Option Agreement shall state the
number of Shares to which it pertains;
c. Each Option Agreement shall state the date
or dates on which it first is exercisable
and the date after which it may no longer
be exercised, and
4
<PAGE> 5
may provide that the Option rights accrue or
become exercisable in installments over a
period of months or years, or upon the
occurrence of certain conditions or the
attainment of stated goals or events; and
d. Exercise of any Option may be conditioned
upon the Participant's execution of a Share
purchase agreement in form satisfactory to
the Administrator providing for certain
protections for the Company and its other
shareholders, including requirements that:
i. The Participant's or the Participant's
Survivors' right to sell or transfer
the Shares may be restricted; and
ii. The Participant or the Participant's
Survivors may be required to execute
letters of investment intent and must
also acknowledge that the Shares will
bear legends noting any applicable
restrictions.
B. ISOs: Each Option intended to be an ISO shall be
issued only to a Key Employee and be subject to the
following terms and conditions, with such additional
restrictions or changes as the Administrator
determines are appropriate but not in conflict with
Section 422 of the Code and relevant regulations and
rulings of the Internal Revenue Service:
a. Minimum standards: The ISO shall meet the
minimum standards required of Non-Qualified
Options, as described in Paragraph 6(A)
above, except clauses (a) thereunder.
b. Option Price: Immediately before the Option
is granted, if the Participant owns,
directly or by reason of the applicable
attribution rules in Section 424(d) of the
Code:
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price per share of
the Shares covered by each Option shall
not be less than one hundred percent
(100%) of the Fair Market Value per
share of the Shares on the date of the
grant of the Option.
ii. More than ten percent (10%) of the
total combined voting power of all
classes of stock of the Company or an
Affiliate, the Option price per share of
the Shares covered by each Option shall
not be less than one hundred ten percent
(110%) of the said Fair Market Value on
the date of grant.
5
<PAGE> 6
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total
combined voting power of all classes
of share capital of the Company or an
Affiliate, each Option shall
terminate not more than ten (10)
years from the date of the grant or
at such earlier time as the Option
Agreement may provide.
ii. More than ten percent (10%) of the
total combined voting power of all
classes of stock of the Company or an
Affiliate, each Option shall
terminate not more than five (5)
years from the date of the grant or
at such earlier time as the Option
Agreement may provide.
d. Limitation on Yearly Exercise: The Option
Agreements shall restrict the amount of
Options which may be exercisable in any
calendar year (under this or any other ISO
plan of the Company or an Affiliate) so that
the aggregate Fair Market Value (determined
at the time each ISO is granted) of the
stock with respect to which ISOs are
exercisable for the first time by the
Participant in any calendar year does not
exceed one hundred thousand dollars
($100,000), provided that this subparagraph
(d) shall have no force or effect if its
inclusion in the Plan is not necessary for
Options issued as ISOs to qualify as ISOs
pursuant to Section 422(d) of the Code.
7. EXERCISE OF OPTIONS AND ISSUE OF SHARES.
An Option (or any part or installment thereof) shall be
exercised by giving written notice to the Company at its principal
executive office address, together with provision for payment of the
full purchase price in accordance with this Paragraph for the Shares
as to which the Option is being exercised, and upon compliance with
any other condition(s) set forth in the Option Agreement. Such
written notice shall be signed by the person exercising the Option,
shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the
Plan or the Option Agreement. Payment of the purchase price for the
Shares as to which such Option is being exercised shall be made (a)
in United States dollars in cash or by check, or (b) at the
discretion of the Administrator, through delivery of shares of Common
Stock having a Fair Market Value equal as of the date of the exercise
to the cash exercise price of the Option, or (c) at the discretion of
the Administrator, by having the Company retain from the shares
otherwise issuable upon exercise of the Option, a number of shares
having a Fair Market Value equal as of the date of exercise to the
exercised price of the Option, or (d) at the discretion of the
Administrator, by delivery of the grantee's personal recourse note
bearing interest payable not less than annually at no less than 100%
of the applicable Federal rate, as defined in Section 1274(d) of the
Code, or (e) at the discretion of the Administrator, in accordance
with a cashless exercise program established with a securities
brokerage firm, and approved by the Administrator, or (f) at the
discretion of the Administrator, by any combination
6
<PAGE> 7
of (a), (b), (c), (d) and (e) above. Notwithstanding the foregoing,
the Administrator shall accept only such payment on exercise of an
ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares
as to which such Option was exercised to the Participant (or to the
Participant's Survivors, as the case may be). In determining what
constitutes "reasonably promptly," it is expressly understood that
the delivery of the Shares may be delayed by the Company in order to
comply with any law or regulation (including, without limitation,
state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.
The Shares shall, upon delivery, be evidenced by an appropriate
certificate or certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date
of exercise of any installment of any Option; provided that the
Administrator shall not accelerate the exercise date of any
installment of any Option granted to any Key Employee as an ISO (and
not previously converted into a Non-Qualified Option pursuant to
Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in
Paragraph 6.B.d.
The Administrator may, in its discretion, amend any term or
condition of an outstanding Option provided (i) such term or
condition as amended is permitted by the Plan, (ii) any such
amendment shall be made only with the consent of the Participant to
whom the Option was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse
to the Participant, and (iii) any such amendment of any ISO shall be
made only after the Administrator, after consulting the counsel for
the Company, determines whether such amendment would constitute a
"modification" of any Option which is an ISO (as that term is defined
in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holder of such ISO.
8. RIGHTS AS A SHAREHOLDER.
No Participant to whom an Option has been granted shall have
rights as a shareholder with respect to any Shares covered by such
Option, except after due exercise of the Option and tender of the
full purchase price for the Shares being purchased pursuant to such
exercise and registration of the Shares in the Company's share
register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
By its terms, an Option granted to a Participant shall not be
transferable by the Participant other than (i) by will or by the laws
of descent and distribution, or (ii) as otherwise determined by the
Administrator and set forth in the applicable Option Agreement. The
designation of a beneficiary of an Option by a Participant shall not
be deemed a transfer prohibited by this Paragraph. Except as provided
above, an Option shall be exercisable, during the Participant's
7
<PAGE> 8
lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Any attempted
transfer, assignment, pledge, hypothecation or other disposition of
any Option or of any rights granted thereunder contrary to the
provisions of this Plan, or the levy of any attachment or similar
process upon an Option, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR
DEATH OR DISABILITY.
Except as otherwise provided in the pertinent Option
Agreement, in the event of a termination of service (whether as an
employee, director or consultant) with the Company or an Affiliate
before the Participant has exercised all Options, the following rules
apply:
a. A Participant who ceases to be an employee, director
or consultant of the Company or of an Affiliate (for
any reason other than termination "for cause",
Disability, or death for which events there are
special rules in Paragraphs 11, 12, and 13,
respectively), may exercise any Option granted to him
or her to the extent that the Option is exercisable
on the date of such termination of service, but only
within such term as the Administrator has designated
in the pertinent Option Agreement.
b. Except as provided in Subparagraph (c) below, or
Paragraph 12 or 13, in no event may an Option
Agreement provide, if the Option is intended to be an
ISO, that the time for exercise be later than three
(3) months after the Participant's termination of
employment.
c. The provisions of this Paragraph, and not the
provisions of Paragraph 12 or 13, shall apply to a
Participant who subsequently becomes Disabled or dies
after the termination of employment, director status
or consultancy, provided, however, in the case of a
Participant's Disability or death within three (3)
months after the termination of employment, director
status or consultancy, the Participant or the
Participant's Survivors may exercise the Option
within one (1) year after the date of the
Participant's termination of employment, but in no
event after the date of expiration of the term of the
Option.
d. Notwithstanding anything herein to the contrary, if
subsequent to a Participant's termination of
employment, termination of director status or
termination of consultancy, but prior to the exercise
of an Option, the Board of Directors determines that,
either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which
would constitute "cause", then such Participant shall
forthwith cease to have any right to exercise any
Option.
8
<PAGE> 9
e. A Participant to whom an Option has been granted
under the Plan who is absent from work with the
Company or with an Affiliate because of temporary
disability (any disability other than a permanent and
total Disability as defined in Paragraph 1 hereof),
or who is on leave of absence for any purpose, shall
not, during the period of any such absence, be
deemed, by virtue of such absence alone, to have
terminated such Participant's employment, director
status or consultancy with the Company or with an
Affiliate, except as the Administrator may otherwise
expressly provide.
f. Except as required by law or as set forth in the
pertinent Option Agreement, Options granted under the
Plan shall not be affected by any change of a
Participant's status within or among the Company and
any Affiliates, so long as the Participant continues
to be an employee, director or consultant of the
Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
Except as otherwise provided in the pertinent Option
Agreement, the following rules apply if the Participant's service
(whether as an employee, director or consultant) with the Company or
an Affiliate is terminated "for cause" prior to the time that all
his or her outstanding Options have been exercised:
a. All outstanding and unexercised Options as of the
time the Participant is notified his or her service
is terminated "for cause" will immediately be
forfeited.
b. For purposes of this Plan, "cause" shall include
(and is not limited to) dishonesty with respect to
the Company or any Affiliate, insubordination,
substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information,
and conduct substantially prejudicial to the
business of the Company or any Affiliate. The
determination of the Administrator as to the
existence of "cause" will be conclusive on the
Participant and the Company.
c. "Cause" is not limited to events which have occurred
prior to a Participant's termination of service, nor
is it necessary that the Administrator's finding of
"cause" occur prior to termination. If the
Administrator determines, subsequent to a
Participant's termination of service but prior to
the exercise of an Option, that either prior or
subsequent to the Participant's termination the
Participant engaged in conduct which would
constitute "cause," then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the
Participant and the Company or an Affiliate, which
contains a conflicting definition of "cause" for
termination and which is in effect at the time of
such termination, shall supersede the definition in
this Plan with respect to such Participant.
9
<PAGE> 10
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option
Agreement, a Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate by reason of Disability
may exercise any Option granted to such Participant:
a. To the extent exercisable but not exercised on the
date of Disability; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of
any additional rights as would have accrued had the
Participant not become Disabled prior to the end of
the accrual period which next ends following the date
of Disability. The proration shall be based upon the
number of days of such accrual period prior to the
date of Disability.
A Disabled Participant may exercise such rights only within
the period ending one (1) year after the date of the Participant's
termination of employment, directorship or consultancy, as the case
may be, notwithstanding that the Participant might have been able to
exercise the Option as to some or all of the Shares on a later date
if the Participant had not become disabled and had continued to be an
employee, director or consultant or, if earlier, within the
originally prescribed term of the Option.
The Administrator shall make the determination both of
whether Disability has occurred and the date of its occurrence
(unless a procedure for such determination is set forth in another
agreement between the Company and such Participant, in which case
such procedure shall be used for such determination). If requested,
the Participant shall be examined by a physician selected or approved
by the Administrator, the cost of which examination shall be paid for
by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
Except as otherwise provided in the pertinent Option
Agreement, in the event of the death of a Participant while the
Participant is an employee, director or consultant of the Company or
of an Affiliate, such Option may be exercised by the Participant's
Survivors:
a. To the extent exercisable but not exercised on the
date of death; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of
any additional rights which would have accrued had
the Participant not died prior to the end of the
accrual period which next ends following the date of
death. The proration shall be based upon the number
of days of such accrual period prior to the
Participant's death.
If the Participant's Survivors wish to exercise the Option,
they must take all necessary steps to exercise the Option within one
(1) year after the date of death of such Participant,
10
<PAGE> 11
notwithstanding that the decedent might have been able to exercise
the Option as to some or all of the Shares on a later date if he or
she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of
the Option.
14. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon
the particular exercise of an Option shall have been effectively
registered under the Securities Act of 1933, as now in force or
hereafter amended (the "1933 Act"), the Company shall be under no
obligation to issue the Shares covered by such exercise unless and
until the following conditions have been fulfilled:
a. The person(s) who exercise(s) such Option shall
warrant to the Company, prior to the receipt of such
Shares, that such person(s) are acquiring such Shares
for their own respective accounts, for investment,
and not with a view to, or for sale in connection
with, the distribution of any such Shares, in which
event the person(s) acquiring such Shares shall be
bound by the provisions of the following legend which
shall be endorsed upon the certificate(s) evidencing
their Shares issued pursuant to such exercise or such
grant:
"The shares represented by this certificate
have been taken for investment and they may
not be sold or otherwise transferred by any
person, including a pledgee, unless (1)
either (a) a Registration Statement with
respect to such shares shall be effective
under the Securities Act of 1933, as
amended, or (b) the Company shall have
received an opinion of counsel satisfactory
to it that an exemption from registration
under such Act is then available, and (2)
there shall have been compliance with all
applicable state securities laws."
b. At the discretion of the Administrator, the Company
shall have received an opinion of its counsel that
the Shares may be issued upon such particular
exercise in compliance with the 1933 Act without
registration thereunder.
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all
Options granted under this Plan which as of such date shall not have
been exercised will terminate and become null and void; provided,
however, that if the rights of a Participant or a Participant's
Survivors have not otherwise terminated and expired, the Participant
or the Participant's Survivors will have the right immediately prior
to such dissolution or liquidation to exercise any Option to the
extent that the Option is exercisable as of the date immediately
prior to such dissolution or liquidation.
11
<PAGE> 12
16. ADJUSTMENTS.
Upon the occurrence of any of the following events, a
Participant's rights with respect to any Option granted to him or her
hereunder which has not previously been exercised in full shall be
adjusted as hereinafter provided, unless otherwise specifically
provided in the pertinent Option Agreement:
A. Stock Dividends and Stock Splits. If (i) 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, or
(ii) additional shares or new or different shares or other securities
of the Company or other non-cash assets are distributed with respect
to such shares of Common Stock, the number of shares of Common Stock
deliverable upon the exercise of such Option may be appropriately
increased or decreased proportionately, and appropriate adjustments
may be made in the purchase price per share to reflect such events.
B. Consolidations or Mergers. 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 (an
"Acquisition"), the Administrator or the board of directors of any
entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by
substituting on an equitable basis for the Shares then subject to
such Options either the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition
or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that all Options must be
exercised (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully
exercisable for purposes of this Subparagraph), within a specified
number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the Fair Market
Value of the shares subject to such Options (either to the extent
then exercisable or, at the discretion of the Administrator, all
Options being made fully exercisable for purposes of this
Subparagraph) over the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in Subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, a Participant upon
exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities which would have been
received if such Option had been exercised prior to such
recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to Subparagraph A, B or C with respect to
ISOs shall be made only after the Administrator, after consulting
with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such ISOs (as that term is
defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would
12
<PAGE> 13
constitute a modification of such ISOs, it may refrain from making such
adjustments, unless the holder of an ISO specifically requests in writing that
such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.
17. 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. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.
20. WITHHOLDING.
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by
13
<PAGE> 14
applicable law or governmental regulation to be withheld from the Participant's
salary, wages or other remuneration in connection with the exercise of an Option
or a Disqualifying Disposition (as defined in Paragraph 21), the Company may
withhold from the Participant's compensation, if any, or may require that the
Participant advance in cash to the Company, or to any Affiliate of the Company
which employs or employed the Participant, the amount of such withholdings
unless a different withholding arrangement, including the use of shares of the
Company's Common Stock or a promissory note, is authorized by the Administrator
(and permitted by law). For purposes hereof, the fair market value of the
shares withheld for purposes of payroll withholding shall be determined in the
manner provided in Paragraph 1 above, as of the most recent practicable date
prior to the date of exercise. If the fair market value of the shares withheld
is less than the amount of payroll withholdings required, the Participant may be
required to advance the difference in cash to the Company or the Affiliate
employer. The Administrator in its discretion may condition the exercise of an
Option for less than the then Fair Market Value on the Participant's payment of
such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
22. TERMINATION OF THE PLAN.
The Plan will terminate on October 27, 2007, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
by the shareholders of the Company. The Plan may be terminated at an earlier
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination shall not affect any Option Agreements executed prior
to the effective date of such termination.
23. AMENDMENT OF THE PLAN AND AGREEMENTS.
The Plan may be amended by the shareholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any
14
<PAGE> 15
national automated quotation system of securities dealers. Any amendment
approved by the Administrator which the Administrator determines is of a scope
that requires shareholder approval shall be subject to obtaining such
shareholder approval. Any modification or amendment of the Plan shall not,
without the consent of a Participant, adversely affect his or her rights under
an Option previously granted to him or her. With the consent of the Participant
affected, the Administrator may amend outstanding Option Agreements in a manner
which may be adverse to the Participant but which is not inconsistent with the
Plan. In the discretion of the Administrator, outstanding Option Agreements may
be amended by the Administrator in a manner which is not adverse to the
Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment, consultancy or director
status of a Participant, nor to prevent a Participant from terminating his or
her own employment, consultancy or director status or to give any Participant a
right to be retained in employment or other service by the Company or any
Affiliate for any period of time.
25. GOVERNING LAW.
This Plan shall be construed and enforced in accordance with the law of the
State of Connecticut.
15
<PAGE> 1
EXHIBIT 10.2
PETROCHEMNET HOLDINGS, INC.
1999 STOCK PLAN
1. PURPOSE. The purpose of the PetroChemNet Holdings, Inc. 1999 Stock
Plan (the "Plan") is to encourage key employees of PetroChemNet Holdings, Inc.,
a Delaware corporation (the "Company"), and of any present or future parent or
subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"); (c) awards of stock in the Company ("Awards"); and
(d) opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall
(be administered by the Board of Directors of the Company (the
"Board") or, subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), by a committee appointed by
the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the
grant or authorization of each Stock Right by the Board (if so
required by applicable state law), and subject to the terms of
the Plan, the Committee shall have the authority to (i)
determine to whom (from among the class of employees eligible
under paragraph 3 to receive ISOs) ISOs shall be granted, and
to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options
and Awards and to make Purchases) Non-Qualified Options,
Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards
shall be granted or Purchases made; (iii) determine the
purchase price of shares subject to each Option or Purchase,
which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the
exercise period; (vi) extend the period during which
outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature
of such restrictions, if any, and (viii) interpret the Plan
and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the
<PAGE> 2
-2-
regulations promulgated thereunder, to ensure that such Option
is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of any Stock
Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time
adopt such rules and regulations for carrying out the Plan as
it may deem advisable. No member of the Board or the Committee
shall be liable for any action or determination made in good
faith with respect to the Plan or any Stock Right granted
under it.
B. COMMITTEE ACTIONS. The Committee may select one of
its members as its chairman, and shall hold meetings at such
time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of a majority of
the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state
law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
The provisions of this Section 2(B) shall be subject to the
provisions of the Company's By-Laws.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock
Rights may be granted to members of the Board. All grants of
Stock Rights to members of the Board shall in all respects be
made in accordance with the provisions of this Plan applicable
to other eligible persons. Members of the Board who either (i)
are eligible to receive grants of Stock Rights pursuant to the
Plan or (ii) have been granted Stock Rights may vote on any
matters affecting the administration of the Plan or the grant
of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of
Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the
granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its
discretion, may take such action as may be necessary to ensure
that Stock Rights granted under the Plan qualify as "qualified
performance-based compensation" within the meaning of Section
162(m) of the Code and applicable regulations promulgated
thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the
following (i) if the Board determines that Stock Rights
granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee
consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any Non-Qualified Options with an
exercise price less than the fair market value per share of
Common Stock are granted under the Plan and the Board
determines that
<PAGE> 3
-3-
such Options should constitute Performance-Based Compensation,
such options shall be made exercisable only upon the
attainment of a pre-established, objective performance goal
established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder
approval and (iii) Stock Rights granted under the Plan may be
subject to such other terms and conditions as are necessary
for compensation recognized in connection with the exercise or
disposition of such Stock Right or the disposition of Common
Stock acquired pursuant to such Stock Right, to constitute
Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 2,095,275, subject to adjustment as provided in paragraph 13. 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 or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,000,000 shares of Common Stock
under the Plan during any fiscal year of the Company. 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 or shall be repurchased by the Company, the shares subject to such Option
shall be included in the determination of the aggregate number of shares of
Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after June 21, 1999 and prior to June 20, 2009. The date of
grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND
PURCHASES. Subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each
<PAGE> 4
-4-
Non-Qualified Option granted, and the purchase price per share
of stock granted in any Award or authorized as a Purchase,
under the Plan may be less than the fair market value of the
Common Stock of the Company on the date of grant; provided
that, in no event shall such exercise price or such purchase
price be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
B. PRICE FOR ISOs. The exercise price per share
specified in the agreement relating to each ISO granted under
the Plan shall not be less than the fair market value per
share of Common Stock on the date of such grant. In the case
of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common
Stock on the date of grant. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each
eligible employee may be granted Options treated as ISOs only
to the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to
stock having a fair market value (determined at the time the
ISOs were granted) in excess of $100,000. The Company intends
to designate any Options granted in excess of such limitation
as Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. 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 date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the
last business day for which such prices or quotes are
available prior to the date of grant 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. If the Common Stock is not publicly traded at
the time an Option is granted under the Plan, "fair market
value" shall mean 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
<PAGE> 5
-5-
the Common Stock in private transactions negotiated at arm's
length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment
becomes exercisable, it shall remain exercisable until
expiration or termination of the Option, unless otherwise
specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may
be exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to
which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have
the right to accelerate the date that any installment of any
Option becomes exercisable; provided that the Committee shall
not, without the consent of an optionee, accelerate the
permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO or the employee's employment agreement, if any,
if an ISO optionee ceases to be employed by the Company and all Related
Corporations other than by reason of death or disability as defined in paragraph
10, no further installments of his or her ISOs shall become exercisable, and his
or her ISOs shall terminate on the earlier of (a) three months after the date of
termination of his or her employment, or (b) their specified expiration dates,
except to the extent that such ISOs (or unexercised installments thereof) have
been converted into Non-Qualified Options pursuant to paragraph 16. For purposes
of this paragraph 9, employment shall be considered as continuing uninterrupted
during any bona fide leave of absence (such as those
<PAGE> 6
-6-
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute or
by contract. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under this
paragraph 9, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. Unless otherwise specified in the agreement
relating to such ISO or the employee's employment agreement,
if any, if an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her
death, any ISO owned by such optionee may be exercised, to the
extent otherwise exercisable on the date of death, by the
estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified
expiration date of the ISO or (ii) the one year anniversary of
the date of the optionee's death.
B. DISABILITY. Unless otherwise specified in the
agreement relating to such ISO or the employee's employment
agreement, if any, if an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or
her disability, such optionee shall have the right to exercise
any ISO held by him or her on the date of termination of
employment, for the number of shares for which he or she could
have exercised it on that date, until the earlier of (i) the
specified expiration date of the ISO or (ii) the one year
anniversary of the date of the termination of the optionee's
employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor
statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and
<PAGE> 7
-7-
cancellation provisions as the Committee may determine. The Committee may from
time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments. No optionee to whom an Option has been granted
shall have rights as a shareholder with respect to any shares covered by such
Option, except after due exercise of the Option and tender of the full purchase
price for the shares being purchased pursuant to such exercise and registration
of the shares in the Company's share register in the name of the optionee.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
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. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's
assets or otherwise (each, an "Acquisition"), the Committee or
the board of directors of any entity assuming the obligations
of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options
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 successor
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) upon written notice to the optionees,
provide that all 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 the Options shall
terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of
the shares subject to such Options
<PAGE> 8
-8-
(to the extent then exercisable or to be exercisable as a
result of the Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event
of a recapitalization or reorganization of the Company (other
than a transaction described in subparagraph B above) pursuant
to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising an Option shall be entitled
to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had
exercised such Option prior to such recapitalization or
reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the
foregoing, any adjustments made pursuant to subparagraphs A, B
or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
F. 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.
G. FRACTIONAL SHARES. No fractional shares shall be
issued under the Plan and the optionee shall receive from the
Company cash in lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the
events described in subparagraphs A, B or C above, the class
and aggregate number of shares set forth in paragraph 4 hereof
that are subject to Stock Rights which previously have been or
subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall
determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
<PAGE> 9
-9-
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal note with a recourse amount
determined by the Administrator (but in no case with a recourse amount less than
twenty-five percent (25%) of the fair market value of the stock) and bearing
non-refundable, fully recourse interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, (d) at the discretion of the Committee and 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, or (e) at the discretion of the Committee, by
any combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by such Option until the date of
issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
June 21, 1999, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. The Plan shall
expire at the end of the day on June 20, 2009 (except as to Options outstanding
on that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.
<PAGE> 10
-10-
16. MODIFICATIONS OF ISOs; CONVERSION OF ISOs INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the transfer of a Non-Qualified
Stock Option, (iii) the grant of an Award, (iv) the making of a Purchase of
Common Stock for less than its fair market value, or (v) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the
<PAGE> 11
-11-
withholding from the shares of Common Stock otherwise deliverable upon exercise
of a Option shares having an aggregate fair market value equal to the amount of
such withholding taxes.
20. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the shares to be issued upon the
particular exercise of a Stock Right shall have been effectively registered
under the Securities Act of 1933, as now in force or hereafter amended (the
"1933 Act"), the Company shall be under no obligation to issue the shares
covered by such exercise unless and until the following conditions have been
fulfilled:
a. The person(s) who exercise(s) such Stock Right shall warrant
to the Company, prior to the receipt of such shares, that such
person(s) are acquiring such shares for their own respective
accounts, for investment, and not with a view to, or for sale
in connection with, the distribution of any such shares, in
which event the person(s) acquiring such shares shall be bound
by the provisions of the following legend which shall be
endorsed upon the certificate(s) evidencing their shares
issued pursuant to such exercise or such grant:
"The shares represented by this certificate have been
taken for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be
effective under the Securities Act of 1933, as
amended, or (b) the Company shall have received an
opinion of counsel satisfactory to it that an
exemption from registration under such Act is then
available, and (2) there shall have been compliance
with all applicable state securities laws."
b. At the discretion of the Committee, the Company shall have
received an opinion of its counsel that the shares may be
issued upon such particular exercise in compliance with the
1933 Act without registration thereunder.
21. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
grantee of such Stock Right or such grantee's survivors have not otherwise
terminated and expired, the grantee of such Stock Right or such grantee's
survivors will have the right immediately prior to such dissolution or
liquidation to exercise any Stock Right to the extent that the Stock Right is
exercisable as of the date immediately prior to such dissolution or liquidation.
22. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
<PAGE> 12
-12-
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
23. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of Delaware,
or the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 1
EXHIBIT 10.3
CheMatch.com, Inc.
2900 North Loop West
Houston, TX 77092
February 8, 2000
CheMatch.com Management Group
c/o CheMatch.com, Inc.
2900 North Loop West
Houston, TX 77092
Re: Amendment and Restatement of Management Incentive
Agreement
Ladies and Gentlemen:
Reference is made to the arrangement (sometimes referred to as the
"Management Incentive Agreement") contained in that certain letter agreement
dated June 21, 1999 between PetroChemNet Holdings, Inc. (now known as
CheMatch.com, Inc., and referred to herein as the "Company") and certain
management members, as amended by that certain letter agreement dated October
26, 1999 which provides for certain incentives to certain management members and
other key employees of the Company upon certain events. This letter agreement
will supersede, amend, and restate the Management Incentive Agreement, which
shall be and read as follows:
In order to promote the growth of the Company and increase the
Company's value and return on investment for its stockholders, the Company has
agreed to provide certain incentives to Carl McCutcheon, John Bohn, Karen Morgan
and Larry McAfee (the "Management Group" or "you") as well as certain other key
employees of the Company (who shall be determined pursuant to the procedures set
forth below and who shall be known herein as the "Key Employees") in the event
the Company has a "fundamental change" (as defined below). This letter agreement
confirms our understanding with respect to this arrangement (and shall be known
as the "Management Incentive Agreement").
1. In the event the Company has a "fundamental change," the Company
shall be obligated to pay the Management Group and Key Employees (subject to the
terms hereof) an aggregate bonus amount (the "Incentive Payment") equal to the
following percentage of Proceeds (as defined below), which in no event shall
exceed a maximum of $15,000,000 in the aggregate, at the times specified below:
Date "Fundamental Change" Occurs Percentage of Proceeds Payable
-------------------------------- ------------------------------
June 21, 1999 to June 21, 2000 Two percent (2%)
June 22, 2000 to September 21, 2000 One and one-half percent (1 1/2%)
<PAGE> 2
September 22, 2000 to December 21, 2000 One percent (1%)
December 22, 2000 to March 21, 2001 Three-quarters percent (3/4%)
March 21, 2001 to June 21, 2001 One-half percent (1/2%)
The Incentive Payment shall be payable upon the occurrence of the first
"fundamental change," except that any portion of the Incentive Payment that is
attributable to escrow payments or future contingent payments shall be payable
if, and at such time or times as, that portion of the consideration is received
by the Company or its securityholders. For purposes of a Public Offering (as
defined below), the "fundamental change" shall be deemed to have occurred on the
date the Company's registration statement becomes effective, but the Incentive
Payment shall not be payable until ninety (90) days thereafter. For the purposes
of a Sale (as defined below), the "fundamental change" date shall be the date of
the closing of the Sale transaction.
In the event that all or any portion of the consideration received by
the Company upon a "fundamental change" is non-cash, the Incentive Payment shall
be made in such non-cash form, wholly or pro rata, as applicable, based upon a
good faith valuation made by the Board of Directors (which, in the case of
publicly-traded securities, shall take into consideration the most recent
closing prices from trades of such securities). Subject to the foregoing and
upon written notice to the Company, each of you and each Key Employee shall have
the option to receive all or such portion as you (or the Key Employee to be
paid) of the Incentive Payment in the form of stock of the Company, in lieu of
cash, which such stock shall have a fair market value when received equal to the
amount of cash in lieu of which it is received (such fair market value to be
determined in good faith by the Board of Directors or the Compensation Committee
thereof).
The Incentive Payment made hereunder shall be in addition to any other
payment that the individual members of the Management Group receive under their
written employment agreements with the Company or with respect to their
ownership (immediately prior to the transaction) of stock of the Company (due to
the exercise of stock options or otherwise) in connection with any "fundamental
change" of the Company. When used herein, the term "fundamental change" shall
mean either (i) the sale or transfer, in one or more related transactions, of
(A) equity securities (including, but not limited to, shares of preferred stock)
representing in excess of 50% of the voting power (on an as-converted basis) of
the capital stock of the Company or (B) all or substantially all of the assets
of the Company, and in both cases based on a valuation of the Company of at
least Two Hundred Million Dollars ($200,000,000) (a "Sale"), or (ii) a public
offering (a "Public Offering") of any of the Company's securities pursuant to a
registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, in which (A) the aggregate net proceeds
from such offering to the Company are at least Twenty Five Million Dollars
($25,000,000) and (B) the price paid by the public for each such security shall
be at least $9.87 per common share (as adjusted for splits, etc.). In the case
of a Public Offering, the Proceeds shall be calculated based on the average
daily closing price of the Company's Common Stock for the 90-day period
immediately following the effectiveness of the Public Offering.
2
<PAGE> 3
2. You hereby acknowledge that the aggregate Incentive Payment is to be
allocated and paid to each of you in the following percentages:
John Bohn 20%
Karen Morgan 20%
Carl McCutcheon 20%
Larry McAfee 15%
John Bohn, Karen Morgan and Carl McCutcheon shall be entitled to their portion
of the Incentive Payment, notwithstanding any termination of employment or other
relationship with the Company. If the Company terminates Larry McAfee without
Cause prior to a "fundamental change," he shall remain entitled to his portion
of the Incentive Payment. However, if Larry McAfee is terminated for Cause or
voluntarily leaves the employment of the Company prior to a "fundamental
change", he shall not be entitled to receive his portion of the Incentive
Payment, and his portion of the Incentive Payment shall be allocated to the Key
Employees. "Cause" shall be defined as set forth in the Incentive Stock Option
and Stock Repurchase Agreement of Larry McAfee.
The remaining 25% of the Incentive Payment shall be paid to the Key
Employees. The Key Employees and the amounts to be paid to each Key Employee
shall be determined by a management committee to be composed of Carl McCutcheon
and Larry McAfee on or before the time when such proceeds are payable. If the
employment with the Company of either Carl McCutcheon or Larry McAfee terminates
prior to such determination, the Compensation Committee of the Board shall have
the discretion to select a replacement member or members of such committee.
3. Options for the purchase of common stock of the Company shall be
granted, as set forth below:
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS EXERCISE PRICE
---- ----------------- --------------
<S> <C> <C>
Carl McCutcheon 168,000 $27.28
John Bohn 168,000 $27.28
Karen Morgan 168,000 $27.28
Larry McAfee 126,000 $27.28
Other Employees 210,000 $27.28
Total 840,000
</TABLE>
Such options shall be vested immediately, and shall expire after the expiration
of five (5) years from the date hereof. One-half of such options shall be
exercisable only after the expiration of one year from the date of grant, and
the remaining one-half shall be exercisable after two years from the date of
grant. Such options shall otherwise be issued under the terms and conditions of
the Company's 1999 Stock Plan with the exception that such options shall not
terminate if such person's employment or other relationship with the Company
terminates.
3
<PAGE> 4
4. None of the above provisions shall be deemed to limit or in any
other way affect the right or benefits to which you or the Key Employees may be
entitled pursuant to a "fundamental change," due to equity ownership or
otherwise. To the extent deemed necessary by legal counsel to the Company, the
Board of Directors will take all actions and make appropriate recommendations to
the Company's stockholders, including the recommendation that this letter
agreement be approved by at least seventy-five percent of the stockholders, so
that the so-called "golden parachute" provisions of the Internal Revenue Code
("Code") Section 280G do not apply to the Company and the provisions of Code
Section 4999 do not apply to the Management Group or to any Key Employee.
5. Except as otherwise provided herein, the provisions of this letter
agreement shall terminate and be of no further force or effect upon the
occurrence of the first "fundamental change" and payment of the Incentive
Payment or if a "fundamental change" does not occur on or before June 21, 2001
(the "Termination Date"); provided, however, that the term hereof may be
extended by the Board of Directors for a single additional three-month period in
the event that the Company or its shareholders are actively engaged in bona-fide
negotiations with respect to a "fundamental change" on the date which should,
absent such extension, have been Termination Date.
6. As used herein, the term "Proceeds" shall mean the aggregate value
of the (i) proceeds paid or payable, in the case of Sale, to the holders of the
Company's equity securities in any transaction resulting in a "fundamental
change" after payment (or assumption by the acquirer) of all outstanding
obligations of the Company (to the extent such need to be discharged at the time
of, or remain the obligation of, the Company or its shareholders following the
"fundamental change"), including but not limited to all promissory notes, lines
of credit, investment banking fees, any severance payments to officers,
employees, and independent consultants, or (ii) in the case of a Public
Offering, the average daily closing price of the Company's Common Stock for the
90-day period immediately following the effectiveness of the Public Offering
multiplied by the number of shares of the Company's Common Stock outstanding, on
a fully diluted basis, on the 90th day immediately following the effectiveness
of the Public Offering.
This is a binding agreement among the parties and supersedes all other
agreements and understandings between the parties (excluding any employment
agreements and stock option agreements) relating to payments to you in the event
of a "fundamental change."
4
<PAGE> 5
Please indicate your acceptance of the foregoing by signing and
returning one copy of the undersigned.
CHEMATCH.COM, INC.
By: /s/ CARL D. MCCUTCHEON
-------------------------------
Name: Carl D. McCutcheon
-----------------------------
Title: Chairman, President and
Chief Executive Officer
----------------------------
MANAGEMENT GROUP
Agreed and Accepted:
/s/ JOHN BOHN
- ---------------------------------
John Bohn
/s/ KAREN MORGAN
- ---------------------------------
Karen Morgan
/s/ CARL D. MCCUTCHEON
- ---------------------------------
Carl D. McCutcheon
/s/ LARRY MCAFEE
- ---------------------------------
Larry McAfee
5
<PAGE> 1
EXHIBIT 10.4
PETROCHEMNET HOLDINGS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 1st day of
May, 1999 by and between PetroChemNet Holdings, Inc., a Delaware corporation
(the "Employer"), and Carl D. McCutcheon (the "Employee").
WITNESSETH:
WHEREAS, the Employer desires to employ the Employee and to enter into
an agreement embodying the terms of such employment; and
WHEREAS, the Employee desires to enter into this Agreement and to
accept such employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Employer and the Employee, intending to be
legally bound, hereby agree as follows:
ARTICLE 1.
TERM OF EMPLOYMENT
Section 1.1. Specified Period.
Employer hereby employs Employee, and Employee hereby accepts
employment with Employer for the period beginning on May 1, 1999 and ending on
April 30, 2001, subject to earlier termination as provided in Article 6.
Section 1.2. Automatic Renewal.
After April 30, 2001, this Agreement shall be renewed automatically for
succeeding terms of one year each, subject to earlier termination as provided in
Article 6, unless one party gives notice to the other at least ninety (90) days
prior to the expiration of any term of his or its intention not to renew.
Section 1.3. "Employment Term" Defined.
As used herein, the phrase "Employment Term" refers to the entire
period of employment of Employee by Employer hereunder, whether for the
period(s) provided above, or whether terminated earlier as hereinafter provided
or extended by mutual agreement between Employer and Employee.
<PAGE> 2
ARTICLE 2.
DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.1. General Duties.
Employee shall serve as President and Chief Executive Officer of
Employer. In such capacity, Employee shall do and perform all services, acts or
things in accordance with the policies set by the Board of Directors of
Employer. Employee shall perform such services in Houston, Texas, unless
otherwise directed by Employer.
Section 2.2. Devotion to Employer's Business.
a) During the Employment Term, Employee shall devote his time
and attention to the business of Employer during normal business hours and for
such additional amounts of time as are customary in the performance of his
duties and responsibilities or as is further required by the Board of Directors
of Employer. However, the expenditure of reasonable amounts of time for
education, charitable or professional activities, service on the Board of
Directors in any corporation or other business entity, and/or management of
personal investments and business affairs shall not be deemed a breach of this
Agreement if those activities do not materially interfere with the services
required under this Agreement or create a conflict of interest with Employer.
Section 2.3. Confidential Information; Tangible Property; Competitive
Activities.
a) During the Employment Term and for a period of two years
thereafter, Employee shall hold in confidence and not use or disclose to any
person or entity without the express written authorization of Employer any
Confidential Information of Employer. For purposes of this Section 2.3,
"Employer" shall include all corporations and entities controlled by,
controlling or under common control with, Employer, and "control" shall mean
beneficial ownership of greater than fifty percent (50%) of the voting power of
the corporation or entity. Information and materials received in confidence from
third parties by Employee are included within the meaning of the phrase
"Confidential Information of Employer" as used in this Section. If any
Confidential Information of Employer described in this Section is sought by
legal process, Employee shall promptly notify Employer and will cooperate with
Employer in preserving its confidentiality in connection with any legal
proceeding.
b) The parties hereto hereby stipulate that the following
information and materials ("Confidential Information of Employer") is important,
material and has independent economic value (actual or potential) from not being
generally known to others who could obtain economic value from its disclosure or
use and constitutes confidential trade secrets that affect the successful
conduct of Employer's business and its goodwill and that any material breach of
any term of this Section 2.3 is a material breach of this Agreement:
(I) All software in any media used by the Employer
(other than publicly available information relating to off-the-shelf
software used by the Employer) and all components thereof, including
any and all proprietary routines and subroutines,
2
<PAGE> 3
communications protocols, interfaces and linkages, all computer code,
including all object code, all source code, all manuals and other
documentation relating thereto;
(II) The names, buying habits and practices of
Employer's existing customers or prospects;
(III) Employee's business, marketing, merchandising
and sales methods, plans, techniques and related data;
(IV) Employer's vendors and suppliers and the
contents of agreements with such vendors and suppliers including
discounts, payment terms and credit extended to Employer;
(V) Costs of services and materials;
(VI) The prices Employer obtains or has obtained or
for which it sells or has sold its products or services;
(VII) Manufacturing and sales costs; Employer's
proprietary manufacturing processes, information processes, and
technical plans;
(VIII) Compensation paid to employees of Employer or
other terms of employment;
(IX) Employer's past and projected sales volume,
profit, profit margins and other financial information concerning
Employer;
(X) Proposed new products or services;
(XI) Enhancements of existing products or services;
(XII) The existence of and contents of contracts and
licenses;
(XIII) Any additional proprietary or confidential
information or materials resulting from or part of any task assigned to
Employee or work performed by Employee, during the Employment Term; and
(XIV) Any additional information or materials deemed
by Employer to be confidential by marking or stamping "Confidential" or
similar words on the cover of such information or materials, by
advising Employee orally or in writing that certain information is
confidential or by generally treating such information in such a manner
that Employee should reasonably believe it to be deemed confidential by
Employer.
Employee's obligations under this Section 2.3 shall not apply
to (i) information which Employee can demonstrate is or has become generally
known other than through Employee's act in violation of this Agreement and (ii)
information which Employee can demonstrate was lawfully acquired by Employee
prior to employment from sources other than Employer.
3
<PAGE> 4
c) All manuals, reports, files, memoranda, models, samples,
tools, machinery, equipment, notes, books, computer hardware, computer software
(in both source and object code form), correspondence, drawings, data and other
written, graphical or electromagnetic records or documentation relating to any
of the products or services of Employer or containing Confidential Information
of Employer which Employee shall prepare, use, construct, observe, possess, or
control shall be and shall remain the sole property of Employer and shall be
returned to Employer immediately upon termination of employment, and Employee
further agrees to return to Employer promptly any such materials which turn up
in Employee's possession subsequent to his termination of employment.
d) Employee shall not (i) during the Employment Term and (ii)
for a one year period immediately following the termination of Employee's
employment with Employer for any reason, or no reason, directly or indirectly,
perform any services for any person or entity engaged in any business that
competes directly with the products and services provided or sold (whether
existing or under development) on the date of termination of Employee's
employment with the Employer, including without limitation, any person or entity
engaged in the business of spot market trading of petroleum-based chemical
products on an internet based trading platform, but excluding third party
services remarketed or resold by the Employer without the addition of
substantial value by the Employer (collectively, the "Business"); or, without
limiting the generality of the foregoing, be or become or agree to be or become,
interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, employee, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm, association, partnership, joint venture or other business entity that
competes directly with the Business (collectively, the "Prohibited
Competition"); provided, however, that nothing contained herein shall prohibit
Employee from (i) investing in the securities of a publicly held company so long
as Employee does not perform services for or otherwise assist such company in
the conduct of its business, or (ii) performing services for a person or entity
that competes with the Business so long as Employee's own services do not
compete with the Business, whether directly or indirectly. Notwithstanding the
foregoing, if the Employer fails to pay Employee any amount required by Section
7.3 or Section 7.4, as applicable, and such payment remains due for a period of
three (3) months, Employee may engage in Prohibited Competition; provided, that,
if Employee engages in such Prohibited Competition, Employer shall have no
obligation to pay Employee the severance payments set forth in Section 7.3(a) or
Section 7.4(a), as applicable, from and after the date Employee commences the
Prohibited Competition.
e) During the Employment Term, Employee shall not, directly or
indirectly, undertake planning for or organization of any business activity
competitive with Employer's Business, or combine or conspire with other
employees or representatives of Employer for the purpose of organizing any
activity competitive with the Business.
f) Employee agrees that during the Employment Term and for one
(1) year thereafter, he will not directly or indirectly, or by action in concert
with others, induce or influence (or seek to induce or influence) any person who
is engaged (as an employee, agent, independent contractor, or otherwise) by
Employer to terminate his or her employment or engagement with Employer.
4
<PAGE> 5
g) Covenants of this Section 2.3 shall be construed as
separate covenants covering their subject matter in each of the separate
counties and states in the United States in which Employer transacts its
business. To the extent that any covenant shall be judicially unenforceable in
any one or more of said counties or states, said covenant shall not be affected
with respect to each other county and state; each covenant with respect to each
county and state being construed as severable and independent.
h) Employee hereby covenants and represents that he will not
at any time during the Employment Term, in any fashion, form or manner, directly
or indirectly, use or divulge, disclose or communicate to Employer or any
independent contractors, representatives, or other agents of Employer, any
confidential information belonging to others. Employee hereby represents that to
the best of Employee's knowledge, the performance of Employee's duties with
Employer will not require the disclosure of any such confidential information.
Employee covenants and agrees that in the event the loyal and complete
performance of his duties hereunder would, in his opinion, require disclosure of
any such confidential information, Employee shall immediately report such belief
in writing to Employer. Employee represents and warrants that Employee is free
to enter into this Agreement and to perform each of the terms and covenants of
it.
Section 2.4. Inventions And Original Works.
a) Employee agrees that he will promptly make full written
disclosure to Employer, will hold in trust for the sole right and benefit of
Employer, and hereby assigns to Employer, all of his right, title and interest
in and to any and all inventions (and patent rights with respect thereto),
original works of authorship (including all copyrights with respect thereto),
developments, discoveries, computer software, operating methods, improvements or
trade secrets which Employee may solely or jointly conceive or develop or reduce
to practice, or cause to be conceived or developed or reduced to practice,
during the course of performing his duties under this Agreement.
b) Employee acknowledges that all original works of authorship
which are made by him (solely or jointly with others) within the scope of his
duties under this Agreement and which are protected by copyrights are "works
made for hire," as that term is defined in the United States Copyright Act (17
U.S.C.A., Section 101, et seq.) and that Employee is an employee as defined
under that Act. Employee further agrees from time to time to execute written
transfers to Employer of ownership of specific original works of authorship (and
all copyrights therein) made by Employee (solely or jointly with others) which
may, despite the preceding sentence, be deemed by a court of law not to be
"works made for hire" in such form as is acceptable to Employer in its
reasonable discretion.
(c) Sections 2.4(a) and (b) shall not apply, however, to
inventions, original works of authorship, developments, discoveries, computer
software, operating methods, improvements or trade secrets which are outside the
scope of the Business, which do not create a conflict of interest with Employer,
and which do not materially interfere with the services required under this
Agreement.
5
<PAGE> 6
Section 2.5. Maintenance of Records.
Employee agrees to use commercially reasonable efforts to keep and
maintain adequate and current written records of all inventions, original works
of authorship, and trade secrets developed or made by him (solely or jointly
with others) during the Employment Term. The records will be in the form of
notes, sketches, drawings and other formats that may be specified by Employer.
