<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LINK2GOV CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
TENNESSEE 7389 62-1803695
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
LINK2GOV CORP.
ONE BURTON HILLS BOULEVARD, SUITE 300
NASHVILLE, TN 37215
(615) 297-2770
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARDSON M. ROBERTS
CHIEF EXECUTIVE OFFICER
LINK2GOV CORP.
ONE BURTON HILLS BOULEVARD, SUITE 300
NASHVILLE, TN 37215
(615) 297-2770
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
HOWARD W. HERNDON, ESQ. F. MITCHELL WALKER, JR., ESQ.
BENJAMIN C. HUDDLESTON, ESQ. TODD J. ROLAPP, ESQ.
WALLER LANSDEN DORTCH & DAVIS, PLLC BASS, BERRY & SIMS PLC
511 UNION STREET, SUITE 2100 315 DEADERICK STREET, SUITE 2700
NASHVILLE, TENNESSEE 37219 NASHVILLE, TENNESSEE 37238-0002
(615) 244-6380 (615) 742-6200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, no par value.......... $57,500,000 $15,180
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES NOR DOES
IT SEEK OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
OR SALE IS NOT PERMITTED.
Subject to Completion, Dated March 22, 2000
LINK2GOV CORP.
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5,000,0000 SHARES
COMMON STOCK
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This is the initial public offering of LINK2GOV Corp. We are offering 5,000,000
shares of our common stock. We anticipate that the initial public offering price
will be between $ and $ per share. We will apply to list our common
stock on the Nasdaq National Market under the symbol "LNKG."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS TO LINK2GOV
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to 750,000 additional
shares to cover over-allotments.
DEUTSCHE BANC ALEX. BROWN
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
THE ROBINSON-HUMPHREY COMPANY
J.C. BRADFORD & CO.
THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus, including "Risk Factors" and the Financial Statements, before
making an investment decision.
OUR BUSINESS
We provide Internet and interactive voice response (IVR) solutions that
enable convenient and inexpensive processing of government-to-citizen (G2C) and
government-to-business (G2B) transactions. We partner with state and local
government entities to deploy easily accessible e-government applications that
allow citizens and businesses to transact directly with government agencies