The records will be available to and remain the sole property of Employer at all
times.
Section 2.6. Obtaining Letters Patent and Copyright Registration.
a) Employee agrees to assist Employer to obtain United States or
foreign letters patent, and copyright registrations (as well as any transfers of
ownership thereof) covering inventions and original works of authorship assigned
hereunder to Employer. Such obligation shall continue beyond the termination of
this Agreement, but Employer shall compensate Employee at a reasonable rate no
less than the Employee's then current salary, whether with Employer or another
entity for time actually spent by Employee at Employer's request on such
assistance after such termination.
b) If Employer is unable for any reason whatsoever, including
Employee's mental or physical incapacity, to secure Employee's signature to
apply for or to pursue any application for any United States or foreign letters
patent or copyright registrations (or any document transferring ownership
thereof) covering inventions or original works of authorship assigned to
Employer under this Agreement, Employee hereby irrevocably designates and
appoints Employer and its duly authorized officers and agents as Employee's
agent and attorney-in-fact to act for and in his behalf and stead to execute and
file any such applications and documents and to do all other lawfully permitted
acts to further the prosecution and issuance of letters, patent or copyright
registrations or transfers thereof with the same legal force and effect as if
executed by Employee. This appointment is coupled with an interest in and to the
inventions and works of authorship and shall survive Employee's death or
disability. Employee hereby waives and quitclaims to Employer any and all claims
(past and present) of any nature whatsoever which Employee now or may hereafter
have for infringement of any patents or copyrights resulting from or relating to
an such application for letters patent or copyright registrations assigned
hereunder to Employer.
ARTICLE 3.
OBLIGATIONS OF EMPLOYER
Section 3.1. General Description.
Employer shall provide Employee with the compensation, incentives and
benefits specified elsewhere in this Agreement.
6
<PAGE> 7
ARTICLE 4.
COMPENSATION OF EMPLOYEE
Section 4.1. Annual Salary.
a) As compensation for his services hereunder, Employee shall
be paid a salary at the rate of $200,000 per year (the "Base Salary") from May
1, 1999. The Base Salary shall be due and payable in equal installments, not
less frequently than twice monthly.
b) Employee shall receive additional increases in Base Salary
during the term of this Agreement as may be determined by Employer in its sole
discretion from time to time, but Employer shall not decrease the Base Salary
set forth in Section 4.1(a) except with Employee's consent.
c) Not later than June 21, 1999, Employer shall grant
Employee, effective as of May 1, 1999, options to purchase an aggregate of
639,159 shares of Common Stock, par value $.01 per share, of Employer
(collectively, the "Options") pursuant to Employer's 1999 Stock Plan (the
"Plan"). An agreement between the Employer and Employee granting the Options
(the "Option Agreement") shall provide the following terms; provided, that to
the extent the terms set forth herein conflict with the terms of the Option
Agreement, the terms herein shall prevail: The exercise price for the Options
shall be the fair market value of the Common Stock on the date of grant. The
Options shall have a ten-year term and shall be immediately exercisable. The
shares purchased under the Options (the "Option Shares") shall be subject to
repurchase by the Employer at the exercise price; provided, however, that the
repurchase right of the Employer shall expire in installments over a four-year
period as follows: (i) with respect to the first 25% of the shares of Common
Stock subject to the Options, the Option Shares shall be released from the
repurchase right quarterly in equal installments during the one-year period
commencing on the date of grant and ending on the first anniversary of the date
of grant and (ii) with respect to the remaining 75% of the shares of Common
Stock subject to the Options, the Option Shares shall be released from the
repurchase right monthly in equal installments for the remaining thirty-six
months thereafter.
d) During the Employment Term, in addition to the Base Salary
set forth in Section 4.1(a), the Employee shall be eligible to receive a
performance based cash bonus with a target rate of 50% of the Base Salary per
annum for each fiscal year in the Employment Term. The amount of the bonus
payment payable to the Employee under this Section 4.1(d), if any, shall be
determined by the Compensation Committee of the Board of Directors of Employer
in a manner consistent with the bonus determinations applicable to the other
executive and senior management employees of Employer.
e) Subject to approval of the agreement by the Employer's
stockholders, the Employee shall be eligible to participate in a Management
Incentive Agreement, substantially in the form attached hereto as Exhibit A.
7
<PAGE> 8
Section 4.2. Tax Withholding.
Employer shall have the right to deduct or withhold from the
compensation due to Employee hereunder any and all sums required for federal
income and social security taxes and all state or local taxes now applicable or
that may be enacted and become applicable in the future.
ARTICLE 5.
EMPLOYEE BENEFITS
Section 5.1. Annual Vacation.
From the date hereof until the first anniversary of Employee's
employment with Employer, Employee shall accrue paid vacation in equal
installments on a monthly basis up to a maximum of three (3) weeks of paid
vacation for such year. Thereafter, Employee shall accrue paid vacation in equal
installments on a monthly basis for each year in the Employment Term up to a
maximum of four (4) weeks of paid vacation for each such year. Notwithstanding
the foregoing, if in any such year, the full number of vacation days are not
used by the Employee, such unused vacation days will not accrue to the next
year. Employee shall not be entitled to receive pay instead of unused vacation,
except upon termination of employment. Employee may be absent from his
employment for vacation for periods in excess of five (5) consecutive days only
at such times as are approved by Employer.
Section 5.2. Benefits.
Employee shall be eligible to participate in any and all benefit plans
provided by Employer to all employees generally, should Employee elect to
participate in any such plans.
Section 5.3. Business Expenses.
Employer shall reimburse Employee for all appropriate expenses for
travel and entertainment by Employee for legitimate business purposes provided
that Employee furnishes to Employer adequate records and documentary evidence
for the substantiation of each such expenditure.
ARTICLE 6.
TERMINATION OF EMPLOYMENT
Section 6.1. Termination.
Employee's employment hereunder may be terminated by Employee or
Employer as herein provided, without further obligation or liability, except as
expressly provided herein.
8
<PAGE> 9
Section 6.2. Resignation, Death or Disability.
Employee's employment hereunder shall be terminated by Employee's
resignation, death, or his inability to perform his duties under this Agreement
on a full-time basis, for a continuous period of ninety (90) days or more or for
an aggregate of ninety (90) days within any period of one hundred eighty (180)
days, because of a physical or mental illness as confirmed by a physician chosen
by Employer and reasonably acceptable to Employee ("Disability").
Section 6.3. Termination For Cause.
a) A termination for Cause (as defined below) shall not take
effect unless the provisions of this Section 6.3(a) are complied with. The
Employee shall be given written notice by the Board of Directors of Employer of
the Employer's intention to terminate his employment with Employer for Cause,
such notice (A) to state in reasonable detail the particular act or acts or
failure or failures to act that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given within three (3) months of
the Board of Directors of Employer learning of such act or acts or failure or
failures to act. The Employee shall have 30 days after the date that such
written notice has been given to the Employee in which to cure such conduct, to
the extent such cure is possible. If he fails to cure such conduct, the Employee
shall then be entitled to a hearing before the Board of Directors (provided,
however, that if the Employee is a member of the Board of Directors at such
time, the Employee shall abstain from such hearing). Such hearing shall be held
within 45 days of such notice to the Employee, provided he requests such hearing
within 10 days of the written notice from the Board of the intention to
terminate him for Cause. If, within five (5) days following such hearing, the
Employee is furnished written notice by the Board confirming that, in its
judgment (with the Employee abstaining from any such vote), grounds for Cause on
the basis of the original notice exist, he shall thereupon be terminated for
Cause.
b) Employee's employment hereunder may be terminated by
Employer at any time for Cause. "Cause" shall mean:
(i) Employee has engaged in willful and material
misconduct in connection with his employment, including willful and material
failure to perform his duties as an officer or employee of Employer;
(ii) Employee has been convicted of or has pleaded
guilty or nolo contendere to a felony other than involving a traffic related
infraction that materially adversely affects the Employee's ability to perform
under this Agreement;
(iii) Employee has committed fraud, misappropriation
of funds or embezzlement, as found by a court of competent jurisdiction,
involving the assets of the Employer, its customers, suppliers or affiliates; or
(iv) Employee's use of narcotics, liquor or illicit
drugs has had a detrimental effect on the performance of his employment
responsibilities, as determined by the board of directors of Employer;
9
<PAGE> 10
Section 6.4. Termination Without Cause.
Employee's employment hereunder may be terminated by the Board of
Directors of Employer at any time without Cause upon sixty (60) days' notice for
any reason, subject to the payment of any amounts required by Section 7.3 or
Section 7.4, as applicable.
Section 6.5. Expiration.
Employee's employment hereunder shall be terminated upon expiration of
the Employment Term as provided in Sections 1.1 and 1.2.
Section 6.6. Notice of Termination.
Any termination of Employee's employment by Employer or by Employee
(other than termination by reason of death) shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall include the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
Section 6.7. Date of Termination.
The "Date of Termination" shall be:
a) if the Employee's employment is terminated by his death,
the date of his death;
b) if the Employee's employment is terminated by his
retirement or resignation, the date of his retirement or resignation;
c) if the Employee's employment is terminated by reason of
Employee's Disability, thirty (30) days after Notice of Termination is given
(provided that Employee is unable to perform his duties on a full-time basis
during such thirty (30) day period);
d) if the Employee's employment is terminated by Employer for
Cause or without Cause, the date the Notice of Termination is given or after if
so specified in such Notice of Termination.
e) If there is a Constructive Termination Without Cause
following a Change in Control, then the date the Employee gives notice thereof.
10
<PAGE> 11
ARTICLE 7.
PAYMENTS TO EMPLOYEE, UPON TERMINATION
Section 7.1. Death, Disability or Retirement.
In the event of Employee's retirement, death or Disability, all accrued
but unpaid salary and benefits generally available to Employee as of the Date of
Termination shall be payable to Employee or Employee's estate without reduction,
in accordance with the terms of any plan, contract, understanding or arrangement
forming the basis for such payment. In addition, Employee (or his
representative) shall be entitled to (i) such other payments as might arise from
any other plan, contract, understanding or arrangement between Employee and
Employer at the time of any such event, (ii) accrued and unpaid salary and
vacation through the date of termination, (iii) the pro rata portion of the
bonus to which the Employee would have been entitled pursuant to Section 4.1(d)
for the year in which such termination occurs and (iv) to exercise any Options
or warrants granted under the Plan (as defined below), to the extent otherwise
exercisable on the date of death, Disability or retirement, at any time within
the term of the Option or warrant.
Section 7.2. Termination For Cause or Resignation.
In the event Employee's employment with Employer is terminated by
Employer for Cause or Employee resigns, neither Employer nor any parent,
subsidiary or affiliate company of Employer shall have any obligation to
Employee under this Agreement or otherwise, except for accrued but unpaid salary
and vacation as of the Date of Termination or as otherwise may be expressly
required by law, no further Option Shares shall become Eligible Shares and all
unexercised Options shall terminate thirty (30) days following the Date of
Termination, at which time, such Options shall no longer be exercisable to any
extent whatsoever.
Section 7.3. Termination Without Cause Prior to a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of a termination of Employee's employment with Employer without Cause
or by Constructive Termination Without Cause (as defined below) at any time
prior to a Change in Control:
a) Employer shall pay to Employee, or in the event of
Employee's subsequent death, to Employee's surviving spouse, or if none, to
Employee's estate, as severance pay or liquidated damages, or both, a sum equal
to the greater of (i) the Base Salary Employee would have earned through the end
of the current term but for his early termination or (ii) the annual Base
Salary, as in effect immediately prior to such termination, which sum shall be
payable over a one-year period commencing on the Date of Termination in
conformity with Company's customary practices for executive compensation as such
practices may be modified from time to time and shall be subject to all
applicable federal, state and local withholding, payroll and other taxes.
b) Employee shall be entitled to any amounts earned, accrued,
owing or otherwise provided for, but not yet paid, under Article 4 or 5 above.
11
<PAGE> 12
c) All Option Shares and other Stock Rights (as defined in the
Plan), if any, granted pursuant to the Plan held by the Employee at the time of
such termination which have not yet become Eligible Shares (as defined in the
Option Agreement) at the time of such termination shall become Eligible Shares
for an additional number of shares of Common Stock equal to fifty percent (50%)
of the aggregate of number of shares of Common Stock which are not Eligible
Shares at the time of such termination. To the extent not already exercised,
such Options as may be required to fulfill the number of shares as determined in
the previous sentence shall remain exercisable until the expiration of the
original term of such option. In addition, any warrants (referred to as
"Purchases" in the Plan) granted to Employee under the Plan which are held by
the Employee at the time of such termination shall remain exercisable until the
expiration of the original term of such warrant. Notwithstanding the foregoing,
in the event of a Change in Control or public offering of the Employer's shares
within one hundred twenty (120) days of such termination, then (i) the remaining
fifty percent (50%) of the aggregate of number of shares of Common Stock which
were not Eligible Shares at the time of such termination shall become Eligible
Shares (and transferred by the Company back to the Employee for the repurchase
price if already repurchased) and (ii) as necessary to fulfill the preceding,
the Company shall extend the term of those Options which were not exercised at
the time of termination. Nothing contained herein shall be deemed to modify or
limit any options or warrants held by Employee that were not granted pursuant to
the Plan.
Section 7.4. Termination Without Cause Following a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of (i) a termination of Employee's employment with Employer without
Cause at any time following a Change in Control (as defined below) or (ii) a
Constructive Termination Without Cause (as defined below) at any time following
a Change in Control:
a) Employer shall pay to Employee, or in the event of
Employee's subsequent death, to Employee's surviving spouse, or if none, to
Employee's estate, as severance pay or liquidated damages, or both, a sum equal
to the greater of (i) the Base Salary Employee would have earned through the end
of the current term but for his early termination or (ii) the annual Base
Salary, as in effect immediately prior to such termination, which sum shall be
payable over a one-year period commencing on the date of such termination in
conformity with Company's customary practices for executive compensation as such
practices may be modified from time to time and shall be subject to all
applicable federal, state and local withholding, payroll and other taxes.
b) Employee shall be entitled to any amounts earned, accrued,
owing or otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and Stock Rights, if any, granted under
the Plan held by the Employee at the time of such termination which have not yet
become Eligible Shares at the time of such termination shall become Eligible
Shares whether or not exercised. To the extent not already exercised, such
Option Shares and warrants (referred to as Purchases by the Plan) shall remain
exercisable until the expiration of the original term of such Option or warrant.
Nothing contained
12
<PAGE> 13
herein shall be deemed to modify or limit any options or warrants held by
Employee that were not granted pursuant to the Plan.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Change in Control" shall mean the closing of (i) a sale by
the Employer of all or substantially all of its assets; (ii) the acquisition in
a single transaction, or a series of related transactions, of shares of capital
stock of the Employer representing at least a majority of the issued and
outstanding shares of capital stock of the Employer (measured on the basis of
voting power) by a person (as defined in Sections 3(a)(9) and 13(d) of the
Securities Exchange Act of 1934), or (iii) a merger or consolidation of the
Employer with or into another entity in a transaction where the shares of the
Employer's capital stock outstanding immediately prior to the closing of such
merger or consolidation represent or are converted into or exchanged for shares
that represent less than a majority of the shares of capital stock of the
resulting or surviving entity outstanding immediately after the closing of such
merger or consolidation. Notwithstanding the foregoing, the term "Change in
Control" shall exclude (1) the closing of the purchase and sale of Employer's
preferred stock and warrants pursuant to the terms of that certain Preferred
Stock and Warrant Purchase Agreement (the "Battery Purchase Agreement") to be
entered into by and among Employer, Battery Ventures V, L.P. and affiliated
entities and the other parties thereto, including without limitation the closing
of the issuance and sale of the Series A Shares or the Series B Shares (in each
case as defined in the Battery Purchase Agreement) and (2) the closing of the
acquisition of CheMatch, Inc. by Employer pursuant to the terms of that certain
Agreement and Plan of Reorganization and the related Plan of Merger, including
the issuance of shares of capital stock of Employer in connection therewith.
"Constructive Termination Without Cause" shall mean a
termination of the Employee's employment with the Employer at his initiative
following the occurrence, without the Employee's written consent, of one or more
of the following events (except in consequence of a prior termination):
(i) a reduction by at least ten percent (10%) of
Employee's then current Base Salary;
(ii) the termination or material reduction of any
employee benefit or perquisite enjoyed by the Employee which is otherwise
offered to similarly situated employees of the Employer generally (other than as
part of an across-the-board reduction applicable to all Employee officers of the
Employer);
(iii) a material diminution in the Employee's duties
or the assignment to the Employee of duties which are materially inconsistent
with such duties;
(iv) the relocation of the Employer's principal
office, or the Employee's own office location as assigned to him by the
Employer, to a location more than 50 miles from Houston, Texas; or
13
<PAGE> 14
(v) the failure of the Employer to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Employer within 60
days after the consummation of a Change in Control.
Section 7.5 Termination Upon Expiration.
Subject to other provisions in this Article 7 to the contrary, upon the
termination of Employee's employment hereunder pursuant to Section 6.5
(Expiration), Employer shall pay to Employee, or in the event of Employee's
subsequent death, to Employee's surviving spouse, or if none, to Employee's
estate, as severance pay or liquidated damages, or both, a sum equal to
seventy-five percent (75%) of the annual Base Salary, as in effect immediately
prior to such termination, which sum shall be payable over a nine-month period
commencing on the date of such termination in conformity with Company's
customary practices for executive compensation as such practices may be modified
from time to time and shall be subject to all applicable federal, state and
local withholding, payroll and other taxes.
Section 7.6 No Duty to Cover.
In connection with the payments made pursuant to Sections 7.3, 7.4 and
7.5 hereof, Employee shall have no duty to seek other employment or otherwise
attempt to cover his damages as a condition to receipt of such payments;
provided that, this Section shall not apply in the event Employee claims he is
entitled to any payment in excess of that provided for in Sections 7.3, 7.4 or
7.5, as applicable.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1. Indemnification.
a) Employer agrees that if the Employee is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of Employer or is or was
serving at the request of Employer as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such Proceeding is the Employee's alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Employee shall be indemnified and held harmless by Employer to the fullest
extent legally permitted or authorized by Employer's certificate of
incorporation or bylaws or, if greater, by the laws of the State of Delaware,
against all cost, expense, liability and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by the
Employee in connection therewith, and such indemnification shall continue as to
the Employee even if he has ceased to be a director, member, employee or agent
of Employer or other entity and shall inure to the benefit of the Employee's
heirs, executors and administrators. Employer shall advance to the Employee all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after
14
<PAGE> 15
receipt by Employer of a written request for such advance. Such request shall
include an undertaking by the Employee to repay the amount of such advance if it
shall ultimately be determined that he is not entitled to be indemnified against
such costs and expenses.
b) Neither the failure of Employer (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Employee under Section 8.1(a) above that indemnification
of the Employee is proper because he has met the applicable standard of conduct,
nor a determination by Employer (including its Board of Directors, independent
legal counsel or stockholders) that the Employee has not met such applicable
standard of conduct, shall create a presumption that the Employee has not met
the applicable standard of conduct.
c) The Company will maintain Directors and Officers Liability
Insurance in the amount of at least $5,000,000 (such amount of coverage which
will be reevaluated by the Directors of the Company following a public offering
of the Company's Common Stock).
Section 8.2. Notices.
Any notices to be given thereunder by either party to the other shall
be in writing and shall be to have been duly given on the date of delivery if
personally delivered or delivered electronically, with electronic verification,
to the persons identified below, or three days after mailing if mailed by
registered or certified, postage prepaid with return receipt requested addressed
as follows:
<TABLE>
<S> <C>
Employee: Carl D. McCutcheon
5390 Tilbury Drive
Houston, TX 77056
Employer: PetroChemNet Holdings, Inc.
1281 Main Street
Stamford, CT 06902
with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Andrew J. Merken, Esq.
</TABLE>
Each party may change its address by written notice in
accordance with this Section.
Section 8.3. Arbitration.
Any controversy, dispute or claim arising out of or in connection with
this Agreement, or
15
<PAGE> 16
the breach, termination or validity hereof, shall be settled by final and
binding arbitration to be conducted by an arbitration tribunal in Houston, Texas
pursuant to the rules of the American Arbitration Association. The arbitration
tribunal shall consist of three arbitrators. The party initiating arbitration
shall nominate one arbitrator in the request for arbitration and the other party
shall nominate a second in the answer thereto within thirty (30) days of receipt
of the request. The two arbitrators so named will then jointly appoint the third
arbitrator. If the answering party fails to nominate its arbitrator within the
thirty (30) day period, or if the arbitrators named by the parties fail to agree
on the third arbitrator within sixty (60) days, the office of the American
Arbitration Association in Houston, Texas shall make the necessary appointments
of such arbitrator(s). The decision or award of the arbitration tribunal (by a
majority determination, or if there is no majority, then by the determination of
the third arbitrator, if any) shall be final, and judgment upon such decision or
award may be entered in any competent court or application may be made to any
competent court for judicial acceptance of such decision or award and an order
of enforcement. In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of the State of Delaware shall govern.
Section 8.4. Attorneys' Fees and Costs.
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 that party may be entitled. This provision shall be
construed as applicable to the entire contract.
Section 8.5. Entire Agreement.
This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the subject matter
contained herein and contains all of the covenants and agreements between the
parties with respect to the subject matter hereof. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party, or one acting on behalf of any
party, which are not embodied herein, and that no other agreement, statement or
promise not contained in this Agreement shall be valid or binding on either
party.
Section 8.6. Governing Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware. Subject to the provisions of Section
8.3, any claims or legal actions by one party against the other arising out of
the relationship between the parties contemplated herein (whether or not arising
under this Agreement) shall be commenced and maintained in any state or federal
court located in such state, and both parties hereby submit to the jurisdiction
and venue of any such court.
Section 8.7. Modifications.
16
<PAGE> 17
Any modification of this Agreement will be effective only if it is in
writing, has been approved by the Board of Directors of Employer, and is signed
by the Employee and by a duly authorized officer of the Employer.
Section 8.8. Effect of Waiver.
The failure of either party to insist on strict compliance with any of
the terms, covenants or conditions of this Agreement by the other party shall
not be deemed a waiver or that term, covenant or condition, nor shall any waiver
or relinquishment of any right or power at any one time or times be deemed a
waiver or relinquishment of that right or power for all or any other times.
Section 8.9. Partial Invalidity.
If any provision in this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
Executed on this the 21st day of June, 1999 as an instrument under
seal.
EMPLOYER: EMPLOYEE:
PETROCHEMNET HOLDINGS, INC.
By: /s/ JOHN BOHN /s/ CARL D. MCCUTCHEON
------------------------------- ------------------------------------
Name: John Bohn Carl D. McCutcheon
Title: President
18
<PAGE> 1
EXHIBIT 10.5
[PETROCHEMNET HOLDINGS, INC. LETTERHEAD]
CONFIDENTIAL
September 6, 1999
Mr. Lawrance Wiley McAfee
11414 Dunbeath Drive
Houston, Texas 77024
Via Fax: 713-463-9688
Dear Larry:
I am pleased to offer you an exciting and rewarding employment opportunity with
PetroChemNet Holdings, Inc., a Delaware Corporation ("the Company"). We believe
that you will be a vital contributor to the continued growth and success of the
Company.
As we discussed, your position with the Company will be salaried (non-hourly),
with the title of Senior Vice President and Chief Financial Officer, reporting
to me. Your position will be located in Houston.
The following terms outline some essential points regarding this offer:
SERVICES: As Chief Financial Officer, you shall have overall responsibility for
management of the Company's financial affairs including accounting, corporate
finance, treasury, cash management, risk management, investor relations,
commercial and investment banking. Of course, travel may be required depending
upon the location of our investors and financial institutions.
COMPENSATION: The Company is pleased to provide you with the following initial
compensation package:
BASE SALARY: A monthly salary of $16,667.00, payable in accordance with the
Company's regular payroll interval, which is currently bi-weekly.
BONUS PROGRAM: In addition to your salary set forth above, you shall be
eligible to receive a performance based target cash bonus of 50% of
your salary, with an upside of 100% of base and a downside of 0% of
base, depending upon your performance.
IPO BONUS PROGRAM: In addition, you will be eligible to receive a target
bonus of up to 15% of the total bonus pool provided under the
Management Incentive Plan in the
<PAGE> 2
event the company successfully completes and IPO or sale, subject to
your performance.
STOCK OPTIONS PLAN:
STOCK OPTIONS: In partial consideration for your agreement to sign the
employee confidentiality, non-disclosure, assignment, and non-solicitation
agreement prior to commencing employment, you will receive options to purchase
106,526 of the Company's shares of the Company common stock at a price of $1.336
per share under the terms and conditions set forth in the Incentive Stock Option
and Stock Repurchase Agreement that is being executed simultaneously with this
Agreement and is hereby incorporated by reference into this letter, subject to
the Incentive Stock Option and Stock Repurchase Agreement which is subject to
approval by the Company's Board of Directors. The Company makes no
representations regarding the potential value of these options because as a
start-up company it is difficult to provide any estimates with regard to future
value. The options will have a four year vesting schedule with 25% vesting after
one year of service and each month thereafter l/36th of the remaining options
will vest. In the event of a change of control, if you do not receive the
position of CFO of the surviving parent company, you will vest in one-half of
the remaining unvested options.
The Stock Option Plan and the granting of any shares and exercise of any options
for shares and the obligations of the Company to sell and deliver shares and
options shall be subject to all applicable laws, rules, and regulations and to
such approvals by any governmental agencies as may be required. The Company does
not represent that such approvals have been or will be received. Any stock
options granted under the plan will be subject to the terms of the plan, a copy
of which will be provided upon request.
Also, in order to comply with applicable securities laws, the Company shall have
the right to:
a. require any shareholder/option holder to execute, as a condition of
the receipt of shares or exercise of an option, a letter evidencing the
shareholder/option holder's intent to acquire the shares for investment and
not with a view to the resale or distribution thereof;
b. place appropriate legends upon the certificates for the shares; and
c. take such other acts as it deems necessary in order to cause the
issuance of shares and optioned shares to comply with applicable provisions
of state and federal securities laws.
In furtherance of these requirements, and without limitation, no shares shall be
saleable or option shall be exercisable unless such shares and options shall be
registered under appropriate federal and state securities laws, or shall be
exempt therefrom, in the opinion of the Company upon advice of counsel to the
Company. Each share grant and option agreement shall contain adequate provisions
to assure that there will be no violation of such laws. This provision shall in
no way obligate the Company to undertake registration of shares or options
hereunder. Issue, transfer, or delivery of certificates for shares or options
may be delayed or terminated, at the discretion of the Company,
<PAGE> 3
until the Company is satisfied that the applicable requirements of the federal
and state securities laws have been met or compliance can easily occur without
the Company incurring material expense.
ADDITIONAL OPTIONS: You have requested an anti-dilution provision which would
restore your options to the original level upon subsequent financings. As you
know, this would require approval from unknown future investors and financial
institutions as well as the Board of Directors in the future. I agree to
recommend you for future option grants depending upon your performance in the
future but can not guarantee the level and timing of the actual grants since
this will depend upon your performance, future financings, and Board approval. I
intend to reward high performance through the issuance of future options grants.
PURCHASE OF COMPANY STOCK: You have expressed interest in potentially purchasing
approximately $100,000 of company stock in the next round of financing. We have
not finalized the plans which would enable this to occur. I agree to support
your efforts to purchase stock and to develop a broader based opportunity for
accredited management employees to purchase stock.
EMPLOYEE BENEFITS AND ORIENTATION: As an employee, you will be eligible to
participate in the Company's employee benefits plans as in effect from time to
time, including medical, dental, 401(k) or equivalent retirement plan, and sick
time. You also will receive four (4) weeks of vacation the first year that will
accrue at the rate of 1.67 days per month and then will be eligible for four (4)
weeks vacation for each year thereafter. On or shortly after your start date, a
new employee orientation will be scheduled to acquaint you with the Company's
policies and procedures, as well as Company-provided benefits as they may exist
from time to time. At that time, any required employee benefit documents,
including payroll information, will be provided for your completion. The Company
retains the right to alter, amend, substitute, or terminate any benefit plans
now in place or offered in the future. The Company is evaluating the
implementation of various benefits programs and anticipates implementing a range
of benefits programs consistent with the company's size.
IMPORTANT CONTINGENCIES TO OFFER:
This employment offer is also conditioned upon the following:
A) IMMIGRATION STATUS: Pursuant to the Immigration Reform Act of 1986, you
must present acceptable proof of identity and the legal right to work in
the United States on your first day of employment at the Company.
B) CONFIDENTIALITY, NON-DISCLOSURE, ASSIGNMENT, AND NON-SOLICITATION
AGREEMENT: You agree that all inventions and work product arising from
your employment with the Company will be the exclusive property of the
Company. You will be required to complete, sign, and return the enclosed
employee confidentiality, non-disclosure, assignment, and non-solicitation
agreement prior to commencing employment.
<PAGE> 4
C) OTHER: You represent that your employment with the Company will not
require you to violate any obligation to or confidence of any other person
or entity.
COMPANY POLICIES AND PROCEDURES: You agree to be bound by all Company employee
policies and procedures in effect from time to time. The Company may modify such
policies and procedures.
EMPLOYMENT AT WILL: Your employment relationship will be "at will," despite
anything to the contrary in this letter or any other communication from the
Company (including employee manuals). This means that you have the right to
terminate your employment with the Company at any time, and that the Company has
the right to terminate your employment at any time with or without cause or
reason. Nothing in this offer letter is a contract of employment for any
definite period of time or a guarantee for a continued specific job or
responsibilities. Further, any employee manual of the Company shall not change
the terms or conditions of your employment with the Company and shall not create
any contractual rights, including any contractual right to employment for a
definite period of time. The terms and conditions stated herein constitute the
entire offer of employment. Any promises, conditions, perquisites, or statements
made prior to this offer and not expressly stated within this offer of
employment, should not be considered binding upon the Company.
SEVERANCE: In the event the Company terminates your employment without Cause
within the first two years, you will be entitled to a severance payment of six
months of base salary.
CHOICE OF LAW: Your employment will be governed by Texas Law.
CONFIDENTIAL PROVISIONS: You agree to keep the provisions of this offer letter
in confidence and not to disclose its contents to any third party, except your
spouse or domestic partner, your legal counsel, and your financial/tax
accountant, subject to obtaining an obligation from them not to further disclose
such information.
COUNTER-PART EXECUTION: This Offer Letter may be executed in two or more
counter-parts, each which shall be deemed an original, but all of which together
shall constitute but one and the same instrument.
We sincerely look forward to your joining the PetroChemNet Holdings, Inc. team.
This offer is valid until 5:00 p.m. Houston Time on September 7, 1999, unless
extended by mutual agreement. Your anticipated start date would commence no
later than two weeks after your acceptance. You agree that this agreement can be
modified only by written agreement signed by both parties. If this offer
correctly sets forth your understanding and all of the above terms and
conditions are agreeable to you, please indicate your written acceptance below
and return the signed letter to me.
<PAGE> 5
Very truly yours,
/s/ CARL D. MCCUTCHEON
- ---------------------
Carl D. McCutcheon
President and Chief Executive Officer
PetroChemNet Holdings, Inc.
I have read and understand and agree with the terms of this offer letter.
Signature: /s/ LAWRANCE W. MCAFEE Date: September 7, 1999
Scheduled Start Date: September 20, 1999
<PAGE> 1
EXHIBIT 10.6
PETROCHEMNET HOLDINGS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 1st day of
June, 1999 by and between PetroChemNet Holdings, Inc., a Delaware corporation
(the "Employer"), and Fred B. Cook (the "Employee").
WITNESSETH:
WHEREAS, the Employer desires to employ the Employee and to enter into
an agreement embodying the terms of such employment; and
WHEREAS, the Employee desires to enter into this Agreement and to
accept such employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Employer and the Employee, intending to be
legally bound, hereby agree as follows:
ARTICLE 1.
TERM OF EMPLOYMENT
Section 1.1. Specified Period.
Employer hereby employs Employee, and Employee hereby accepts
employment with Employer for the period beginning on June 1, 1999 and ending on
May 31, 2001, subject to earlier termination as provided in Article 6.
Section 1.2. Automatic Renewal.
After May 31, 2001, this Agreement shall be renewed automatically for
succeeding terms of one year each, subject to earlier termination as provided in
Article 6, unless one party gives notice to the other at least ninety (90) days
prior to the expiration of any term of his or its intention not to renew.
Section 1.3. "Employment Term" Defined.
As used herein, the phrase "Employment Term" refers to the entire
period of employment of Employee by Employer hereunder, whether for the
period(s) provided above, or whether terminated earlier as hereinafter provided
or extended by mutual agreement between Employer and Employee.
<PAGE> 2
ARTICLE 2.
DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.1. General Duties.
Employee shall serve as Vice-President of Employer, initially in charge
of the CheMatch trading platform. In such capacity, Employee shall do and
perform all services, acts or things in accordance with the policies set by the
Board of Directors of Employer. Employee shall perform such services in Houston,
Texas, unless otherwise directed by Employer.
Section 2.2. Devotion to Employer's Business.
a) During the Employment Term, Employee shall devote his time
and attention to the business of Employer during normal business hours and for
such additional amounts of time as are customary in the performance of his
duties and responsibilities or as is further required by the Board of Directors
of Employer. However, the expenditure of reasonable amounts of time for
education, charitable or professional activities, service on the Board of
Directors in any corporation or other business entity, and/or management of
personal investments and business affairs shall not be deemed a breach of this
Agreement if those activities do not materially interfere with the services
required under this Agreement or create a conflict of interest with Employer.
Section 2.3. Confidential Information; Tangible Property; Competitive
Activities.
a) During the Employment Term and for a period of two years
thereafter, Employee shall hold in confidence and not use or disclose to any
person or entity without the express written authorization of Employer any
Confidential Information of Employer. For purposes of this Section 2.3,
"Employer" shall include all corporations and entities controlled by,
controlling or under common control with, Employer, and "control" shall mean
beneficial ownership of greater than fifty percent (50%) of the voting power of
the corporation or entity. Information and materials received in confidence from
third parties by Employee are included within the meaning of the phrase
"Confidential Information of Employer" as used in this Section. If any
Confidential Information of Employer described in this Section is sought by
legal process, Employee shall promptly notify Employer and will cooperate with
Employer in preserving its confidentiality in connection with any legal
proceeding.
b) The parties hereto hereby stipulate that the following
information and materials ("Confidential Information of Employer") is important,
material and has independent economic value (actual or potential) from not being
generally known to others who could obtain economic value from its disclosure or
use and constitutes confidential trade secrets that affect the successful
conduct of Employer's business and its goodwill and that any material breach of
any term of this Section 2.3 is a material breach of this Agreement:
(I) All software in any media used by the Employer
(other than publicly available information relating to off-the-shelf
software used by the Employer) and all components thereof, including
any and all proprietary routines and subroutines,
2
<PAGE> 3
communications protocols, interfaces and linkages, all computer code,
including all object code, all source code, all manuals and other
documentation relating thereto;
(II) The names, buying habits and practices of
Employer's existing customers or prospects;
(III) Employee's business, marketing, merchandising
and sales methods, plans, techniques and related data;
(IV) Employer's vendors and suppliers and the
contents of agreements with such vendors and suppliers including
discounts, payment terms and credit extended to Employer;
(V) Costs of services and materials;
(VI) The prices Employer obtains or has obtained or
for which it sells or has sold its products or services;
(VII) Manufacturing and sales costs; Employer's
proprietary manufacturing processes, information processes, and
technical plans;
(VIII) Compensation paid to employees of Employer or
other terms of employment;
(IX) Employer's past and projected sales volume,
profit, profit margins and other financial information concerning
Employer;
(X) Proposed new products or services;
(XI) Enhancements of existing products or services;
(XII) The existence of and contents of contracts and
licenses;
(XIII) Any additional proprietary or confidential
information or materials resulting from or part of any task assigned to
Employee or work performed by Employee, during the Employment Term; and
(XIV) Any additional information or materials deemed
by Employer to be confidential by marking or stamping "Confidential" or
similar words on the cover of such information or materials, by
advising Employee orally or in writing that certain information is
confidential or by generally treating such information in such a manner
that Employee should reasonably believe it to be deemed confidential by
Employer.
Employee's obligations under this Section 2.3 shall not apply
to (i) information which Employee can demonstrate is or has become generally
known other than through Employee's act in violation of this Agreement and (ii)
information which Employee can demonstrate was lawfully acquired by Employee
prior to employment from sources other than Employer.
3
<PAGE> 4
c) All manuals, reports, files, memoranda, models, samples,
tools, machinery, equipment, notes, books, computer hardware, computer software
(in both source and object code form), correspondence, drawings, data and other
written, graphical or electromagnetic records or documentation relating to any
of the products or services of Employer or containing Confidential Information
of Employer which Employee shall prepare, use, construct, observe, possess, or
control shall be and shall remain the sole property of Employer and shall be
returned to Employer immediately upon termination of employment, and Employee
further agrees to return to Employer promptly any such materials which turn up
in Employee's possession subsequent to his termination of employment.
d) Employee shall not (i) during the Employment Term and (ii)
for a one year period immediately following the termination of Employee's
employment with Employer for any reason, or no reason, directly or indirectly,
perform any services for any person or entity engaged in any business that
competes directly with the products and services provided or sold (whether
existing or under development) on the date of termination of Employee's
employment with the Employer, including without limitation, any person or entity
engaged in the business of spot market trading of petroleum-based chemical
products on an internet based trading platform, but excluding third party
services remarketed or resold by the Employer without the addition of
substantial value by the Employer (collectively, the "Business"); or, without
limiting the generality of the foregoing, be or become or agree to be or become,
interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, employee, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm, association, partnership, joint venture or other business entity that
competes directly with the Business (collectively, the "Prohibited
Competition"); provided, however, that nothing contained herein shall prohibit
Employee from (i) investing in the securities of a publicly held company so long
as Employee does not perform services for or otherwise assist such company in
the conduct of its business, or (ii) performing services for a person or entity
that competes with the Business so long as Employee's own services do not
compete with the Business, whether directly or indirectly. Notwithstanding the
foregoing, if the Employer fails to pay Employee any amount required by Section
7.3 or Section 7.4, as applicable, and such payment remains due for a period of
thirty (30) days, Employee may engage in Prohibited Competition. Because of the
difficulty of measuring economic losses as a result of the breach of the
covenants in this clause (d), and because of the immediate and irreparable
damage that would be caused for which they would have no other adequate remedy,
Employee agrees that, in the event of a breach by Employee of the provisions of
this clause (d), (x) the provisions of this clause (d) may be enforced against
Employee by injunctions and restraining orders without any requirement that such
matter be submitted to arbitration in accordance with the provisions of Section
8.3 of this Agreement, (y) in the event that Employee breaches the provisions of
this clause (d) following Employer's timely payment to Employee of the amounts
due Employee under this Agreement upon the occurrence of a termination of
Employee's employment, then Employee shall pay all reasonable costs and expenses
of Employer incurred in connection with seeking and enforcing any such
injunctions and restraining orders.
e) During the Employment Term, Employee shall not, directly or
indirectly, undertake planning for or organization of any business activity
competitive with Employer's
4
<PAGE> 5
Business, or combine or conspire with other employees or representatives of
Employer for the purpose of organizing any activity competitive with the
Business.
f) Employee agrees that during the Employment Term and for one
(1) year thereafter, he will not directly or indirectly, or by action in concert
with others, induce or influence (or seek to induce or influence) any person who
is engaged (as an employee, agent, independent contractor, or otherwise) by
Employer to terminate his or her employment or engagement with Employer.
g) Covenants of this Section 2.3 shall be construed as
separate covenants covering their subject matter in each of the separate
counties and states in the United States in which Employer transacts its
business. To the extent that any covenant shall be judicially unenforceable in
any one or more of said counties or states, said covenant shall not be affected
with respect to each other county and state; each covenant with respect to each
county and state being construed as severable and independent.
h) Employee hereby covenants and represents that he will not
at any time during the Employment Term, in any fashion, form or manner, directly
or indirectly, use or divulge, disclose or communicate to Employer or any
independent contractors, representatives, or other agents of Employer, any
confidential information belonging to others. Employee hereby represents that to
the best of Employee's knowledge, the performance of Employee's duties with
Employer will not require the disclosure of any such confidential information.
Employee covenants and agrees that in the event the loyal and complete
performance of his duties hereunder would, in his opinion, require disclosure of
any such confidential information, Employee shall immediately report such belief
in writing to Employer. Employee represents and warrants that Employee is free
to enter into this Agreement and to perform each of the terms and covenants of
it.
Section 2.4. Inventions And Original Works.
a) Employee agrees that he will promptly make full written
disclosure to Employer, will hold in trust for the sole right and benefit of
Employer, and hereby assigns to Employer, all of his right, title and interest
in and to any and all inventions (and patent rights with respect thereto),
original works of authorship (including all copyrights with respect thereto),
developments, discoveries, computer software, operating methods, improvements or
trade secrets which Employee may solely or jointly conceive or develop or reduce
to practice, or cause to be conceived or developed or reduced to practice,
during the course of performing his duties under this Agreement.
b) Employee acknowledges that all original works of authorship
which are made by him (solely or jointly with others) within the scope of his
duties under this Agreement and which are protected by copyrights are "works
made for hire," as that term is defined in the United States Copyright Act (17
U.S.C.A., Section 101, et seq.) and that Employee is an employee as defined
under that Act. Employee further agrees from time to time to execute written
transfers to Employer of ownership of specific original works of authorship (and
all copyrights therein) made by Employee (solely or jointly with others) which
may, despite the
5
<PAGE> 6
preceding sentence, be deemed by a court of law not to be "works made for hire"
in such form as is acceptable to Employer in its reasonable discretion.
(c) Sections 2.4(a) and (b) shall not apply, however, to
inventions, original works of authorship, developments, discoveries, computer
software, operating methods, improvements or trade secrets which are outside the
scope of the Business, which do not create a conflict of interest with Employer,
and which do not materially interfere with the services required under this
Agreement.
Section 2.5. Maintenance of Records.
Employee agrees to use commercially reasonable efforts to keep and
maintain adequate and current written records of all inventions, original works
of authorship, and trade secrets developed or made by him (solely or jointly
with others) during the Employment Term. The records will be in the form of
notes, sketches, drawings and other formats that may be specified by Employer.
The records will be available to and remain the sole property of Employer at all
times.
Section 2.6. Obtaining Letters Patent and Copyright Registration.
a) Employee agrees to assist Employer to obtain United States or
foreign letters patent, and copyright registrations (as well as any transfers of
ownership thereof) covering inventions and original works of authorship assigned
hereunder to Employer. Such obligation shall continue beyond the termination of
this Agreement, but Employer shall compensate Employee at a reasonable rate no
less than the Employee's then current salary, whether with Employer or another
entity for time actually spent by Employee at Employer's request on such
assistance after such termination.
b) If Employer is unable for any reason whatsoever, including
Employee's mental or physical incapacity, to secure Employee's signature to
apply for or to pursue any application for any United States or foreign letters
patent or copyright registrations (or any document transferring ownership
thereof) covering inventions or original works of authorship assigned to
Employer under this Agreement, Employee hereby irrevocably designates and
appoints Employer and its duly authorized officers and agents as Employee's
agent and attorney-in-fact to act for and in his behalf and stead to execute and
file any such applications and documents and to do all other lawfully permitted
acts to further the prosecution and issuance of letters, patent or copyright
registrations or transfers thereof with the same legal force and effect as if
executed by Employee. This appointment is coupled with an interest in and to the
inventions and works of authorship and shall survive Employee's death or
disability. Employee hereby waives and quitclaims to Employer any and all claims
(past and present) of any nature whatsoever which Employee now or may hereafter
have for infringement of any patents or copyrights resulting from or relating to
any such application for letters patent or copyright registrations assigned
hereunder to Employer.
6
<PAGE> 7
ARTICLE 3.
OBLIGATIONS OF EMPLOYER
Section 3.1. General Description.
Employer shall provide Employee with the compensation, incentives and
benefits specified elsewhere in this Agreement.
ARTICLE 4.
COMPENSATION OF EMPLOYEE
Section 4.1. Annual Salary.
a) As compensation for his services hereunder, Employee shall
be paid a salary at the rate of $140,000 per year (the "Base Salary") from June
1, 1999. The Base Salary shall be due and payable in equal installments, not
less frequently than twice monthly.
b) Employee shall receive additional increases in Base Salary
during the term of this Agreement as may be determined by Employer in its sole
discretion from time to time, but Employer shall not decrease the Base Salary
set forth in Section 4.1(a) except with Employee's consent.
c) Not later than June 21, 1999, Employer shall grant Employee
options to purchase an aggregate of 53,263 shares of Common Stock, par value
$.01 per share, of Employer (collectively, the "Options") pursuant to Employer's
1999 Stock Plan (the "Plan"). An agreement between the Employer and Employee
granting the Options (the "Option Agreement") shall provide the following terms;
provided, that to the extent the terms set forth herein conflict with the terms
of the Option Agreement, the terms herein shall prevail: The exercise price for
the Options shall be the fair market value of the Common Stock on the date of
grant. The Options shall have a ten-year term and shall be immediately
exercisable. The shares purchased under the Options (the "Option Shares") shall
be subject to repurchase by the Employer at the exercise price; provided,
however, that the repurchase right of the Employer shall expire in installments
over a four-year period as follows: (i) with respect to the first 25% of the
shares of Common Stock subject to the Options, the Option Shares shall be
released from the repurchase right quarterly in equal installments during the
one-year period commencing on the date of grant and ending on the first
anniversary of the date of grant and (ii) with respect to the remaining 75% of
the shares of Common Stock subject to the Options, the Option Shares shall be
released from the repurchase right monthly in equal installments for the
remaining thirty-six months thereafter.
d) During the Employment Term, in addition to the Base Salary
set forth in Section 4.1(a), the Employee shall be eligible to receive a
performance based cash bonus with a target rate of 50% of the Base Salary per
annum for each fiscal year in the Employment Term. The amount of the bonus
payment payable to the Employee under this Section 4.1(d), if any, shall be
determined by the Compensation Committee of the Board of Directors of Employer
in a
7
<PAGE> 8
manner consistent with the bonus determinations applicable to the other
executive and senior management employees of Employer.
Section 4.2. Tax Withholding.
Employer shall have the right to deduct or withhold from the
compensation due to Employee hereunder any and all sums required for federal
income and social security taxes and all state or local taxes now applicable or
that may be enacted and become applicable in the future.
ARTICLE 5.
EMPLOYEE BENEFITS
Section 5.1. Annual Vacation.
From the date hereof until the first anniversary of Employee's
employment with Employer, Employee shall accrue paid vacation in equal
installments on a monthly basis up to a maximum of three (3) weeks of paid
vacation for such year. Thereafter, Employee shall accrue paid vacation in equal
installments on a monthly basis for each year in the Employment Term up to a
maximum of four (4) weeks of paid vacation for each such year. Notwithstanding
the foregoing, if in any such year, the full number of vacation days are not
used by the Employee, then up to five (5) unused vacation days may accrue and be
carried over to the next subsequent year. Employee shall not be entitled to
receive pay instead of unused vacation, except upon termination of employment.
Employee may be absent from his employment for vacation for periods in excess of
five (5) consecutive days only at such times as are approved by Employer.
Section 5.2. Benefits.
Employee shall be eligible to participate in any and all benefit plans
provided by Employer to all employees generally, should Employee elect to
participate in any such plans.
Section 5.3. Business Expenses.
Employer shall reimburse Employee for all appropriate expenses for
travel and entertainment by Employee for legitimate business purposes provided
that Employee furnishes to Employer adequate records and documentary evidence
for the substantiation of each such expenditure.
ARTICLE 6.
TERMINATION OF EMPLOYMENT
Section 6.1. Termination.
Employee's employment hereunder may be terminated by Employee or
Employer as herein provided, without further obligation or liability, except as
expressly provided herein.
8
<PAGE> 9
Section 6.2. Resignation, Death or Disability.
Employee's employment hereunder shall be terminated by Employee's
resignation, death, or his inability to perform his duties under this Agreement
on a full-time basis, for a continuous period of ninety (90) days or more or for
an aggregate of ninety (90) days within any period of one hundred eighty (180)
days, because of a physical or mental illness as confirmed by a physician chosen
by Employer and reasonably acceptable to Employee ("Disability").
Section 6.3. Termination For Cause.
a) A termination for Cause (as defined below) shall not take
effect unless the provisions of this Section 6.3(a) are complied with. The
Employee shall be given written notice by the Board of Directors of Employer of
the Employer's intention to terminate his employment with Employer for Cause,
such notice (A) to state in reasonable detail the particular act or acts or
failure or failures to act that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given within three (3) months of
the Board of Directors of Employer learning of such act or acts or failure or
failures to act. The Employee shall have 30 days after the date that such
written notice has been given to the Employee in which to cure such conduct, to
the extent such cure is possible. If he fails to cure such conduct, the Employee
shall then be entitled to a hearing before the Board of Directors (provided,
however, that if the Employee is a member of the Board of Directors at such
time, the Employee shall abstain from such hearing). Such hearing shall be held
within 45 days of such notice to the Employee, provided he requests such hearing
within 10 days of the written notice from the Board of the intention to
terminate him for Cause. If, within five (5) days following such hearing, the
Employee is furnished written notice by the Board confirming that, in its
judgment (with the Employee abstaining from any such vote), grounds for Cause on
the basis of the original notice exist, he shall thereupon be terminated for
Cause.
b) Employee's employment hereunder may be terminated by
Employer at any time for Cause. "Cause" shall mean:
(i) Employee has engaged in willful and material
misconduct in connection with his employment, including willful and material
failure to perform his duties as an officer or employee of Employer;
(ii) Employee has been convicted of or has pleaded
guilty or nolo contendere to a felony other than involving a traffic related
infraction that materially adversely affects the Employee's ability to perform
under this Agreement;
(iii) Employee has committed fraud, misappropriation
of funds or embezzlement, as found by a court of competent jurisdiction,
involving the assets of the Employer, its customers, suppliers or affiliates; or
(iv) Employee's use of narcotics, liquor or illicit
drugs has had a detrimental effect on the performance of his employment
responsibilities, as determined by the board of directors of Employer;
Section 6.4. Termination Without Cause.
9
<PAGE> 10
Employee's employment hereunder may be terminated by the Board of
Directors of Employer at any time without Cause upon sixty (60) days' notice for
any reason, subject to the payment of any amounts required by Section 7.3 or
Section 7.4, as applicable.
Section 6.5. Expiration.
Employee's employment hereunder shall be terminated upon expiration of
the Employment Term as provided in Sections 1.1 and 1.2.
Section 6.6. Notice of Termination.
Any termination of Employee's employment by Employer or by Employee
(other than termination by reason of death) shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall include the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
Section 6.7. Date of Termination.
The "Date of Termination" shall be:
a) if the Employee's employment is terminated by his death,
the date of his death;
b) if the Employee's employment is terminated by his
retirement or resignation, the date of his retirement or resignation;
c) if the Employee's employment is terminated by reason of
Employee's Disability, thirty (30) days after Notice of Termination is given
(provided that Employee is unable to perform his duties on a full-time basis
during such thirty (30) day period);
d) if the Employee's employment is terminated by Employer for
Cause or without Cause, the date the Notice of Termination is given or after if
so specified in such Notice of Termination.
e) If there is a Constructive Termination Without Cause
following a Change in Control, then the date the Employee gives notice thereof.
ARTICLE 7.
PAYMENTS TO EMPLOYEE, UPON TERMINATION
Section 7.1. Death, Disability or Retirement.
In the event of Employee's retirement, death or Disability, all accrued
but unpaid salary and benefits generally available to Employee as of the Date of
Termination shall be payable to Employee or Employee's estate without reduction,
in accordance with the terms of any plan,
10
<PAGE> 11
contract, understanding or arrangement forming the basis for such payment. In
addition, Employee (or his representative) shall be entitled to (i) such other
payments as might arise from any other plan, contract, understanding or
arrangement between Employee and Employer at the time of any such event, (ii)
accrued and unpaid salary and vacation through the date of termination, (iii)
the pro rata portion of the bonus to which the Employee would have been entitled
pursuant to Section 4.1(d) for the year in which such termination occurs and
(iv) to exercise any Options or warrants granted under the Plan (as defined
below), to the extent otherwise exercisable on the date of death, Disability or
retirement, at any time within the term of the Option or warrant.
Section 7.2. Termination For Cause or Resignation.
In the event Employee's employment with Employer is terminated by
Employer for Cause or Employee resigns, neither Employer nor any parent,
subsidiary or affiliate company of Employer shall have any obligation to
Employee under this Agreement or otherwise, except for accrued but unpaid salary
and vacation as of the Date of Termination or as otherwise may be expressly
required by law, no further Option Shares shall become Eligible Shares and all
unexercised Options shall terminate thirty (30) days following the Date of
Termination, at which time, such Options shall no longer be exercisable to any
extent whatsoever.
Section 7.3. Termination Without Cause Prior to a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of a termination of Employee's employment with Employer without Cause
or by Constructive Termination Without Cause (as defined below) at any time
prior to a Change in Control:
a) Employer shall pay to Employee, or in the event of
Employee's subsequent death, to Employee's surviving spouse, or if none, to
Employee's estate, as severance pay or liquidated damages, or both, a sum equal
to the greater of (i) the Base Salary Employee would have earned through the end
of the current term but for his early termination or (ii) the annual Base
Salary, as in effect immediately prior to such termination, which sum shall be
payable in full in one lump sum immediately on the date of such termination and
shall be subject to all applicable federal, state and local withholding, payroll
and other taxes.
b) Employee shall be entitled to any amounts earned, accrued,
owing or otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and other Stock Rights (as defined in the
Plan), if any, granted pursuant to the Plan held by the Employee at the time of
such termination which have not yet become Eligible Shares (as defined in the
Option Agreement) at the time of such termination shall become Eligible Shares
for an additional number of shares of Common Stock equal to fifty percent (50%)
of the aggregate of number of shares of Common Stock which are not Eligible
Shares at the time of such termination. To the extent not already exercised,
such Options as may be required to fulfill the number of shares as determined in
the previous sentence shall remain exercisable until the expiration of the
original term of such option. In addition, any warrants (referred to as
"Purchases" in the Plan) granted to Employee under the Plan which are held by
the Employee at the time of such termination shall remain exercisable until the
expiration of the original
11
<PAGE> 12
term of such warrant. Notwithstanding the foregoing, in the event of a Change in
Control or public offering of the Employer's shares within one hundred twenty
(120) days of such termination, then (i) the remaining fifty percent (50%) of
the aggregate of number of shares of Common Stock which were not Eligible Shares
at the time of such termination shall become Eligible Shares (and transferred by
the Company back to the Employee for the repurchase price if already
repurchased) and (ii) as necessary to fulfill the preceding, the Company shall
extend the term of those Options which were not exercised at the time of
termination. Nothing contained herein shall be deemed to modify or limit any
options or warrants held by Employee that were not granted pursuant to the Plan.
Section 7.4. Termination Without Cause Following a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of (i) a termination of Employee's employment with Employer without
Cause at any time following a Change in Control (as defined below) or (ii) a
Constructive Termination Without Cause (as defined below) at any time following
a Change in Control:
a) Employer shall pay to Employee, or in the event of
Employee's subsequent death, to Employee's surviving spouse, or if none, to
Employee's estate, as severance pay or liquidated damages, or both, a sum equal
to the greater of (i) the Base Salary Employee would have earned through the end
of the current term but for his early termination or (ii) the annual Base
Salary, as in effect immediately prior to such termination, which sum shall be
payable in full in one lump sum immediately on the date of such termination and
shall be subject to all applicable federal, state and local withholding, payroll
and other taxes.
b) Employee shall be entitled to any amounts earned, accrued,
owing or otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and Stock Rights, if any, granted under
the Plan held by the Employee at the time of such termination which have not yet
become Eligible Shares at the time of such termination shall become Eligible
Shares whether or not exercised. To the extent not already exercised, such
Option Shares and warrants (referred to as Purchases by the Plan) shall remain
exercisable until the expiration of the original term of such Option or warrant.
Nothing contained herein shall be deemed to modify or limit any options or
warrants held by Employee that were not granted pursuant to the Plan.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Change in Control" shall mean the closing of (i) a sale by
the Employer of all or substantially all of its assets; (ii) the acquisition in
a single transaction, or a series of related transactions, of shares of capital
stock of the Employer representing at least a majority of the issued and
outstanding shares of capital stock of the Employer (measured on the basis of
voting power) by a person (as defined in Sections 3(a)(9) and 13(d) of the
Securities Exchange Act of 1934), or (iii) a merger or consolidation of the
Employer with or into another entity in a transaction where the shares of the
Employer's capital stock outstanding immediately prior to the closing of such
merger or consolidation represent or are converted into or exchanged for shares
12
<PAGE> 13
that represent less than a majority of the shares of capital stock of the
resulting or surviving entity outstanding immediately after the closing of such
merger or consolidation. Notwithstanding the foregoing, the term "Change in
Control" shall exclude (1) the closing of the purchase and sale of Employer's
preferred stock and warrants pursuant to the terms of that certain Preferred
Stock and Warrant Purchase Agreement (the "Battery Purchase Agreement") to be
entered into by and among Employer, Battery Ventures V, L.P. and affiliated
entities and the other parties thereto, including without limitation the closing
of the issuance and sale of the Series A Shares or the Series B Shares (in each
case as defined in the Battery Purchase Agreement) and (2) the closing of the
acquisition of CheMatch, Inc. by Employer pursuant to the terms of that certain
Agreement and Plan of Reorganization and the related Plan of Merger, including
the issuance of shares of capital stock of Employer in connection therewith.
"Constructive Termination Without Cause" shall mean a
termination of the Employee's employment with the Employer at his initiative
following the occurrence, without the Employee's written consent, of one or more
of the following events (except in consequence of a prior termination):
(i) a reduction by at least ten percent (10%) of
Employee's then current Base Salary;
(ii) the termination or material reduction of any
employee benefit or perquisite enjoyed by the Employee which is otherwise
offered to similarly situated employees of the Employer generally (other than as
part of an across-the-board reduction applicable to all Employee officers of the
Employer);
(iii) a material diminution in the Employee's duties
or the assignment to the Employee of duties which are materially inconsistent
with such duties;
(iv) the relocation of the Employer's principal
office, or the Employee's own office location as assigned to him by the
Employer, to a location more than 50 miles from Houston, Texas; or
(v) the failure of the Employer to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Employer within 60
days after the consummation of a Change in Control.
Section 7.5 Termination Upon Expiration.
Subject to other provisions in this Article 7 to the contrary, upon the
termination of Employee's employment hereunder pursuant to Section 6.5
(Expiration), Employer shall pay to Employee, or in the event of Employee's
subsequent death, to Employee's surviving spouse, or if none, to Employee's
estate, as severance pay or liquidated damages, or both, a sum equal to
seventy-five percent (75%) of the annual Base Salary, as in effect immediately
prior to such termination, which sum shall be payable in full in one lump sum
immediately on the date of such termination and shall be subject to all
applicable federal, state and local withholding, payroll and other taxes.
13
<PAGE> 14
Section 7.6 No Duty to Cover.
In connection with the payments made pursuant to Sections 7.3, 7.4 and
7.5 hereof, Employee shall have no duty to seek other employment or otherwise
attempt to cover his damages as a condition to receipt of such payments;
provided that, this Section shall not apply in the event Employee claims he is
entitled to any payment in excess of that provided for in Sections 7.3, 7.4 or
7.5, as applicable.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1. Indemnification.
a) Employer agrees that if the Employee is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of Employer or is or was
serving at the request of Employer as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such Proceeding is the Employee's alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Employee shall be indemnified and held harmless by Employer to the fullest
extent legally permitted or authorized by Employer's certificate of
incorporation or bylaws or, if greater, by the laws of the State of Delaware,
against all cost, expense, liability and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by the
Employee in connection therewith, and such indemnification shall continue as to
the Employee even if he has ceased to be a director, member, employee or agent
of Employer or other entity and shall inure to the benefit of the Employee's
heirs, executors and administrators. Employer shall advance to the Employee all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after receipt by Employer of a written request for such advance.
Such request shall include an undertaking by the Employee to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
b) Neither the failure of Employer (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Employee under Section 8.1(a) above that indemnification
of the Employee is proper because he has met the applicable standard of conduct,
nor a determination by Employer (including its Board of Directors, independent
legal counsel or stockholders) that the Employee has not met such applicable
standard of conduct, shall create a presumption that the Employee has not met
the applicable standard of conduct.
14
<PAGE> 15
c) The Company will maintain Directors and Officers Liability
Insurance in the amount of at least $5,000,000 (such amount of coverage which
will be reevaluated by the Directors of the Company following a public offering
of the Company's Common Stock).
Section 8.2. Notices.
Any notices to be given thereunder by either party to the other shall
be in writing and shall be to have been duly given on the date of delivery if
personally delivered or delivered electronically, with electronic verification,
to the persons identified below, or three days after mailing if mailed by
registered or certified, postage prepaid with return receipt requested addressed
as follows:
<TABLE>
<S> <C>
Employee: Fred B. Cook
5842 Cinnamon Creek
Houston, TX 77084
Employer: PetroChemNet, Inc.
1281 Main Street
Stamford, CT 06902
with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Andrew J. Merken, Esq.
</TABLE>
Each party may change its address by written notice in accordance with
this Section.
Section 8.3. Arbitration.
Any controversy, dispute or claim arising out of or in connection with
this Agreement, or the breach, termination or validity hereof, shall be settled
by final and binding arbitration to be conducted by an arbitration tribunal in
Houston, Texas pursuant to the rules of the American Arbitration Association;
provided, however, that any injunction or restraining order sought by Employer
as contemplated by the provisions of Section 2.3(d) of this Agreement shall not
be required to be submitted to arbitration. The arbitration tribunal shall
consist of three arbitrators. The party initiating arbitration shall nominate
one arbitrator in the request for arbitration and the other party shall nominate
a second in the answer thereto within thirty (30) days of receipt of the
request. The two arbitrators so named will then jointly appoint the third
arbitrator. If the answering party fails to nominate its arbitrator within the
thirty (30) day period, or if the arbitrators named by the parties fail to agree
on the third arbitrator within sixty (60) days, the office of the American
Arbitration Association in Houston, Texas shall make the necessary appointments
of such arbitrator(s). The decision or award of the arbitration tribunal (by a
majority determination, or if there is no majority, then by the determination of
the third arbitrator, if any) shall be final, and judgment upon such decision or
award may be entered in
15
<PAGE> 16
any competent court or application may be made to any competent court for
judicial acceptance of such decision or award and an order of enforcement. In
the event of any procedural matter not covered by the aforesaid rules, the
procedural law of the State of Delaware shall govern.
Section 8.4. Attorneys' Fees and Costs.
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 that party may be entitled. This provision shall be
construed as applicable to the entire contract.
Section 8.5. Entire Agreement.
This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the subject matter
contained herein and contains all of the covenants and agreements between the
parties with respect to the subject matter hereof. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party, or one acting on behalf of any
party, which are not embodied herein, and that no other agreement, statement or
promise not contained in this Agreement shall be valid or binding on either
party.
Section 8.6. Governing Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware. Subject to the provisions of Section
8.3, any claims or legal actions by one party against the other arising out of
the relationship between the parties contemplated herein (whether or not arising
under this Agreement) shall be commenced and maintained in any state or federal
court located in such state, and both parties hereby submit to the jurisdiction
and venue of any such court.
16
<PAGE> 17
Section 8.7. Modifications.
Any modification of this Agreement will be effective only if it is in
writing, has been approved by the Board of Directors of Employer, and is signed
by the Employee and by a duly authorized officer of the Employer.
Section 8.8. Effect of Waiver.
The failure of either party to insist on strict compliance with any of
the terms, covenants or conditions of this Agreement by the other party shall
not be deemed a waiver or that term, covenant or condition, nor shall any waiver
or relinquishment of any right or power at any one time or times be deemed a
waiver or relinquishment of that right or power for all or any other times.
Section 8.9. Partial Invalidity.
If any provision in this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
Executed as of this the 21st day of June, 1999 as a sealed instrument.
EMPLOYER: EMPLOYEE:
PETROCHEMNET HOLDINGS, INC.
By: /s/ JOHN A. BOHN /s/ FRED B. COOK
---------------------------------- ------------------------------------
Name: John A. Bohn Fred B. Cook
Title:
18
<PAGE> 1
EXHIBIT 10.7
PETROCHEMNET HOLDINGS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 1st day of
May, 1999 by and between PetroChemNet Holdings, Inc., a Delaware corporation
(the "Employer"), and John Bohn (the "Employee").
WITNESSETH:
WHEREAS, the Employer desires to employ the Employee and to enter into
an agreement embodying the terms of such employment; and
WHEREAS, the Employee desires to enter into this Agreement and to
accept such employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Employer and the Employee, intending to be
legally bound, hereby agree as follows:
ARTICLE 1.
TERM OF EMPLOYMENT
Section 1.1. Specified Period.
Employer hereby employs Employee, and Employee hereby accepts
employment with Employer for the period beginning on May 1, 1999 and ending on
April 30, 2001, subject to earlier termination as provided in Article 6.
Section 1.2. Automatic Renewal.
After April 30, 2001, this Agreement shall be renewed automatically for
succeeding terms of one year each, subject to earlier termination as provided in
Article 6, unless one party gives notice to the other at least ninety (90) days
prior to the expiration of any term of his or its intention not to renew.
Section 1.3. "Employment Term" Defined.
As used herein, the phrase "Employment Term" refers to the entire
period of employment of Employee by Employer hereunder, whether for the
period(s) provided above, or whether terminated earlier as hereinafter provided
or extended by mutual agreement between Employer and Employee.
<PAGE> 2
ARTICLE 2.
DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.1. General Duties.
Employee shall serve as Chairman of the Board of Employer. In such
capacity, Employee shall do and perform all services, acts or things in
accordance with the policies set by the Board of Directors of Employer. Employee
shall perform such services in Stamford, Connecticut, unless otherwise directed
by Employer.
Section 2.2. Devotion to Employer's Business.
a) During the Employment Term, Employee shall devote his time
and attention to the business of Employer during normal business hours and for
such additional amounts of time as are customary in the performance of his
duties and responsibilities or as is further required by the Board of Directors
of Employer. However, the expenditure of reasonable amounts of time for
education, charitable or professional activities, service on the Board of
Directors in any corporation or other business entity, and/or management of
personal investments and business affairs shall not be deemed a breach of this
Agreement if those activities do not materially interfere with the services
required under this Agreement or create a conflict of interest with Employer.
Section 2.3. Confidential Information; Tangible Property; Competitive
Activities.
a) During the Employment Term and for a period of two years
thereafter, Employee shall hold in confidence and not use or disclose to any
person or entity without the express written authorization of Employer any
Confidential Information of Employer. For purposes of this Section 2.3,
"Employer" shall include all corporations and entities controlled by,
controlling or under common control with, Employer, and "control" shall mean
beneficial ownership of greater than fifty percent (50%) of the voting power of
the corporation or entity. Information and materials received in confidence from
third parties by Employee are included within the meaning of the phrase
"Confidential Information of Employer" as used in this Section. If any
Confidential Information of Employer described in this Section is sought by
legal process, Employee shall promptly notify Employer and will cooperate with
Employer in preserving its confidentiality in connection with any legal
proceeding.
b) The parties hereto hereby stipulate that the following
information and materials ("Confidential Information of Employer") is important,
material and has independent economic value (actual or potential) from not being
generally known to others who could obtain economic value from its disclosure or
use and constitutes confidential trade secrets that affect the successful
conduct of Employer's business and its goodwill and that any material breach of
any term of this Section 2.3 is a material breach of this Agreement:
(I) All software in any media used by the Employer
(other than publicly available information relating to off-the-shelf
software used by the Employer) and all components thereof, including
any and all proprietary routines and subroutines,
2
<PAGE> 3
communications protocols, interfaces and linkages, all computer code,
including all object code, all source code, all manuals and other
documentation relating thereto;
(II) The names, buying habits and practices of
Employer's existing customers or prospects;
(III) Employee's business, marketing, merchandising
and sales methods, plans, techniques and related data;
(IV) Employer's vendors and suppliers and the
contents of agreements with such vendors and suppliers including
discounts, payment terms and credit extended to Employer;
(V) Costs of services and materials;
(VI) The prices Employer obtains or has obtained or
for which it sells or has sold its products or services;
(VII) Manufacturing and sales costs; Employer's
proprietary manufacturing processes, information processes, and
technical plans;
(VIII) Compensation paid to employees of Employer or
other terms of employment;
(IX) Employer's past and projected sales volume,
profit, profit margins and other financial information concerning
Employer;
(X) Proposed new products or services;
(XI) Enhancements of existing products or services;
(XII) The existence of and contents of contracts and
licenses;
(XIII) Any additional proprietary or confidential
information or materials resulting from or part of any task assigned to
Employee or work performed by Employee, during the Employment Term; and
(XIV) Any additional information or materials deemed
by Employer to be confidential by marking or stamping "Confidential" or
similar words on the cover of such information or materials, by
advising Employee orally or in writing that certain information is
confidential or by generally treating such information in such a manner
that Employee should reasonably believe it to be deemed confidential by
Employer.
Employee's obligations under this Section 2.3 shall not apply
to (i) information which Employee can demonstrate is or has become generally
known other than through Employee's act in violation of this Agreement and (ii)
information which Employee can demonstrate was lawfully acquired by Employee
prior to employment from sources other than Employer.
3
<PAGE> 4
c) All manuals, reports, files, memoranda, models, samples,
tools, machinery, equipment, notes, books, computer hardware, computer software
(in both source and object code form), correspondence, drawings, data and other
written, graphical or electromagnetic records or documentation relating to any
of the products or services of Employer or containing Confidential Information
of Employer which Employee shall prepare, use, construct, observe, possess, or
control shall be and shall remain the sole property of Employer and shall be
returned to Employer immediately upon termination of employment, and Employee
further agrees to return to Employer promptly any such materials which turn up
in Employee's possession subsequent to his termination of employment.
d) Employee shall not (i) during the Employment Term and (ii)
for a one year period immediately following the termination of Employee's
employment with Employer for any reason, or no reason, directly or indirectly,
perform any services for any person or entity engaged in any business that
competes directly with the products and services provided or sold (whether
existing or under development) on the date of termination of Employee's
employment with the Employer, including without limitation, any person or entity
engaged in the business of spot market trading of petroleum-based chemical
products on an internet based trading platform, but excluding third party
services remarketed or resold by the Employer without the addition of
substantial value by the Employer (collectively, the "Business"); or, without
limiting the generality of the foregoing, be or become or agree to be or become,
interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, employee, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm, association, partnership, joint venture or other business entity that
competes directly with the Business (collectively, the "Prohibited
Competition"); provided, however, that nothing contained herein shall prohibit
Employee from (i) investing in the securities of a publicly held company so long
as Employee does not perform services for or otherwise assist such company in
the conduct of its business, or (ii) performing services for a person or entity
that competes with the Business so long as Employee's own services do not
compete with the Business, whether directly or indirectly. Notwithstanding the
foregoing, if the Employer fails to pay Employee any amount required by Section
7.3 or Section 7.4, as applicable, and such payment remains due for a period of
three (3) months, Employee may engage in Prohibited Competition; provided, that,
if Employee engages in such Prohibited Competition, Employer shall have no
obligation to pay Employee the severance payments set forth in Section 7.3(a) or
Section 7.4(a), as applicable, from and after the date Employee commences the
Prohibited Competition.
e) During the Employment Term, Employee shall not, directly or
indirectly, undertake planning for or organization of any business activity
competitive with Employer's Business, or combine or conspire with other
employees or representatives of Employer for the purpose of organizing any
activity competitive with the Business.
f) Employee agrees that during the Employment Term and for one
(1) year thereafter, he will not directly or indirectly, or by action in concert
with others, induce or influence (or seek to induce or influence) any person who
is engaged (as an employee, agent, independent contractor, or otherwise) by
Employer to terminate his or her employment or engagement with Employer.
4
<PAGE> 5
g) Covenants of this Section 2.3 shall be construed as
separate covenants covering their subject matter in each of the separate
counties and states in the United States in which Employer transacts its
business. To the extent that any covenant shall be judicially unenforceable in
any one or more of said counties or states, said covenant shall not be affected
with respect to each other county and state; each covenant with respect to each
county and state being construed as severable and independent.
h) Employee hereby covenants and represents that he will not
at any time during the Employment Term, in any fashion, form or manner, directly
or indirectly, use or divulge, disclose or communicate to Employer or any
independent contractors, representatives, or other agents of Employer, any
confidential information belonging to others. Employee hereby represents that to
the best of Employee's knowledge, the performance of Employee's duties with
Employer will not require the disclosure of any such confidential information.
Employee covenants and agrees that in the event the loyal and complete
performance of his duties hereunder would, in his opinion, require disclosure of
any such confidential information, Employee shall immediately report such belief
in writing to Employer. Employee represents and warrants that Employee is free
to enter into this Agreement and to perform each of the terms and covenants of
it.
Section 2.4. Inventions And Original Works.
a) Employee agrees that he will promptly make full written
disclosure to Employer, will hold in trust for the sole right and benefit of
Employer, and hereby assigns to Employer, all of his right, title and interest
in and to any and all inventions (and patent rights with respect thereto),
original works of authorship (including all copyrights with respect thereto),
developments, discoveries, computer software, operating methods, improvements or
trade secrets which Employee may solely or jointly conceive or develop or reduce
to practice, or cause to be conceived or developed or reduced to practice,
during the course of performing his duties under this Agreement.
b) Employee acknowledges that all original works of authorship
which are made by him (solely or jointly with others) within the scope of his
duties under this Agreement and which are protected by copyrights are "works
made for hire," as that term is defined in the United States Copyright Act (17
U.S.C.A., Section 101, et seq.) and that Employee is an employee as defined
under that Act. Employee further agrees from time to time to execute written
transfers to Employer of ownership of specific original works of authorship (and
all copyrights therein) made by Employee (solely or jointly with others) which
may, despite the preceding sentence, be deemed by a court of law not to be
"works made for hire" in such form as is acceptable to Employer in its
reasonable discretion.
(c) Sections 2.4(a) and (b) shall not apply, however, to
inventions, original works of authorship, developments, discoveries, computer
software, operating methods, improvements or trade secrets which are outside the
scope of the Business, which do not create a conflict of interest with Employer,
and which do not materially interfere with the services required under this
Agreement.
5
<PAGE> 6
Section 2.5. Maintenance of Records.
Employee agrees to use commercially reasonable efforts to keep and
maintain adequate and current written records of all inventions, original works
of authorship, and trade secrets developed or made by him (solely or jointly
with others) during the Employment Term. The records will be in the form of
notes, sketches, drawings and other formats that may be specified by Employer.
The records will be available to and remain the sole property of Employer at all
times.
Section 2.6. Obtaining Letters Patent and Copyright Registration.
a) Employee agrees to assist Employer to obtain United States
or foreign letters patent, and copyright registrations (as well as any transfers
of ownership thereof) covering inventions and original works of authorship
assigned hereunder to Employer. Such obligation shall continue beyond the
termination of this Agreement, but Employer shall compensate Employee at a
reasonable rate no less than the Employee's then current salary, whether with
Employer or another entity for time actually spent by Employee at Employer's
request on such assistance after such termination.
b) If Employer is unable for any reason whatsoever, including
Employee's mental or physical incapacity, to secure Employee's signature to
apply for or to pursue any application for any United States or foreign letters
patent or copyright registrations (or any document transferring ownership
thereof) covering inventions or original works of authorship assigned to
Employer under this Agreement, Employee hereby irrevocably designates and
appoints Employer and its duly authorized officers and agents as Employee's
agent and attorney-in-fact to act for and in his behalf and stead to execute and
file any such applications and documents and to do all other lawfully permitted
acts to further the prosecution and issuance of letters, patent or copyright
registrations or transfers thereof with the same legal force and effect as if
executed by Employee. This appointment is coupled with an interest in and to the
inventions and works of authorship and shall survive Employee's death or
disability. Employee hereby waives and quitclaims to Employer any and all claims
(past and present) of any nature whatsoever which Employee now or may hereafter
have for infringement of any patents or copyrights resulting from or relating to
an such application for letters patent or copyright registrations assigned
hereunder to Employer.
ARTICLE 3.
OBLIGATIONS OF EMPLOYER
Section 3.1. General Description.
Employer shall provide Employee with the compensation, incentives and
benefits specified elsewhere in this Agreement.
6
<PAGE> 7
ARTICLE 4.
COMPENSATION OF EMPLOYEE
Section 4.1. Annual Salary.
a) As compensation for his services hereunder, Employee shall
be paid a salary at the rate of $ 175,000 per year (the "Base Salary") from May
1, 1999. The Base Salary shall be due and payable in equal installments, not
less frequently than twice monthly.
b) Employee shall receive additional increases in Base Salary
during the term of this Agreement as may be determined by Employer in its sole
discretion from time to time, but Employer shall not decrease the Base Salary
set forth in Section 4.1(a) except with Employee's consent.
c) Not later than June 21, 1999, Employer shall grant
Employee, effective as of May 1, 1999, options to purchase an aggregate of
266,316 shares of Common Stock, par value $.01 per share, of Employer
(collectively, the "Options") pursuant to Employer's 1999 Stock Plan (the
"Plan"). An agreement between the Employer and Employee granting the Options
(the "Option Agreement") shall provide the following terms; provided, that to
the extent the terms set forth herein conflict with the terms of the Option
Agreement, the terms herein shall prevail: The exercise price for the Options
shall be the fair market value of the Common Stock on the date of grant. The
Options shall have a ten-year term and shall be immediately exercisable. The
shares purchased under the Options (the "Option Shares") shall be subject to
repurchase by the Employer at the exercise price; provided, however, that the
repurchase right of the Employer shall expire in installments over a four-year
period as follows: (i) with respect to the first 25% of the shares of Common
Stock subject to the Options, the Option Shares shall be released from the
repurchase right quarterly in equal installments during the one-year period
commencing on the date of grant and ending on the first anniversary of the date
of grant and (ii) with respect to the remaining 75% of the shares of Common
Stock subject to the Options, the Option Shares shall be released from the
repurchase right monthly in equal installments for the remaining thirty-six
months thereafter.
d) During the Employment Term, in addition to the Base Salary
set forth in Section 4.1(a), the Employee shall be eligible to receive a
performance based cash bonus with a target rate of 50% of the Base Salary per
annum for each fiscal year in the Employment Term. The amount of the bonus
payment payable to the Employee under this Section 4.1(d), if any, shall be
determined by the Compensation Committee of the Board of Directors of Employer
in a manner consistent with the bonus determinations applicable to the other
executive and senior management employees of Employer.
e) Subject to approval of the agreement by the Employer's
stockholders, the Employee shall be eligible to participate in a Management
Incentive Agreement, substantially in the form attached hereto as Exhibit A.
7
<PAGE> 8
Section 4.2. Tax Withholding.
Employer shall have the right to deduct or withhold from the
compensation due to Employee hereunder any and all sums required for federal
income and social security taxes and all state or local taxes now applicable or
that may be enacted and become applicable in the future.
ARTICLE 5.
EMPLOYEE BENEFITS
Section 5.1. Annual Vacation.
From the date hereof until the first anniversary of Employee's
employment with Employer, Employee shall accrue paid vacation in equal
installments on a monthly basis up to a maximum of three (3) weeks of paid
vacation for such year. Thereafter, Employee shall accrue paid vacation in equal
installments on a monthly basis for each year in the Employment Term up to a
maximum of four (4) weeks of paid vacation for each such year. Notwithstanding
the foregoing, if in any such year, the full number of vacation days are not
used by the Employee, such unused vacation days will not accrue to the next
year. Employee shall not be entitled to receive pay instead of unused vacation,
except upon termination of employment. Employee may be absent from his
employment for vacation for periods in excess of five (5) consecutive days only
at such times as are approved by Employer.
Section 5.2. Benefits.
Employee shall be eligible to participate in any and all benefit plans
provided by Employer to all employees generally, should Employee elect to
participate in any such plans.
Section 5.3. Business Expenses.
Employer shall reimburse Employee for all appropriate expenses for
travel and entertainment by Employee for legitimate business purposes provided
that Employee furnishes to Employer adequate records and documentary evidence
for the substantiation of each such expenditure.
ARTICLE 6.
TERMINATION OF EMPLOYMENT
Section 6.1. Termination.
Employee's employment hereunder may be terminated by Employee or
Employer as herein provided, without further obligation or liability, except as
expressly provided herein.
8
<PAGE> 9
Section 6.2. Resignation, Death or Disability.
Employee's employment hereunder shall be terminated by Employee's
resignation, death, or his inability to perform his duties under this Agreement
on a full-time basis, for a continuous period of ninety (90) days or more or for
an aggregate of ninety (90) days within any period of one hundred eighty (180)
days, because of a physical or mental illness as confirmed by a physician chosen
by Employer and reasonably acceptable to Employee ("Disability").
Section 6.3. Termination For Cause.
a) A termination for Cause (as defined below) shall not take
effect unless the provisions of this Section 6.3(a) are complied with. The
Employee shall be given written notice by the Board of Directors of Employer of
the Employer's intention to terminate his employment with Employer for Cause,
such notice (A) to state in reasonable detail the particular act or acts or
failure or failures to act that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given within three (3) months of
the Board of Directors of Employer learning of such act or acts or failure or
failures to act. The Employee shall have 30 days after the date that such
written notice has been given to the Employee in which to cure such conduct, to
the extent such cure is possible. If he fails to cure such conduct, the Employee
shall then be entitled to a hearing before the Board of Directors (provided,
however, that if the Employee is a member of the Board of Directors at such
time, the Employee shall abstain from such hearing). Such hearing shall be held
within 45 days of such notice to the Employee, provided he requests such hearing
within 10 days of the written notice from the Board of the intention to
terminate him for Cause. If, within five (5) days following such hearing, the
Employee is furnished written notice by the Board confirming that, in its
judgment (with the Employee abstaining from any such vote), grounds for Cause on
the basis of the original notice exist, he shall thereupon be terminated for
Cause.
b) Employee's employment hereunder may be terminated by
Employer at any time for Cause. "Cause" shall mean:
(i) Employee has engaged in willful and material
misconduct in connection with his employment, including willful and material
failure to perform his duties as an officer or employee of Employer;
(ii) Employee has been convicted of or has pleaded
guilty or nolo contendere to a felony other than involving a traffic related
infraction that materially adversely affects the Employee's ability to perform
under this Agreement;
(iii) Employee has committed fraud, misappropriation
of funds or embezzlement, as found by a court of competent jurisdiction,
involving the assets of the Employer, its customers, suppliers or affiliates; or
(iv) Employee's use of narcotics, liquor or illicit
drugs has had a detrimental effect on the performance of his employment
responsibilities, as determined by the board of directors of Employer;
9
<PAGE> 10
Section 6.4. Termination Without Cause.
Employee's employment hereunder may be terminated by the Board of
Directors of Employer at any time without Cause upon sixty (60) days' notice for
any reason, subject to the payment of any amounts required by Section 7.3 or
Section 7.4, as applicable.
Section 6.5. Expiration.
Employee's employment hereunder shall be terminated upon expiration of
the Employment Term as provided in Sections 1.1 and 1.2.
Section 6.6. Notice of Termination.
Any termination of Employee's employment by Employer or by Employee
(other than termination by reason of death) shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall include the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
Section 6.7. Date of Termination.
The "Date of Termination" shall be:
a) if the Employee's employment is terminated by his death,
the date of his death;
b) if the Employee's employment is terminated by his
retirement or resignation, the date of his retirement or resignation;
c) if the Employee's employment is terminated by reason of
Employee's Disability, thirty (30) days after Notice of Termination is given
(provided that Employee is unable to perform his duties on a full-time basis
during such thirty (30) day period);
d) if the Employee's employment is terminated by Employer for
Cause or without Cause, the date the Notice of Termination is given or after if
so specified in such Notice of Termination.
e) If there is a Constructive Termination Without Cause
following a Change in Control, then the date the Employee gives notice thereof.
ARTICLE 7.
PAYMENTS TO EMPLOYEE, UPON TERMINATION
Section 7.1. Death, Disability or Retirement.
In the event of Employee's retirement, death or Disability, all accrued
but unpaid salary and benefits generally available to Employee as of the Date of
Termination shall be payable to Employee or Employee's estate without reduction,
in accordance with the terms of any plan,
10
<PAGE> 11
contract, understanding or arrangement forming the basis for such payment. In
addition, Employee (or his representative) shall be entitled to (i) such other
payments as might arise from any other plan, contract, understanding or
arrangement between Employee and Employer at the time of any such event, (ii)
accrued and unpaid salary and vacation through the date of termination, (iii)
the pro rata portion of the bonus to which the Employee would have been entitled
pursuant to Section 4.1(d) for the year in which such termination occurs and
(iv) to exercise any Options or warrants granted under the Plan (as defined
below), to the extent otherwise exercisable on the date of death, Disability or
retirement, at any time within the term of the Option or warrant.
Section 7.2. Termination For Cause or Resignation.
In the event Employee's employment with Employer is terminated by
Employer for Cause or Employee resigns, neither Employer nor any parent,
subsidiary or affiliate company of Employer shall have any obligation to
Employee under this Agreement or otherwise, except for accrued but unpaid salary
and vacation as of the Date of Termination or as otherwise may be expressly
required by law, no further Option Shares shall become Eligible Shares and all
unexercised Options shall terminate thirty (30) days following the Date of
Termination, at which time, such Options shall no longer be exercisable to any
extent whatsoever.
Section 7.3. Termination Without Cause Prior to a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of a termination of Employee's employment with Employer without Cause
or by Constructive Termination Without Cause (as defined below) at any time
prior to a Change in Control:
a) Employer shall pay to Employee, or in the event of
Employee's subsequent death, to Employee's surviving spouse, or if none, to
Employee's estate, as severance pay or liquidated damages, or both, a sum equal
to the greater of (i) the Base Salary Employee would have earned through the end
of the current term but for his early termination or (ii) the annual Base
Salary, as in effect immediately prior to such termination, which sum shall be
payable over a one-year period commencing on the Date of Termination in
conformity with Company's customary practices for executive compensation as such
practices may be modified from time to time and shall be subject to all
applicable federal, state and local withholding, payroll and other taxes.
b) Employee shall be entitled to any amounts earned, accrued,
owing or otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and other Stock Rights (as defined in the
Plan), if any, granted pursuant to the Plan held by the Employee at the time of
such termination which have not yet become Eligible Shares (as defined in the
Option Agreement) at the time of such termination shall become Eligible Shares
for an additional number of shares of Common Stock equal to fifty percent (50%)
of the aggregate of number of shares of Common Stock which are not Eligible
Shares at the time of such termination. To the extent not already exercised,
such Options as may be required to fulfill the number of shares as determined in
the previous sentence shall remain exercisable until the expiration of the
original term of such option. In addition, any warrants
11
<PAGE> 12
(referred to as "Purchases" in the Plan) granted to Employee under the Plan
which are held by the Employee at the time of such termination shall remain
exercisable until the expiration of the original term of such warrant.
Notwithstanding the foregoing, in the event of a Change in Control or public
offering of the Employer's shares within one hundred twenty (120) days of such
termination, then (i) the remaining fifty percent (50%) of the aggregate of
number of shares of Common Stock which were not Eligible Shares at the time of
such termination shall become Eligible Shares (and transferred by the Company
back to the Employee for the repurchase price if already repurchased) and (ii)
as necessary to fulfill the preceding, the Company shall extend the term of
those Options which were not exercised at the time of termination. Nothing
contained herein shall be deemed to modify or limit any options or warrants held
by Employee that were not granted pursuant to the Plan.
Section 7.4. Termination Without Cause Following a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of (i) a termination of Employee's employment with Employer without
Cause at any time following a Change in Control (as defined below) or (ii) a
Constructive Termination Without Cause (as defined below) at any time following
a Change in Control:
a) Employer shall pay to Employee, or in the event of
Employee's subsequent death, to Employee's surviving spouse, or if none, to
Employee's estate, as severance pay or liquidated damages, or both, a sum equal
to the greater of (i) the Base Salary Employee would have earned through the end
of the current term but for his early termination or (ii) the annual Base
Salary, as in effect immediately prior to such termination, which sum shall be
payable over a one-year period commencing on the date of such termination in
conformity with Company's customary practices for executive compensation as such
practices may be modified from time to time and shall be subject to all
applicable federal, state and local withholding, payroll and other taxes.
b) Employee shall be entitled to any amounts earned, accrued,
owing or otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and Stock Rights, if any, granted under
the Plan held by the Employee at the time of such termination which have not yet
become Eligible Shares at the time of such termination shall become Eligible
Shares whether or not exercised. To the extent not already exercised, such
Option Shares and warrants (referred to as Purchases by the Plan) shall remain
exercisable until the expiration of the original term of such Option or warrant.
Nothing contained herein shall be deemed to modify or limit any options or
warrants held by Employee that were not granted pursuant to the Plan.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Change in Control" shall mean the closing of (i) a sale by
the Employer of all or substantially all of its assets; (ii) the acquisition in
a single transaction, or a series of related transactions, of shares of capital
stock of the Employer representing at least a majority of the issued and
outstanding shares of capital stock of the Employer (measured on the basis of
voting
12
<PAGE> 13
power) by a person (as defined in Sections 3(a)(9) and 13(d) of the Securities
Exchange Act of 1934), or (iii) a merger or consolidation of the Employer with
or into another entity in a transaction where the shares of the Employer's
capital stock outstanding immediately prior to the closing of such merger or
consolidation represent or are converted into or exchanged for shares that
represent less than a majority of the shares of capital stock of the resulting
or surviving entity outstanding immediately after the closing of such merger or
consolidation. Notwithstanding the foregoing, the term "Change in Control" shall
exclude (1) the closing of the purchase and sale of Employer's preferred stock
and warrants pursuant to the terms of that certain Preferred Stock and Warrant
Purchase Agreement (the "Battery Purchase Agreement") to be entered into by and
among Employer, Battery Ventures V, L.P. and affiliated entities and the other
parties thereto, including without limitation the closing of the issuance and
sale of the Series A Shares or the Series B Shares (in each case as defined in
the Battery Purchase Agreement) and (2) the closing of the acquisition of
CheMatch, Inc. by Employer pursuant to the terms of that certain Agreement and
Plan of Reorganization and the related Plan of Merger, including the issuance of
shares of capital stock of Employer in connection therewith.
"Constructive Termination Without Cause" shall mean a
termination of the Employee's employment with the Employer at his initiative
following the occurrence, without the Employee's written consent, of one or more
of the following events (except in consequence of a prior termination):
(i) a reduction by at least ten percent (10%) of
Employee's then current Base Salary;
(ii) the termination or material reduction of any
employee benefit or perquisite enjoyed by the Employee which is otherwise
offered to similarly situated employees of the Employer generally (other than as
part of an across-the-board reduction applicable to all Employee officers of the
Employer);
(iii) a material diminution in the Employee's duties
or the assignment to the Employee of duties which are materially inconsistent
with such duties;
(iv) the relocation of the Employer's principal
office, or the Employee's own office location as assigned to him by the
Employer, to a location more than 50 miles from Stamford, Connecticut; or
(v) the failure of the Employer to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Employer within 60
days after the consummation of a Change in Control.
Section 7.5 Termination Upon Expiration.
Subject to other provisions in this Article 7 to the contrary, upon the
termination of Employee's employment hereunder pursuant to Section 6.5
(Expiration), Employer shall pay to Employee, or in the event of Employee's
subsequent death, to Employee's surviving spouse, or if none, to Employee's
estate, as severance pay or liquidated damages, or both, a sum equal to
13
<PAGE> 14
seventy-five percent (75%) of the annual Base Salary, as in effect immediately
prior to such termination, which sum shall be payable over a nine-month period
commencing on the date of such termination in conformity with Company's
customary practices for executive compensation as such practices may be modified
from time to time and shall be subject to all applicable federal, state and
local withholding, payroll and other taxes.
Section 7.6 No Duty to Cover.
In connection with the payments made pursuant to Sections 7.3, 7.4 and
7.5 hereof, Employee shall have no duty to seek other employment or otherwise
attempt to cover his damages as a condition to receipt of such payments;
provided that, this Section shall not apply in the event Employee claims he is
entitled to any payment in excess of that provided for in Sections 7.3, 7.4 or
7.5, as applicable.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1. Indemnification.
a) Employer agrees that if the Employee is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of Employer or is or was
serving at the request of Employer as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such Proceeding is the Employee's alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Employee shall be indemnified and held harmless by Employer to the fullest
extent legally permitted or authorized by Employer's certificate of
incorporation or bylaws or, if greater, by the laws of the State of Delaware,
against all cost, expense, liability and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by the
Employee in connection therewith, and such indemnification shall continue as to
the Employee even if he has ceased to be a director, member, employee or agent
of Employer or other entity and shall inure to the benefit of the Employee's
heirs, executors and administrators. Employer shall advance to the Employee all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after receipt by Employer of a written request for such advance.
Such request shall include an undertaking by the Employee to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
b) Neither the failure of Employer (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Employee under Section 8.1(a) above that indemnification
of the Employee is proper because he has met the applicable standard of conduct,
nor a determination by Employer (including its Board of Directors, independent
legal counsel or stockholders) that the Employee has not met such applicable
standard
14
<PAGE> 15
of conduct, shall create a presumption that the Employee has not met the
applicable standard of conduct.
c) The Company will maintain Directors and Officers Liability
Insurance in the amount of at least $5,000,000 (such amount of coverage which
will be reevaluated by the Directors of the Company following a public offering
of the Company's Common Stock).
Section 8.2. Notices.
Any notices to be given thereunder by either party to the other shall
be in writing and shall be to have been duly given on the date of delivery if
personally delivered or delivered electronically, with electronic verification,
to the persons identified below, or three days after mailing if mailed by
registered or certified, postage prepaid with return receipt requested addressed
as follows:
Employee: John Bohn
2 Tokeneke Beach Drive
Darien, CT 06820
Employer: PetroChemNet Holdings, Inc.
1281 Main Street
Stamford, CT 06902
with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Andrew J. Merken, Esq.
Each party may change its address by written notice in
accordance with this Section.
Section 8.3. Arbitration.
Any controversy, dispute or claim arising out of or in connection with
this Agreement, or the breach, termination or validity hereof, shall be settled
by final and binding arbitration to be conducted by an arbitration tribunal in
Stamford, Connecticut pursuant to the rules of the American Arbitration
Association. The arbitration tribunal shall consist of three arbitrators. The
party initiating arbitration shall nominate one arbitrator in the request for
arbitration and the other party shall nominate a second in the answer thereto
within thirty (30) days of receipt of the request. The two arbitrators so named
will then jointly appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the thirty (30) day period, or if the arbitrators
named by the parties fail to agree on the third arbitrator within sixty (60)
days, the office of the American Arbitration Association in Stamford,
Connecticut shall make the necessary appointments of such arbitrator(s). The
decision or award of the arbitration tribunal
15
<PAGE> 16
(by a majority determination, or if there is no majority, then by the
determination of the third arbitrator, if any) shall be final, and judgment upon
such decision or award may be entered in any competent court or application may
be made to any competent court for judicial acceptance of such decision or award
and an order of enforcement. In the event of any procedural matter not covered
by the aforesaid rules, the procedural law of the State of Delaware shall
govern.
Section 8.4. Attorneys' Fees and Costs.
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 that party may be entitled. This provision shall be
construed as applicable to the entire contract.
Section 8.5. Entire Agreement.
This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the subject matter
contained herein and contains all of the covenants and agreements between the
parties with respect to the subject matter hereof. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party, or one acting on behalf of any
party, which are not embodied herein, and that no other agreement, statement or
promise not contained in this Agreement shall be valid or binding on either
party.
Section 8.6. Governing Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware. Subject to the provisions of Section
8.3, any claims or legal actions by one party against the other arising out of
the relationship between the parties contemplated herein (whether or not arising
under this Agreement) shall be commenced and maintained in any state or federal
court located in such state, and both parties hereby submit to the jurisdiction
and venue of any such court.
Section 8.7. Modifications.
Any modification of this Agreement will be effective only if it is in
writing, has been approved by the Board of Directors of Employer, and is signed
by the Employee and by a duly authorized officer of the Employer.
Section 8.8. Effect of Waiver.
The failure of either party to insist on strict compliance with any of
the terms, covenants or conditions of this Agreement by the other party shall
not be deemed a waiver or that term, covenant or condition, nor shall any waiver
or relinquishment of any right or power at any one time or times be deemed a
waiver or relinquishment of that right or power for all or any other times.
16
<PAGE> 17
Section 8.9. Partial Invalidity.
If any provision in this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
Executed on this the 21st day of June, 1999 as an instrument under
seal.
EMPLOYER: EMPLOYEE:
PETROCHEMNET HOLDINGS, INC.
By: /s/ JOHN BOHN /s/ JOHN BOHN
--------------------------------- ------------------------------------
Name: John Bohn John Bohn
Title: President
18
<PAGE> 1
EXHIBIT 10.8
CONSULTANT AND RELEASE AGREEMENT
THIS CONSULTANT AND RELEASE AGREEMENT is made and entered into by and
between CheMatch.com, Inc. ("Company"), a Delaware corporation formerly named
PetroChemNet Holdings, Inc., and John Bohn ("Consultant"), to be effective the
26th day of January, 2000 (the "Effective Date") subject to Consultant's right
to revoke this Agreement within seven days following the execution of this
Agreement as specified in Section 7.2.
In consideration of the mutual covenants, promises and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company and Consultant agree as
follows:
1. CHANGE OF STATUS FROM EMPLOYEE TO CONTRACTOR:
1.1. As of the Effective Date, the relationship presently existing
between Company and Consultant is changed from an employment relationship to a
contractor relationship. With respect to all benefit plans and programs of
Company, Consultant's employment by Company shall be terminated and Consultant
shall no longer have any rights under any such benefit plan or program (other
than (a) as expressly provided for herein and (b) Consultant's right to receive
the vested benefits accrued thereunder as may be provided in such benefit plan
or program). As of the Effective Date, Consultant resigns as an officer,
director (including, without limitation, as Company's Chairman of the Board),
agent or representative of the Company and any of its subsidiaries and
affiliates in which Consultant holds office, is a director, or for whom
Consultant acts as an agent or representative. As of the Effective Date,
Consultant also resigns as a fiduciary and member of any and all committees
established with respect to any employee benefit plan maintained by Company or
any of its subsidiaries and affiliates. The resignations described in the two
preceding sentences shall occur automatically and without any further required
action by Consultant, Company or any other person.
1.2. Upon the payment of Consultant's base salary through January 31,
2000, Company shall have no further obligations to Consultant for any salary,
bonus, or other compensation of any type for services rendered by Consultant to
Company on or before such date. From and after the Effective Date, Company's
obligations to pay compensation to Consultant for services rendered shall be
governed exclusively by this Agreement.
2. EXTENT OF SERVICES: DUTIES OF CONSULTANT:
2.1. During the Term (as such term is defined in Section 8.1),
Consultant agrees to serve as a consultant of Company in accordance with the
provisions of this Article 2. During the Term, and subject to Consultant's
reasonable availability, Consultant shall provide such consulting and advisory
services as the Board of Directors of Company (the "Board") or the Chief
Executive Officer of Company (the "CEO") may reasonably request, including
assisting in such strategic and financial matters, acquisition strategy or other
projects as the Board or the CEO deems appropriate ("Consulting Services"). When
so requested, Consultant will consult with officers and employees of Company,
and others designated by the Board or the CEO, at reasonable times and places.
2.2. The Company shall reimburse Consultant for all reasonable
out-of-pocket expenses actually incurred by Consultant in performance of the
Consulting Services, provided that such
-Page 1-
<PAGE> 2
expenses are approved in advance by Company and that Consultant furnishes to
Company adequate records and documentary evidence for the substantiation of each
such expenditure. Consultant shall be provided with the use of an office in
Company's Connecticut office and reasonable administrative, technical and
communications support; provided that (a) such use of the office and support
relates primarily to the business of Company and is not disruptive of normal
business activities and (b) Company's obligations under this sentence shall end
on the earlier of December 31, 2000, or the date Company no longer maintains an
office in Connecticut.
2.3. During the Term, Consultant shall not engage, directly or
indirectly, in any other business, investment, or activity that is contrary to
the interests of Company or its subsidiaries or affiliates. Consultant agrees
that he shall not knowingly become involved in a conflict of interest with
Company or its subsidiaries or affiliates, or upon discovery thereof, allow such
a conflict to continue. Moreover, Consultant agrees that he shall disclose to or
discuss with Company's General Counsel any facts or circumstances which might
involve such a conflict of interest that has not been approved by the Board or
the CEO. Company and Consultant recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest." Moreover, Company and Consultant recognize there are many borderline
situations. In some instances, full disclosure of facts by the Consultant to
Company's General Counsel may be all that is necessary to enable Company to
protect its interests. In others, if no improper motivation appears to exist and
the interests of Company have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Company to
terminate the consulting relationship.
3. AMENDMENT TO CERTAIN EXISTING AGREEMENTS:
3.1. Company and Consultant have heretofore entered into (a) that
certain Incentive Stock Option and Stock Repurchase Agreement dated June 21,
1999 (the "June Option Agreement"), (b) that certain Nonstatutory Stock Option
and Stock Repurchase Agreement dated November 5, 1999 (the "November Option
Agreement"; the June Option Agreement and the November Option Agreement are
collectively referred to herein as the "Option Agreements"), and (c) that
certain letter agreement dated June 21, 1999, as amended on October 26, 1999, by
and among Company, Consultant, Karen Morgan, and Carl McCutcheon providing for
certain incentive payments upon a "fundamental change" of Company (the
"Incentive Payment Agreement"). Consultant has heretofore delivered to Company
two Secured Promissory Notes dated October 23, 1999, one in the original
principal amount of $50,000.00 and the other in the original principal amount of
$127,899.29, in connection with the partial exercise of the June Option
Agreement (collectively, the "Promissory Notes"). Effective as of the Effective
Date, the Promissory Notes, the Option Agreements, and the Incentive Payment
Agreement shall be and are hereby amended to the extent necessary as follows:
3.1.1. The "Payment Due Date" in each of the Promissory
Notes relating to the date Consultant ceases
employment with Company or a "Related Corporation"
shall be changed to January 26, 2001.
3.1.2 With respect to each of the Option Agreements, (a)
all of the "Option Shares" shall become "Eligible
Shares" on the Effective Date, (b) Consultant (or, in
the event of the death of Consultant, Consultant's
estate, personal representative or beneficiary to
whom the option has been assigned pursuant to section
10 thereof) may exercise the option in whole or in
part from time to time until June 20, 2009, and (c)
all of the "Option Shares" that Consultant acquires
upon exercise of the option shall be deemed to be
"Released Shares."
-Page 2-
<PAGE> 3
Consultant acknowledges that, from and after the
Effective Date, Consultant shall not be permitted to
exercise an option under the Option Agreements by
delivery of a promissory note and related pledge
agreement.
3.1.3 For purposes of the Incentive Payment Agreement only,
Consultant shall be deemed to be an employee of
Company until June 20, 2001.
4. COMPENSATION FOR FUTURE CONSULTING SERVICES:
4.1. In full compensation of the readiness and performance of the
Consulting Services to be performed hereunder, Company shall pay to Consultant a
consulting fee in the following sums: (a) $218,750.00, which sum shall be
payable in equal installments over a 15-month period commencing in February,
2000, in conformity with Employer's customary practices for executive
compensation as such practices may be modified from time to time; (b)
$87,500.00, which sum shall be payable in a lump sum on the date bonuses are
paid to executives and senior management employees with respect to Company's
fiscal year ending on December 31, 2000 (or payable on March 1, 2001, if not
paid prior to that date); and (c) $29,166.67, which sum shall be payable in a
lump sum on the date bonuses are paid to executives and senior management
employees with respect to Company's fiscal year ending on December 31, 2001(or
payable on March 1, 2002, if not paid prior to that date).
4.2. For each month during the period, if any, after the Effective Date
(but in no event beyond the expiration of the Term) that Consultant elects to
continue coverage for himself and any of his eligible dependents under Company's
group health plans pursuant to the continuation of coverage provisions contained
in Sections 601 through 608 of the Employee Retirement Income Security Act of
1974, as amended, Company shall pay to Consultant an amount equal to the
difference, if any, between (a) the monthly premium charged by Company generally
to its former executive employees for such continuation coverage under such
plans and (b) the monthly premium charged by Company generally to its active
executive employees for coverage under such plans.
4.3. Consultant shall pay all social security, federal income taxes,
unemployment insurance, worker's compensation insurance, pensions, annuities or
other liabilities or taxes incurred by or on behalf or for the benefit of
Consultant arising out of the performance by Consultant of his obligations under
this Agreement.
5. INDEPENDENT CONTRACTOR RELATIONSHIP:
5.1. Throughout the entire Term, Consultant shall be an independent
contractor with the full power and authority to select the means, methods and
manner of performing Consulting Services hereunder, however, Consultant shall
secure Company approval of the means, methods, and manner in which Company and
its subsidiaries and affiliates are represented. Consultant will in no way be
considered to be an agent, employee, or servant of Company or any of its
subsidiaries or affiliates. Consultant shall have no authority to bind Company
or any of its subsidiaries or affiliates in any capacity for any purpose. It is
not the purpose or intention of this Agreement or the parties to create, and the
same shall not be construed as creating, any partnership, partnership relation,
joint venture, agency, or employment relationship. Consultant shall be free to
pursue such other business or consulting interests which are not otherwise in
violation of Section 2.3 or Article 6, including full time employment,
directorships and investments of any kind. Consultant hereby agrees that he
shall not, during the Term, participate in Company's benefit plans and programs
for its employees.
-Page 3-
<PAGE> 4
6. ADDITIONAL DUTIES AND OBLIGATIONS OF CONSULTANT:
6.1. Consultant and Company have heretofore entered into that certain
Employment Agreement dated May 1, 1999 (the "Employment Agreement"). Consultant
hereby agrees that he shall continue to be subject to the provisions of sections
2.3, 2.4, 2.5, and 2.6 of the Employment Agreement as if the provisions of such
sections were set forth herein in full; provided, however, that solely for
purposes of applying such provisions, (a) Consultant's performance of Consulting
Services shall be equivalent to employment by Company and (b) the "Employment
Term" under the Employment Agreement shall be considered to end simultaneously
with the expiration of the Term.
6.2. Consultant shall refrain, both during the consulting relationship
and after the consulting relationship terminates, from publishing any oral or
written statements about Company, any of its subsidiaries or affiliates, or any
of such entities' officers, directors, employees, agents or representatives that
are slanderous, libelous, or defamatory; or that disclose private or
confidential information about Company or any of its subsidiaries or affiliates,
or any of such entities' business affairs, officers, directors, employees,
agents, or representatives; or that constitute an intrusion into the seclusion
or private lives of Company or any of its subsidiaries or affiliates, or any of
such entities' officers, directors, employees, agents, or representatives; or
that give rise to unreasonable publicity about the private lives of Company or
any of its subsidiaries or affiliates, or any of such entities' officers,
directors, employees, agents, or representatives; or that place Company or any
of its subsidiaries or affiliates, or any of such entities' officers, directors,
employees, agents, or representatives in a false light before the public; or
that constitute a misappropriation of the name or likeness of Company or any of
its subsidiaries or affiliates, or any of such entities' officers, directors,
employees, agents, or representatives. Consultant shall not use Company's name,
the name of any of Company's subsidiaries or affiliates, nor the name of any of
such entities' officers, directors, employees, agents or representatives, in any
press release, advertisement, or similar announcement without the prior consent
of the Board or the CEO; provided, however, that use of Company's name in a
format that is not widely disseminated, which is not inconsistent with any
public statement of Company and which relates solely to Consultant's personal
involvement with Company shall not require the prior consent of the Board or the
CEO. A violation or threatened violation of this prohibition may be enjoined by
the courts. The rights afforded Company under this provision are in addition to
any and all rights and remedies otherwise afforded by law.
6.3. Consultant shall not, either during the existence of the
consulting relationship or thereafter, use or appropriate, directly or
indirectly, for Consultant's own benefit or for the benefit of another, any of
the business opportunities concerning the subject matter of the consulting
relationship that were entrusted to Consultant by Company.
7. RELEASE:
7.1. The term "Released Subject Matters" means and includes any and all
activities relating or pertaining to Consultant's prior employment by Company or
services heretofore rendered by Consultant for Company or any of its
subsidiaries or affiliates prior to the Effective Date; the termination of such
prior employment; and/or any and all prior discussions, representations,
understandings, or agreements between, on the one hand, Company or its
subsidiaries or affiliates, and/or their agents, representatives, attorneys, or
contractors, and, on the other hand, Consultant or his agents or
representatives, regarding his employment by Company or its subsidiaries or
affiliates or services heretofore rendered to Company or its subsidiaries or
affiliates prior to the Effective Date.
-Page 4-
<PAGE> 5
The term "Released Subject Matters" includes but is not limited to (a) any
claims by Consultant under the Employment Agreement and (b) any claims under the
Age Discrimination in Employment Act, the Americans with Disabilities Act of
1990, the Family and Medical Leave Act of 1993, Title VII of the Civil Rights
Act of 1964, 42 U.S.C. Section 1981, and any other statutory, tort, or common
law cause of action (including, without limitation, any claim or cause of action
based on alleged discriminatory (whether age, sex or other type of
discrimination), retaliatory or illegal employment practices).
7.2. Consultant, on his behalf and on behalf of his representatives,
heirs, administrators, executors, and assigns, and on behalf of any other
persons or entities claiming by, through, or under Consultant, does hereby fully
release, acquit and forever discharge Company and its subsidiaries or
affiliates, and their respective employees, officers, directors, trustees,
committee-members, boards, members of such boards, chairmen of the boards,
contractors, consultants, agents, representatives, attorneys, successors, and
assigns (the "Released Entities"), from and against any and all rights,
benefits, payments, claims, demands, causes of action, suits, debts, accounts,
controversies, agreements, promises, damages, judgments, and/or liabilities
whatsoever, in law or equity, of any and every character, kind and nature
whatsoever, for personal injury, property damage or economic loss, whether known
or unknown, contingent or fixed, either in or arising out of the law of
contracts, torts, or under statutory law, arising out of, resulting from, or
based upon the Released Subject Matters. This release is to be broadly construed
and shall extend to and extinguish any and all claims, demands or causes of
action of every kind or nature whatsoever, known or unknown, suspected or
unsuspected, which Consultant has or hereafter can, shall, or may have, in
Consultant's own right or in a representative capacity, for, upon or by reason
of any matter, cause or thing whatsoever from the beginning of the world to the
Effective Date, including without limitation of the generality hereof, any past,
present or future claims, matters or causes of action that Consultant has or may
hereafter have arising out of, based upon, or in any way relating to any prior
actions or inactions with respect to any of the Released Subject Matters;
provided, however, that such release shall not affect any future obligation
which Company may have to Consultant under the terms of this Agreement.
Consultant acknowledges and agrees that all of the terms and conditions of 29
USC 626 pertaining to the waiver of his rights under the Age Discrimination in
Employment Act have been complied with, including that he has been given 21 days
to consider this Agreement and this release, that he was advised by Company to
consult an attorney and that he has in fact consulted an attorney prior to
executing this Agreement and this release, and that for a period of 7 days
following the execution of this Agreement, he may revoke this Agreement. If
Consultant does not within 7 days following the execution of this Agreement
provide Company with a written notice of revocation, Consultant shall no longer
have the right to revoke this Agreement.
7.3. It is expressly agreed that upon the Effective Date, no future
disputes between (a) any of Company or any of its subsidiaries or affiliates or
any of the Released Entities, and (b) Consultant, whether under this Agreement
or otherwise, shall in any way affect the enforceability of the release granted
above.
8. TERM AND TERMINATION:
8.1. The term of this Agreement (the "Term") shall extend from the
Effective Date until April 30, 2001.
8.2. The consulting relationship established by this Agreement shall
terminate automatically upon expiration of the Term. Upon termination of the
consulting relationship as a
-Page 5-
<PAGE> 6
result of expiration of the Term, Consultant shall be entitled to no further
payments under this Agreement except for the remaining payment described in
Section 4.1(c), which shall be paid as provided in such Section.
8.3. The consulting relationship established by this Agreement shall
terminate automatically upon Consultant's death. Upon termination of the
consulting relationship as a result of Consultant's death, Consultant's heirs,
administrators, or legatees shall be entitled under this Agreement to all of the
remaining unpaid amounts described in Section 4.1, which amounts shall continue
to be paid as provided in such Section.
8.4. Company shall have the right to terminate the consulting
relationship under this Agreement at any time prior to the expiration of the
Term for "cause" upon the determination by the Board that "cause" exists for the
termination of the consulting relationship. As used in this Section 8.4, the
term "cause" shall mean (a) Consultant has been convicted of a felony (which,
through lapse of time or otherwise, is not subject to appeal); (b) Consultant
has willfully engaged in conduct that Consultant knows or should know is
materially injurious to Company or any of its subsidiaries or affiliates, and/or
(c) Consultant's breach of Section 2.3 or Article 6 of this Agreement which
remains uncorrected for 30 days following written notice to Consultant by
Company of such breach. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the consulting
relationship by Company is delegated to the Board for determination. If
Consultant disagrees with the decision reached by the Board, the dispute will be
limited to whether the Board reached its decision in good faith. Upon
termination of the consulting relationship for cause, Consultant shall be
entitled to no further payments under Sections 4.1 and 4.2 of this Agreement.
8.5. In the event that Consultant obtains full time employment with
some third party or agrees to provide full time consulting services to some
third party [the term "full time" means at least thirty (30) hours per week],
Company shall have the right to terminate the consulting relationship under this
Agreement by providing a written notice of termination to Consultant. In the
event of termination of the consulting relationship by Company under this
Section, Consultant shall be entitled under this Agreement to all of the
remaining unpaid amounts of the consulting fee specified in Section 4.1 that
otherwise would have been due Consultant under the terms of this Agreement,
which shall continue to be paid as provided in such Section.
8.6. This consulting relationship may be terminated at any time for any
reason whatsoever by Consultant upon the giving of one month written notice.
Upon such termination of the consulting relationship by Consultant under this
Section, Consultant shall be entitled to no further payments under Sections 4.1
and 4.2 of this Agreement.
8.7. Consultant waives, and Company shall not be required to pay, any
severance or severance benefits, in connection with the termination of the
consulting relationship, whether from a Company sponsored severance plan or the
general assets of Company. The consideration and remuneration provided for under
this Agreement are in lieu of and take the place of any other severance pay or
severance benefit, which Consultant forfeits.
8.8. It is understood that the termination of this Agreement shall not
relieve Consultant of any continuing obligations imposed upon Consultant
hereunder, including, but not limited to the obligations specified in Article 6
above. Further, the provisions of Article 7 shall survive the termination of
this Agreement.
-Page 6-
<PAGE> 7
9. MISCELLANEOUS:
9.1. The obligations of Consultant herein to Company are personal to
Consultant and may not be assigned by Consultant without the express written
consent of Company.
9.2. The laws of the State of Delaware will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or place of performance thereof.
9.3. If any portion of this Agreement or the release granted in this
Agreement should be declared unenforceable by a court of competent jurisdiction,
such unenforceable portion shall be severed and the remainder of this Agreement
and the release granted by this Agreement shall remain valid and enforceable.
9.4. Consultant represents, acknowledges, and agrees that the only
shares of common stock of Company that Consultant owns or has a right to acquire
or otherwise receive from Company are described on Appendix 1 attached hereto.
Consultant represents, acknowledges, and agrees that he has no right, title, or
claim to any (a) shares of preferred stock, or options or warrants to acquire
shares of preferred stock, of Company or (b) shares of any class of stock or
other equity interest in, or options or warrants to acquire shares of any class
of stock or other equity interest in, any subsidiary or affiliate of Company.
Consultant acknowledges and agrees that any future claims he may have to shares
of stock of Company (other than as described on Appendix 1 attached hereto) or
shares of stock or other equity interest in any subsidiary or affiliate of
Company shall be void and of no effect unless such claim relates to shares or
other equity interests authorized in a written agreement between Consultant and
Company, which agreement has been signed on behalf of Company by the CEO.
9.5. This Agreement replaces all previous agreements or discussions
relating to the subject matters hereof and this Agreement, plus the Company's
policies and procedures, constitute the entire agreement between Company and
Consultant with respect to the subject matters of this Agreement. This Agreement
may not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer or representative of Company, or by any
written document unless it is signed by an officer of Company.
-Page 7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals effective as of the Effective Date stated above.
CHEMATCH.COM, INC.
By: /s/ CARL D. MCCUTCHEON
-------------------------------------------
Name: Carl D. McCutcheon
--------------------------------------
Title: Chairman, President and Chief
Executive Officer
-------------------------------------
This 26th day of January, 2000
/s/ JOHN BOHN
------------------------------------------
JOHN BOHN
This 26th day of January, 2000
-Page 8-
<PAGE> 9
APPENDIX 1
COMPANY COMMON STOCK
OWNERSHIP, WARRANTS AND OPTIONS
1. 272,400 shares of Company's common stock owned personally by Consultant
and/or by a family limited partnership for the benefit of certain members of
Consultant's family.
2. A warrant to acquire 4,500 shares of Company's common stock.
3. Two stock options awarded under Company's 1997 Employee, Director and
Consultant Stock Option Plan. One such stock option provided for the purchase
of up to an aggregate of 38,250 shares of Company's common stock at a
purchase price per share of $3.33, and the other such stock option provided
for the purchase of up to an aggregate of 150,600 shares of Company's common
stock at a purchase price per share of $.83.
4. Two stock options awarded under Company's 1999 Stock Plan. One such stock
option provided for the purchase of up to an aggregate of 266,316 shares of
Company's common stock at a purchase price per share of $1.336, and the other
such stock option provided for the purchase of up to an aggregate of 19,800
shares of Company's common stock at a purchase price per share of $1.47.
-Page 9-
<PAGE> 1
EXHIBIT 10.9
PETROCHEMNET HOLDINGS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 1st day of May,
1999 by and between PetroChemNet Holdings, Inc., a Delaware corporation (the
"Employer"), and Karen Morgan (the "Employee").
WITNESSETH:
WHEREAS, the Employer desires to employ the Employee and to enter into an
agreement embodying the terms of such employment; and
WHEREAS, the Employee desires to enter into this Agreement and to accept
such employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Employer and the Employee, intending to be
legally bound, hereby agree as follows:
ARTICLE 1.
TERM OF EMPLOYMENT
Section 1.1. Specified Period.
Employer hereby employs Employee, and Employee hereby accepts employment
with Employer for the period beginning on May 1, 1999 and ending on April 30,
2001, subject to earlier termination as provided in Article 6.
Section 1.2. Automatic Renewal.
After April 30, 2001, this Agreement shall be renewed automatically for
succeeding terms of one year each, subject to earlier termination as provided in
Article 6, unless one party gives notice to the other at least ninety (90) days
prior to the expiration of any term of her or its intention not to renew.
Section 1.3. "Employment Term" Defined.
As used herein, the phrase "Employment Term" refers to the entire period of
employment of Employee by Employer hereunder, whether for the period(s) provided
above, or whether terminated earlier as hereinafter provided or extended by
mutual agreement between Employer and Employee.
<PAGE> 2
ARTICLE 2.
DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.1. General Duties.
Employee shall serve as Executive Vice-President and Chief Operating
Officer of Employer. In such capacity, Employee shall do and perform all
services, acts or things in accordance with the policies set by the Board of
Directors of Employer. Employee shall perform such services in Stamford,
Connecticut, unless otherwise directed by Employer.
In addition, during the Employment Term, Employee shall be afforded
observation rights for all meetings of the Employer's Board of Directors.
Section 2.2. Devotion to Employer's Business.
a) During the Employment Term, Employee shall devote her time and
attention to the business of Employer during normal business hours and for such
additional amounts of time as are customary in the performance of her duties and
responsibilities or as is further required by the Board of Directors of
Employer. However, the expenditure of reasonable amounts of time for education,
charitable or professional activities, service on the Board of Directors in any
corporation or other business entity, and/or management of personal investments
and business affairs shall not be deemed a breach of this Agreement if those
activities do not materially interfere with the services required under this
Agreement or create a conflict of interest with Employer.
Section 2.3. Confidential Information; Tangible Property; Competitive
Activities.
a) During the Employment Term and for a period of two years
thereafter, Employee shall hold in confidence and not use or disclose to any
person or entity without the express written authorization of Employer any
Confidential Information of Employer. For purposes of this Section 2.3,
"Employer" shall include all corporations and entities controlled by,
controlling or under common control with, Employer, and "control" shall mean
beneficial ownership of greater than fifty percent (50%) of the voting power of
the corporation or entity. Information and materials received in confidence from
third parties by Employee are included within the meaning of the phrase
"Confidential Information of Employer" as used in this Section. If any
Confidential Information of Employer described in this Section is sought by
legal process, Employee shall promptly notify Employer and will cooperate with
Employer in preserving its confidentiality in connection with any legal
proceeding.
b) The parties hereto hereby stipulate that the following
information and materials ("Confidential Information of Employer") is important,
material and has independent economic value (actual or potential) from not being
generally known to others who could obtain economic value from its disclosure or
use and constitutes confidential trade secrets that affect the successful
conduct of Employer's business and its goodwill and that any material breach of
any term of this Section 2.3 is a material breach of this Agreement:
2
<PAGE> 3
(I) All software in any media used by the Employer (other than
publicly available information relating to off-the-shelf software used by
the Employer) and all components thereof, including any and all proprietary
routines and subroutines, communications protocols, interfaces and
linkages, all computer code, including all object code, all source code,
all manuals and other documentation relating thereto;
(II) The names, buying habits and practices of Employer's
existing customers or prospects;
(III) Employee's business, marketing, merchandising and sales
methods, plans, techniques and related data;
(IV) Employer's vendors and suppliers and the contents of
agreements with such vendors and suppliers including discounts, payment
terms and credit extended to Employer;
(V) Costs of services and materials;
(VI) The prices Employer obtains or has obtained or for which it
sells or has sold its products or services;
(VII) Manufacturing and sales costs; Employer's proprietary
manufacturing processes, information processes, and technical plans;
(VIII) Compensation paid to employees of Employer or other terms
of employment;
(IX) Employer's past and projected sales volume, profit, profit
margins and other financial information concerning Employer;
(X) Proposed new products or services;
(XI) Enhancements of existing products or services;
(XII) The existence of and contents of contracts and licenses;
(XIII) Any additional proprietary or confidential information or
materials resulting from or part of any task assigned to Employee or work
performed by Employee, during the Employment Term; and
(XIV) Any additional information or materials deemed by Employer
to be confidential by marking or stamping "Confidential" or similar words
on the cover of such information or materials, by advising Employee orally
or in writing that certain information is confidential or by generally
treating such information in such a manner that Employee should reasonably
believe it to be deemed confidential by Employer.
Employee's obligations under this Section 2.3 shall not apply to (i)
information which Employee can demonstrate is or has become generally known
other than through
3
<PAGE> 4
Employee's act in violation of this Agreement and (ii) information which
Employee can demonstrate was lawfully acquired by Employee prior to employment
from sources other than Employer.
c) All manuals, reports, files, memoranda, models, samples, tools,
machinery, equipment, notes, books, computer hardware, computer software (in
both source and object code form), correspondence, drawings, data and other
written, graphical or electromagnetic records or documentation relating to any
of the products or services of Employer or containing Confidential Information
of Employer which Employee shall prepare, use, construct, observe, possess, or
control shall be and shall remain the sole property of Employer and shall be
returned to Employer immediately upon termination of employment, and Employee
further agrees to return to Employer promptly any such materials which turn up
in Employee's possession subsequent to her termination of employment.
d) Employee shall not (i) during the Employment Term and (ii) for a
one year period immediately following the termination of Employee's employment
with Employer for any reason, or no reason, directly or indirectly, perform any
services for any person or entity engaged in any business that competes directly
with the products and services provided or sold (whether existing or under
development) on the date of termination of Employee's employment with the
Employer, including without limitation, any person or entity engaged in the
business of spot market trading of petroleum-based chemical products on an
internet based trading platform, but excluding third party services remarketed
or resold by the Employer without the addition of substantial value by the
Employer (collectively, the "Business"); or, without limiting the generality of
the foregoing, be or become or agree to be or become, interested in or
associated with, in any capacity (whether as a partner, shareholder, owner,
officer, director, employee, principal, agent, creditor, trustee, consultant,
co-venturer or otherwise) any individual, corporation, firm, association,
partnership, joint venture or other business entity that competes directly with
the Business (collectively, the "Prohibited Competition"); provided, however,
that nothing contained herein shall prohibit Employee from (i) investing in the
securities of a publicly held company so long as Employee does not perform
services for or otherwise assist such company in the conduct of its business, or
(ii) performing services for a person or entity that competes with the Business
so long as Employee's own services do not compete with the Business, whether
directly or indirectly. Notwithstanding the foregoing, if the Employer fails to
pay Employee any amount required by Section 7.3 or Section 7.4, as applicable,
and such payment remains due for a period of three (3) months, Employee may
engage in Prohibited Competition; provided, that, if Employee engages in such
Prohibited Competition, Employer shall have no obligation to pay Employee the
severance payments set forth in Section 7.3(a) or Section 7.4(a), as applicable,
from and after the date Employee commences the Prohibited Competition.
e) During the Employment Term, Employee shall not, directly or
indirectly, undertake planning for or organization of any business activity
competitive with Employer's Business, or combine or conspire with other
employees or representatives of Employer for the purpose of organizing any
activity competitive with the Business.
f) Employee agrees that during the Employment Term and for one (1)
year thereafter, she will not directly or indirectly, or by action in concert
with others, induce or
4
<PAGE> 5
influence (or seek to induce or influence) any person who is engaged (as an
employee, agent, independent contractor, or otherwise) by Employer to terminate
her employment or engagement with Employer.
g) Covenants of this Section 2.3 shall be construed as separate
covenants covering their subject matter in each of the separate counties and
states in the United States in which Employer transacts its business. To the
extent that any covenant shall be judicially unenforceable in any one or more of
said counties or states, said covenant shall not be affected with respect to
each other county and state; each covenant with respect to each county and state
being construed as severable and independent.
h) Employee hereby covenants and represents that she will not at any
time during the Employment Term, in any fashion, form or manner, directly or
indirectly, use or divulge, disclose or communicate to Employer or any
independent contractors, representatives, or other agents of Employer, any
confidential information belonging to others. Employee hereby represents that to
the best of Employee's knowledge, the performance of Employee's duties with
Employer will not require the disclosure of any such confidential information.
Employee covenants and agrees that in the event the loyal and complete
performance of her duties hereunder would, in her opinion, require disclosure of
any such confidential information, Employee shall immediately report such belief
in writing to Employer. Employee represents and warrants that Employee is free
to enter into this Agreement and to perform each of the terms and covenants of
it.
Section 2.4. Inventions And Original Works.
a) Employee agrees that she will promptly make full written disclosure
to Employer, will hold in trust for the sole right and benefit of Employer, and
hereby assigns to Employer, all of her right, title and interest in and to any
and all inventions (and patent rights with respect thereto), original works of
authorship (including all copyrights with respect thereto), developments,
discoveries, computer software, operating methods, improvements or trade secrets
which Employee may solely or jointly conceive or develop or reduce to practice,
or cause to be conceived or developed or reduced to practice, during the course
of performing her duties under this Agreement.
b) Employee acknowledges that all original works of authorship which
are made by him (solely or jointly with others) within the scope of her duties
under this Agreement and which are protected by copyrights are "works made for
hire," as that term is defined in the United States Copyright Act (17 U.S.C.A.,
Section 101, et seq.) and that Employee is an employee as defined under that
Act. Employee further agrees from time to time to execute written transfers to
Employer of ownership of specific original works of authorship (and all
copyrights therein) made by Employee (solely or jointly with others) which may,
despite the preceding sentence, be deemed by a court of law not to be "works
made for hire" in such form as is acceptable to Employer in its reasonable
discretion.
c) Sections 2.4(a) and (b) shall not apply, however, to inventions,
original works of authorship, developments, discoveries, computer software,
operating methods, improvements or trade secrets which are outside the scope of
the Business, which do not create a
5
<PAGE> 6
conflict of interest with Employer, and which do not materially interfere with
the services required under this Agreement.
Section 2.5. Maintenance of Records.
Employee agrees to use commercially reasonable efforts to keep and maintain
adequate and current written records of all inventions, original works of
authorship, and trade secrets developed or made by him (solely or jointly with
others) during the Employment Term. The records will be in the form of notes,
sketches, drawings and other formats that may be specified by Employer. The
records will be available to and remain the sole property of Employer at all
times.
Section 2.6. Obtaining Letters Patent and Copyright Registration.
a) Employee agrees to assist Employer to obtain United States or foreign
letters patent, and copyright registrations (as well as any transfers of
ownership thereof) covering inventions and original works of authorship assigned
hereunder to Employer. Such obligation shall continue beyond the termination of
this Agreement, but Employer shall compensate Employee at a reasonable rate no
less than the Employee's then current salary, whether with Employer or another
entity for time actually spent by Employee at Employer's request on such
assistance after such termination.
b) If Employer is unable for any reason whatsoever, including Employee's
mental or physical incapacity, to secure Employee's signature to apply for or to
pursue any application for any United States or foreign letters patent or
copyright registrations (or any document transferring ownership thereof)
covering inventions or original works of authorship assigned to Employer under
this Agreement, Employee hereby irrevocably designates and appoints Employer and
its duly authorized officers and agents as Employee's agent and attorney-in-fact
to act for and in her behalf and stead to execute and file any such applications
and documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters, patent or copyright registrations or
transfers thereof with the same legal force and effect as if executed by
Employee. This appointment is coupled with an interest in and to the inventions
and works of authorship and shall survive Employee's death or disability.
Employee hereby waives and quitclaims to Employer any and all claims (past and
present) of any nature whatsoever which Employee now or may hereafter have for
infringement of any patents or copyrights resulting from or relating to an such
application for letters patent or copyright registrations assigned hereunder to
Employer.
ARTICLE 3.
OBLIGATIONS OF EMPLOYER
Section 3.1. General Description.
Employer shall provide Employee with the compensation, incentives and
benefits specified elsewhere in this Agreement.
6
<PAGE> 7
ARTICLE 4.
COMPENSATION OF EMPLOYEE
Section 4.1. Annual Salary.
a) As compensation for her services hereunder, Employee shall be paid
a salary at the rate of $175,000 per year (the "Base Salary") from May 1, 1999.
The Base Salary shall be due and payable in equal installments, not less
frequently than twice monthly.
b) Employee shall receive additional increases in Base Salary during
the term of this Agreement as may be determined by Employer in its sole
discretion from time to time, but Employer shall not decrease the Base Salary
set forth in Section 4.1(a) except with Employee's consent.
c) Not later than June 21, 1999, Employer shall grant Employee,
effective as of May 1, 1999, options to purchase an aggregate of 266,316 shares
of Common Stock, par value $.01 per share, of Employer (collectively, the
"Options") pursuant to Employer's 1999 Stock Plan (the "Plan"). An agreement
between the Employer and Employee granting the Options (the "Option Agreement")
shall provide the following terms; provided, that to the extent the terms set
forth herein conflict with the the terms of the Option Agreement, the terms
herein shall prevail: The exercise price for the Options shall be the fair
market value of the Common Stock on the date of grant. The Options shall have a
ten-year term and shall be immediately exercisable. The shares purchased under
the Options (the "Option Shares") shall be subject to repurchase by the Employer
at the exercise price; provided, however, that the repurchase right of the
Employer shall expire in installments over a four-year period as follows: (i)
with respect to the first 25% of the shares of Common Stock subject to the
Options, the Option Shares shall be released from the repurchase right quarterly
in equal installments during the one-year period commencing on the date of grant
and ending on the first anniversary of the date of grant and (ii) with respect
to the remaining 75% of the shares of Common Stock subject to the Options, the
Option Shares shall be released from the repurchase right monthly in equal
installments for the remaining thirty-six months thereafter.
d) During the Employment Term, in addition to the Base Salary set
forth in Section 4.1(a), the Employee shall be eligible to receive a performance
based cash bonus with a target rate of 50% of the Base Salary per annum for each
fiscal year in the Employment Term. The amount of the bonus payment payable to
the Employee under this Section 4.1(d), if any, shall be determined by the
Compensation Committee of the Board of Directors of Employer in a manner
consistent with the bonus determinations applicable to the other executive and
senior management employees of Employer.
e) Subject to approval of the agreement by the Employer's
stockholders, the Employee shall be eligible to participate in a Management
Incentive Agreement, substantially in the form attached hereto as Exhibit A.
7
<PAGE> 8
f) In addition to the Base Salary set forth in Section 4.1(a) and the
performance based cash bonus set forth in Section 4.1(d), Employee shall receive
a bonus of $50,000 upon execution of this Agreement.
Section 4.2. Tax Withholding.
Employer shall have the right to deduct or withhold from the compensation
due to Employee hereunder any and all sums required for federal income and
social security taxes and all state or local taxes now applicable or that may be
enacted and become applicable in the future.
ARTICLE 5.
EMPLOYEE BENEFITS
Section 5.1. Annual Vacation.
From the date hereof until the first anniversary of Employee's employment
with Employer, Employee shall accrue paid vacation in equal installments on a
monthly basis up to a maximum of three (3) weeks of paid vacation for such year.
Thereafter, Employee shall accrue paid vacation in equal installments on a
monthly basis for each year in the Employment Term up to a maximum of four (4)
weeks of paid vacation for each such year. Notwithstanding the foregoing, if in
any such year, the full number of vacation days are not used by the Employee,
such unused vacation days will not accrue to the next year. Employee shall not
be entitled to receive pay instead of unused vacation, except upon termination
of employment. Employee may be absent from her employment for vacation for
periods in excess of five (5) consecutive days only at such times as are
approved by Employer.
Section 5.2. Benefits.
Employee shall be eligible to participate in any and all benefit plans
provided by Employer to all employees generally, should Employer elect to
participate in any such plans.
Section 5.3. Business Expenses.
Employer shall reimburse Employee for all appropriate expenses for travel
and entertainment by Employee for legitimate business purposes provided that
Employee furnishes to Employer adequate records and documentary evidence for the
substantiation of each such expenditure.
ARTICLE 6.
TERMINATION OF EMPLOYMENT
Section 6.1. Termination.
Employee's employment hereunder may be terminated by Employee or Employer
as herein provided, without further obligation or liability, except as expressly
provided herein.
8
<PAGE> 9
Section 6.2. Resignation, Death or Disability.
Employee's employment hereunder shall be terminated by Employee's
resignation, death, or her inability to perform her duties under this Agreement
on a full-time basis, for a continuous period of ninety (90) days or more or for
an aggregate of ninety (90) days within any period of one hundred eighty (180)
days, because of a physical or mental illness as confirmed by a physician chosen
by Employer and reasonably acceptable to Employee ("Disability").
Section 6.3. Termination For Cause.
a) A termination for Cause (as defined below) shall not take effect
unless the provisions of this Section 6.3(a) are complied with. The Employee
shall be given written notice by the Board of Directors of Employer of the
Employer's intention to terminate her employment with Employer for Cause, such
notice (A) to state in reasonable detail the particular act or acts or failure
or failures to act that constitute the grounds on which the proposed termination
for Cause is based and (B) to be given within three (3) months of the Board of
Directors of Employer learning of such act or acts or failure or failures to
act. The Employee shall have 30 days after the date that such written notice has
been given to the Employee in which to cure such conduct, to the extent such
cure is possible. If she fails to cure such conduct, the Employee shall then be
entitled to a hearing before the Board of Directors (provided, however, that if
the Employee is a member of the Board of Directors at such time, the Employee
shall abstain from such hearing). Such hearing shall be held within 45 days of
such notice to the Employee, provided she requests such hearing within 10 days
of the written notice from the Board of the intention to terminate him for
Cause. If, within five (5) days following such hearing, the Employee is
furnished written notice by the Board confirming that, in its judgment (with the
Employee abstaining from any such vote), grounds for Cause on the basis of the
original notice exist, she shall thereupon be terminated for Cause.
b) Employee's employment hereunder may be terminated by Employer at
any time for Cause. "Cause" shall mean:
(i) Employee has engaged in willful and material misconduct in
connection with her employment, including willful and material failure to
perform her duties as an officer or employee of Employer;
(ii) Employee has been convicted of or has pleaded guilty or nolo
contendere to a felony other than involving a traffic related infraction that
materially adversely affects the Employee's ability to perform under this
Agreement;
(iii) Employee has committed fraud, misappropriation of funds or
embezzlement, as found by a court of competent jurisdiction, involving the
assets of the Employer, its customers, suppliers or affiliates; or
(iv) Employee's use of narcotics, liquor or illicit drugs has had
a detrimental effect on the performance of her employment responsibilities, as
determined by the board of directors of Employer;
9
<PAGE> 10
Section 6.4. Termination Without Cause.
Employee's employment hereunder may be terminated by the Board of Directors
of Employer at any time without Cause upon sixty (60) days' notice for any
reason, subject to the payment of any amounts required by Section 7.3 or Section
7.4, as applicable.
Section 6.5. Expiration.
Employee's employment hereunder shall be terminated upon expiration of the
Employment Term as provided in Sections 1.1 and 1.2.
Section 6.6. Notice of Termination.
Any termination of Employee's employment by Employer or by Employee (other
than termination by reason of death) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall include the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Employee's employment under the provision so indicated.
Section 6.7. Date of Termination.
The "Date of Termination" shall be:
a) if the Employee's employment is terminated by her death, the date
of her death;
b) if the Employee's employment is terminated by her retirement or
resignation, the date of her retirement or resignation;
c) if the Employee's employment is terminated by reason of Employee's
Disability, thirty (30) days after Notice of Termination is given (provided that
Employee is unable to perform her duties on a full-time basis during such thirty
(30) day period);
d) if the Employee's employment is terminated by Employer for Cause or
without Cause, the date the Notice of Termination is given or after if so
specified in such Notice of Termination.
e) If there is a Constructive Termination Without Cause following a
Change in Control, then the date the Employee gives notice thereof.
ARTICLE 7.
PAYMENTS TO EMPLOYEE, UPON TERMINATION
Section 7.1. Death, Disability or Retirement.
In the event of Employee's retirement, death or Disability, all accrued but
unpaid salary and benefits generally available to Employee as of the Date of
Termination shall be payable to Employee or Employee's estate without reduction,
in accordance with the terms of any plan,
10
<PAGE> 11
contract, understanding or arrangement forming the basis for such payment. In
addition, Employee (or her representative) shall be entitled to (i) such other
payments as might arise from any other plan, contract, understanding or
arrangement between Employee and Employer at the time of any such event, (ii)
accrued and unpaid salary and vacation through the date of termination, (iii)
the pro rata portion of the bonus to which the Employee would have been entitled
pursuant to Section 4.1(d) for the year in which such termination occurs and
(iv) to exercise any Options or warrants granted under the Plan (as defined
below), to the extent otherwise exercisable on the date of death, Disability or
retirement, at any time within the term of the Option or warrant.
Section 7.2. Termination For Cause or Resignation.
In the event Employee's employment with Employer is terminated by Employer
for Cause or Employee resigns, neither Employer nor any parent, subsidiary or
affiliate company of Employer shall have any obligation to Employee under this
Agreement or otherwise, except for accrued but unpaid salary and vacation as of
the Date of Termination or as otherwise may be expressly required by law, no
further Option Shares shall become Eligible Shares and all unexercised Options
shall terminate thirty (30) days following the Date of Termination, at which
time, such Options shall no longer be exercisable to any extent whatsoever.
Section 7.3. Termination Without Cause Prior to a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of a termination of Employee's employment with Employer without Cause
or by Constructive Termination Without Cause (as defined below) at any time
prior to a Change in Control:
a) Employer shall pay to Employee, or in the event of Employee's
subsequent death, to Employee's surviving spouse, or if none, to Employee's
estate, as severance pay or liquidated damages, or both, a sum equal to the
greater of (i) the Base Salary Employee would have earned through the end of the
current term but for her early termination or (ii) the annual Base Salary, as in
effect immediately prior to such termination, which sum shall be payable over a
one-year period commencing on the Date of Termination in conformity with
Company's customary practices for executive compensation as such practices may
be modified from time to time and shall be subject to all applicable federal,
state and local withholding, payroll and other taxes.
b) Employee shall be entitled to any amounts earned, accrued, owing or
otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and other Stock Rights (as defined in the Plan),
if any, granted pursuant to the Plan held by the Employee at the time of such
termination which have not yet become Eligible Shares (as defined in the Option
Agreement) at the time of such termination shall become Eligible Shares for an
additional number of shares of Common Stock equal to fifty percent (50%) of the
aggregate of number of shares of Common Stock which are not Eligible Shares at
the time of such termination. To the extent not already exercised, such Options
as may be required to fulfill the number of shares as determined in the previous
sentence shall remain exercisable until the expiration of the original term of
such option. In addition, any warrants
11
<PAGE> 12
(referred to as "Purchases" in the Plan) granted to Employee under the Plan
which are held by the Employee at the time of such termination shall remain
exercisable until the expiration of the original term of such warrant.
Notwithstanding the foregoing, in the event of a Change in Control or public
offering of the Employer's shares within one hundred twenty (120) days of such
termination, then (i) the remaining fifty percent (50%) of the aggregate of
number of shares of Common Stock which were not Eligible Shares at the time of
such termination shall become Eligible Shares (and transferred by the Company
back to the Employee for the repurchase price if already repurchased) and (ii)
as necessary to fulfill the preceding, the Company shall extend the term of
those Options which were not exercised at the time of termination. Nothing
contained herein shall be deemed to modify or limit any options or warrants held
by Employee that were not granted pursuant to the Plan.
Section 7.4. Termination Without Cause Following a Change in Control.
Subject to other provisions in this Article 7 to the contrary, upon the
occurrence of (i) a termination of Employee's employment with Employer without
Cause at any time following a Change in Control (as defined below) or (ii) a
Constructive Termination Without Cause (as defined below) at any time following
a Change in Control:
a) Employer shall pay to Employee, or in the event of Employee's
subsequent death, to Employee's surviving spouse, or if none, to Employee's
estate, as severance pay or liquidated damages, or both, a sum equal to the
greater of (i) the Base Salary Employee would have earned through the end of the
current term but for her early termination or (ii) the annual Base Salary, as in
effect immediately prior to such termination, which sum shall be payable over a
one-year period commencing on the date of such termination in conformity with
Company's customary practices for executive compensation as such practices may
be modified from time to time and shall be subject to all applicable federal,
state and local withholding, payroll and other taxes.
b) Employee shall be entitled to any amounts earned, accrued, owing or
otherwise provided for, but not yet paid, under Article 4 or 5 above.
c) All Option Shares and Stock Rights, if any, granted under the Plan
held by the Employee at the time of such termination which have not yet become
Eligible Shares at the time of such termination shall become Eligible Shares
whether or not exercised. To the extent not already exercised, such Option
Shares and warrants (referred to as Purchases by the Plan) shall remain
exercisable until the expiration of the original term of such Option or warrant.
Nothing contained herein shall be deemed to modify or limit any options or
warrants held by Employee that were not granted pursuant to the Plan.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Change in Control" shall mean the closing of (i) a sale by the
Employer of all or substantially all of its assets; (ii) the acquisition in a
single transaction, or a series of related transactions, of shares of capital
stock of the Employer representing at least a majority of the issued and
outstanding shares of capital stock of the Employer (measured on the basis of
voting
12
<PAGE> 13
power) by a person (as defined in Sections 3(a)(9) and 13(d) of the Securities
Exchange Act of 1934), or (iii) a merger or consolidation of the Employer with
or into another entity in a transaction where the shares of the Employer's
capital stock outstanding immediately prior to the closing of such merger or
consolidation represent or are converted into or exchanged for shares that
represent less than a majority of the shares of capital stock of the resulting
or surviving entity outstanding immediately after the closing of such merger or
consolidation. Notwithstanding the foregoing, the term "Change in Control" shall
exclude (1) the closing of the purchase and sale of Employer's preferred stock
and warrants pursuant to the terms of that certain Preferred Stock and Warrant
Purchase Agreement (the "Battery Purchase Agreement") to be entered into by and
among Employer, Battery Ventures V, L.P. and affiliated entities and the other
parties thereto, including without limitation the closing of the issuance and
sale of the Series A Shares or the Series B Shares (in each case as defined in
the Battery Purchase Agreement) and (2) the closing of the acquisition of
CheMatch, Inc. by Employer pursuant to the terms of that certain Agreement and
Plan of Reorganization and the related Plan of Merger, including the issuance of
shares of capital stock of Employer in connection therewith.
"Constructive Termination Without Cause" shall mean a termination of
the Employee's employment with the Employer at her initiative following the
occurrence, without the Employee's written consent, of one or more of the
following events (except in consequence of a prior termination):
(i) a reduction by at least ten percent (10%) of Employee's then
current Base Salary;
(ii) the termination or material reduction of any employee benefit or
perquisite enjoyed by the Employee which is otherwise offered to similarly
situated employees of the Employer generally (other than as part of an
across-the-board reduction applicable to all Employee officers of the Employer);
(iii) a material diminution in the Employee's duties or the assignment
to the Employee of duties which are materially inconsistent with such duties;
(iv) the relocation of the Employer's principal office, or the
Employee's own office location as assigned to him by the Employer, to a location
more than 50 miles from Stamford, Connecticut; or
(v) the failure of the Employer to obtain the assumption in writing of
its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Employer within 60 days after the
consummation of a Change in Control.
Section 7.5 Termination Upon Expiration.
Subject to other provisions in this Article 7 to the contrary, upon the
termination of Employee's employment hereunder pursuant to Section 6.5
(Expiration), Employer shall pay to Employee, or in the event of Employee's
subsequent death, to Employee's surviving spouse, or if none, to Employee's
estate, as severance pay or liquidated damages, or both, a sum equal to
13
<PAGE> 14
seventy-five percent (75%) of the annual Base Salary, as in effect immediately
prior to such termination, which sum shall be payable over a nine-month period
commencing on the date of such termination in conformity with Company's
customary practices for executive compensation as such practices may be modified
from time to time and shall be subject to all applicable federal, state and
local withholding, payroll and other taxes.
Section 7.6 No Duty to Cover.
In connection with the payments made pursuant to Sections 7.3, 7.4 and 7.5
hereof, Employee shall have no duty to seek other employment or otherwise
attempt to cover her damages as a condition to receipt of such payments;
provided that, this Section shall not apply in the event Employee claims she is
entitled to any payment in excess of that provided for in Sections 7.3, 7.4 or
7.5, as applicable.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1. Indemnification.
a) Employer agrees that if the Employee is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that she is or was a director, officer or employee of Employer or is or was
serving at the request of Employer as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such Proceeding is the Employee's alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Employee shall be indemnified and held harmless by Employer to the fullest
extent legally permitted or authorized by Employer's certificate of
incorporation or bylaws or, if greater, by the laws of the State of Delaware,
against all cost, expense, liability and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by the
Employee in connection therewith, and such indemnification shall continue as to
the Employee even if she has ceased to be a director, member, employee or agent
of Employer or other entity and shall inure to the benefit of the Employee's
heirs, executors and administrators. Employer shall advance to the Employee all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after receipt by Employer of a written request for such advance.
Such request shall include an undertaking by the Employee to repay the amount of
such advance if it shall ultimately be determined that she is not entitled to be
indemnified against such costs and expenses.
b) Neither the failure of Employer (including its Board of Directors,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any proceeding concerning payment of amounts claimed by the
Employee under Section 8.1(a) above that indemnification of the Employee is
proper because she has met the applicable standard of conduct, nor a
determination by Employer (including its Board of Directors, independent legal
counsel or stockholders) that the Employee has not met such applicable standard
14
<PAGE> 15
of conduct, shall create a presumption that the Employee has not met the
applicable standard of conduct.
c) The Company will maintain Directors and Officers Liability
Insurance in the amount of at least $5,000,000 (such amount of coverage which
will be reevaluated by the Directors of the Company following a public offering
of the Company's Common Stock).
Section 8.2. Notices.
Any notices to be given thereunder by either party to the other shall be in
writing and shall be to have been duly given on the date of delivery if
personally delivered or delivered electronically, with electronic verification,
to the persons identified below, or three days after mailing if mailed by
registered or certified, postage prepaid with return receipt requested addressed
as follows:
Employee: Karen Morgan
93 Weed Avenue
Stamford, CT 06902
Employer: PetroChemNet Holdings, Inc.
1281 Main Street
Stamford, CT 06902
with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Andrew J. Merken, Esq.
Each party may change its address by written notice in accordance with this
Section.
Section 8.3. Arbitration.
Any controversy, dispute or claim arising out of or in connection with this
Agreement, or the breach, termination or validity hereof, shall be settled by
final and binding arbitration to be conducted by an arbitration tribunal in
Stamford, Connecticut pursuant to the rules of the American Arbitration
Association. The arbitration tribunal shall consist of three arbitrators. The
party initiating arbitration shall nominate one arbitrator in the request for
arbitration and the other party shall nominate a second in the answer thereto
within thirty (30) days of receipt of the request. The two arbitrators so named
will then jointly appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the thirty (30) day period, or if the arbitrators
named by the parties fail to agree on the third arbitrator within sixty (60)
days, the office of the American Arbitration Association in Stamford,
Connecticut shall make the necessary appointments of such arbitrator(s). The
decision or award of the arbitration tribunal (by a majority determination, or
if there is no majority, then by the determination of the third
15
<PAGE> 16
arbitrator, if any) shall be final, and judgment upon such decision or award may
be entered in any competent court or application may be made to any competent
court for judicial acceptance of such decision or award and an order of
enforcement. In the event of any procedural matter not covered by the aforesaid
rules, the procedural law of the State of Delaware shall govern.
Section 8.4. Attorneys' Fees and Costs.
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 that party may be entitled. This provision shall be construed as
applicable to the entire contract.
Section 8.5. Entire Agreement.
This Agreement supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the subject matter contained
herein and contains all of the covenants and agreements between the parties with
respect to the subject matter hereof. Each party to this Agreement acknowledges
that no representations, inducements, promises or agreements, orally or
otherwise, have been made by any party, or one acting on behalf of any party,
which are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement shall be valid or binding on either party.
Section 8.6. Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware. Subject to the provisions of Section
8.3, any claims or legal actions by one party against the other arising out of
the relationship between the parties contemplated herein (whether or not arising
under this Agreement) shall be commenced and maintained in any state or federal
court located in such state, and both parties hereby submit to the jurisdiction
and venue of any such court.
Section 8.7. Modifications.
Any modification of this Agreement will be effective only if it is in
writing, has been approved by the Board of Directors of Employer, and is signed
by the Employee and by a duly authorized officer of the Employer.
Section 8.8. Effect of Waiver.
The failure of either party to insist on strict compliance with any of the
terms, covenants or conditions of this Agreement by the other party shall not be
deemed a waiver or that term, covenant or condition, nor shall any waiver or
relinquishment of any right or power at any one time or times be deemed a waiver
or relinquishment of that right or power for all or any other times.
16
<PAGE> 17
Section 8.9. Partial Invalidity.
If any provision in this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
Executed on this the 21st day of June, 1999 as an instrument under seal.
EMPLOYER: EMPLOYEE:
PETROCHEMNET HOLDINGS, INC.
By: /s/ JOHN BOHN /s/ KAREN MORGAN
----------------------------------- -----------------------------------
Name: John Bohn Karen Morgan
Title: President
18
<PAGE> 1
EXHIBIT 10.10
CONSULTANT AND RELEASE AGREEMENT
THIS CONSULTANT AND RELEASE AGREEMENT is made and entered into by and
between CheMatch.com, Inc. ("Company"), a Delaware corporation formerly named
PetroChemNet Holdings, Inc., and Karen Morgan ("Consultant"), to be effective
the 26th day of January, 2000 (the "Effective Date") subject to Consultant's
right to revoke this Agreement within seven days following the execution of this
Agreement as specified in Section 7.2.
In consideration of the mutual covenants, promises and representations
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company and Consultant agree as
follows:
1. CHANGE OF STATUS FROM EMPLOYEE TO CONTRACTOR:
1.1. As of the Effective Date, the relationship presently existing between
Company and Consultant is changed from an employment relationship to a
contractor relationship. With respect to all benefit plans and programs of
Company, Consultant's employment by Company shall be terminated and Consultant
shall no longer have any rights under any such benefit plan or program (other
than (a) as expressly provided for herein and (b) Consultant's right to receive
the vested benefits accrued thereunder as may be provided in such benefit plan
or program). As of the Effective Date, Consultant resigns as an officer,
director, agent or representative of the Company and any of its subsidiaries and
affiliates in which Consultant holds office, is a director, or for whom
Consultant acts as an agent or representative. As of the Effective Date,
Consultant also resigns as a fiduciary and member of any and all committees
established with respect to any employee benefit plan maintained by Company or
any of its subsidiaries and affiliates. The resignations described in the two
preceding sentences shall occur automatically and without any further required
action by Consultant, Company or any other person.
1.2. Upon the payment of Consultant's base salary through January 31, 2000,
Company shall have no further obligations to Consultant for any salary, bonus,
or other compensation of any type for services rendered by Consultant to Company
on or before such date. From and after the Effective Date, Company's obligations
to pay compensation to Consultant for services rendered shall be governed
exclusively by this Agreement.
2. EXTENT OF SERVICES: DUTIES OF CONSULTANT:
2.1. During the Term (as such term is defined in Section 8.1), Consultant
agrees to serve as a consultant of Company in accordance with the provisions of
this Article 2. During the Term, and subject to Consultant's reasonable
availability, Consultant shall provide such consulting and advisory services as
the Board of Directors of Company (the "Board") or the Chief Executive Officer
of Company (the "CEO") may reasonably request, including assisting in such
strategic and financial matters, acquisition strategy or other projects as the
Board or the CEO deems appropriate ("Consulting Services"). When so requested,
Consultant will consult with officers and employees of Company, and others
designated by the Board or the CEO, at reasonable times and places.
2.2. The Company shall reimburse Consultant for all reasonable
out-of-pocket expenses actually incurred by Consultant in performance of the
Consulting Services, provided that such
-1-
<PAGE> 2
expenses are approved in advance by Company and that Consultant furnishes to
Company adequate records and documentary evidence for the substantiation of
each such expenditure. Consultant shall be provided with the use of an office
in Company's Connecticut office and reasonable administrative, technical and
communications support; provided that (a) such use of the office and support
relates primarily to the business of Company and is not disruptive of normal
business activities and (b) Company's obligations under this sentence shall
end on the earlier of December 31, 2000, or the date Company no longer
maintains an office in Connecticut.
2.3. During the Term, Consultant shall not engage, directly or indirectly,
in any other business, investment, or activity that is contrary to the interests
of Company or its subsidiaries or affiliates. Consultant agrees that she shall
not knowingly become involved in a conflict of interest with Company or its
subsidiaries or affiliates, or upon discovery thereof, allow such a conflict to
continue. Moreover, Consultant agrees that she shall disclose to or discuss with
Company's General Counsel any facts or circumstances which might involve such a
conflict of interest that has not been approved by the Board or the CEO. Company
and Consultant recognize that it is impossible to provide an exhaustive list of
actions or interests which constitute a "conflict of interest." Moreover,
Company and Consultant recognize there are many borderline situations. In some
instances, full disclosure of facts by Consultant to Company's General Counsel
may be all that is necessary to enable Company to protect its interests. In
others, if no improper motivation appears to exist and the interests of Company
have not suffered, prompt elimination of the outside interest will suffice. In
still others, it may be necessary for Company to terminate the consulting
relationship.
3. AMENDMENT TO CERTAIN EXISTING AGREEMENTS:
3.1. Company and Consultant have heretofore entered into (a) that certain
Incentive Stock Option and Stock Repurchase Agreement dated June 21, 1999 (the
"June Option Agreement"), (b) that certain Nonstatutory Stock Option and Stock
Repurchase Agreement dated November 5, 1999 (the "November Option Agreement";
the June Option Agreement and the November Option Agreement are collectively
referred to herein as the "Option Agreements"), and (c) that certain letter
agreement dated June 21, 1999, as amended on October 26, 1999, by and among
Company, Consultant, John Bohn, and Carl McCutcheon providing for certain
incentive payments upon a "fundamental change" of Company (the "Incentive
Payment Agreement"). Consultant has heretofore delivered to Company two Secured
Promissory Notes dated September 26, 1999, one in the original principal amount
of $49,999.80 and the other in the original principal amount of $127,899.29, in
connection with the partial exercise of the June Option Agreement (collectively,
the "Promissory Notes"). Effective as of the Effective Date, the Promissory
Notes, the Option Agreements, and the Incentive Payment Agreement shall be and
are hereby amended to the extent necessary as follows:
3.1.1. The "Payment Due Date" in each of the Promissory Notes
relating to the date Consultant ceases employment with
Company or a "Related Corporation" shall be changed to
January 26, 2001.
3.1.2. With respect to each of the Option Agreements, (a) all of
the "Option Shares" shall become "Eligible Shares" on the
Effective Date, (b) Consultant (or, in the event of the
death of Consultant, Consultant's estate, personal
representative or beneficiary to whom the option has been
assigned pursuant to section 10 thereof) may exercise the
option in whole or in part from time to time until
June 20, 2009, and (c) all of the "Option Shares" that
Consultant
-2-
<PAGE> 3
acquires upon exercise of the option shall be deemed to be
"Released Shares." Consultant acknowledges that, from and
after the Effective Date, Consultant shall not be
permitted to exercise an option under the Option Agree-
ments by delivery of a promissory note and related pledge
agreement.
3.1.3. For purposes of the Incentive Payment Agreement only,
Consultant shall be deemed to be an employee of Company
until June 20, 2001.
4. COMPENSATION FOR FUTURE CONSULTING SERVICES:
4.1. In full compensation of the readiness and performance of the
Consulting Services to be performed hereunder, Company shall pay to Consultant a
consulting fee in the following sums: (a) $218,750.00, which sum shall be
payable in equal installments over a 15-month period commencing in February,
2000, in conformity with Employer's customary practices for executive
compensation as such practices may be modified from time to time; (b)
$87,500.00, which sum shall be payable in a lump sum on the date bonuses are
paid to executives and senior management employees with respect to Company's
fiscal year ending on December 31, 2000 (or payable on March 1, 2001, if not
paid prior to that date); and (c) $29,166.67, which sum shall be payable in a
lump sum on the date bonuses are paid to executives and senior management
employees with respect to Company's fiscal year ending on December 31, 2001(or
payable on March 1, 2002, if not paid prior to that date).
4.2. For each month during the period, if any, after the Effective Date
(but in no event beyond the expiration of the Term) that Consultant elects to
continue coverage for herself and any of her eligible dependents under Company's
group health plans pursuant to the continuation of coverage provisions contained
in Sections 601 through 608 of the Employee Retirement Income Security Act of
1974, as amended, Company shall pay to Consultant an amount equal to the
difference, if any, between (a) the monthly premium charged by Company generally
to its former executive employees for such continuation coverage under such
plans and (b) the monthly premium charged by Company generally to its active
executive employees for coverage under such plans.
4.3. Consultant shall pay all social security, federal income taxes,
unemployment insurance, worker's compensation insurance, pensions, annuities or
other liabilities or taxes incurred by or on behalf or for the benefit of
Consultant arising out of the performance by Consultant of her obligations under
this Agreement.
5. INDEPENDENT CONTRACTOR RELATIONSHIP:
5.1. Throughout the entire Term, Consultant shall be an independent
contractor with the full power and authority to select the means, methods and
manner of performing Consulting Services hereunder, however, Consultant shall
secure Company approval of the means, methods, and manner in which Company and
its subsidiaries and affiliates are represented. Consultant will in no way be
considered to be an agent, employee, or servant of Company or any of its
subsidiaries or affiliates. Consultant shall have no authority to bind Company
or any of its subsidiaries or affiliates in any capacity for any purpose. It is
not the purpose or intention of this Agreement or the parties to create, and the
same shall not be construed as creating, any partnership, partnership relation,
joint venture, agency, or employment relationship. Consultant shall be free to
pursue such other business or consulting interests which are not otherwise in
violation of Section 2.3 or Article 6, including full
-3-
<PAGE> 4
time employment, directorships and investments of any kind. Consultant hereby
agrees that she shall not, during the Term, participate in Company's benefit
plans and programs for its employees.
6. ADDITIONAL DUTIES AND OBLIGATIONS OF CONSULTANT:
6.1. Consultant and Company have heretofore entered into that certain
Employment Agreement dated May 1, 1999 (the "Employment Agreement"). Consultant
hereby agrees that she shall continue to be subject to the provisions of
sections 2.3, 2.4, 2.5, and 2.6 of the Employment Agreement as if the provisions
of such sections were set forth herein in full; provided, however, that solely
for purposes of applying such provisions, (a) Consultant's performance of
Consulting Services shall be equivalent to employment by Company and (b) the
"Employment Term" under the Employment Agreement shall be considered to end
simultaneously with the expiration of the Term.
6.2. Consultant shall refrain, both during the consulting relationship and
after the consulting relationship terminates, from publishing any oral or
written statements about Company, any of its subsidiaries or affiliates, or any
of such entities' officers, directors, employees, agents or representatives that
are slanderous, libelous, or defamatory; or that disclose private or
confidential information about Company or any of its subsidiaries or affiliates,
or any of such entities' business affairs, officers, directors, employees,
agents, or representatives; or that constitute an intrusion into the seclusion
or private lives of Company or any of its subsidiaries or affiliates, or any of
such entities' officers, directors, employees, agents, or representatives; or
that give rise to unreasonable publicity about the private lives of Company or
any of its subsidiaries or affiliates, or any of such entities' officers,
directors, employees, agents, or representatives; or that place Company or any
of its subsidiaries or affiliates, or any of such entities' officers, directors,
employees, agents, or representatives in a false light before the public; or
that constitute a misappropriation of the name or likeness of Company or any of
its subsidiaries or affiliates, or any of such entities' officers, directors,
employees, agents, or representatives. Consultant shall not use Company's name,
the name of any of Company's subsidiaries or affiliates, nor the name of any of
such entities' officers, directors, employees, agents or representatives, in any
press release, advertisement, or similar announcement without the prior consent
of the Board or the CEO; provided, however, that use of Company's name in a
format that is not widely disseminated, which is not inconsistent with any
public statement of Company and which relates solely to Consultant's personal
involvement with Company shall not require the prior consent of the Board or the
CEO. A violation or threatened violation of this prohibition may be enjoined by
the courts. The rights afforded Company under this provision are in addition to
any and all rights and remedies otherwise afforded by law.
6.3. Consultant shall not, either during the existence of the consulting
relationship or thereafter, use or appropriate, directly or indirectly, for
Consultant's own benefit or for the benefit of another, any of the business
opportunities concerning the subject matter of the consulting relationship that
were entrusted to Consultant by Company.
7. RELEASE:
7.1. The term "Released Subject Matters" means and includes any and all
activities relating or pertaining to Consultant's prior employment by Company or
services heretofore rendered by Consultant for Company or any of its
subsidiaries or affiliates prior to the Effective Date; the termination of such
prior employment; and/or any and all prior discussions, representations,
understandings, or agreements between, on the one hand, Company or its
subsidiaries or affiliates,
-4-
<PAGE> 5
and/or their agents, representatives, attorneys, or contractors, and, on the
other hand, Consultant or her agents or representatives, regarding her
employment by Company or its subsidiaries or affiliates or services heretofore
rendered to Company or its subsidiaries or affiliates prior to the Effective
Date. The term "Released Subject Matters" includes but is not limited to
(a) any claims by Consultant under the Employment Agreement and (b) any claims
under the Age Discrimination in Employment Act, the Americans with Disabilities
Act of 1990, the Family and Medical Leave Act of 1993, Title VII of the Civil
Rights Act of 1964, 42 U.S.C. Section 1981, and any other statutory, tort, or
common law cause of action (including, without limitation, any claim or cause
of action based on alleged discriminatory (whether age, sex or other type of
discrimination), retaliatory or illegal employment practices).
7.2. Consultant, on her behalf and on behalf of her representatives, heirs,
administrators, executors, and assigns, and on behalf of any other persons or
entities claiming by, through, or under Consultant, does hereby fully release,
acquit and forever discharge Company and its subsidiaries or affiliates, and
their respective employees, officers, directors, trustees, committee-members,
boards, members of such boards, chairmen of the boards, contractors,
consultants, agents, representatives, attorneys, successors, and assigns (the
"Released Entities"), from and against any and all rights, benefits, payments,
claims, demands, causes of action, suits, debts, accounts, controversies,
agreements, promises, damages, judgments, and/or liabilities whatsoever, in law
or equity, of any and every character, kind and nature whatsoever, for personal
injury, property damage or economic loss, whether known or unknown, contingent
or fixed, either in or arising out of the law of contracts, torts, or under
statutory law, arising out of, resulting from, or based upon the Released
Subject Matters. This release is to be broadly construed and shall extend to and
extinguish any and all claims, demands or causes of action of every kind or
nature whatsoever, known or unknown, suspected or unsuspected, which Consultant
has or hereafter can, shall, or may have, in Consultant's own right or in a
representative capacity, for, upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the Effective Date, including
without limitation of the generality hereof, any past, present or future claims,
matters or causes of action that Consultant has or may hereafter have arising
out of, based upon, or in any way relating to any prior actions or inactions
with respect to any of the Released Subject Matters; provided, however, that
such release shall not affect any future obligation which Company may have to
Consultant under the terms of this Agreement. Consultant acknowledges and agrees
that all of the terms and conditions of 29 USC 626 pertaining to the waiver of
her rights under the Age Discrimination in Employment Act have been complied
with, including that she has been given 21 days to consider this Agreement and
this release, that she was advised by Company to consult an attorney and that
she has in fact consulted an attorney prior to executing this Agreement and this
release, and that for a period of 7 days following the execution of this
Agreement, she may revoke this Agreement. If Consultant does not within 7 days
following the execution of this Agreement provide Company with a written notice
of revocation, Consultant shall no longer have the right to revoke this
Agreement.
7.3. It is expressly agreed that upon the Effective Date, no future
disputes between (a) any of Company or any of its subsidiaries or affiliates or
any of the Released Entities, and (b) Consultant, whether under this Agreement
or otherwise, shall in any way affect the enforceability of the release granted
above.
-Page 5-
<PAGE> 6
8. TERM AND TERMINATION:
8.1. The term of this Agreement (the "Term") shall extend from the
Effective Date until April 30, 2001.
8.2. The consulting relationship established by this Agreement shall
terminate automatically upon expiration of the Term. Upon termination of the
consulting relationship as a result of expiration of the Term, Consultant shall
be entitled to no further payments under this Agreement except for the remaining
payment described in Section 4.1(c), which shall be paid as provided in such
Section.
8.3. The consulting relationship established by this Agreement shall
terminate automatically upon Consultant's death. Upon termination of the
consulting relationship as a result of Consultant's death, Consultant's heirs,
administrators, or legatees shall be entitled under this Agreement to all of the
remaining unpaid amounts described in Section 4.1, which amounts shall continue
to be paid as provided in such Section.
8.4. Company shall have the right to terminate the consulting relationship
under this Agreement at any time prior to the expiration of the Term for "cause"
upon the determination by the Board that "cause" exists for the termination of
the consulting relationship. As used in this Section 8.4, the term "cause" shall
mean (a) Consultant has been convicted of a felony (which, through lapse of time
or otherwise, is not subject to appeal); (b) Consultant has willfully engaged in
conduct that Consultant knows or should know is materially injurious to Company
or any of its subsidiaries or affiliates, and/or (c) Consultant's breach of
Section 2.3 or Article 6 of this Agreement which remains uncorrected for 30 days
following written notice to Consultant by Company of such breach. It is
expressly acknowledged and agreed that the decision as to whether "cause" exists
for termination of the consulting relationship by Company is delegated to the
Board for determination. If Consultant disagrees with the decision reached by
the Board, the dispute will be limited to whether the Board reached its decision
in good faith. Upon termination of the consulting relationship for cause,
Consultant shall be entitled to no further payments under Sections 4.1 and 4.2
of this Agreement.
8.5. In the event that Consultant obtains full time employment with some
third party or agrees to provide full time consulting services to some third
party [the term "full time" means at least thirty (30) hours per week], Company
shall have the right to terminate the consulting relationship under this
Agreement by providing a written notice of termination to Consultant. In the
event of termination of the consulting relationship by Company under this
Section, Consultant shall be entitled under this Agreement to all of the
remaining unpaid amounts of the consulting fee specified in Section 4.1 that
otherwise would have been due Consultant under the terms of this Agreement,
which shall continue to be paid as provided in such Section.
8.6. This consulting relationship may be terminated at any time for any
reason whatsoever by Consultant upon the giving of one month written notice.
Upon such termination of the consulting relationship by Consultant under this
Section, Consultant shall be entitled to no further payments under Sections 4.1
and 4.2 of this Agreement.
8.7. Consultant waives, and Company shall not be required to pay, any
severance or severance benefits, in connection with the termination of the
consulting relationship, whether from a Company sponsored severance plan or the
general assets of Company. The consideration and
-Page 6-
<PAGE> 7
remuneration provided for under this Agreement are in lieu of and take the
place of any other severance pay or severance benefit, which Consultant
forfeits.
8.8. It is understood that the termination of this Agreement shall not
relieve Consultant of any continuing obligations imposed upon Consultant
hereunder, including, but not limited to the obligations specified in Article 6
above. Further, the provisions of Article 7 shall survive the termination of
this Agreement.
9. MISCELLANEOUS:
9.1. The obligations of Consultant herein to Company are personal to
Consultant and may not be assigned by Consultant without the express written
consent of Company.
9.2. The laws of the State of Delaware will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or place of performance thereof.
9.3. If any portion of this Agreement or the release granted in this
Agreement should be declared unenforceable by a court of competent jurisdiction,
such unenforceable portion shall be severed and the remainder of this Agreement
and the release granted by this Agreement shall remain valid and enforceable.
9.4. Consultant represents, acknowledges, and agrees that the only shares
of common stock of Company that Consultant owns or has a right to acquire or
otherwise receive from Company are described on Appendix 1 attached hereto.
Consultant represents, acknowledges, and agrees that she has no right, title, or
claim to any (a) shares of preferred stock, or options or warrants to acquire
shares of preferred stock, of Company or (b) shares of any class of stock or
other equity interest in, or options or warrants to acquire shares of any class
of stock or other equity interest in, any subsidiary or affiliate of Company.
Consultant acknowledges and agrees that any future claims she may have to shares
of stock of Company (other than as described on Appendix 1 attached hereto) or
shares of stock or other equity interest in any subsidiary or affiliate of
Company shall be void and of no effect unless such claim relates to shares or
other equity interests authorized in a written agreement between Consultant and
Company, which agreement has been signed on behalf of Company by the CEO.
9.5. This Agreement replaces all previous agreements or discussions
relating to the subject matters hereof and this Agreement, plus the Company's
policies and procedures, constitute the entire agreement between Company and
Consultant with respect to the subject matters of this Agreement. This Agreement
may not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer or representative of Company, or by any
written document unless it is signed by an officer of Company.
-Page 7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals effective as of the Effective Date stated above.
CHEMATCH.COM, INC.
By: /s/ CARL D. MCCUTCHEON
------------------------------------
Name: Carl D. McCutcheon
------------------------------
Title: Chairman, President and
Chief Executive Officer
-----------------------------
This 26th day of January, 2000
/s/ KAREN MORGAN
----------------------------------------
KAREN MORGAN
This 26th day of January, 2000
-Page 8-
<PAGE> 9
APPENDIX 1
COMPANY COMMON STOCK
OWNERSHIP, WARRANTS AND OPTIONS
1. 196,200 shares of Company's common stock owned personally by Consultant
and/or by a family limited partnership for the benefit of certain
members of Consultant's family.
2. A warrant to acquire 3,000 shares of Company's common stock.
3. Two stock options awarded under Company's 1997 Employee, Director and
Consultant Stock Option Plan. One such stock option provided for the
purchase of up to an aggregate of 75,000 shares of Company's common
stock at a purchase price per share of $3.33, and the other such stock
option provided for the purchase of up to an aggregate of 106,500
shares of Company's common stock at a purchase price per share of $.83.
4. Two stock options awarded under Company's 1999 Stock Plan. One such
stock option provided for the purchase of up to an aggregate of 266,316
shares of Company's common stock at a purchase price per share of
$1.336, and the other such stock option provided for the purchase of up
to an aggregate of 6,600 shares of Company's common stock at a purchase
price per share of $1.47.
-Page 9-
<PAGE> 1
EXHIBIT 10.12
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
November 24, 1999
To each of the several Purchasers
(the "Purchasers") and the several DeWitt
Principals (as defined herein) listed on the signature
pages hereto
Ladies and Gentlemen:
This will confirm that in consideration of (i) the purchase by Battery
Ventures V, L.P., Battery Investment Partners V LLC and Battery Ventures
Convergence Fund, L.P. (collectively, "Battery Ventures") pursuant to that
certain Preferred Stock and Warrant Purchase Agreement dated June 21, 1999 (the
"Initial Purchase Agreement") of (A) an aggregate of 2,138,400 Series A Units
(as defined in the Initial Purchase Agreement), comprised of an aggregate of
2,138,400 shares of Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and the related Series A Warrants of PetroChemNet Holdings,
Inc., a Delaware corporation (the "Company") and (B) an aggregate of 2,032,200
Series B Units (as defined in the Initial Purchase Agreement), comprised of an
aggregate of 2,032,200 shares of Series B Convertible Preferred Stock (the
"Series B Preferred Stock") and the related Series B Warrants of the Company,
and (ii) the Purchasers' agreement on the date hereof to purchase, subject to
the terms and conditions set forth in that certain Preferred Stock and Warrant
Purchase Agreement dated on even date herewith (the "Series C Purchase
Agreement"), an aggregate of 3,503,169 Series C Units (as defined in the Series
C Purchase Agreement), comprised of an aggregate of 3,503,169 shares of Series C
Convertible Preferred Stock (the "Series C Preferred Stock") and the related
Series C Warrants of the Company, and as an inducement to the Purchasers to
enter into the Series C Purchase Agreement, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Company covenants and agrees with each of the Purchasers as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"CheMatch Reorganization Agreement" shall mean that certain
Agreement and Plan of Reorganization dated as of June 21, 1999 by and among
PetroChemNet Holdings, Inc., the Company, PCN Merger Sub and the DeWitt
Principals.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
<PAGE> 2
Amended and Restated Registration Rights Agreement -- Page 2
"Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued
or issuable upon conversion of the Purchased Shares and the Warrant Shares, and
any shares of capital stock received in respect thereof.
"Convertible Preferred Stock" shall mean the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and the
Series C Convertible Preferred Stock of the Company.
"DeWitt Principals" shall mean each of Earl H. Armstrong,
Teresa A. Acosta and William P. Barry.
"Exchange Act" shall mean the Securities Exchange Act of 1934
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Preferred Stock Warrants" shall mean the Series A Preferred
Stock Purchase Warrants and the Series B Preferred Stock Purchase Warrants
issued to Battery Ventures pursuant to the Initial Purchase Agreement, and the
Series C Preferred Stock Purchase Warrants issued to the Purchasers pursuant to
the Series C Purchase Agreement.
"Purchased Shares" shall mean the shares of Series A Preferred
Stock and Series B Preferred Stock issued pursuant to the Initial Purchase
Agreement, and the shares of Series C Preferred Stock issued pursuant to the
Series C Purchase Agreement.
"Registrable Common Shares" shall mean (i) the shares of
Common Stock of the Company issued to the DeWitt Principals, Fred B. Cook and
Jorge A. Werlang in connection with the transactions contemplated by the
CheMatch Reorganization Agreement and (ii) the shares of Common Stock of the
Company issued upon the exercise or conversion of warrants issued to the DeWitt
Principals in connection with the transactions contemplated by the CheMatch
Reorganization Agreement.
"Registration Expenses" shall mean the expenses so described
in Section 8.
"Restricted Stock" shall mean the Conversion Shares and the
Registrable Common Shares, excluding Conversion Shares or Registrable Common
Shares which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act; provided, however, that for purposes of
Section 4(a) of this Agreement the term "Restricted Stock" shall not include the
Registrable Common Shares, and, accordingly,
2
<PAGE> 3
Amended and Restated Registration Rights Agreement -- Page 3
the holders of the Registrable Common Shares shall not have any right to request
a registration pursuant to said Section 4(a).
"Securities Act" shall mean the Securities Act of 1933 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in
Section 8.
"Series B Convertible Preferred Stock" shall mean the shares
of Series B Convertible Preferred Stock of the Company.
"Warrant Shares" shall mean the shares of Convertible
Preferred Stock issuable or issued upon exercise of the Preferred Stock
Warrants.
2. Restrictive Legend. Each certificate representing Purchased
Shares, Conversion Shares or Restricted Stock shall, except as otherwise
provided in this Section 2 or in Section 3, be stamped or otherwise imprinted
with a legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state securities laws.
These securities have been acquired for investment and not with a view to
distribution or resale, and may not be sold mortgaged, pledged, hypothecated or
otherwise transferred without an effective registration statement for such
securities under the Securities Act of 1933 and applicable state securities
laws, or the availability of an exemption from the registration provisions of
the Securities Act of 1933 and applicable state securities laws."
A certificate shall not bear such legend if in the opinion of counsel reasonably
satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault,
LLP shall be satisfactory) the securities being sold thereby may be publicly
sold without registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of
any Purchased Shares, Conversion Shares or Restricted Stock (other than under
the circumstances described in Sections 4, 5 or 6), the holder thereof shall
give written notice to the Company of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company (it being agreed that Testa, Hurwitz &
Thibeault, LLP shall be satisfactory) to the effect that the proposed transfer
may be effected without registration under the Securities Act, whereupon the
holder of such stock shall be entitled to transfer such stock in accordance with
the terms of its notice; provided, however, that no such opinion of counsel
shall be required for a transfer to one or more partners of the transferor (in
the case of a transferor that is a partnership), to one or more members of the
transferor (in the case of a
3
<PAGE> 4
Amended and Restated Registration Rights Agreement -- Page 4
transferor that is a limited liability company) or to an affiliated corporation
(in the case of a transferor that is a corporation); provided, further, however,
that any transferee other than a partner or affiliate of the transferor shall
execute and deliver to the Company a representation letter in form reasonably
satisfactory to the Company's counsel to the effect that the transferee is
acquiring Restricted Stock for its own account, for investment purposes and
without any view to distribution thereof. Each certificate for Purchased Shares
or Conversion Shares transferred as above provided shall bear the legend set
forth in Section 2, except that such certificate shall not bear such legend if
(i) such transfer is in accordance with the provisions of Rule 144 (or any other
rule permitting public sale without registration under the Securities Act) or
(ii) the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act. The restrictions provided for in this
Section 3 shall not apply to securities which are not required to bear the
legend prescribed by Section 2 in accordance with the provisions of that
Section. If the Company does not accept an opinion of counsel required hereby
signed by Testa, Hurwitz & Thibeault, LLP, the Company will pay the reasonable
fees and disbursements of other counsel in connection with all opinions rendered
by them pursuant to this Section 3.
4. Required Registration.
(a) Subject to Section 13(f) of this Agreement, at any
time after the earlier of June 21, 2001 or the date that is six months after the
consummation of the Company's first underwritten public offering, (i) the
holders of Restricted Stock (excluding for purposes of this clause (i)
Conversion Shares relating to the Series C Preferred Stock) constituting at
least sixty percent (60%) in interest of the total shares of such Restricted
Stock then outstanding, taken together as a single class or (ii) the holders of
Restricted Stock relating to the Series C Preferred Stock constituting at least
sixty percent (60%) in interest of the total shares of such Restricted Stock
then outstanding, taken together as a single class, may request the Company to
register under the Securities Act all or any portion of the shares of Restricted
Stock held by such requesting holder or holders for sale in the manner specified
in such notice. For purposes of this Section 4 (unless otherwise specified
herein) and Sections 5, 6, 13(a) and 13(d), the term "Restricted Stock" shall be
deemed to include the number of shares of Restricted Stock which would be
issuable to a holder of Purchased Shares upon conversion of all shares of
Convertible Preferred Stock held by such holder at such time; provided, however,
that the only securities which the Company shall be required to register
pursuant hereto shall be shares of Common Stock; provided, further, however,
that, in any underwritten public offering contemplated by this Section 4 or
Sections 5 and 6, the holders of Purchased Shares shall be entitled to sell such
Purchased Shares to the underwriters for conversion and sale of the shares of
Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 4 within
180 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering in which the
holders of Restricted Stock shall have been entitled to join pursuant to
Sections 5 or 6.
4
<PAGE> 5
Amended and Restated Registration Rights Agreement -- Page 5
(b) Following receipt of any notice under this Section 4,
the Company shall immediately notify all holders of Restricted Stock and
Purchased Shares from whom notice has not been received and such holders shall
then be entitled within 30 days thereafter to request the Company to include in
the requested registration all or any portion of their shares of Restricted
Stock. The Company shall use its best efforts to register under the Securities
Act, for public sale in accordance with the method of disposition described in
paragraph (a) above, the number of shares of Restricted Stock specified in such
notice (and in all notices received by the Company from other holders within 30
days after the giving of such notice by the Company). The Company shall be
obligated to register Restricted Stock pursuant to this Sections on two
occasions only for each class of holders specified in Section 4(a)(i) and
4(a)(ii); provided, however, that such obligation shall be deemed satisfied only
when a registration statement covering all shares of Restricted Stock specified
in notices received as aforesaid for sale in accordance with the method of
disposition specified by the requesting holders (i) shall have become effective
and, if such method of disposition is a firm commitment underwritten public
offering, all such shares shall have been sold pursuant thereto or (ii) if such
registration statement has been withdrawn prior to the consummation of the
offering at the request of the Investors (other than as a result of a material
adverse change in the business, prospects or condition, financial or otherwise,
of the Company).
(c) The Company (or at the option of the Company, the
holders of Common Stock) shall be entitled to include in any registration
statement referred to in this Section 4, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company or such other holders for its own account, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Restricted Stock to be sold. Except for
registration statements on Form S-4, S-8 or any successor thereto, the Company
will not file with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other stockholders,
from the date of receipt of a notice from requesting holders pursuant to this
Section 4 until the completion of the period of distribution of the registration
contemplated thereby.
(d) If in the opinion of the managing underwriter the
inclusion of all of the Restricted Stock requested to be registered under this
Section would adversely affect the marketing of such shares, any Conversion
Shares to be sold by the holders of Restricted Stock shall be excluded only
after any Registrable Common Shares and shares to be sold by holders of Common
Stock other than the holders of Restricted Stock have been excluded, in such
manner that the shares to be sold shall be allocated among the selling holders
of the Conversion Shares pro rata based on their ownership of Restricted Stock.
5. Incidental Registration. Subject to Section 13(f) of this
Agreement, if the Company at any time (other than pursuant to Section 4 or
Section 6) proposes to register any of its securities under the Securities Act
for sale to the public, whether for its own
5
<PAGE> 6
Amended and Restated Registration Rights Agreement -- Page 6
account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Restricted Stock for sale to the public), each
such time it will give written notice to all holders of outstanding Restricted
Stock of its intention so to do. Upon the written request of any such holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of its Restricted Stock, the Company will use its
best efforts to cause the Restricted Stock as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the holder (in accordance
with its written request) of such Restricted Stock so registered. In the event
that any registration pursuant to this Section 5 shall be, in whole or in part,
an underwritten public offering of Common Stock, the number of shares of
Restricted Stock to be included in such an underwriting may be reduced (pro rata
among the requesting holders based upon the number of shares of Restricted Stock
held by such requesting holders) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein; provided,
however, that such number of shares of Restricted Stock shall not be reduced if
any shares are to be included in such underwriting for the account of any person
other than the Company or requesting holders of Restricted Stock; provided,
further, however, that in no event shall the number of shares of Restricted
Stock included in the offering be reduced below twenty percent (20%) of the
total number of shares of Common Stock included in such offering, unless the
offering is the Company's initial public offering of the Company's securities in
which case the number of shares of Restricted Stock to be included by the
holders may be reduced or eliminated entirely as set forth above.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 5 without thereby incurring
any liability to the holders of Restricted Stock.
6. Registration on Form S-3. Subject to Section 13(f) of this
Agreement, if at any time (i) a holder or holders of Restricted Stock then
outstanding request that the Company file a registration statement on Form S-3
or any successor thereto for a public offering of all or any portion of the
shares of Restricted Stock held by such requesting holder or holders, provided
that the reasonably anticipated aggregate price to the public of such shares of
Restricted Stock equals or exceeds $1,000,000 and (ii) the Company is a
registrant entitled to use Form S-3 or any successor thereto to register such
shares, then the Company shall use its best efforts to register under the
Securities Act on Form S-3 or any successor thereto for public sale in
accordance with the method of disposition specified in such notice, the number
of shares of Restricted Stock specified in such notice. Whenever the Company is
required by this Section 6 to use its best efforts to effect the registration of
Restricted Stock, each of the procedures and requirements of Section 4
(including but not limited to the requirement that the Company notify all
holders of Restricted Stock from whom notice has not been received and provide
them with the opportunity to participate in the offering) shall apply to such
registration; provided, however, that there shall be no limitation on the number
of registrations on Form S-3 which may be requested and obtained under this
Section 6.
6
<PAGE> 7
Amended and Restated Registration Rights Agreement -- Page 7
(b) Notwithstanding anything to the contrary set forth in
this Agreement, the Company's obligation under this Agreement to register
Restricted Stock under the Securities Act on registration statements
("Registration Statements") may, upon the reasonable determination of the Board
of Directors made not more than twice in the aggregate (and not more than once
with respect to a Registration Statement on Form S-1 and not more than once with
respect to a Registration Statement on Form S-3) during any 12-month period, be
suspended in the event and during such period as unforeseen circumstances
(including without limitation (i) an underwritten primary offering by the
Company (which includes no secondary offering) if the Company is advised in
writing by its underwriters that the registration of the Restricted Stock would
have a material adverse effect on the Company's offering, or (ii) pending
negotiations relating to, or consummation of, a transaction or the occurrence of
an event which would require additional disclosure of material information by
the Company in Registration Statements or such other filings, as to which the
Company has a bona fide business purpose for preserving confidentiality or which
renders the Company unable to comply with Securities and Exchange Commission
(the "SEC") requirements) exist (such unforeseen circumstances being hereinafter
referred to as a "Suspension Event") which would make it impractical or
unadvisable for the Company to file the Registration Statements or such other
filings or to cause such to become effective. Such suspension shall continue
only for so long as such event is continuing but in no event for a period longer
than (i) one hundred and twenty (120) days, in the case of a Registration
Statement on Form S-1 (or any successor thereto) or (ii) ninety (90) days, in
the case of a Registration Statement on Form S-3 (or any successor thereto). The
Company shall notify the Purchasers of the existence and nature of any
Suspension Event.
7. Registration Procedures. If and whenever the Company is
required by the provisions of Sections 4, 5 or 6 to use its best efforts to
effect the registration of any shares of Restricted Stock under the Securities
Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 4, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the period specified in paragraph (a) above and comply with the
provisions of the Securities Act with respect to the disposition of all
Restricted Stock covered by such registration statement in accordance with the
sellers' intended method of disposition set forth in such registration statement
for such period;
7
<PAGE> 8
Amended and Restated Registration Rights Agreement -- Page 8
(c) furnish to each seller of Restricted Stock and to
each underwriter such number of copies of the registration statement and each
such amendment and supplement thereto (in each case including all exhibits) and
the prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request; provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock
and each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
prepare and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Restricted Stock, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten and at the request of
any seller of Restricted Stock, use its best efforts to furnish on the date that
Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (i) an opinion dated such date of counsel representing the Company
for the purposes of such registration, addressed to the underwriters and to such
seller, to such effect as reasonably may be requested by counsel for the
underwriters, and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period
8
<PAGE> 9
Amended and Restated Registration Rights Agreement -- Page 9
ending no more than five business days prior to the date of such letter) with
respect to such registration as such underwriters reasonably may request;
(h) make available for inspection by each seller of
Restricted Stock, any underwriter participating in any distribution pursuant to
such registration statement, and any attorney, accountant or other agent
retained by such seller or underwriter, reasonable access to all financial and
other records, pertinent corporate documents and properties of the Company, as
such parties may reasonably request, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(i) cooperate with the selling holders of Restricted
Stock and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Restricted Stock to be
sold, such certificates to be in such denominations and registered in such names
as such holders or the managing underwriters may request at least two business
days prior to any sale of Restricted Stock; and
(j) permit any holder of Restricted Stock which holder,
in the sole and exclusive judgment, exercised in good faith, of such holder,
might be deemed to be a controlling person of the Company, to participate in
good faith in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such holder and its counsel should
be included.
For purposes of Section 7(a) and 7(b) and of Section 4(c), (i)
the period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and (ii) the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby and
90 days after the effective date thereof; provided, however, that the period
referred to in this clause (ii) shall be extended by one day for each day that
the Company's obligations are suspended under Section 6(b) in connection with a
Suspension Event and for each day that the holders of Restricted Stock are
unable to sell their shares of Restricted Stock upon the happening of an event
as a result of which the prospectus contained in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein (subject to a maximum period under
this clause (ii) of 180 days).
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information
requested by the Company with respect to themselves and the proposed
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws and to make the
registration statement correct, accurate and complete in all respects with
respect to such sellers; provided, however, that this requirement shall not be
deemed to
9
<PAGE> 10
Amended and Restated Registration Rights Agreement -- Page 10
limit any disclosure obligation arising out of any seller's relationship to the
Company if one of such seller's agents or affiliates is an officer, director or
control person of the Company. In addition, the sellers shall, if requested by
the Company, execute such other agreements, which are reasonably satisfactory to
them and which shall contain such provisions as may be customary and reasonable
in order to accomplish the registration of the Restricted Stock.
In connection with each registration pursuant to Sections 4, 5
or 6 covering an underwritten public offering, the Company and each seller agree
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying
with Sections 4, 5 and 6, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees and expenses of one outside counsel for the selling
holders of Restricted Stock in connection with the registration of Restricted
Stock, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, costs of any insurance which
might be obtained, but excluding any Selling Expenses, are called "Registration
Expenses." All underwriting discounts and selling commissions applicable to the
sale of Restricted Stock and the fees and expenses of more than one counsel for
the selling holders of Restricted Stock in connection with the registration of
Restricted Stock are called "Selling Expenses."
The Company will pay all Registration Expenses in connection
with each registration statement under Sections 4, 5 or 6. All Selling Expenses
in connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification.
(a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, the
Company will indemnify and hold harmless each holder of Restricted Stock, its
officers and directors, each underwriter of such Restricted Stock thereunder and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder, officer, director,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact
10
<PAGE> 11
Amended and Restated Registration Rights Agreement -- Page 11
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, (ii) any blue sky application or other document executed
by the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Restricted Stock under the securities laws thereof
(any such application, document or information herein called a "Blue Sky
Application"), (iii) 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, (iv) any violation by the Company or its agents of any
rule or regulation promulgated under the Securities Act applicable to the
Company or its agents and relating to action or inaction required of the Company
in connection with such registration, or (v) any failure to register or qualify
the Restricted Stock in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company (the undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on the seller's behalf (provided
that in such instance the Company shall not be so liable if it has undertaken
its best efforts to so register or qualify the Restricted Stock) and will
reimburse each such holder, and such officer and director, each such underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such seller, any such underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, each
seller of such Restricted Stock thereunder, severally and not jointly, will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each other
holder of Restricted Stock, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, other seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or any Blue Sky Application or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, other seller,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with
11
<PAGE> 12
Amended and Restated Registration Rights Agreement -- Page 12
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus; and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 9 and shall only relieve it from any liability which it may have to such
indemnified party under this Section 9 if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 9 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) The indemnities provided in this Section 9 shall
survive the transfer of any Restricted Stock by such holder.
10. Changes in Common Stock or Convertible Preferred Stock. If,
and as often as, there is any change in the Common Stock or the Convertible
Preferred Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate
12
<PAGE> 13
Amended and Restated Registration Rights Agreement -- Page 13
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Common Stock or the
Convertible Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Stock to the public without registration,
at all times after 90 days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration.
12. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the articles of organization or Bylaws of the
Company or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent the
indemnification provisions herein may be deemed not enforceable.
13
<PAGE> 14
Amended and Restated Registration Rights Agreement -- Page 14
13. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Purchased Shares or Restricted
Stock), whether so expressed or not; provided, however, that registration rights
conferred herein on the holders of Purchased Shares or Restricted Stock shall
only inure to the benefit of a transferee of Purchased Shares or Restricted
Stock if (i) there is transferred to such transferee at least ten percent (10%)
of the shares of Restricted Stock (appropriately adjusted for any subdivision or
combination) originally issued pursuant to the Initial Purchase Agreement or the
Series C Purchase Agreement, as the case may be, to the direct or indirect
transferor of such transferee or (ii) such transferee is a partner, shareholder
or affiliate of a party hereto.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by certified or
registered mail, return receipt requested, postage prepaid, or telexed, in the
case of non-U.S. residents, addressed as follows:
if to the Company or any other party hereto, at the address of
such party set forth in the Initial Purchase Agreement or the Series C Purchase
Agreement, as the case may be, or in a certain Stockholders Agreement by and
among the parties hereto (other than Jorge A. Werlang) dated as of the date
hereof with a copy to the Company's counsel as indicated therein, or as to Mr.
Werlang, at his address as set forth in the Termination and Settlement Agreement
to which he is party with the Company and CheMatch, Inc.;
if to any subsequent holder of Purchased Shares or Restricted
Stock, to it at such address as may have been furnished to the Company in
writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Purchased Shares or
Restricted Stock) or to the holders of Purchased Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware.
(d) This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them or any of them as to such subject
matter; provided, however, that with respect to the parties to the Initial
Purchase Agreement, this Agreement shall be effective insofar as the Series A
Units and Series B Units are concerned only upon the closing of the Series C
Purchase Agreement at which time the Registration Rights Agreement, dated June
21, 1999, among the Company, Battery Ventures and the other parties named
therein shall be null and void and of no further effect.
14
<PAGE> 15
Amended and Restated Registration Rights Agreement -- Page 15
(e) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least 66% of the outstanding shares of Restricted Stock held
by the Investors (excluding any shares of the Convertible Preferred Stock issued
pursuant to the exercise of Preferred Stock Warrants issued pursuant to the
Initial Purchase Agreement or the Series C Purchase Agreement) and at least 66%
of the outstanding shares of Restricted Stock held by non-Investors.
Notwithstanding the foregoing, no such amendment or modification shall be
effective if and to the extent that such amendment or modification either (a)
creates any additional affirmative obligations to be complied with by any or all
of the Purchasers or (b) grants to any one or more Purchasers any rights more
favorable than any rights granted to all other Purchasers or otherwise treats
any one or more Purchasers differently than all other Purchasers.
(f) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) The obligations of the Company to register shares of
Restricted Stock under Sections 4, 5 or 6 shall terminate four (4) years after
completion of an underwritten public offering of shares of Common Stock in which
the net proceeds received by the Company shall be at least $25 million and the
per share price paid by the public for such shares shall be at least $15.70 per
share (appropriately adjusted to reflect any subdivision, combination or the
like).
(h) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the Company, each holder
of Restricted Stock who is a party to this Agreement shall agree not to sell
publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 180 days following the consummation of such initial
public offering; provided, however, that all persons entitled to registration
rights with respect to shares of Common Stock who are not parties to this
Agreement and all executive officers and directors of the Company shall also
have agreed not to sell publicly their Common Stock under the circumstances and
pursuant to the terms set forth in this Section 13(h).
(i) The Company shall not grant to any third party any
registration rights comparable to or more favorable than any of those contained
herein without the prior written consent of holders holding more than 66% of the
Restricted Stock, so long as the Purchasers shall own at least 50% of the
Restricted Stock.
(j) If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
15
<PAGE> 16
Amended and Restated Registration Rights Agreement -- Page 16
[Remainder of page intentionally left blank.]
16
<PAGE> 17
Amended and Restated Registration Rights Agreement -- Page 17
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
PETROCHEMNET HOLDINGS, INC.
By: /s/ LARRY MCAFEE
---------------------------
Name: Larry McAfee
Title:
AGREED TO AND ACCEPTED as of
the date first above written.
EARL H. ARMSTRONG TERESA A. ACOSTA
/s/ EARL H. ARMSTRONG /s/ TERESA A. ACOSTA
- ------------------------------ ------------------------------
WILLIAM P. BARRY FRED B. COOK
/s/ WILLIAM P. BARRY /s/ FRED B. COOK
- ------------------------------ ------------------------------
JORGE A. WERLANG
/s/ JORGE A. WERLANG
- ------------------------------
17
<PAGE> 18
Amended and Restated Registration Rights Agreement -- Page 18
PURCHASERS:
SPROUT CAPITAL VIII, L.P.
By: DLJ Capital Corp.,
its managing general partner
By: /s/ JANET A. HICKEY
-------------------------
Name: Janet A. Hickey
Title: Senior Vice President
SPROUT VENTURE CAPITAL, L.P.
By: DLJ Capital Corp.,
its general partner
By: /s/ JANET A. HICKEY
-------------------------
Name: Janet A. Hickey
Title: Senior Vice president
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation,
its general partner
By: /s/ JANET A. HICKEY
-------------------------
Name: Janet A. Hickey
Title: Attorney in-fact
DLJ CAPITAL CORP.
By: /s/ JANET A. HICKEY
-------------------------
Name: Janet A. Hickey
Title: Senior Vice president
MARQUETTE VENTURE PARTNERS III, L.P.
By: Marquette III, L.L.C.
By: /s/ [ILLEGIBLE]
-------------------------
Name:
Title:
E. I. DUPONT DE NEMOURS AND COMPANY
By: /s/ JON ERIK FRYWALD
-------------------------
Name: Jon Erik Frywald
Title: Vice President e-Commerce
18
<PAGE> 19
Amended and Restated Registration Rights Agreement -- Page 19
BATTERY VENTURES V, L.P.
By: Battery Partners V, LLC
By: /s/ OLIVER D. CURME
-------------------------
Member Manager
BATTERY INVESTMENT PARTNERS V LLC
By: /s/ OLIVER D. CURME
-------------------------
Member Manager
BATTERY VENTURES CONVERGENCE FUND, L.P.
By: Battery Convergence Partners, LLC
By: /s/ OLIVER D. CURME
-------------------------
Name: Oliver D. Curme
Title:
STOLT-NIELSEN TRANSPORTATION GROUP LTD.
By: /s/ JAN CHR. ENGELHARDSTEN
---------------------------
Name: Jan Chr. Engelhardsten
Title: Chief Financial Officer
MILLENIUM HOLDINGS INC.
By: /s/ GEORGE H. HEMPSTEAD
-------------------------
Name: George H. Hempstead
Title: Senior Vice President
/s/ DON CHURCHMAN
- -------------------------
Don Churchman
/s/ CHRIS DAVIS
- -------------------------
Chris Davis
/s/ ROGER LEEDY
- -------------------------
Roger Leedy
/s/ LARRY MCAFEE
- -------------------------
Larry McAfee
/s/ CARL MCCUTCHEON
- -------------------------
Carl McCutcheon
/s/ JIM RAHE
- -------------------------
Jim Rahe
/s/ JOHN SHARUM
- -------------------------
John Sharum
/s/ GERRY ELIAS
- -------------------------
Gerry Elias
19
<PAGE> 1
EXHIBIT 10.13
ALLIANCE AGREEMENT
This Alliance Agreement ("Agreement"), dated as of June 21, 1999, is by
and between PETROCHEMNET HOLDINGS, INC., a Delaware corporation
("PetroChemNet"), and DEWITT & COMPANY INCORPORATED, a newly-formed Texas
corporation ("DeWitt").
RECITALS
This Agreement outlines our mutual objectives in entering into an ongoing
Strategic Alliance between the parties hereto, following the anticipated
reorganizations transactions consummated on or about the date hereof involving
PetroChemNet, DeWitt, the stockholders of DeWitt and certain other parties. As a
result of those reorganizations transactions, among other things, PetroChemNet
acquired CheMatch, Inc., a Texas corporation ("CheMatch"). The purposes of this
Agreement include fostering the growth and development of PetroChemNet and
DeWitt, among others.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged:
1. DeWitt will place its products on a DeWitt branded channel on the
PetroChemNet Information Platform, directly accessible at
"dewitt.petrochem.net" to provide analysis, information and consulting
services on an appropriate fee sharing basis.
2. DeWitt will provide Trading Analysis and Support on the PetroChemNet
Trading Platform (formerly CheMatch). These services will be provided on a
fee sharing basis with the anticipation that the share to PetroChemNet will
be significantly lower than for items presented on the Information
Platform.
3. PetroChemNet will develop a Tier One Level of service for the exclusive
purpose of providing DeWitt's Trading Analysis and Support directly to
Trading Platform users, subject to a first right of refusal provision as
defined below. Tier One Level will be defined as the only level from which
actual data and/or commentary can be accessed directly (one toggle away)
from the actual Trading Platform screen.
4. Both DeWitt and PetroChemNet acknowledge that PetroChemNet will provide
other links from the sales and trading platform on a Tier Two basis to its
own information and analysis, and to other information, analysis and
services as may be useful to the value of the sales and trading activity.
Tier Two basis shall mean that a menu screen describing other data and/or
commentary available will be accessible from the trading screen but not the
actual data and/or commentary screen itself.
5. Tier One exclusivity for Dewitt will be subject to a first right of
refusal. For those product areas included or planned for inclusion on a
Trading Platform which are not yet covered by a DeWitt Consulting Service,
DeWitt will be granted a right of first refusal to broaden its consulting
line to match new PetroChemNet product additions. DeWitt agrees to develop
such products and services at its expense. Both parties agree to provide
reasonable notice in relation to their interactions in this area.
<PAGE> 2
6. PetroChemNet will grant Dewitt access to trading information and screens
(in preference to other consulting companies only) for product areas for
which DeWitt provides online information. PetroChemNet retains the right to
offer such trading pricing and other information from Trading Platform
activities to third parties that are not competitors of Dewitt.
7. DeWitt agrees to use reasonable commercial efforts to assist in the
promotion of membership participation, liquidity, and usage of the
PetroChemNet Trading Platform. To this end DeWitt will allow its client
lists to be used via offering CheMatch trading to all clients of the
appropriate associated DeWitt Services.
8. Dewitt retains the right to offer or deliver its Consulting Services via
other alternative marketing and/or delivery modes as may best fit its
business objectives. DeWitt will not offer Trading Services for specific
products on another competitive Trading Platform as long as those products
are being significantly traded on PetroChemNet.
9. All DeWitt Consulting Services and the new Trading Services provided by
DeWitt on the Trading Platforms and the content thereof remain the express
property of Dewitt and may not be sold or distributed in any manner other
than outlined in this Agreement.
10. Both parties recognize that there will be costs involved in bringing DeWitt
products and services into the PetroChem.net system. Both agree that costs
to develop, produce, and market DeWitt's basic Services will be
undertaken by the parties to reflect reasonable burden sharing related to
making the products and services available over the PetroChem.net system.
For the new Trading Analysis and Support services, PetroChemNet will share
a reasonable burden for staff as it relates to the ongoing input and screen
maintenance for the Trading platform.
11. PetroChemNet may terminate this Agreement upon the payment to DeWitt of
$500,000 in cash. DeWitt may terminate this Agreement with or without cause
on one year's prior written notice upon the payment to PetroChemNet of
$60,000 at such final termination date. Upon any such termination, all
rights and obligations under this Agreement shall terminate and be of no
further force or effect.
12. In the event that either party (the "Non-Defaulting Party") believes that
the other party hereto has failed to perform any of its obligations under
this Agreement or if a dispute arises between the parties hereto involving
the subject matter of this Agreement, the Non-Defaulting Party may provide
notice of such failure or a notice of such dispute to the other party and
both parties agree to promptly meet and attempt to resolve that failure to
perform or dispute in an amicable manner, before any action is brought by
either party hereto in any court of competent jurisdiction regarding that
matter.
13. Each of Teresa A. Acosta, Earl H. Armstrong and William P. Barry (the
"Stockholders") join in the execution and delivery of this agreement
exclusively for the purposes of this Section, and no others. None of them
shall be personally liable for any action or omission of DeWitt under this
Agreement except as provided in this Section. As additional consideration
for PetroChemNet's entering into this
<PAGE> 3
Agreement, neither any Stockholder nor DeWitt shall, during the term of this
Agreement, directly or indirectly, for himself, herself or itself or on behalf
of or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature, supply for use on any Internet-based
trading platform (a "Trading Platform") any daily trading analysis ("Daily
Product Information") relating to any petrochemical or petrochemical-based
product. Notwithstanding the foregoing, if a Stockholder and/or DeWitt in good
faith wish, at any time during the term of this Agreement, to supply Daily
Product Information for use on a Trading Platform with respect to any
petrochemical or petrochemical-related product that neither PetroChemNet nor any
of its affiliates (including CheMatch Inc., a Texas corporation, PetroChemNet,
Inc., a Delaware corporation, and any of their respective successors or assigns
(including any subsequent direct or indirect purchaser of the CheMatch On-Line
system), all of whom, collectively with PetroChemNet, are sometimes referred to
herein as a "PetroChemNet-related Party") is not then offering on a Trading
Platform, then such party (a "Supplying Party") shall first provide to
PetroChemNet written notice (the "Offer Notice") of the Supplying Party's wish
to do the same, which Offer Notice shall set out the petrochemical or
petrochemical-related product with respect to which the Supplying Party wishes
to provide such information, and if the following provisions are complied with
by that Supplying Party, it shall not be deemed a breach of the provisions set
out above in this Section. The Supplying Party agrees that, during the 90-day
period after delivery of an Offer Notice, it will not offer the Daily Product
Information that was the subject of such Offer Notice to any party for use on a
Trading Platform. During such 90-day period, the Holdings-related Parties shall
have an exclusive right to determine whether or not they want to have the
Supplying Party supply such Daily Product Information for use on the
Holdings-related Parties' Trading Platform, which right will include an
exclusive right in favor of the Holdings-related Parties to negotiate with the
Supplying Party as to the terms thereof during that 90-day period. If an
agreement is not reached between the Supplying Party and the relevant
Holdings-related Party during that 90-day period, then the Supplying Party shall
be free to engage in supplying such Daily Product Information to or for the
benefit of any party, and the Holdings-related Parties shall be free to acquire
such Daily Product Information from any other source or to develop such Daily
Product Information itself, in any case, on any terms and conditions each such
party deems acceptable in its sole and absolute discretion, which terms may be
similar or dissimilar to those discussed by it with the other related party.
Notwithstanding any provision of this Section or any other agreement to the
contrary, including without limitation any provision of (including without
limitation the indemnity provisions set out in Section 9 of) that certain
Agreement and Plan of Reorganization, by and among the parties hereto, Fred B.
Cook, PetroChemNet, Inc., a Delaware corporation, and a wholly-owned subsidiary
of PetroChemNet which was merged into PetroChemNet, Inc., no Stockholder shall
be personally liable for a breach of the covenants set out in this Section, nor
shall he or she be obligated for any indemnity or contribution for a breach of
the covenants set out in this Section, unless that Stockholder either alone or
with any other person, persons, company, partnership, corporation or business of
whatever nature, engaged (whether for himself or herself or on behalf of any
such other person or party, and whether directly or indirectly) in the activity
that first resulted in that breach of such covenants.
<PAGE> 4
In general, PetroChemNet and DeWitt agree to explore and develop other
joint business opportunities and relationships in other areas that are mutually
agreed and beneficial. PetroChemNet and DeWitt anticipate that following the
acquisition of CheMatch, PetroChemNet will, for a brief interim period, maintain
appropriate office space in DeWitt's Office Suite in Houston for the purpose of
sales, account management and customer support. Accordingly, DeWitt and
PetroChemNet will enter into a Service Agreement and work jointly toward shared
personnel and support facilities as appropriate. This approach should offer
efficiencies and cost savings. Not withstanding this, PetroChemNet may, locate
its facilities as it may, in its sole discretion, after reasonable notice is
given.
Accepted and Agreed:
DEWITT & COMPANY INCORPORATED PETROCHEMNET HOLDINGS, INC.
By: /s/ EARL H. ARMSTRONG By: /s/ JOHN A. BOHN, JR.
-------------------------------- -------------------------------
Earl H. Armstrong Name: John A. Bohn, Jr.
As Its Authorized Vice President As Its Authorized President
TERESA A. ACOSTA EARL H. ARMSTRONG
/s/ TERESA A. ACOSTA [BY EARL H. ARMSTRONG] /s/ EARL H. ARMSTRONG
- -------------------- ---------------------
WILLIAM P. BARRY
/s/ WILLIAM P. BARRY
- --------------------
<PAGE> 1
EXHIBIT 10.14
[Letterhead of PetroChemNet Holdings, Inc.]
September 30, 1999
Computer Sciences Corporation
266 Second Avenue
Waltham, MA 02451
Gentlemen:
This letter will evidence our mutual understanding with respect to the
strategic alliance (the "Strategic Alliance") between PetroChemNet Holdings,
Inc., a Delaware corporation ("PCN") and Computer Sciences Corporation, a
Nevada corporation ("CSC").
1. Initial Purchase of PCN Stock.
(a) CSC or one of its subsidiaries will purchase, for an aggregate of $1
million cash, a number of shares of common stock of PCN which as of
the date of this letter represents 1.25% of the fully diluted
outstanding common stock of PCN at a price based on the fully diluted
common stock of PCN having an aggregate value of $80 million.
(b) CSC's investment must be approved by PCN's Board; the Board is
expected to consider the investment prior to October 6, 1999. PCN will
provide CSC with written notification of PCN's Board approval.
2. Commissions for New PCN Business.
(a) CSC and PCN have agreed upon a list of prospective PCN customers with
whom CSC has a relationship and to whom CSC will be authorized to
market PCN services (the "Listed Prospects"). The list is attached
hereto and as may be amended by mutual consent.
(b) This list will be updated from time to time by mutual agreement, and
Listed Prospects that are not actively being pursued by CSC within 3
months of being added to the list will be removed from the list.
(c) PCN may either pursue the Listed Prospects in conjunction with CSC or
individually without CSC, but PCN will provide notice and coordination
of its activities in pursuit of the Listed Prospects on at least a
monthly basis.
(d) CSC will receive commissions on a monthly basis, equal to 20% of the
cash realized (commissions from trading activities) by PCN from sales
of its services to Listed Prospects
<PAGE> 2
for the preceding month during the 3-year period following the initial
sale, unless earlier terminated in accordance with paragraphs 5 or 8
below.
3. CSC Consulting Services.
(a) CSC will have the right of first negotiation, but not the obligation,
to provide consulting services required by PCN in certain specified
areas, including strategic consulting, marketing, new product
development, system development management, international, logistics,
letters of credit and credit enhancement.
(b) These services will be provided at competitive rates and are subject
to negotiation of mutually agreeable definitive agreements.
4. Additional Opportunities.
(a) CSC and PCN may enter into mutually agreeable additional arrangements
with respect to co-branded, co-marketed or cross-sold services.
5. Payments.
(a) Commissions payable under paragraph 2 above shall be paid in common
stock of PCN, valued based on the most recent transaction value or
appraisal until there is a market price established after PCN's initial
public offering, after which time the price of the common stock will be
the closing sales price of the common stock at the end of the month in
which the commissions are earned. No further commissions will be
payable under paragraph 2 above after CSC is issued $5 million in
aggregate value of common stock under paragraphs 2, 3 or 4 herein. PCN
and CSC will renegotiate and extend a mutually agreeable commission
structure beyond this $5 million aggregate cap by mutual consent and
amendment to this agreement to reflect CSC's ongoing contributions.
(b) On a project-by project basis, PCN may, but shall not be obligated to,
offer CSC the right to receive up to 50% of CSC's consulting fees under
paragraph 3 above in the form of PCN common stock, and CSC shall not be
obligated to accept any such stock in lieu of cash. The consulting fees
will be payable upon the completion of the consulting services in
accordance with the definitive agreements, and the common stock will be
valued based on the most recent transaction value or appraisal, except,
if PCN is a public company at the date of the contract execution of the
consulting services, the value will be based on the average of the
closing sales prices of the common stock for the 10 trading days
immediately preceding the date of contract execution of the consulting
services, unless agreed otherwise in advance.
(c) Amounts payable under paragraph 4 above shall be set forth in the
definitive agreements and may be in the form of common stock of PCN
valued as set forth in such definitive agreements.
6. Preferred Provider.
(a) During the term of the Strategic Alliance:
2
<PAGE> 3
(i) CSC will be the preferred IT systems integrator with whom PCN
partners, or enters into arrangements for co-branded, co-marketed
or cross-sold services so long as CSC's rates are competitive and
its technology and performance are reasonably acceptable to PCN;
(ii) PCN will be CSC's and its affiliates preferred platform and
exchange for independent market trading of commodity products
traded over PCN's system (including initially chemicals, polymers
and refined oil products) with respect to PCN's direct
competitors that are set forth from time to time in writing by
PCN to CSC in whom CSC makes an investment, or with whom CSC
partners, or enters into arrangements for co-branded, co-marketed
or cross-sold services. If CSC proposes to make an investment in
or a strategic alliance for co-branded, co-marketed or cross-sold
services or otherwise with any competitor of PCN, CSC shall give
PCN 30 days' prior written notice. If PCN wishes to enter into
new lines of business in addition to trading of chemicals,
polymers and refined oil products and wishes to define additional
direct competitors in which CSC would not make an investment, or
with whom CSC would not partner, or enter into arrangements for
co-branded, co-marketed or cross-sold services, then PCN shall
give CSC 30 days' prior written notice and amend this agreement
by mutual consent. PCN initially designates such competitors to
include (but not be limited to) ChemConnect, Commercex and I-2-I,
e-chemicals, fob.com, Verticalnet, efuel.com, and their
affiliates that are engaged in directly competing business.
(b) CSC and its affiliates will not compete with PCN during the term of
the Strategic Alliance and for a period of one year after the
termination of the Strategic Alliance.
7. Meetings.
(a) Carl D. McCutcheon and a senior representative of CSC, who shall
initially be Chris Davis, shall meet no less than once each calendar
quarter to discuss opportunities and methods to improve the Strategic
Alliance.
8. Term.
(a) Either CSC or PCN may terminate the Strategic Alliance at any time
upon 30 days' prior written notice.
(b) Upon termination of the Strategic Alliance:
(i) If PCN has not completed its initial public offering, PCN will
have the option to repurchase all PCN common stock held by CSC at
a price equal to the appraised value of such shares determined by
the average of two independent appraisers, one selected by PCN,
the second selected by CSC, (unless by mutual agreement it is
determined that a second appraisal is not necessary). The
appraisal costs shall be shared equally by PCN and CSC;
(ii) If PCN has completed its initial public offering, PCN shall have
the option to repurchase all PCN common stock held by CSC at a
price equal to the average closing price of the common stock for
the 10 trading days immediately preceding the date of repurchase.
If PCN chooses not to repurchase the shares of common stock of
PCN held
3
<PAGE> 4
by CSC, CSC shall sell not more that 25% of the shares of PCN
held by it in any subsequent calendar quarter, subject to any
restrictions imposed by underwriters or securities laws;
(iii) PCN will continue to pay commissions to CSC pursuant paragraph 2
above, subject to the limitation in paragraph 5 above, if PCN
terminates the Strategic Alliance. If CSC terminates the
Strategic Alliance, PCN will pay commissions to CSC pursuant to
paragraph 2 above, subject to the limitations in paragraph 5
above, only for a period of six months after the date of
termination. Upon termination of the Strategic Alliance, CSC
will no longer be authorized as a PCN sales channel under
paragraph 2 above;
(iv) CSC will complete any consulting project for PCN previously
commenced pursuant to paragraph 3 above;
(v) CSC and PCN will terminate on an orderly basis all arrangements
entered into pursuant to paragraph 4 above; and
(vi) The provisions of paragraphs 6 (other than paragraph 6(b) which
shall remain in effect in accordance with its terms) and 7 above
will cease to apply to CSC and PCN.
9. Miscellaneous.
(a) The Strategic Alliance, this letter and all documentations
contemplated by this letter shall be governed by the internal law of
the State of Texas, without regard to any conflict of laws principles.
(b) Each of PCN and CSC will bear its own costs and expenses of the
preparation of the documentation and performance of the obligations
set forth in this letter.
4
<PAGE> 5
If this letter correctly sets forth our understanding, please indicate your
acceptance by executing this letter in the space provided below.
This letter agreement shall be effective as of September 30, 1999. CSC agrees
to wire transfer the funds to PCN's designated account to purchase the stock
within 5 business days after notification by PCN of its Board of Directors
approval of this transaction.
Very truly yours,
PETROCHEMNET HOLDINGS, INC.
By /s/ CARL D. McCUTCHEON
-------------------------------------
Carl D. McCutcheon
President and Chief Executive Officer
ACCEPTED AND AGREED TO
THIS 30th day of September, 1999
COMPUTER SCIENCES CORPORATION
By /s/ PAUL T. TUCKER
------------------------------
Paul T. Tucker
Vice President
5
<PAGE> 1
EXHIBIT 10.15
[Letterhead of PetroChemNet Holdings, Inc.]
November 11, 1999
E.I. du Pont de Nemours and Company
1007 Market Street
Wilmington, DE 19898
Gentlemen:
This letter will evidence our mutual understanding and agreement with
respect to the strategic alliance (the "Strategic Alliance") between
PetroChemNet Holdings, Inc., a Delaware corporation ("PCN, CheMatch, or the
Company") and E. I. du Pont de Nemours and Company, a Delaware corporation
("DuPont").
1. DuPont Purchase of PCN Preferred Stock.
(a) DuPont will purchase for cash $7 million of PCN Series C Preferred
Stock at the same price and subject to the same terms and
conditions as the other purchasers of the Series C Preferred Stock
at the closing of the Series C Preferred Stock financing ("the
Series C Preferred Stock Financing"). The target closing date for
the Series C Preferred Stock Financing is November 18, 1999.
2 DuPont Purchase of PCN Common Stock
(a) DuPont shall, simultaneous with the closing of the Series C
Preferred Stock Financing, purchase a number of shares of PCN
Common Stock equal to $5,000,000, divided by the price per share
paid for the Series C Preferred Stock. The consideration for the
purchase of the Common Stock shall consist of $.01 per share cash,
and other good and valuable consideration including goods and
services as further described herein.
(b) DuPont will work with PCN to add those potential customers agreed
by the parties to the customers using the CheMatch platform of PCN
for trading products. For each such customer up to a maximum of 20
customers, that completes at least five (5) traces prior to
December 31, 2000, with third parties other than DuPont on the
CheMatch platform at the standard rates charged for the use of the
CheMatch platform, DuPont shall earn a commission of $100,000. In
lieu of a cash payment, DuPont will use such commission to
purchase a number of shares of Common Stock of PCN equal to such
$100,000, divided by the Fair Market Value per share of Common
Stock. For the purposes of this paragraph 2(b), "Fair Market
Value" shall mean (i) the price per share paid for the Series C
Preferred Stock until the date 120 days from 1 December 1999, or
(ii) thereafter, the per share price based on the most recent
transaction value or appraisal, if PCN has not completed its
initial public offering, or if PCN has completed its initial
<PAGE> 2
public offering, the closing price of PCN's Common Stock on the date of
the fifth trade that meets the condition set forth above.
(c) DuPont shall have the right to purchase, prior to the closing of the
initial public offering of Common Stock of PCN registered under the
Securities Act of 1933, as amended, additional shares of PCN Common
Stock, so that after such purchase DuPont would own 10% of the "fully
diluted" Common Stock of PCN. In determining "fully diluted" Common
Stock, all outstanding consultant, employee and director stock options
shall be assumed to be exercised, all warrants shall be assumed to be
exercised at a net amount using the Fair Market Value of the Common
Stock, and all Preferred Stock shall be assumed to be converted at the
conversion price in effect at that time. For the purposes of this
paragraph 2(c), "Fair Market Value" shall mean the per shares price to
public in the initial public offering of Common Stock in the event that
DuPont shall exercise its right to purchase such additional shares in
connection with the initial public offering of Common Stock of PCN, or
the per share price based on the most recent transaction value or
appraisal if such purchase is not in connection with the initial public
offering. For the purposes of this paragraph 2(c), DuPont shall be
deemed to have exercised its right hereunder in connection with the
initial public offering of Common Stock of PCN, if prior to any written
notice to PCN by DuPont that it is exercising its right to purchase
additional shares of Common Stock under this paragraph 2(c), PCN
notifies DuPont in writing that it is contemplating filing a
registration statement with the Securities and Exchange Commission for
an initial public offering of its Common Stock within the following 60
days. DuPont shall have 15 days after receipt of such notice to
exercise its right to purchase under this paragraph 2(c) by sending
written notice to PCN of such exercise. If DuPont fails to send such
notice to PCN within the time set forth above, DuPont shall be deemed
to have waived its right to purchase any additional shares of Common
Stock of PCN in the event that the contemplated initial public offering
of Common Stock of PCN is completed. If DuPont exercises its right to
purchase such additional shares of Common Stock, the closing of such
purchase shall occur at the same time as the closing of the initial
public offering. DuPont shall have the right to purchase additional
shares of Common Stock under this paragraph 2(c) only once, and after
such initial purchase, its rights under this paragraph 2(c) shall
terminate. Further provided that, in the event DuPont has exercised the
share purchase option outlined in this paragraph 2(c), the provisions
of paragraph 2(b) above shall not operate to allow DuPont to increase
its ownership in excess of the 10% of "fully diluted" Common Stock of
PCN specified above in this paragraph 2(c).
3. DuPont's Obligations and Agreements.
(a) For the purposes of this paragraph 3, "Products" shall mean bulk
chemicals, bulk polymers and refined oil products available for trade
over the CheMatch system
(b) DuPont shall: (1) for a period of one year from the closing of the
transactions contemplated by this letter agreement use the CheMatch
platform of PCN at the standard rates charged for the use of the
CheMatch platform exclusively for Products that it buys using
e-commerce; (2) use reasonable efforts to use the
2
<PAGE> 3
CheMatch platform of PCN at the standard rates charged for the use of
the CheMatch platform for any Products that it trades; (3) for the
four year period commencing 1 January 2001, use reasonable efforts to
trade at the standard rates charged for the use of the CheMatch
platform an increasing amount of spot purchases of Products provided
that for the relevant Product CheMatch continues to serve as the
marketplace for at least a reasonable quantity of such Product and
such purchases continue to be in DuPont's economic interest; (4)
assist PCN with the design of the CheMatch platform so that it becomes
a more commercially desirable means of transacting business; and (5)
provide PCN, at no cost to PCN, with a full time equivalent employee
with knowledge of the relevant markets for a period of one year to
work on increasing the volume of trading through the CheMatch
platform.
(c) DuPont shall not invest in enterprises competing with PCN in the
business of providing an on-line neutral marketplace with Product
offerings which significantly overlap with those available through
PCN, and specifically including without limitation ChemConnect, Inc.,
and I to I Solutions Limited. Subject to the specific exclusion of
ChemConnect, Inc., and I to I Solutions Limited, such prohibition
shall not apply to investment by DuPont in enterprises in the business
of providing an on-line neutral marketplace where DuPont's interest is
to invest in such enterprises in order to enable DuPont to sell
branded or specialty products. This provision shall remain in effect
for the period during which DuPont or its affiliates maintain an
equity interest in PCN, provided, however, that this provision shall
remain in effect for at least one year from the date of the closing of
the transactions contemplated by this letter agreement.
(d) DuPont shall provide PCN with a credit of $2 million towards the
purchase of DuPont products and/or consulting services over a three
year period from the closing of the Series C Preferred Stock
Financing. The products and/or services shall include those related
to market development, advertising, safety, health and environmental,
logistics and other products or services as mutually agreed by the
parties. Purchases of products shall be deducted from the $2 million
total credit at list price less standard discount. Consulting
services will be valued at $400 per hour. Additional services
provided by DuPont may include without limitation items such as office
space in international locations, attendance at trade conferences to
provide testimonials or demonstrations of the CheMatch system,
speaking at company or industry functions, trade shows or
presentations to securities analysts.
4. Additional Conditions.
(a) Subject to the execution of appropriate license agreements, DuPont
will make available to CheMatch, for use on its site or through access
to a DuPont Safety Resources site, certain safety, health and
environmental information as agreed by the parties for a negotiated
annual fee to be applied against the $2 million commitment pursuant to
3(d) above to purchase DuPont products and services. Provided that
the fee for any year is agreed by the parties, DuPont further agrees
not to make such information available to ChemConnect, Inc. or
E-Chemicals.
3
<PAGE> 4
(b) Provided that DuPont is in compliance with its obligations under
paragraph 3, DuPont shall have the right to observe at PCN Board
meetings so long as it owns 5% or more of PCN's Common Stock on a
fully diluted basis (including Common Stock issuable on conversion of
the Series C Preferred Stock warrants and options), but DuPont shall
not be entitled to be present during any discussions relating to
specific third party customers. DuPont shall give PCN notice prior to
the date of the PCN Board meeting at which DuPont desires to have an
observer. Such notice shall state the name of the observer and shall
acknowledge that such observer is bound by confidentiality obligations
to DuPont no less stringent than those set out in this letter
agreement as a condition to the observer attending the PCN Board
meeting.
(c) The securities which are the subject of this agreement have not been
registered under the Securities Act of 1933, as amended, or applicable
state securities laws. These securities have been acquired for
investment and not with a view to distribution or resale, and may not
be sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such securities under
the Securities Act of 1933, as amended, and applicable state
securities laws, or the availability of an exemption from the
registration provisions of the Securities Act of 1933 and applicable
state securities laws. These securities will be further subject to any
transfer restrictions imposed by the managing underwriter of the PCN
initial public offering for such period following the PCN initial
public offering as is determined by such managing underwriter.
(d) The parties agree to meet quarterly for a minimum period of two years
to share ideas and recommendations on e-commerce strategies and site
design as related to PCN's CheMatch platform and DuPont's e-commerce
activities. There will be no consulting or other fees for those
personnel participating in these quarterly sessions.
(e) DuPont and PCN shall use reasonable efforts to generate additional
revenue streams for each other, which may include, for example,
integration opportunities between PCN's CheMatch platform and DuPont's
services.
(f) For a period of five years from the Closing of the transactions
contemplated by this letter agreement, DuPont shall have the right of
first negotiation to provide logistics, product testing and safety,
health and environmental services or other services which are
identified by DuPont to PCN as potential offerings. PCN shall be free
to pursue with other parties any services which at such time are not
identified by DuPont to PCN or which DuPont is not presently or at
such time capable of delivering. Any such services provided by DuPont
shall be at competitive rates and shall be subject to negotiation of
definitive agreements.
5. Confidentiality and Privacy.
(a) Both Parties shall maintain the confidentiality of each other's
proprietary information pursuant to the confidentiality agreement
between them dated October 19, 1999.
(b) PCN shall adopt a privacy policy no less comprehensive and with terms
substantially similar to the then current terms of DuPont's privacy
policy. DuPont shall not be obligated to provide information to PCN
which is deemed
4
<PAGE> 5
private under any applicable law, directive, statute, or regulation
which would violate such law, directive, statue, or regulation
provided that DuPont shall provide a copy of such policy to PCN and
shall give notice of any changes in policies.
(c) Neither party may reference the other party to this agreement in
presentations to third parties, advertising, promotions or other
published information, unless such disclosure is required by law,
without the other party's prior consent. Both parties may make
disclosure of the existence of the DuPont investment in PCN in
mutually agreed press releases provided that the detailed terms and
conditions shall remain confidential unless required to be disclosed
by law. Provided that, PCN and DuPont agree that they will issue a
press release contemporaneous with the Series C Preferred Stock
closing acknowledging and giving public notice of DuPont's inclusion
as an investor in PCN, without giving specific details of the
provisions of this agreement. Such press release is subject to mutual
approval as to form and substance, which approval shall not be
unreasonably withheld.
6. Miscellaneous
(a) The Strategic Alliance, this letter agreement and all documentation
contemplated by this letter shall be governed by the internal law of
the State of Delaware, without regard to any conflict of laws
principles.
(b) Each of PCN and DuPont will bear its own costs and expenses of the
preparation of the documentation and performance of the obligations
set forth in this letter.
If this letter correctly sets forth our understanding, please indicate
your acceptance by executing this letter in the space provided below.
Very truly yours,
PETROCHEMNET HOLDINGS, INC.
By: /s/ CARL D. MCCUTCHEON
----------------------------------
Carl D. McCutcheon
President and Chief Executive Officer
ACCEPTED AND AGREED TO
THIS 12th day of November, 1999
E.I. duPont de Nemours and Company
By: /s/ J. ERIK FYRWALD
--------------------
J. ERIK FYRWALD
5
<PAGE> 1
EXHIBIT 10.16
CheMatch.com, Inc.
2900 North Loop West, Suite 1120
Houston, TX 77092
Carl D. McCutcheon
President and Chief Executive Officer
January 19, 2000
Mr. Ernst Jung
Bayer AG
KP-AKV
Building W 1
D-51368 Leverkusen
Gentlemen:
This letter will evidence our mutual understanding and agreement with
respect to the strategic alliance (the "Strategic Alliance") between
CheMatch.com, Inc., a Delaware corporation (the "Company") and Bayer AG
("Purchaser").
1. Purchase of Company Common Stock by Purchaser.
---------------------------------------------
(a) Purchaser hereby agrees to purchase 204,291 shares of the
Company's common stock, par value $.01 per share (the "Common
Stock"), pursuant to a Subscription Agreement (in the form
attached hereto as Exhibit A) for $2,000,008.89 in cash.
(b) Following such payment, a dollar-for-dollar credit will accrue to
Purchaser's trading account against which one-sided commissions
generated by Purchaser pursuant to that certain Participant
Agreement between Purchaser and the Company (the "Participant
Agreement"), will be debited. Any credit attributable to payments
on the Note that remain in Purchaser's trading account as of
December 31, 2001 will be cancelled.
2. Other Obligations and Agreements.
--------------------------------
(a) Use of Names. Neither party to this agreement may reference the
other party to this agreement in presentations, advertising,
promotions or other published information without the other
party's prior consent (which consent shall not be unreasonably
withheld); provided, however, that either party may make such
disclosure if in the reasonable opinion of such party's counsel
such disclosure is required by law under the circumstances.
<PAGE> 2
(b) Trading Use. Purchaser shall use the Company's trading platform
as the preferred platform for e-Commerce trading for all the
products traded on the Company's platform from the date hereof
through December 31, 2001 for any products that it buys, sells,
trades, auctions, reverse auctions or otherwise transfers using
e-Commerce to the extent such products are then traded over the
Company's system.
3. Miscellaneous.
-------------
(a) The Strategic Alliance, this letter agreement and all
documentation contemplated by this letter shall be governed by
the laws of the State of Texas, without regard to any conflict of
laws principles.
(b) Each of Purchaser and the Company will bear its own costs and
expenses of the preparation of the documentation and performance
of the obligations set forth in this letter.
If this letter correctly sets forth our understanding, please indicate
your acceptance by executing this letter in the space provided below.
Very truly yours,
/s/ CARL D. MCCUTCHEON
Carl D. McCutcheon
ACCEPTED AND AGREED TO
THIS 24th DAY OF JANUARY, 2000:
BAYER AG
By: /s/ ERNST JUNG
-----------------------------------------
Name: Ernst Jung
Title: KP-AKV
2
<PAGE> 1
EXHIBIT 10.17
CheMatch.com, Inc.
2900 North Loop West, Suite 1120
Houston, TX 77092
Carl D. McCutcheon
President and Chief Executive Officer
January 22, 2000
Muehlstein Holding Corporation
Via E-mail: [email protected]
Ladies and Gentlemen:
This letter will evidence our mutual understanding and agreement with
respect to the strategic alliance (the "Strategic Alliance") between
CheMatch.com, Inc., a Delaware corporation (the "Company") and Muehlstein
Holding Corporation, a Delaware corporation ("Purchaser").
1. Purchase of Company Common Stock by Purchaser.
---------------------------------------------
(a) Purchaser hereby agrees to purchase 204,291 shares of the
Company's common stock, par value $.01 per share (the "Common
Stock"), pursuant to a Subscription Agreement (in the form
attached hereto as Exhibit A) for $1,000,008.89 in cash and the
execution of a promissory note (the "Note") (in the form attached
hereto as Exhibit B) in favor of the Company in aggregate
principal amount of $1,000,008.89. At least one half of the
shares of Common Stock purchased by Purchaser pursuant to the
Subscription Agreement will be subject to a Security Agreement
(in the form attached hereto as Exhibit C).
(b) The Note will be payable in eight consecutive quarterly
installments of $125,000.00 payable January 1, April 1, July 1
and October 1, commencing April 1, 2000. With each payment, a
dollar-for-dollar credit will accrue to Purchaser's trading
account against which one-sided commissions generated by
Purchaser pursuant to that certain Participant Agreement between
Purchaser and the Company (the "Participant Agreement"), will be
debited. To the extent that Purchaser expects to generate
one-sided commissions under the Participant Agreement in excess
of $125,000.00, the Note may be prepaid to increase the credit in
Purchaser's trading account. Any credit attributable to payments
on the Note that remain in Purchaser's trading account as of May
1, 2002 will be cancelled.
<PAGE> 2
2. Other Obligations and Agreements.
--------------------------------
(a) Use of Names. Neither party to this agreement may reference the
other party to this agreement in presentations, advertising,
promotions or other published information without the other
party's prior consent (which consent shall not be unreasonably
withheld); provided, however, that either party may make such
disclosure if in the reasonable opinion of such party's counsel
such disclosure is required by law under the circumstances.
(b) Exclusivity. Purchaser shall commit good faith efforts to use the
Company's trading platform on an exclusive basis (except to the
extent provided hereinafter) from the date hereof through
December 31, 2001 for any chemicals and plastics that it buys,
sells, trades, auctions, reverse auctions or otherwise transfers
using e-Commerce to the extent such products are then traded over
the Company's system. Notwithstanding the foregoing, however,
Purchaser reserves the right, in its sole discretion, but acting
in good faith, to utilize other platforms as well as its own
platform (if one should be established) (i) for selling and
buying purposes or (ii) where suppliers require the use of other
platforms.
3. Miscellaneous.
-------------
(a) The Strategic Alliance, this letter agreement and all
documentation contemplated by this letter shall be governed by
the laws of the State of Texas, without regard to any conflict of
laws principles.
(b) Each of Purchaser and the Company will bear its own costs and
expenses of the preparation of the documentation and performance
of the obligations set forth in this letter.
If this letter correctly sets forth our understanding, please indicate
your acceptance by executing this letter in the space provided below.
Very truly yours,
/s/ CARL D. MCCUTCHEON
Carl D. McCutcheon
ACCEPTED AND AGREED TO
THIS 27th DAY OF JANUARY, 2000:
MEUHLSTEIN HOLDING CORPORATION
By: /s/ RONALD J. RESTIVO
-----------------------------------------
Name: Ronald J. Restivo
Title: Chief Financial Officer
2
<PAGE> 1
EXHIBIT 10.18
MASTER OUTSOURCED SERVICES AGREEMENT
This Master Outsourced Services Agreement (the "Agreement") is
effective as of the 27 day of January, 2000 (the "Effective Date") and is by and
between eCredit.com, Inc., a Delaware corporation having its principal place of
business at 400 Blue Hill Drive, Suite 300, Westwood, MA 02090 ("eCredit.com")
and CheMatch.com, Inc., a Delaware corporation having its principal place of
business at 2900 North Loop West, Suite 1120, Houston, TX 77092 ("Client").
WHEREAS, Client conducts credit evaluations of its prospective
customers and arranges financing for customers; and
WHEREAS, eCredit.com, among other business activities, offers certain
proprietary business process automation services designed to facilitate the
credit evaluation and financing process in an outsourced environment
("Outsourced Services"); and
WHEREAS, Client desires to retain eCredit.com to customize the
Outsourced Services according to protocols provided by Client ("Client's
Business Logic") to process consumer and business credit information provided by
Client or obtained by eCredit.com at the request of Client ("Data").
NOW THEREFORE, in consideration of the foregoing, the mutual promises
set forth in this Agreement and for other good and valuable consideration, the
receipt and adequacy of which is acknowledged by all parties, the parties hereby
agree as follows:
1. Obligations of eCredit.com. eCredit.com will customize its Outsourced
Services according to Client's Business Logic (as set forth in Schedule 1 hereto
and made a part hereof) and will process Data according to Client's Business
Logic and return the results of such processing ("Processed Transactions") to
Client in an online interactive mode. These Outsourced Services will be provided
to Client on a non-exclusive basis.
2. Payment. Client shall pay to eCredit.com the fees as set forth in Schedule
2.1 hereto.
3. Term. This Agreement shall continue in effect for an initial term as set
forth in Schedule 3.1 (the "Initial Term") and will automatically renew at the
end of the Initial Term or any extension for additional terms as set forth in
Schedule 3.1 ("Renewal Terms") unless either party tenders written notice of its
intent to terminate within sixty (60) days of the renewal date, or the Agreement
is otherwise terminated.
4. Terms and Conditions. The attached Terms and Conditions are incorporated
herein and made a part hereof.
Executed as of the date set forth above, as a document under seal, by the duly
authorized representatives of the parties hereto.
ECREDIT.COM, INC. CHEMATCH.COM, INC.
Name: Kevin M. Higgins Name: Carl D. McCutcheon
--------------------------- ------------------------------
Signature: /s/ KEVIN M. HIGGINS Signature: /s/ CARL D. MCCUTCHEON
---------------------- -------------------------
Title: VP of Channel Sales Title: Chairman, President and
& Sales Ops, duly authorized Chief Executive Officer,
duly authorized
1
<PAGE> 2
MASTER OUTSOURCED SERVICES AGREEMENT
Terms and Conditions
1. Performance of Outsourced Services. eCredit.com will use commercially
reasonable efforts to assure that Outsourced Services are generally available
twenty-four (24) hours per day, seven (7) days per week, according to the
Specifications. Client shall be solely and exclusively responsible for the
provision of Client's Business Logic and Data.
2. Taxes and Charges. Client shall reimburse eCredit.com within ten (10) days of
receipt of eCredit.com's invoice for all taxes or similar assessments related
to this Agreement, other than taxes based on the net income of eCredit.com.
3. Pass Through Expenses. Client will reimburse eCredit.com for any new or
increased fees, or other charges that directly increase eCredit.com's costs in
performing this Agreement, provided that Client may terminate this Agreement on
thirty (30) days written notice if such cost increases are unacceptable to
Client.
4. Termination.
4.1 Either party hereto may terminate this Agreement immediately should the
other party (i) admit in writing its inability to pay its debts generally as
they become due; (ii) make a general assignment for the benefit of creditors;
(iii) institute or consent to bankruptcy proceedings against it; (iv) be
adjudicated as being bankrupt or insolvent; (v) seek or consent to
reorganization under any bankruptcy act; or (vi) have a decree entered against
it by a court of competent jurisdiction appointing a receiver, liquidator,
trustee or assignee in bankruptcy or in insolvency covering all or substantially
all of such party's property or providing for the liquidation of such party's
property or business affairs.
4.2 Should either party commit a material breach of its obligations, the other
party may terminate this Agreement, by thirty (30) days' written notice
describing the basis for such termination unless prior to expiration of such
period the defaulting party cures such default. Client's non-payment of any
invoice shall constitute a material breach.
4.3 Either party may terminate this Agreement for any reason on ninety (90) days
written notice.
4.4 Upon termination by either party, eCredit.com shall discontinue any use of
Client's Business Logic and Data (all of which constitute Intellectual Property
of Client) within ten (10) business days following the date of termination.
Except as otherwise provided in this Agreement, within ten (10) business days
following the termination of this Agreement, each of the parties shall return to
the other party all materials belonging to the other party that constitute
Confidential Information and/or Intellectual Property.
4.5 To the extent that rights have accrued thereunder prior to termination, the
provisions of this Agreement relating to payment of any fees, charges or other
amounts owed, payment of any interest thereon, warranties, compliance with law,
and indemnity shall survive any termination or expiration of this Agreement as
well as any other provisions which expressly provide therefor. The provisions of
this Agreement relating to ownership of intellectual property, confidentiality,
and limitation of liability shall survive any termination or expiration of this
Agreement indefinitely.
5. Intellectual Property and Confidentiality.
5.1 Intellectual Property Rights.
(a) For purposes of this Agreement, "Intellectual Property" shall mean (i)
copyrights (including, without limitation, the right to reproduce,
distribute copies of, display and perform the copyrighted work and to
prepare derivative works in any format or media), copyright registrations
and applications, patent rights (including, without limitation,
registrations and applications), trade mark and service mark rights
(including, without limitation, registrations and applications), trade
names, mask-work rights, trade secrets, moral rights, algorithms, trade
dress, goodwill and other proprietary rights, and all renewals, divisions,
continuations, continuations-in-part, reissues, additions and extensions
thereof, regardless of whether any of such rights arise under the laws of
the United States or any other state, country or jurisdiction; (ii)
intangible legal rights or interests evidenced by or embodied in any idea,
design, concept, process, technology, invention, discovery, enhancement,
improvement or information and data which is not generally known, (including
formulae, procedures, protocols, techniques and results of experimentation
and testing) that is necessary or useful, regardless of patentability, but
including patents, patent applications, trade secrets, and know-how; (iii)
all appurtenances related to, and derivatives of any of the foregoing; (iv)
Client's Business Logic and Data proprietary to Client and any Confidential
Information of Client and (v) the Outsourced Services and any Confidential
Information of eCredit.com.
(b) Except as expressly set forth in this Agreement, neither party will
acquire any right, title, or interest in the other's Intellectual Property.
2
<PAGE> 3
5.2 Protection of Confidential Information.
(a) Confidential Information. Each party understands and acknowledges that
any data or information, oral or written, treated as confidential that
relates to the other's research, development or business activities,
including any unannounced products and services, other clients, suppliers,
and service providers, business processes and plans, finances, internal
operations, developments, inventions, processes, plans, financial
information, data, revenue, forecasts, projections, methods of compiling,
manipulating, presenting and disseminating Outsourced Services, Client's
Business Logic and Data, or information, access control systems, security
codes, and details of systems and applications which is disclosed or
otherwise made available to the other party and the financial and other
contractual terms of this Agreement (collectively, "Confidential
Information"), represent valuable confidential information that may be
entitled to protection as trade secrets. The parties shall keep
confidential, shall not disclose, and shall protect from unauthorized
disclosure by their employees and agents, Confidential Information and all
copies or physical embodiments thereof in any media in its possession, and
shall limit access to Confidential Information to those who require such
access in connection with this Agreement. Each party shall secure and
protect the Confidential Information and any and all copies and other
physical embodiments thereof in any media in its possession in a manner
consistent with the steps taken to protect its own trade secrets and
Confidential Information, but not less than a reasonable degree of care.
Each party shall take appropriate action with its employees who are
permitted access to the Confidential Information to satisfy its obligations
hereunder.
(b) Exceptions. The confidentiality obligations set forth above shall not
prohibit disclosure of (i) information previously known to the receiving
party without reference to Confidential Information, (ii) information which
is or becomes publicly known through no wrongful act of the receiving
party, (iii) information received from a third party under no
confidentiality obligation with respect to the Confidential Information,
(iv) information required to be disclosed under administrative or court
order or in arbitration or litigation arising out of a this Agreement, or
(vi) information concerning the terms of this Agreement in connection with
debt and capital fund-raising of either party and other transactions to
third parties under confidentiality obligations to either party of this
Agreement.
6. Representations, Warranties and Certain Agreements.
6.1 Y2K Compliance. The following should be considered a Y2K Readiness
Disclosure under the Year 2000 Information and Readiness Disclosure Act.
eCredit.com hereby warrants that (i) the proprietary software applications and
tools developed by eCredit.com and used in providing the Outsourced Services
(the "Software") will properly perform all date functions, including, but not
limited to, processing the year 2000, leap years, and calculations and formulas
involving dates in more than one century ("Century Compliant"), and (ii) the
Software will not cause an abnormal abort to occur, or generate incorrect values
or invalid outputs, based on management, manipulation or calculation of data
involving dates, including leap days ("Date Compliant") when used with other
components which are Century Compliant and Date Compliant. In the event any
Software is not Century Compliant or Date Compliant, eCredit.com shall, to the
extent necessary, promptly repair such Software or replace such Software with
Software of equivalent functionality and performance which meets the foregoing
standards; this shall be Client's sole remedy for breach of these warranties and
for failure of the Outsourced Services to be Century Compliant and Date
Compliant. Client hereby warrants that Client's Business Logic, used by it in
connection with the Outsourced Services, is Century Compliant and Date
Compliant. In the event any of Client's Business Logic is not Century Compliant
or Date Compliant, Client shall, to the extent necessary, promptly repair such
Business Logic or replace such Client's Business Logic with Client's Business
Logic of equivalent functionality and performance which meets the foregoing
standards; this shall be eCredit.com's sole remedy for breach of these
warranties and for failure of the Client's Business Logic to be Century
Compliant and Date Compliant.
6.2 Certain Obligations of Client. Client hereby represents, warrants and
covenants that throughout the term of this Agreement, Client shall (i) have the
right to disclose or cause the disclosure of Client's Business Logic and Data to
eCredit.com and such disclosure and eCredit.com's use thereof pursuant to this
Agreement shall be in compliance with all applicable laws including but not
limited to the federal and state laws pertaining to credit, debt collection,
business practices and consumer protection; (ii) not use the Outsourced Services
on behalf of any third party and only in connection with a credit transaction
involving the Client's customer on whom the information is to be furnished and
involving the extension of credit to, or review or collection of an account of,
the Client's customer; (iii) submit any marketing literature Client creates
pertaining to Outsourced Services to eCredit.com for review and approval prior
to publication; (iv) Client shall bear all collection risk (including, without
limitation, credit card fraud and any other type of credit fraud) with respect
to sales of its products; (v) be solely responsible for maintaining complete
backup records of all information relating to its customers' orders, inquiries
and purchases and any other customer information, once transactions have been
processed; (vi) assume all responsibility for: the use, development, content and
maintenance of Client's Business Logic and Data and all expenses and liabilities
relating thereto, any liability for any unauthorized use by Client of the
Outsourced Services and (vii) only use the Outsourced Services with respect to
credit transactions in the United States of America unless otherwise agreed by
the parties in advance.
6.3 Certain Obligations of eCredit.com. eCredit.com hereby represents, warrants
and covenants that throughout the term of this Agreement: (i) the Outsourced
Services shall be in compliance with all applicable laws including but not
limited to the federal
3
<PAGE> 4
and state laws pertaining to credit, debt collection, business practices and
consumer protection; (ii) Client shall have the right to disclose to its
customers those portions of the Outsourced Services made available for that
purpose by eCredit.com; (iii) eCredit.com shall not use the Client's Business
Logic and Data on behalf of any third party and only in connection with a credit
transaction involving the Client's customer on whom the information is to be
furnished and involving the extension of credit to, or review or collection of
an account of, the Client's customer; and (iv) eCredit.com shall assume all
responsibility for: the use, development, content and maintenance of Outsourced
Services and all expenses and liabilities relating thereto, including any
liability for any unauthorized use by eCredit.com of Client's Business Logic and
Data.
7. Indemnification.
7.1 Indemnification. Each party shall indemnify, defend and hold harmless the
other party and its officers, employees, agents, affiliates and subsidiaries
against and from all losses, expenses, liabilities, damages and costs including,
without limitation, reasonable attorneys' fees, that may at any time be incurred
by any of them in connection with any allegation, investigation, claim, suit or
other proceeding threatened or brought against either of them related to that
party's Intellectual Property, products, or services.
7.2 Notice; Defense of Claims. Each party shall give prompt written notice to
the other party of any claim for indemnification hereunder, specifying to the
extent known the amount and nature of the claim, and any matter which in the
opinion of such party is likely to give rise to an indemnification claim. The
indemnifying party shall have the right to control the defense through counsel
of its choosing. The indemnified party shall have the right to the extent of
its interests to participate on its own behalf and at its own expense in such
matter or its settlement through counsel of its choosing.
8. DISCLAIMER OF IMPLIED WARRANTIES AND LIMITATION OF LIABILITY. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH PARTY HEREBY SPECIFICALLY DISCLAIMS
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING ANY SUBJECT
CONTEMPLATED BY THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN IN NO EVENT: (i) SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE, PROFITS OR
BUSINESS, COSTS OF DELAY, COSTS OF LOST OR DAMAGED DATA OR DOCUMENTATION; NOR
(ii) SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR ANY AMOUNTS IN EXCESS, IN THE AGGREGATE, OF
FEES PAID TO ECREDIT.COM HEREUNDER DURING THE THREE-MONTH PERIOD PRIOR TO THE
DATE THE CAUSE OF ACTION AROSE. THE EXCLUSIONS AND LIMITATIONS OF THIS SECTION
DO NOT APPLY TO ANY BREACH OF OBLIGATIONS HEREUNDER REGARDING CONFIDENTIALITY OR
INTELLECTUAL PROPERTY, OR LIABILITY ARISING FOR BODILY INJURY OF A PERSON, OR IN
STATES THAT PROHIBIT THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL
DAMAGES OR LIMITATIONS ON THE DURATION OF AN IMPLIED WARRANTY. THE PARTIES AGREE
THAT PAYMENTS TO ECREDIT.COM FOR SERVICES PERFORMED BY ECREDIT.COM AND RECEIVED
BY CLIENT SHALL NOT COUNT TOWARD FULFILLMENT OF THIS LIABILITY LIMITATION.
9. Miscellaneous.
9.1 Publicity. Neither party may use the other's name without the express
written consent of that party.
9.2 No Third Party Benefits. This Agreement is entered into solely for the
respective benefit of the parties and their respective successors and assigns,
and nothing in this Agreement will be construed as giving any entity other than
the parties to this Agreement, persons and entities expressly indemnified
hereunder and their respective successors and permitted assigns, any right,
remedy or claim under this Agreement.
4
<PAGE> 5
9.13 Section Headings. The section and subsection headings used herein are for
reference and convenience only, and shall not enter into the interpretation
hereof.
9.14 Neutral Construction. The parties to this Agreement agree that this
Agreement was negotiated fairly between them at arm's length and that the final
terms of this Agreement are the product of the parties' negotiations. Each party
warrants and represents that it has sought and received legal counsel of its own
choosing with regard to the contents of this Agreement and the rights and
obligations affected hereby. The parties agree that this Agreement shall be
deemed to have been jointly and equally drafted by them, and that the provisions
of this Agreement therefore should not be construed against a party or parties
on the grounds that the party or parties drafted or was more responsible for
drafting the provision(s).
9.15 Employees. Neither eCredit.com nor Client shall hire or seek to engage the
services of, nor offer to pay commissions, compensation or any other form of
incentives to the employees or consultants of the other for any purpose
whatsoever without the express written consent of the other party. This
provision shall expire eighteen (18) months after the termination of this
Agreement.
9.16 Assignment. Neither this Agreement, nor any rights hereunder, may be
assigned by either party unless assignment is accepted in writing by the other
party and any attempt to assign this Agreement or any rights hereunder without
written approval the other party shall automatically terminate this Agreement.
/s/ KMH (Initial) 2/3/00 (Date) /s/ CDM (Initial) 1/28/00 (Date)
- -------- ------- -------- --------
eCredit.com, Inc. Client
6
<PAGE> 1
EXHIBIT 10.19
CheMatch.com, Inc.
2900 North Loop West, Suite 1120
Houston, TX 77092
February 2, 2000
Mr. Peter Singleton
William Heinemann Inc.
275 Washington Street
Newton, Mass. 02458
Via E-mail: [email protected]
Dear Mr. Singleton,
This letter will evidence our mutual understanding and agreement with
respect to the strategic alliance (the "Strategic Alliance") between
CheMatch.com, Inc., a Delaware corporation (the "Company") and William Heinemann
Inc. ("Purchaser") a Delaware corporation.
1. Purchase of Company Common Stock by Purchaser.
---------------------------------------------
(a) Purchaser hereby agrees to purchase 153,218 shares of the
Company's common stock, par value $.01 per share (the "Common
Stock"), pursuant to a Subscription Agreement (in the form
attached hereto as Exhibit A) for $1,500,004.22 in cash.
2. Other Obligations and Agreements.
--------------------------------
(a) Use of Names. Neither party to this agreement may reference the
other party to this agreement in presentations, advertising,
promotions or other published information without the other
party's prior consent (which consent shall not be unreasonably
withheld); provided, however, that either party may make such
disclosure if in the reasonable opinion of such party's counsel
such disclosure is required by law under the circumstances.
(b) Advertising and Information Agreement. The Company will purchase
information content, advertising and other promotional material
and services from Purchaser, or Purchaser's designee, in amounts
totaling at least $500,000.00 during the two-year period
beginning January 1, 2000. Each item of content, advertising or
other service will be priced from time to time as mutually agreed
by the parties.
3. Miscellaneous.
-------------
(a) The Strategic Alliance, this letter agreement and all
documentation contemplated by this letter shall be governed by
the laws of the State of Texas, without regard to any conflict of
laws principles.
<PAGE> 2
(b) Each of Purchaser and the Company will bear its own costs and
expenses of the preparation of the documentation and performance
of the obligations set forth in this letter.
If this letter correctly sets forth our understanding, please indicate
your acceptance by executing this letter in the space provided below.
Very truly yours,
CheMatch.com, Inc.
By: /s/ CARL D. MCCUTCHEON
----------------------------
ACCEPTED AND AGREED TO
THIS 11th DAY OF FEBRUARY, 2000:
WILLIAM HEINEMANN INC.
By: /s/ HENRY Z. HORBACZWESKI
----------------------------
Name: Henry Z. Horbaczweski
Title: Senior Vice President and
General Counsel
2
<PAGE> 1
EXHIBIT 10.20
STRATEGIC ALLIANCE AGREEMENT
This Strategic Alliance Agreement (this "Agreement"), dated and
effective as of February 7, 2000 (the "Effective Date"), is by and between
Optimum Logistics Ltd. ("Optimum") and CheMatch.com, Inc. ("CheMatch") (Optimum
and CheMatch each sometimes a "Party" and collectively, the "Parties").
W I T N E S S E T H:
WHEREAS, CheMatch offers news and information relevant to the chemical
industry and owns and operates an internet-based exchange service (the "CheMatch
System") through which users can execute negotiated trades of bulk petrochemical
products; and
WHEREAS, Optimum has created and operates an internet-based logistics
operating system (the "TransLink System") through which users can procure
transportation and other logistics services for simple and complex shipments of
bulk chemicals from a variety of service providers, as well as manage and
monitor such shipments through all phases of the supply chain; and
WHEREAS, Optimum intends to expand the multicarrier and multimodal
functionality of the TransLink System to provide users with a broader selection
of logistics service providers in order to support customer requirements; and
WHEREAS, Optimum and CheMatch believe that the services offered to their
respective users through Optimum's TransLink System and CheMatch's CheMatch
System are complimentary; and
WHEREAS, Optimum and CheMatch believe that each could expand its user
base by electronically linking and integrating the TransLink System and CheMatch
System internet access sites and cross-promoting use of their respective
services to their respective existing and future users; and
WHEREAS, Optimum and CheMatch desire to form a strategic alliance to
integrate the TransLink System and CheMatch System internet access sites and to
cross-promote the use of their respective services to their respective existing
and future users on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Optimum and CheMatch agree as
follows:
1. STRATEGIC ALLIANCE
(a) Alliance. Subject to, and in accordance with, the terms and
conditions of this Agreement, Optimum and CheMatch hereby establish a strategic
alliance (the "Alliance")
<PAGE> 2
pursuant to which each agrees to exclusively promote the other in its normal
marketing activities as the preferred provider of the services offered by the
other as further described in Section 5(a), and to establish on a non-exclusive
basis revenue-sharing arrangements and click-through system integration between
their respective websites, all as more fully set forth herein.
(b) Alliance Liaisons. Optimum and CheMatch will each appoint one (1)
person to serve as its Alliance liaison (the "Alliance Liaisons"). The Alliance
Liaisons will serve as contact persons for their respective Parties with respect
to matters relating to the Alliance and will manage the relationship established
between the Parties by this Agreement. Either Party may at any time and in its
sole discretion, remove its respective Alliance Liaison and appoint a different
person to that position. Upon appointment of a new Alliance Liaison, the Party
making such appointment shall notify the other Party of such appointment in
writing within five (5) business days. The initial Alliance Liaisons are as
follows:
For Optimum:
William J. Jennings
Optimum Logistics Ltd.
2001 W. Main, Suite 104
Stamford, CT 06902
Telephone Number: (203) 323-9204
Fax Number: (203) 323-9308
Email Address: [email protected]
For CheMatch:
Ray Hodil
CheMatch.com, Inc.
1281 Main Street
Stamford, CT 06902
Telephone Number: (888) 999-7261
Fax Number: (203) 357-7011
Email Address: [email protected]
(c) Quarterly Meetings. The executive officers, their designee or
Alliance Liaisons of Optimum and CheMatch will meet on a quarterly basis to
review and discuss Alliance operations, performance, marketing and strategy,
including, but not limited to, the milestone dates set forth in Section 6 of
this Agreement and the Standards (as defined in Section 6) and the entities to
be listed on Exhibit B and Exhibit C. Unless otherwise agreed to by both
Parties, the first such quarterly meeting shall be held in April, 2000, with
subsequent meetings to be held each July, October, January and April thereafter
during the Term (as defined in Section 2 below) of this Agreement. Such meetings
shall be held on a date and at a time and location to be agreed upon by the
Parties not less than ten (10) business days before each meeting. At each such
meeting, the Parties shall appoint one (1) person to keep and prepare minutes of
the proceedings, which minutes shall reflect all agreements reached and all
actions taken or directed to be taken by the Parties at such meeting. Within
five (5) business days after the conclusion of each such
2
<PAGE> 3
meeting, the Party responsible for preparing the minutes of such meeting shall
circulate a draft of such minutes to the other Party for review and comment. The
Parties shall then work together in good faith to revise such minutes to their
mutual satisfaction. Upon completion of such revisions, each Party shall execute
two (2) copies of such minutes, retain one of such executed copies for its
records and deliver the other to the other Party. No agreement reached or action
taken or directed to be taken at any such meeting shall be binding on the
Parties unless the minutes of such meeting have been executed by both Parties.
2. TERM
(a) Initial Term. Unless earlier terminated in accordance with the
provisions of Section 12 hereof, the initial term of this Agreement (the
"Initial Term") is three (3) years, commencing on the Effective Date and
extending through the third (3rd) anniversary of that date, after which this
Agreement shall terminate unless extended pursuant to Section 2(b) below (the
Initial Term together with all such extensions, the "Term").
(b) Extension of Initial Term.
(i) On or before the first anniversary of the Effective Date, the
Parties shall attempt in good faith to develop a mutually agreeable set
of performance criteria to be achieved by the Parties under this
Agreement by specified dates, which performance criteria and dates shall
be attached hereto as Exhibit A. Exhibit A shall set forth the
performance criteria that must be met in order to extend the Initial
Term for one (1) year following the three-year period specified in
Section 2(a) above. In the event that such performance criteria are met
by both Parties on or before the dates set forth therein, the Initial
Term shall be automatically extended for an additional one (1) year
period. Thereafter, the Term shall be automatically extended for
successive one (1) year periods unless either Party provides the other
written notice of its desire not to extend the Term at least one hundred
twenty (120) days prior to the then-scheduled termination thereof.
(ii) In the event that one or more of the performance criteria
set forth on Exhibit A have not been achieved on or before the
applicable date or dates set forth therein by either Party but the
Parties nevertheless desire to extend the Initial Term, the Parties may
do so by executing a written amendment to this Agreement extending the
Initial Term not less than ninety (90) days prior to then-scheduled
termination thereof.
(iii) In the event that the Parties are unable to agree on the
set of performance criteria and dates to be attached hereto as Exhibit A
on or before the first anniversary of the Effective Date, the Initial
Term and this Agreement shall terminate on the date that is six (6)
months after the first anniversary of the Effective Date, unless
otherwise agreed in writing by the Parties at least ninety (90) days
prior to such date.
3. EQUITY INVESTMENT
(a) CheMatch Investment in Optimum. If, during the Initial Term of this
Agreement, Optimum conducts a private offering of any of its securities, whether
debt or equity, for an
3
<PAGE> 4
aggregate amount of at least five million dollars ($5,000,000), and such
offering is extended to investors other than, or in addition to, financial
institutions, venture capital funds, private equity funds, affiliates of Optimum
and employees of Optimum (such investors hereinafter, "Strategic Investors"),
Optimum shall offer CheMatch the opportunity to invest at least one million
dollars ($1,000,000) in the first such offering (but not in any subsequent
offering) made by Optimum during the Initial Term on the same financial terms
offered to other Strategic Investors in such offering; provided, however, that
CheMatch's participation in such offering shall be limited to a maximum of ten
percent (10%) of such offering, unless Optimum otherwise agrees in writing.
(b) Investment in Competitors. During the Initial Term, neither Party
shall make any investment of any kind, whether debt, equity or convertible to
equity, in any direct competitor of the other Party.
(c) Competing Systems. During the Term, neither Party, nor any of their
respective affiliates, shall build, establish, offer or maintain a system that
would constitute a "direct competitor" of the other Party.
(d) "Direct Competitors". For purposes of this Agreement, "direct
competitor" of CheMatch shall include all internet based trading platforms for
electronic trading of bulk petrochemicals and polymers among third parties, and
"direct competitor" of Optimum shall include all integrated logistics operations
and tracking systems for bulk liquid shipments.
4. REVENUE SHARING
(a) TransLink Participants. During the Term of this Agreement, each time
an entity represented by a registered user of the TransLink System (each such
entity and all of its affiliates collectively, a "TransLink Participant")
obtains a spot contract with a firm price for transportation via one or more
modes (including tanker, barge or tank container) as to a product, subject to
customary terms and conditions ( a "Freight Fixture"), through use of the
TransLink System and such TransLink Participant subsequently utilizes a
hyperlink connection or other electronic means of direct data or information
exchange established between the TransLink System and the CheMatch System
pursuant to this Agreement to access the CheMatch System and execute a trade as
to such product using the CheMatch System that is to be completed using the
transportation secured by such Freight Fixture, CheMatch shall pay Optimum
twenty percent (20%) of the total commission revenue earned by CheMatch from
such TransLink Participant in respect of such product trade, regardless of
whether such TransLink Participant is a buyer or a seller in such product trade;
provided, however, that the maximum amount payable by CheMatch to Optimum under
this Section 4(a) during any one contract year during the Term of this Agreement
shall be five million dollars ($5,000,000). Once the maximum yearly payment of
five million dollars ($5,000,000) by CheMatch to Optimum has been reached for a
particular contract year, CheMatch shall have no further payment obligations to
Optimum under this Section 4(a) during such contract year; provided, however,
that all other terms and conditions of this Agreement shall remain in full force
and effect. All amounts payable under this Section 4(a) shall be due and payable
monthly in arrears. Payments due under this Section 4(a) for each month during
which this Agreement remains in effect shall be due and payable on or before the
twentieth (20th) day of the next succeeding month.
4
<PAGE> 5
(b) CheMatch Participants. During the Term of this Agreement, each time
an entity represented by a registered user of the CheMatch System (each such
entity and all of its affiliates collectively, a "CheMatch Participant")
executes a trade as to a product, whether as buyer or seller, through use of the
CheMatch System and such CheMatch Participant subsequently utilizes a hyperlink
connection or other electronic means of direct data or information exchange
established between the CheMatch System and the TransLink System pursuant to
this Agreement to access the TransLink System and obtain a Freight Fixture for
the fulfillment of such product trade using the TransLink System, Optimum shall
pay CheMatch twenty percent (20%) of the total commission or other transaction
fee revenues, if any, earned by Optimum in respect of a Freight Fixture related
directly to the fulfillment of such product trade and obtained through use of
the TransLink System; provided, however, that the maximum amount payable by
Optimum to CheMatch under this Section 4(b) during any one contract year during
the Term of this Agreement shall be five million dollars ($5,000,000). Once the
maximum yearly payment of five million dollars ($5,000,000) by Optimum to
CheMatch has been reached for a particular contract year, Optimum shall have no
further payment obligations to CheMatch under this Section 4(b) during such
contract year; provided, however, that all other terms and conditions of this
Agreement shall remain in full force and effect. All amounts payable under this
Section 4(b) shall be due and payable monthly in arrears. Payments due under
this Section 4(b) for each month during which this Agreement remains in effect
shall be due and payable on or before the twentieth (20th) day of the next
succeeding month.
(c) Verification. For purposes of verifying the amounts payable by the
Parties to each other under this Section 4, each Party shall have the right to
retain an outside firm to audit and evaluate the payments and payment
obligations of the other Party for any contract year or part thereof during
which this Agreement is in effect, and if, in a Party's sole discretion and at
its own cost, it elects to do so, such Party shall notify the other Party
thereof in writing within one hundred twenty (120) days of the end of such
contract year. The other Party shall allow such firm to have reasonable access
to its books and records and shall cause its independent accountants to make
their work papers relating to such payments and payment obligations reasonably
available to such firm; provided, however, that such outside firm shall first
execute a confidentiality agreement in a form reasonably satisfactory to such
other Party pursuant to which such outside firm agrees to limit its use of the
information contained in the books and records of such other Party and the work
papers of such other Party's independent accountants to the conduct of such
audit and evaluation and to refrain from disclosing any such information to any
third party except as may be required by law. If a Party fails to deliver such
notice within such period, the payments made by the other Party during such
contract year shall be deemed to have been finally accepted by such Party as
payment in full of all payment obligations of the other Party under Section 4(a)
or (b), as applicable, for such contract year.
(d) Disputes. If, as a result of the analysis of an outside firm, a
Party (the "Challenging Party") wishes to challenge the payments or payment
obligations of the other Party (the "Non-Challenging Party") required by Section
4(a) or (b), as applicable, or any of the information upon which they are based,
then the Challenging Party shall make its challenge by providing the
Non-Challenging Party written notice (the "Challenge Notice"), which Challenge
Notice shall set forth in reasonable detail the basis for the challenge. Both
Parties shall use their
5
<PAGE> 6
reasonable best efforts to resolve matters raised in the Challenge Notice, but
if the Parties cannot resolve their dispute within ten (10) days after receipt
of the Challenge Notice by the Non-Challenging Party, the challenge described in
such Challenge Notice shall be preserved for subsequent resolution, as described
below, by the Parties or by one of the eight largest accounting firms in the
United States that has not issued an audit report with respect to the financial
statements for either Party during the then-preceding two (2) years and is not
then under current engagement to perform audit work by either Party (the
"Independent Accountants"). The Challenging Party shall, at any time after the
expiration of such ten-day period, provide the Non-Challenging Party with the
opportunity to choose one (1) out of not less than two (2) accounting firms
designated by the Challenging Party that could qualify as Independent
Accountants. The Non-Challenging Party will have five (5) days to select one of
the firms so designated, and such firm shall be the Independent Accountants.
Failing such selection, the Challenging Party will designate one of the firms it
proposed to be the Independent Accountants. Both Parties shall execute such
reasonable and customary engagement letters as the Independent Accountants may
request. In any event, the Parties may mutually agree to select any accounting
firm to be the Independent Accountants.
Within ten (10) days after the appointment of the Independent
Accountants, each Party shall submit to the other and to the Independent
Accountants in writing its position with respect to the challenge set forth in
the Challenge Notice and its proposed resolution of the dispute, together with
such supporting documentation as they deem necessary. Within thirty (30) days
after receiving such position statements, the Independent Accountants shall
select one of the two proposed resolutions to the dispute (but not itself
propose another resolution) that it determines, in its sole discretion, to be
the most reasonable proposal in light of the provisions of this Agreement. Such
selection shall be final and binding on both Parties. The fees and expenses of
the Independent Accountants shall be borne by the Party whose proposal is not
selected. Both Parties jointly and severally exculpate and release the
Independent Accountants from any liability with respect to any decision or
judgment that the Independent Accountants may take or commit during the course
of their activities described above.
(e) "Contract Year". For purposes of this Agreement, "contract year"
shall mean a period beginning on the Effective Date or any anniversary thereof
and extending through the day immediately preceding the next succeeding
anniversary of the Effective Date.
5. JOINT MARKETING
(a) Cross-Promotion. The Parties hereby agree to cooperate in good faith
to promote the Alliance and the use of their respective services offered through
the TransLink System and the CheMatch System by third parties. To that end,
Optimum will prominently display on the TransLink System website (the "TransLink
Site") hyperlinks to the CheMatch System website, which is currently located at
WWW.CHEMATCH.COM (the "CheMatch Site"), which hyperlinks shall conform to the
requirements set forth in the Standards (as defined in Subsection 6(a)(i)).
Likewise, CheMatch will prominently display on the CheMatch Site hyperlinks to
the TransLink Site, which hyperlinks shall conform to the requirements set forth
in the Standards. Additionally, Optimum shall exclusively promote CheMatch as
the preferred Independent Trading Platform (as defined below) for electronic
trading of bulk petrochemicals
6
<PAGE> 7
among third parties in substantially all of Optimum's promotional materials,
sales calls and other promotions in connection with the TransLink System which
refer to such trading platforms, and CheMatch shall exclusively promote Optimum
as the preferred provider of integrated logistics services for bulk liquid
petrochemical shipments in substantially all of CheMatch's promotional
materials, sales calls and other promotions in connection with the CheMatch
System which refer to such integrated logistics services. Each Party shall
obtain the written approval of the other Party prior to releasing any sales or
promotional materials or other publicity concerning the alliance, the terms of
this Agreement or the other Party's service offerings, which approval shall not
be unreasonably withheld. For the purposes of this Agreement, Independent
Trading Platform shall mean a trading platform which is not (i) jointly or
solely operated by any of the top ten (10) petrochemical companies; (ii) offered
under the brand name of any of the top ten (10) petrochemical companies; or
(iii) jointly or solely operated by any of the top ten (10) consumers or
producers of petrochemicals. The determination of a company's rank shall be made
on the basis of the consolidated international revenue of the company for the
last fiscal year.
(b) Optimum Strategic Prospects. The Parties agree that Exhibit B
contains a list of entities with whom CheMatch currently has an ongoing
commercial relationship and with whom Optimum would like to develop a regular
commercial relationship (each an "Optimum Strategic Prospect"). CheMatch agrees
to make good faith efforts to assist Optimum in establishing such a commercial
relationship with the Optimum Strategic Prospects. For each Optimum Strategic
Prospect which CheMatch successfully refers to Optimum prior to the expiration
of Exhibit B as provided below, such referral to be conclusively presumed by the
execution of a signed services contract with respect to the use of the TransLink
System between Optimum and such Optimum Strategic Prospect, Optimum shall pay
CheMatch twenty percent (20%) of the gross revenue earned and actually received
from such Optimum Strategic Prospect under such contract for one (1) year
following the execution of such contract. Notwithstanding any other provision of
this Agreement, Exhibit B shall expire and be of no further force or effect on
the first anniversary of the Effective Date unless otherwise agreed in writing
prior to such expiration date; provided, however, that, upon expiration of
Exhibit B, Optimum's payment obligations under this Section 5(b) in respect of
any Optimum Strategic Prospects successfully referred to Optimum by CheMatch (as
evidenced by the execution of a signed services contract with respect to the use
of the TransLink System between Optimum and such Optimum Strategic Prospect)
prior to such expiration date shall survive such expiration of Exhibit B; and
provided, further, that all other provisions of this Agreement shall remain in
full force and effect following such expiration of Exhibit B.
(c) CheMatch Strategic Prospects. The Parties agree that Exhibit C
contains a list of entities with whom Optimum currently has an ongoing
commercial relationship and with whom CheMatch would like to develop a regular
commercial relationship (each a "CheMatch Strategic Prospect"). Optimum agrees
to make good faith efforts to assist CheMatch in establishing such a commercial
relationship with the CheMatch Strategic Prospects. For each CheMatch Strategic
Prospect which Optimum successfully refers to CheMatch prior to the expiration
of Exhibit C as provided below, such referral to be conclusively presumed by the
execution of a signed services contract with respect to the use of the CheMatch
System between CheMatch and such CheMatch Strategic Prospect, CheMatch shall pay
Optimum twenty percent (20%) of the gross revenue
7
<PAGE> 8
earned and actually received from such CheMatch Strategic Prospect under such
contract for one (1) year following the execution of such contract.
Notwithstanding any other provision of this Agreement, Exhibit C shall expire
and be of no further force or effect on the first anniversary of the Effective
Date unless otherwise agreed in writing prior to such expiration date; provided,
however, that, upon expiration of Exhibit C, CheMatch's payment obligations
under this Section 5(c) in respect of any CheMatch Strategic Prospects
successfully referred to CheMatch by Optimum (as evidenced by the execution of a
signed services contract with respect to the use of the CheMatch System between
CheMatch and such CheMatch Strategic Prospect) prior to such expiration date
shall survive such expiration of Exhibit C; and provided, further, that all
other provisions of this Agreement shall remain in full force and effect
following such expiration of Exhibit C.
6. SYSTEMS INTEGRATION
(a) Site Establishment.
(i) On or before April 30, 2000, Optimum shall have established
the TransLink Site on a host server under Optimum's control, which site
shall substantially conform to the requirements for websites set forth
on Exhibit D attached hereto (the "Standards"), be accessible to all
TransLink Participants and CheMatch Participants and be fully
operational for all of its intended purposes, including, but not limited
to, providing CheMatch Participants the services set forth in Section
6(c) below; provided, however, that the services set forth in
Subsections 6(c)(vii) and (viii) need not be available to TransLink
Participants or CheMatch Participants until August 31, 2000.
(ii) On or before April 30, 2000, CheMatch shall have established
the CheMatch Site on a host server under CheMatch's control, which site
shall substantially conform to the requirements for websites set forth
in the Standards, be accessible to all CheMatch Participants and
TransLink Participants and be fully operational for all of its intended
purposes, including, but not limited to, providing TransLink
Participants the services set forth in Section 6(d) below.
(b) Site Linking.
(i) On or before May 15, 2000, the TransLink Site shall be linked
to the CheMatch Site by means of a hyperlink which uses the CheMatch
logo as the activation point and which shall be located on the Home
page, all pages on which strategic alliances or partnerships are
described, if any, the log-on page if different from the Home page, the
splash page if different from the Home page, and the tool bar in the
"Shipments View" (as defined in the Standards) of the TransLink Site.
Such hyperlink shall conform to the hyperlink requirements set forth in
the Standards and enable TransLink Participants to access the CheMatch
Site by clicking on the CheMatch logo; provided, however, that once a
TransLink Participant has reached the CheMatch Site, either directly, or
through use of the hyperlink from the TransLink Site, such TransLink
Participant shall only have access to the services available on the
CheMatch System and set forth in Section 6(d) below if such TransLink
Participant is authorized to use the CheMatch System pursuant
8
<PAGE> 9
to a user agreement executed between CheMatch and such TransLink
Participant (each such TransLink Participant, an "Authorized TransLink
Participant").
(ii) On or before May 15, 2000, the CheMatch Site shall be linked
to the TransLink Site by means of a hyperlink which uses the TransLink
logo as the activation point and which shall be located on the Home
page, all pages on which strategic alliances or partnerships are
described, if any, the log-on page if different from the Home page, the
splash page if different from the Home page, and the tool bar of the
[name of page where CheMatch Participants conduct trades] of the
CheMatch Site. Such hyperlink shall conform to hyperlink requirements
set forth in the Standards and enable CheMatch Participants to access
the TransLink Site by clicking on the TransLink logo; provided, however,
that once a CheMatch Participant has reached the TransLink Site, either
directly, or through use of the hyperlink from the CheMatch Site, such
CheMatch Participant shall only have access to the services available on
the TransLink System and set forth in Section 6(c) below if such
CheMatch Participant is authorized to use the TransLink System pursuant
to a user agreement executed between Optimum and such CheMatch
Participant (each such CheMatch Participant, an "Authorized CheMatch
Participant").
(c) Optimum Services. Optimum will offer to Authorized CheMatch
Participants the services set forth below in Subsections 6(c)(i)-(vi) on and
after April 30, 2000 and the services set forth below in Subsections 6(c)(vii)
and (viii) on and after August 31, 2000:
(i) Nominations for transportation, storage or other services to
be provided to Authorized CheMatch Participants by service providers
under pre-existing contracts between Authorized CheMatch Participants
and such service providers;
(ii) Customs brokering and related documentation;
(iii) Freight forwarding and related documentation;
(iv) Cargo surveying and related documentation;
(v) Terminaling and/or storage of bulk liquids;
(vi) Inventory management and tracking;
(vii) Freight Fixtures for bulk multimodal transportation
(including transportation by parcel tanker, product tanker, tank
container, rail car or barge) of liquids traded by Authorized CheMatch
Participants, regardless of whether such Authorized CheMatch
Participants have traded such liquids on the CheMatch System; and
(viii) Indications of freight costs for bulk multimodal
transportation (including transportation by parcel tanker, product
tanker, tank container, rail car or barge) of liquids traded by
Authorized CheMatch Participants.
9
<PAGE> 10
Authorized CheMatch Participants will have access to the same services
provided via the TransLink System to other TransLink users regardless of whether
they enter the TransLink Site via a hyperlink from the CheMatch Site or directly
from any other web location. Optimum shall retain sole discretion with respect
to the establishment of pricing policies and terms and conditions of use of the
TransLink System; provided, however, that Optimum shall apply all such pricing
policies and terms and conditions of use to Authorized CheMatch Participants
without regard to whether they enter the TransLink Site via a hyperlink from the
CheMatch Site or directly. Notwithstanding the foregoing or any other provision
of this Agreement, Optimum may (but shall not be obligated to) offer pricing or
terms and conditions of use to Authorized CheMatch Participants which are more
favorable than those offered to other TransLink users.
The Standards set forth how the services listed in Subsections
6(c)(i)-(viii) shall be accessed by Authorized CheMatch Participants who elect
to enter the TransLink Site via a hyperlink from the CheMatch Site, including
access pathways.
(d) CheMatch Services. CheMatch will offer the following services to
Authorized TransLink Participants through the CheMatch Site, whether accessed
directly or through the hyperlink from the TransLink Site:
(i) Third party electronic trading of all products traded on the
CheMatch System;
(ii) Except as prohibited by contractual agreements with
information and/or content providers, news services, at fees no less
favorable than those customarily charged to CheMatch news service
customers; and
Authorized TransLink Participants will have access to the same services
provided via the CheMatch System to other CheMatch users regardless of whether
they enter the CheMatch Site via a hyperlink from the TransLink Site or directly
from any other web location. CheMatch shall retain sole discretion with respect
to the establishment of pricing policies and terms and conditions of use of the
CheMatch System; provided, however, that CheMatch shall apply all such pricing
policies and terms and conditions of use to Authorized TransLink Participants
without regard to whether they enter the CheMatch Site via a hyperlink from the
TransLink Site or directly. Notwithstanding the foregoing or any other provision
of this Agreement, CheMatch may (but shall not be obligated to) offer pricing or
terms and conditions of use to Authorized TransLink Participants which are more
favorable than those offered to other CheMatch users.
The Standards set forth how such services shall be accessed by
Authorized TransLink Participants who elect to enter the CheMatch site via a
hyperlink from the TransLink Site, including access pathways.
(e) Site Maintenance, Data Back-up and Disaster Recovery. Commencing on
May 15, 2000, and continuing thereafter so long as this Agreement remains in
effect, the Parties shall maintain their respective websites, including data
back-up and disaster recovery systems, in accordance with the maintenance
procedures and requirements set forth in the Standards.
10
<PAGE> 11
(f) Costs. Each of the Parties shall pay all of their own costs and
expenses incurred in connection with this Agreement and adapting and linking
their respective systems and websites to those of the other, including, but not
limited to, costs and expenses incurred for computer hardware or software,
whether purchased from third parties or developed internally, system or website
development or modifications, consulting services, marketing materials or
services and legal services.
7. DATA SHARING
(a) Data. For purposes of this Agreement, "Data" shall mean all
information related to a Party's customers, prospective customers, website users
and their activities on such Party's website.
(b) Data Sharing and Ownership. Each Party shall own and shall be
entitled to use and otherwise exploit, in its sole discretion, all Data which
such Party has acquired (i) independently of the other Party, and (ii) without
breach of any confidentiality agreement or other obligation of secrecy owed by
such Party or any other person or entity to the other Party. Neither Party
grants any rights or interest it may have in its Data to the other Party, and
neither Party is obligated to share with the other Party any of its Data or
other information, other than as expressly provided in this Agreement. Each
Party hereby grants a nonexclusive, nontransferable license to the other Party
to use for the other Party's internal business operations such of its Data that
is transmitted to the other Party through any program or function that enables
Data to be shared as contemplated by the Standards as the other Party has not
already independently acquired without breach of any confidentiality agreement
or other obligation of secrecy owed by the other Party or any other person or
entity to the originating Party.
(c) Limits on Data Collection Devices. Unless otherwise mutually agreed
in writing, neither Party shall include or permit to be used any mechanism,
program, "bot," "cookie," "spider" or other device which enables the collection
of Data or other information during or with respect to a customer visit to or
activities on the other Party's website.
8. REPRESENTATIONS AND WARRANTIES
(a) Representations and Warranties of Both Parties. As an inducement to
the other to enter into this Agreement, each Party represents and warrants to
the other the following:
(i) Organization, Corporate Power, Etc. Each Party (A) is duly
organized, validly existing and in good standing in the case of Optimum,
under the laws of Bermuda, under which it is chartered, and, in the case
of CheMatch, under the laws of the state Delaware, under which it is
incorporated, (B) has the corporate power and authority to carry on its
business as it is now being conducted, and (C) is, or shall be at the
Effective Date, duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it makes
such licensing or qualification necessary;
(ii) Authority of Parties. Each Party has full power and
authority to execute, deliver and perform this Agreement. The execution,
delivery and performance of this
11
<PAGE> 12
Agreement has been duly authorized and approved by all necessary
corporate action on the part of both Parties and does not require any
further authorization or consent on the part of either Party;
(iii) Binding Obligation. This Agreement has been duly executed
and delivered by each Party and constitutes the valid and binding
obligation of each Party, enforceable against each Party in accordance
with its respective terms (except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship and other laws relating to or affecting creditors'
rights generally and by general equity principles);
(iv) No Litigation To each Party's respective knowledge, there
are no lawsuits, claims, suits, proceedings or investigations pending or
threatened against it which question the legality or propriety of the
transactions contemplated by this Agreement;
(v) Consents and Approvals No consent, approval, authorization,
action or order of, or declaration, filing or registration with, or
notice to, any court, administrative agency, governmental body or other
third party is required to be made or obtained by either Party in
connection with the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the performance
of either Party's obligations hereunder;
(vi) Intellectual Property. Each of the Parties either owns or
has sufficient rights in its respective intellectual property,
including, without limitation, copyrights, trademarks, design rights,
know-how and patents, to be used in the performance of its respective
obligations under this Agreement;
(vii) Year 2000. All systems, equipment, software and other items
used by either Party in carrying out its respective obligations under
this Agreement (including any related data or interfaces) shall be "Year
2000 Compliant." "Year 2000 Compliant" means that a device shall be able
to accurately process date data (including, but not limited to,
calculating, comparing, and sequencing) from, into, and between the
twentieth (20th) and twenty-first (21st) centuries, including leap year
calculations;
(viii) Statements True and Correct. The representations and
warranties of the Parties in this Agreement are true and correct in all
material respects.
(b) Disclaimer of All Other Warranties. THE WARRANTIES MADE BY THE
PARTIES IN THIS SECTION 8 ARE IN LIEU OF, AND EACH PARTY FOR ITSELF DISCLAIMS
ANY AND ALL OTHER WARRANTIES, CONDITIONS, OR REPRESENTATIONS (EXPRESS OR
IMPLIED, ORAL OR WRITTEN), WITH RESPECT TO INFORMATION, INFORMATIONAL CONTENT,
ITS SERVICES, OR ITS RESPECTIVE WEBSITE, INCLUDING ANY AND ALL IMPLIED
WARRANTIES OR CONDITIONS OF QUALITY, SUITABILITY, TITLE, NONINFRINGEMENT,
MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER
12
<PAGE> 13
OR NOT THE WARRANTING PARTY KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS
OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW,
BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING.
9. CONFIDENTIALITY
(a) Obligations of Parties. Each Party understands and acknowledges that
so long as this Agreement remains in effect, the Parties will have access to
certain Confidential Information (as defined in Section 9(b) below) concerning
their respective businesses that is a valuable and unique asset of the
respective Parties upon which their respective businesses are dependent. To
insure the continued secrecy of this Confidential Information, and in
consideration of the services provided to each other hereunder, each Party
agrees not to disclose such information of the other Party or permit such
information of the other Party to be disclosed to any third party while this
Agreement remains in effect or at any time thereafter, without the prior written
consent of the other Party. Each Party further understands and acknowledges that
if this Agreement is terminated for any reason, neither Party shall take or
retain, without prior written authorization from the other Party, originals or
copies of any records, papers, programs, computer software, documents, fee
books, files, or any other matter of whatever nature which is, contains or may
facilitate access to Confidential Information. The Parties agree that there
shall be a rebuttable presumption that a Party's disclosure to a third party of
Confidential Information of the other Party will not result in irreparable
damage or harm to such other Party and that monetary damages will be adequate to
compensate such other Party for any damage or harm resulting from such
disclosure. Any Party who seeks injunctive or other equitable relief against the
other Party in respect of any disclosure of the Party's Confidential Information
to a third party by such other Party shall be required to prove, by clear and
convincing evidence, that such disclosure will result in irreparable damage or
harm to the Party and that monetary damages will not be adequate to compensate
the Party for any damage or harm resulting from such disclosure. Subject to
Section 9(c) below, a Party may only disclose Confidential Information when
disclosure by such Party is required under applicable law or by a valid subpoena
or other court or governmental order, decree, regulation or rule; provided,
however, that if disclosure is required under this provision, such Party shall
advise the other Party of the requirement to disclose Confidential Information
prior to such disclosure and as soon as reasonably practicable after such Party
becomes aware of such required disclosure or aware that an action has been taken
seeking such disclosure unless such notice is legally prohibited; and provided
further, that upon the request of the other Party, such Party agrees to
reasonably cooperate with and at the expense of the other Party in any
reasonable and lawful actions which the other Party takes to resist such
disclosure, limit the information to be disclosed or limit the extent to which
the information so disclosed may be used or made available to third parties.
(b) "Confidential Information". For purposes of this Agreement and
except as provided in Section 9(c) below, "Confidential Information" shall
include, without limitation, any and all secrets or confidential technology,
intellectual property rights, proprietary information, customer or supplier
lists, trade secrets, records, notes, memoranda, Data (as defined in Section
7(a) above), ideas, processes, methods, techniques, systems, formulas, patent
applications, models, devices, programs, computer software, writings, research,
personnel information,
13
<PAGE> 14
customer or supplier information, plans or any other information of whatever
nature in the possession or control of a Party that is not generally known or
available to members of the general public, including any copies, worksheets, or
extracts from any of the above.
(c) Exceptions. The term "Confidential Information" of a Party shall not
include any information which (i) is or becomes generally available to and known
by the public (other than as a result of an impermissible disclosure directly or
indirectly by the other Party), (ii) is or becomes available to the other Party
on a non-confidential basis from a source other than the Party, provided, that
such source is not and was not bound by a confidentiality agreement with, or
other obligation of secrecy to, the Party, or (iii) has been or is hereafter
independently acquired by the other Party without violating any confidentiality
agreement with, or other obligation to, the Party.
10. INDEMNITY
(a) Indemnification by Optimum.
(i) Optimum shall indemnify, defend and hold CheMatch and the
CheMatch Indemnified Parties (as defined in Subsection 10(a)(ii) below)
harmless from and against, and in respect of, any and all claims by, and
liabilities to, third parties including governmental entities
("Third-Party Claims") asserted against or incurred by, and any and all
expenses (including all reasonable fees and expenses of counsel, travel
costs and other out-of-pocket costs) in connection with pending or
threatened litigation or other proceedings regarding such Third-Party
Claims ("Expenses") incurred by, CheMatch or any of the CheMatch
Indemnified Parties that arise out of or relate to:
(A) any actual or alleged patent, copyright or trademark
or other intellectual property right infringement, or
misappropriation or violation of any other proprietary right (an
"Infringement"), to the extent that the Infringement directly
relates to content, products or functions provided by Optimum and
not to any Third Party Claims directly relating to jointly
approved content, designs or specifications or to content,
specifications or designs solely prepared by CheMatch;
(B) any material breach of any representation, warranty or
obligation under this Agreement by Optimum, not materially
contributed to by CheMatch; or
(C) use of the TransLink Site or the TransLink System by
any third party.
(ii) The "CheMatch Indemnified Parties" shall mean and include:
(A) CheMatch's affiliates;
(B) the respective directors, officers, agents and
employees of and counsel to CheMatch and its affiliates;
14
<PAGE> 15
(C) each other person, if any, controlling CheMatch or any
of its affiliates; and
(D) the successors, assigns, heirs and personal
representatives of any of the foregoing.
(iii) Expenses shall be reimbursed when and as incurred promptly
upon submission of statements to Optimum by CheMatch or any of the
CheMatch Indemnified Parties.
(b) Indemnification by CheMatch.
(i) CheMatch shall indemnify, defend and hold Optimum and the
Optimum Indemnified Parties (as defined in Subsection 10(b)(ii) below)
harmless from and against, and in respect of, any and all Third-Party
Claims asserted against or incurred by, and any and all Expenses
incurred by, Optimum or any of the Optimum Indemnified Parties that
arise out of or relate to:
(A) any actual or alleged patent, copyright or trademark
or other intellectual property right infringement, or
misappropriation or violation of any other proprietary right (an
"Infringement"), to the extent that the Infringement directly
relates to content, products or functions provided by CheMatch
and not to any Third Party Claims directly relating to jointly
approved content, designs or specifications or to content,
specifications or designs solely prepared by Optimum;
(B) any material breach of any representation, warranty or
obligation under this Agreement by CheMatch, not materially
contributed to by Optimum; or
(C) use of the CheMatch Site or the CheMatch System by any
third party.
(ii) The "Optimum Indemnified Parties" shall mean and include:
(A) Optimum's affiliates;
(B) the respective directors, officers, agents and
employees of and counsel to Optimum and its affiliates;
(C) each other person, if any, controlling Optimum or any
of its affiliates; and
(D) the successors, assigns, heirs and personal
representatives of any of the foregoing.
15
<PAGE> 16
(iii) Expenses shall be reimbursed when and as incurred promptly
upon submission of statements to CheMatch by Optimum or any of the
Optimum Indemnified Parties.
(c) Cross Indemnification In respect of any intellectual property that
the Parties agree shall be jointly owned, each Party shall indemnify and hold
the other, the Optimum Indemnified Parties and the CheMatch Indemnified Parties
harmless from and against, and in respect of, any Third-Party Claims asserted
against or incurred by, and any and all Expenses incurred by either Party or any
of the Optimum Indemnified Parties and the CheMatch Indemnified Parties that
arise out of or relate to any Infringement to the extent that each Party shall
bear its pro-rata share, based on the percentage of ownership of the
intellectual property which is the subject of controversy, of the costs related
to any such Third Party Claim.
(d) Notice of Claims for Indemnification. If any third party shall make
any written claim or commence any arbitration proceeding or suit against any one
or more of Optimum or the Optimum Indemnified Parties or CheMatch or the
CheMatch Indemnified Parties (each an "Indemnified Person") with respect to
which an Indemnified Person intends to make a claim for indemnification against
Optimum under Section 10(a), or against CheMatch under Section 10(b) (as the
case may be, the "Indemnifying Party"), the Indemnified Person shall promptly
(but in no event more than ten (10) days after learning of such claim) give
written notice to the Indemnifying Party of such Third-Party Claim and the
provisions of Sections 10(e) and (f) shall apply; provided, however, that any
failure to provide the foregoing notice on a timely basis shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that it is
prejudiced or otherwise damaged thereby.
(e) Control of Proceedings.
(i) the Indemnifying Party shall have twenty (20) business days
after receipt of the notice referred to in Section 10(d) to notify the
Indemnified Person that it elects to conduct and control the defense of
such claim, proceeding or suit. If the Indemnifying Party does not give
the foregoing notice, the Indemnified Person shall have the right to
defend, contest, settle or compromise such claim, proceeding or suit in
the exercise of its exclusive discretion, subject to the provisions of
Section 10(f), and the Indemnifying Party shall, upon request from any
Indemnified Person, promptly pay to such Indemnified Person in
accordance with the other terms of this Section 10 the amount of any
Third-Party Claim resulting from the Indemnifying Person's liability to
the third-party claimant and all related Expenses.
(ii) If the Indemnifying Party gives the foregoing notice, it
shall have the right to undertake, conduct and control, through counsel
reasonably acceptable to the Indemnified Person, and at the Indemnifying
Party's sole expense, the conduct and settlement of such claim,
proceeding or suit, and the Indemnified Person shall cooperate with the
Indemnifying Party in connection therewith; provided, however, that
16
<PAGE> 17
(A) the Indemnifying Party shall not thereby permit any
lien, encumbrance or other adverse legal or equitable charge to
thereafter attach to any asset of the Indemnified Person;
(B) the Indemnifying Party shall not thereby permit any
injunction against the Indemnified Person, except for injunctions
that prohibit continuing Infringements;
(C) the Indemnifying Party shall permit the Indemnified
Person and counsel chosen by the Indemnified Person and
reasonably acceptable to the Indemnifying Party to monitor such
conduct or settlement and shall provide the Indemnified Person
and such counsel with such information regarding such claim,
proceeding or suit as either of them may reasonably request
(which request may be general or specific), but the fees and
expenses of such counsel shall be borne by the Indemnified
Person, unless (1) the Indemnifying Party and the Indemnified
Person shall have mutually agreed to the retention of such
counsel, or (2) the named parties to any such claim, proceeding
or suit include the Indemnified Person and the Indemnifying
Party, and in the reasonable opinion of counsel to the
Indemnified Person, representation of both parties by the same
counsel would be inappropriate due to actual or likely conflicts
of interest between the Indemnified Person and the Indemnifying
Party, in either of which cases the reasonable fees and
disbursements of counsel for such Indemnified Person shall be
reimbursed by the Indemnifying Party to the Indemnified Person if
the Indemnifying Party is ultimately held liable, or if the
Indemnifying Party is able to recover such fees and disbursements
where the Indemnified Party is not so able.
(iii) In no event shall the Indemnifying Party, without the prior
written consent of the Indemnified Person, settle or comprise any claim
or consent to the entry of any judgment that does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Person a release from all liability (or covenant not
to sue) in respect of such claim.
(iv) If the Indemnifying Party shall not have undertaken the
conduct and control of the defense of any claim, suit or proceeding as
provided above, the Indemnifying Party shall nevertheless be entitled
through counsel chosen by the Indemnifying Party and reasonably
acceptable to the Indemnified Person to monitor the conduct or
settlement of such claim by the Indemnified Person, and the Indemnified
Person shall provide the Indemnifying Party and such counsel with such
information regarding such action or suit as either of them may
reasonably request (which request may be general or specific), but all
costs and Expenses incurred in connection with such monitoring shall be
borne by the Indemnifying Party, unless the Indemnified Party is able to
recover such costs and Expenses where the Indemnifying Party is not so
able.
17
<PAGE> 18
(f) Settlement of Third-Party Claims by the Indemnified Person.
(i) Provided that the Indemnifying Party is contesting a claim,
suit or proceeding in good faith, the Indemnified Person shall not pay
or settle any such claim, proceeding or suit. Notwithstanding the
foregoing, the Indemnified Person shall have the right to pay or settle
any such claim, proceeding or suit while the Indemnifying Party is
contesting such claim, proceeding or suit in good faith; provided,
however, that in such event, the Indemnified Person shall waive any
right to indemnity therefor by the Indemnifying Party, and no amount in
respect thereof shall be claimed as a Third-Party Claim or Expense under
this Section 10.
(ii) If the Indemnifying Party shall not have undertaken the
conduct and control of the defense of any claim, suit or proceeding as
provided above, the Indemnified Person, on not less than thirty (30)
days prior written notice to the Indemnifying Party, may make settlement
(including payment in full) of such claim, and such settlement shall be
binding upon the Indemnified Person and the Indemnifying Party, unless
within such 30-day period the Indemnifying Party shall have requested
the Indemnified Person to contest such claim at the expense of the
Indemnifying Party. In such event, the Indemnified Person shall promptly
comply with such request, and the Indemnifying Party shall have the
right to direct the defense of such claim or any litigation based
thereon subject to all of the conditions of this Section 10.
Notwithstanding anything in this Section 10 to the contrary, if the
Indemnified Person advises the Indemnifying Party that it has determined
to make settlement of a claim, the Indemnified Person shall have the
right to do so at its own cost and expense, without any requirement to
contest such claim at the request of the Indemnifying Party, but without
any right under the provisions of this Section 10 for indemnification by
the Indemnifying Party.
(iii) In no event shall the Indemnified Party pay or settle any
such claim, proceeding or suit on terms that:
(A) permit any lien, encumbrance or other adverse legal or
equitable charge to thereafter attach to any asset of the
Indemnifying Party; or
(B) permit any injunction against the Indemnifying Party,
except for injunctions that prohibit continuing Infringements.
(g) Further Requirements for Indemnification Except as may be expressly
provided otherwise in this Agreement, no Indemnifying Party shall be required to
defend or indemnify any Indemnified Person for any Third-Party Claims or
Expenses, to the extent that such Third-Party Claims or Expenses are finally
adjudged to have been caused by the negligence, gross negligence, or willful
misconduct of the Indemnified Person. Each Party agrees to cooperate with the
defense of a Third Party Claim and to take such actions as the Indemnifying
Party may reasonably request in order to reduce or eliminate exposure to a Third
Party Claim.
18
<PAGE> 19
11. LIMITATION OF LIABILITY; NO THIRD PARTY BENEFICIARIES
(a) Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, STATUTORY OR CONSEQUENTIAL
DAMAGES OR ANY MULTIPLE OF ACTUAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT,
TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, AND WHETHER OR NOT THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
(b) No Third Party Beneficiaries. This Agreement does not confer upon
any person, and nothing expressed or referred to in this Agreement shall be
construed to give any person, other than the Parties to this Agreement, any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement, except and only to the extent
provided in Section 10 to the Optimum Indemnified Parties and the CheMatch
Indemnified Parties. This Agreement and all of its provisions and conditions are
otherwise for the sole and exclusive benefit of the Parties hereto and their
respective successors and assigns.
(c) Neither Party accepts any liability for or arising out of the
services offered or provided by the other Party.
12. TERMINATION
(a) By Agreement. This Agreement may be terminated at any time by the
written agreement of the Parties.
(b) Breach. This Agreement may be terminated by either Party upon thirty
(30) days written notice to the other in the event of a material breach of any
material provision of this Agreement which remains uncured at the expiration of
such thirty (30) days; provided, however, that only the non-breaching Party
shall have the right to terminate this Agreement under this Section 12(b); and
provided, further, that the failure of a Party to meet its obligations set forth
in Section 6 of this Agreement or in the Standards by the dates set forth
therein shall not constitute a material breach of a material provision of this
Agreement so long as such Party is diligently pursuing and continues to
diligently pursue fulfillment of such obligations.
13. INTELLECTUAL PROPERTY RIGHTS
(a) CheMatch hereby grants a non-exclusive, non-transferable, worldwide
license to Optimum to use CheMatch's trade names, logos and trademarks solely
for purposes of effecting the transactions contemplated by this Agreement,
subject to the prior written approval of CheMatch, which approval shall not be
unreasonably withheld or delayed. CheMatch may revoke this license by giving ten
(10) days written notice of revocation to Optimum. Optimum hereby grants a
non-exclusive, non-transferable, worldwide license to CheMatch to use Optimum's
trade names, logos and trademarks solely for purposes of effecting the
transactions contemplated by this Agreement, subject to the prior written
approval of Optimum, which approval shall not be unreasonably withheld or
delayed. Optimum may revoke this license by giving ten (10) days written notice
of revocation to CheMatch. Notwithstanding the foregoing,
19
<PAGE> 20
neither Party may use the other Party's marks in any manner that might be deemed
to create a unitary composite mark.
(b) Other than as expressly set forth in this Agreement, CheMatch shall
have no right to use the marks, trade names or other proprietary rights of
Optimum without the prior written approval of Optimum. Other than as expressly
set forth in this Agreement, Optimum shall have no right to use the marks, trade
names or other proprietary rights of CheMatch without the prior written approval
of CheMatch.
14. PUBLICITY
Neither Party shall make, without the approval of the other, any press
release or other public announcement concerning the Alliance or the transactions
contemplated by this Agreement, except to the extent that a Party is obligated
by law or the rules of any stock exchange to make such a press release or
announcement. In such case, the other Party shall be advised thereof, and the
Parties shall use their best efforts to cause a mutually agreeable release or
announcement to be issued. For the avoidance of doubt, the foregoing shall not
preclude communications or disclosures necessary to implement the provisions of
this Agreement or to comply with accounting and Securities and Exchange
Commission disclosure obligations.
15. GOVERNING LAW; JURISDICTION
(a) Governing Law. This Agreement shall be governed by, and in
accordance with, the internal laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
(b) Jurisdiction. Each Party agrees (i) that any action, dispute or
proceeding relating to this Agreement shall be brought in the state district
courts of Harris County, Texas and freely submits to the jurisdiction of the
state district courts of Harris County, Texas, (ii) that it freely waives any
right to, and will not, oppose any such action or proceeding in the state
district courts of Harris County, Texas on the basis that the jurisdiction is
not a convenient forum, and (iii) not to oppose the enforcement against it in
any other jurisdiction of any judgement or order properly obtained from such a
Texas court.
16. NOTICES
All notices or other communications provided for or permitted to be
given under this Agreement shall be in writing and shall be given either by
depositing such writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested, by
delivering such writing to the recipient in person or by nationally recognized
courier. All notices or other communications to be sent to a Party under this
Agreement shall be sent to or made at the following addresses, or such other
address as the Parties may specify by notice to each other from time to time in
accordance herewith:
20
<PAGE> 21
If to Optimum, at the following address:
Optimum Logistics Ltd.
Attention: William J. Jennings
2001 W. Main, Suite 104
Stamford, CT 06902
with a copy to:
George C. Jones
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
If to CheMatch, at the following address:
CheMatch.com, Inc.
Attention: Pat McSpadden
2900 North Loop West, Suite 1120
Houston, Texas 77092
with a copy to:
Ray Hodil
CheMatch.com, Inc.
1281 Main Street
Stamford, CT 06902
A notice or other communication given under this Agreement shall be
effective upon receipt by the person to whom such notice was sent.
17. ARBITRATION
Except for disputes relating to the provisions of Section 4 of this
Agreement or to issues of proprietary rights, including, but not limited to,
intellectual property and confidentiality, any dispute not resolved by amicable
resolution will be governed exclusively and finally by arbitration. Such
arbitration will be conducted by the American Arbitration Association ("AAA") in
New York and will be initiated and conducted in accordance with the Commercial
Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules will be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures will
not apply in order to promote the efficient arbitration of disputes where the
nature of the dispute, including without limitation the amount in controversy,
does not justify the application of such procedures. The arbitration panel will
consist of three (3) arbitrators. Each Party will name an arbitrator
21
<PAGE> 22
within ten (10) days after the delivery of the Demand. The third arbitrator,
selected by the first two, will be a neutral participant, with no prior working
relationship with either Party. The arbitration shall be conducted on
consecutive business days until completed unless all Parties agree otherwise,
and the arbitrators shall use their best efforts to expedite the arbitration so
that the entire arbitration shall be completed within six (6) months of the
delivery of the Demand. The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and
not state law, will be used to determine whether a dispute hereunder can be
resolved by arbitration. The Federal Rules of Evidence will apply in toto. The
arbitrators may enter a default decision against any Party who fails to
participate in the arbitration proceedings. The arbitrators shall have the
authority to award compensatory damages only and shall have no authority to
award incidental, consequential, exemplary or punitive damages. The award
rendered by the arbitrators will be final, binding and non-appealable, and
judgment upon such award may be entered by any court of competent jurisdiction.
18. MISCELLANEOUS
(a) No Partnership; Independent Contractors. Nothing contained in this
Agreement is intended or shall be construed to create any partnership, joint
venture, or association between the Parties, and any inferences to the contrary
are hereby expressly negated. The relationship of the Parties is and shall at
all times be solely that of independent contractors. No agency, employment or
any fiduciary relationship is created by this Agreement. Although the Parties
will, inter alia, link their websites, cross-promote their services and pay each
other a percentage of certain revenues under this Agreement, the Parties intend
that the Alliance formed by this Agreement is only in the nature of a referral
or broker arrangement. Neither Party shall do anything that has the effect of
creating an obligation by the other Party to a third party.
(b) Assignment. Neither this Agreement, nor any rights or obligations
arising from it, may be assigned, delegated, transferred or subcontracted by
either Party without the express written consent of the other, which will not be
unreasonably withheld or delayed. Notwithstanding the foregoing, either Party
may assign, delegate, transfer or sub-contract any of its rights or obligations
arising under this Agreement to an affiliate without obtaining the other's
express written consent; provided, however, that no such assignment, transfer,
delegation or sub-contract shall relieve such Party of its obligations under
this Agreement.
(c) Force Majeure. Neither Party shall be liable for damages and costs
to the other Party arising out of delays or failures to perform its obligations
under this Agreement if such delays or failures result from causes beyond its
reasonable control. Notice of any such delays or failures and explanation of
their causes must be given to the other within five (5) days of the occurrence.
(d) Entire Agreement. This Agreement constitutes the entire agreement
between the Parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties, and there are no
warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth
herein or contemplated hereby. Except as otherwise provided herein, no
supplement, modification or waiver of this
22
<PAGE> 23
Agreement shall be binding unless it shall be specifically designated to be a
supplement, modification or waiver of this Agreement and shall be executed in
writing by both of the Parties.
(e) Waiver. No failure on the part of a Party hereto to exercise, and no
delay in its exercise of, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise by a Party of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(f) Headings. The use of headings in this Agreement is for convenience
only and shall not affect the construction or interpretation of this Agreement.
(g) Exhibits. Each Exhibit referred to in this Agreement is a part of,
and hereby incorporated into, this Agreement. Any reference to "this Agreement"
shall be deemed to include the Exhibits hereto.
(h) Severability. If one or more of the provisions of this Agreement are
at any time found to be invalid by a court, tribunal or other forum of competent
jurisdiction, or otherwise rendered unenforceable, such decision shall not have
the effect of invalidating or voiding the remainder of this Agreement. This
Agreement shall be deemed amended by modifying or severing such provisions as
necessary to render it valid, legal and enforceable while preserving its intent,
or if that is not possible, by substituting another provision that is valid,
legal and enforceable which materially effectuates the Parties' intent. Any such
invalid or unenforceable provision or provisions shall be severable from this
Agreement, so that the validity or enforceability of the remaining provisions of
this Agreement, or the validity of the provision(s) in question in any other
jurisdiction, shall not be affected thereby.
(i) Bankruptcy. Each Party must notify the other if it becomes insolvent
or enters into any bankruptcy or insolvency proceedings.
(j) Survival. The provisions of Sections 7, 9 and 10 shall survive the
termination of this Agreement for whatever reason, subject to any applicable
statute of limitations and subject to any provisions contained in such sections.
(SIGNATURE PAGE FOLLOWS)
23
<PAGE> 24
EXECUTED to be effective as of the date first above written.
"OPTIMUM"
OPTIMUM LOGISTICS, LTD.
By: /s/ SAMUEL COOPERMAN
---------------------------------------
Name: Samuel Cooperman
-------------------------------------
Title: Chief Executive Officer
------------------------------------
Date: February 7, 2000
------------------------------------
"CHEMATCH"
CHEMATCH.COM, INC.
By: /s/ CARL D. MCCUTCHEON
---------------------------------------
Name: Carl D. McCutcheon
-------------------------------------
Title: Chairman, President and Chief
Executive Officer
------------------------------------
Date: February 7, 2000
------------------------------------
24
<PAGE> 1
EXHIBIT 10.21
CheMatch.com, Inc.
2900 NORTH LOOP WEST, SUITE 1120
HOUSTON, TX 77092
February 11, 2000
General Electric Company
One Plastics Avenue
Pittsfield, MA 01201
Ladies and Gentlemen:
This letter will evidence our mutual understanding and agreement with
respect to the strategic alliance (the "Strategic Alliance") between
CheMatch.com, Inc., a Delaware corporation (the "Company") and General Electric
Company, a New York corporation, acting by and through its GE Plastics business
unit ("Purchaser").
1. Purchase of Company Common Stock by Purchaser.
---------------------------------------------
(a) Purchaser hereby agrees to purchase 306,435 shares of the
Company's common stock, par value $0.01 per share (the "Common
Stock"), pursuant to a Stock Purchase Agreement (in the form
attached hereto as Exhibit A) for $3064.35 in cash and the
execution of a promissory note (the "Note") (in the form attached
hereto as Exhibit B) in favor of the Company in aggregate
principal amount of $1,997,956.20. 204,290 of the shares of
Common Stock purchased by Purchaser will be subject to a Security
Agreement (in the form attached hereto as Exhibit C).
2. Other Obligations and Agreements.
--------------------------------
(a) Neither party to this agreement may reference this agreement (or
the transactions contemplated hereby) or the other party to this
agreement in presentations, press releases, advertising,
promotions or other published information or otherwise without
the other party's prior written consent (which consent shall not
be unreasonably withheld); provided, however, that either party
may make such disclosure if in the reasonable opinion of such
party's counsel such disclosure is required by law under the
circumstances. Following the closing, the parties will work
together to produce a mutually acceptable press release.
(b) The parties are entering into this Agreement and the transactions
contemplated hereby on a non-exclusive basis and nothing in this
Agreement or in any other agreement by and between the parties
shall be construed to limit the ability of either party to enter
into any transaction, including a transaction similar to that
described herein, with any other party.
<PAGE> 2
(c) Each of the parties agrees that, without the other party's prior
written consent in each instance, from the date hereof through
December 31, 2002, it shall not (i) knowingly solicit for
employment in its business or (ii) employ in its business any
employee of the other party who became known, or hereafter
becomes known, to such party in the course of the negotiation or
performance of this Agreement. For purposes of this Paragraph,
Purchaser's "business" shall be deemed to be the activities of
the GE Plastics business unit.
(d) Purchaser shall use the Company trading platform on a good faith,
preferred basis from the date hereof through December 31, 2001
for any bulk commodity petrochemicals that it buys, trades,
auctions, or reverse auctions using e-Commerce to the extent such
products are then traded over the Company's system.
(e) Purchaser will agree to make reasonable business efforts to
assist the Company in developing viable e-Commerce trading
activity in specific contract-dominated markets where Purchaser
is a significant buyer. These markets include, but are not
limited to, cumene, phenol, butadiene, and acrylonitrile.
(f) Purchaser will promote the use of Company's trading platform to
other entities by reasonable means, including, but not limited
to, direct correspondence to a minimum of 20 new potential
trading participants. Purchaser will provide a list of the
companies, and the Company will review and agree to these, as
soon as possible after the closing.
(g) Purchaser will agree to a reciprocal portal arrangement with the
Company between the CheMatch.com and Purchaser's Global Supplier
Network websites with the intent of generating a mutual referral
channel.
(h) One of Purchaser's full time employees will devote at least 50%
of his/her time to assist the Company's personnel in developing
Purchaser's presence on the trading platform.
3. Additional Undertakings
-----------------------
(a) Unless otherwise restricted by any contract currently in effect,
the Company will negotiate with Purchaser as a potential supplier
of the credit insurance model to be used in future integrated
e-Commerce transactions on the trading platform and shall provide
Purchaser with the right to match any offers (a "third party
offer") received by the Company for comparable services and to
provide to the Company such services on the same terms as the
third party offers.
(b) The Company will assign Purchaser a position on the CheMatch
Industry Council for as long as the Company has such a Council.
This Council will initially be comprised of CheMatch strategic
investors and senior CheMatch management, and will act as an
advisory committee.
(c) Purchaser shall have the right to nominate five (5) additional
products for launching on the trading platform within 180 days of
the closing hereof. If any or
2
<PAGE> 3
all of these products are included on the Company trading
platform, Purchaser agrees to commit good faith commercially
reasonable efforts to assist in developing viable e-Commerce
trading activity.
(d) The Company shall have the right to disclose the materials and
volumes involved in transactions made by Purchaser over the
trading platform for purposes of promoting or advertising the
trading platform, provided that no disclosure of price terms,
delivery locations, or Purchaser's identity will be permitted
except with Purchaser's express prior written consent; provided,
however, that the Company may make such disclosure if, in the
reasonable opinion of such party's counsel, such disclosure is
required by law under the circumstances.
4. Miscellaneous.
-------------
(a) The Strategic Alliance, this letter agreement and all
documentation contemplated by this letter shall be governed by
the laws of the State of Delaware, without regard to any conflict
of laws principles.
(b) Each of Purchaser and the Company will bear its own costs and
expenses of the preparation of the documentation and performance
of the obligations set forth in this letter.
(c) With the exception of Section 2(c) which will survive until
December 31, 2002, this Agreement shall continue until December
31, 2001 after which time either party may terminate this
Agreement on sixty (60) days written notice.
If this letter correctly sets forth our understanding, please indicate
your acceptance by executing this letter in the space provided below.
Very truly yours,
CHEMATCH.com, INC.
By: /s/ CARL D. MCCUTCHEON
----------------------------
Name: Carl D. McCutcheon
-------------------------
Title: Chairman, President and
Chief Financial Officer
-------------------------
ACCEPTED AND AGREED TO
THIS 11th DAY OF FEBRUARY, 2000:
GENERAL ELECTRIC COMPANY
By: /s/ GARY L. ROGERS
----------------------------------
Name: Gary L. Rogers
--------------------------------
Title: President and Chief
Executive Officer, GE Plastics
-------------------------------
3
<PAGE> 1
EXHIBIT 10.22
CheMatch.com, Inc.
2900 North Loop West, Suite 1120
Houston, TX 77092
Carl D. McCutcheon
President and Chief Executive Officer
February 11, 2000
Mr. Phillip Townsend
TownsendTarnell, Inc.
Dear Mr. Townsend,
This letter will evidence our mutual understanding and agreement with
respect to the strategic alliance (the "Strategic Alliance") between
CheMatch.com, Inc., a Delaware corporation (the "Company") and TownsendTarnell,
Inc., ("Purchaser").
1. Purchase of Company Common Stock by Purchaser.
---------------------------------------------
(a) Purchaser hereby agrees to purchase 61,288 shares of the
Company's common stock, par value $.01 per share (the "Common
Stock"), pursuant to a Subscription Agreement (in the form
attached hereto as Exhibit A) for $612.88 in cash and the
execution of a promissory note (the "Note") (in the form attached
hereto as Exhibit B) in favor of the Company in aggregate
principal amount of $599,396.64 with interest accruing thereon at
the rate of 8% per annum. All of the shares of Common Stock
purchased by Purchaser pursuant to the Subscription Agreement
will be subject to a Security Agreement (in the form attached
hereto as Exhibit C).
(b) The Note will be payable in twelve consecutive monthly principle
installments of $49,949.72 payable, commencing February 1, 2000.
Additionally, each monthly payment will include all outstanding
interest due on the outstanding principle balance.
2. Other Obligations and Agreements.
--------------------------------
(a) Use of Names. Neither party to this agreement may reference the
other party to this agreement in presentations, advertising,
promotions or other published information without the other
party's prior consent (which consent shall not be unreasonably
withheld); provided, however, that either party may make such
disclosure if in the reasonable opinion of such party's counsel
such disclosure is required by law under the circumstances.
(b) Company and Purchaser agree to a Consulting and Support Services
Agreement (hereinafter "Consulting Agreement") to reflect the
following:
<PAGE> 2
(i) The Company will pay Purchaser a fee of $70,000.00 per
month beginning February 1, 2000, for a term of nine
consecutive months, in return for the commitments of
Purchaser, provided below. The parties hereto may cancel
this Consulting Agreement by mutual consent on six months
notice.
(ii) During the first six months of this Consulting Agreement,
the best reasonable efforts of Purchaser's personnel shall
be dedicated to promoting the use of the Company's trading
platform and website by potential buyers of thermoplastic
resins in North America and Europe. This effort will
include up to, but not be limited to, approximately 800
entities identified by the company as potential users of
its trading platform and related services. Purchaser will
maintain daily or weekly communications with the Company,
or its designated representative(s), regarding the status
of contacts with the list entities, qualifications of the
entities in terms of net worth, revenue, and credit
worthiness, and discussion with each entity toward
establishing them as members and traders on the trading
platform and users of related services.
(iii) Purchaser will commit its best reasonable efforts to
provide information from its North American and European
databases and resources of Purchaser, or any affiliated
company, including, but not limited to, the Plastics Market
Monthly, the Tarnell Buyer Profiles (of approximately
14,000 North American buyers), the Tarnell Financial
Resumes (of 6,000 buyers), the Tarnell Purchasing and
Paying Records (of 10,000 buyers) and access to
approximately 50 employees of Purchaser (or Purchaser's
related consultants and/or contract hires) who create and
operate these services on an unrestricted and timely basis
to furnish the Company the necessary information in order
to enable the Company to secure the listed entities as
members and traders on the trading platform and
specifically to fulfill the obligations under paragraph
(ii) above.
(iv) Purchaser and Company agree to use reasonable commercial
efforts to negotiate a separate agreement to install
interface to access new users for both parties.
3. Company investment in Purchaser's website.
-----------------------------------------
(a) Purchaser will provide Company with a mutually acceptable
business plan for the creation and development of
TownsendTarnell.com ("TT.com"). This business plan will include
the design and implementation strategy for TT.com, the sources
and uses of funds, milestones, budgets, and projections all to
the sole satisfaction of Company. Upon such satisfaction, Company
will extend a line of credit evidenced by a Promissory Note,
Security Agreement, License Agreement, and related documents.
This line of credit will make available funds up to five hundred
thousand dollars ($500,000.00), with any funds drawn being due
and payable at the end of one year. Interest will accrue at the
rate of 12% per annum and the payable monthly on the outstanding
principle balance. If the Company
2
<PAGE> 3
elects not to extend a line of credit within 30 days of receipt
of Purchaser's business plan, the Company will relinquish the
option of investing in TT.com in their first round of private
placement.
(b) If, prior to January 1, 2002, TT.com conducts a private offering
of any of its securities, whether debt or equity, for an
aggregate amount of at least five million dollars
($5,000,000.00), TT.com shall offer to Company the opportunity to
invest at least one million dollars ($1,000,000.00) in the first
such offering (but not in any subsequent offering) made by TT.com
on the same financial terms offered to other Strategic Investors
in such offering; provided, however, that the Company's
participation in such offering shall be limited to a maximum of
ten percent (10%) of such offering, unless TT.com otherwise
agrees in writing.
4. Miscellaneous.
-------------
(a) The Strategic Alliance, this letter agreement and all
documentation contemplated by this letter shall be governed by
the laws of the State of Texas, without regard to any conflict of
laws principles.
(b) Each of Purchaser and the Company will bear its own costs and
expenses of the preparation of the documentation and performance
of the obligations set forth in this letter.
If this letter correctly sets forth our understanding, please indicate your
acceptance by executing this letter in the space provided below.
Very truly yours,
/s/ CARL D. MCCUTCHEON
Carl D. McCutcheon
ACCEPTED AND AGREED TO
THIS 11th DAY OF FEBRUARY, 2000:
TOWNSENDTARNELL, INC.
By: /s/ PHILLIP TOWNSEND
-----------------------------
Name: Phillip Townsend
Title: President
3
<PAGE> 1
EXHIBIT 16.1
February 25, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read the statements made by PetroChemNet, Inc. (the "Company") under
the caption "Change in Independent Accountants" on page 73 of the Registration
Statement on Form S-1 dated March 1, 2000 and agree with the statements
contained in the third through sixth sentences therein. We have no basis to
agree or disagree with other statements of the Company contained therein.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF CHEMATCH.COM, INC.
CheMatch, Inc. (Texas)
PetroChemNet, Inc. (Delaware)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
Houston, Texas
February 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-21-1999
<PERIOD-END> DEC-31-1999
<CASH> 30,170
<SECURITIES> 0
<RECEIVABLES> 73
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,288
<PP&E> 1,692
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,768
<CURRENT-LIABILITIES> 0
<BONDS> 0
66,951
0
<COMMON> 43
<OTHER-SE> (29,366)
<TOTAL-LIABILITY-AND-EQUITY> 40,768
<SALES> 0
<TOTAL-REVENUES> 182
<CGS> 0
<TOTAL-COSTS> 8,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (236)
<INCOME-PRETAX> (8,325)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,325)
<EPS-BASIC> (11.61)
<EPS-DILUTED> (11.61)
</TABLE>
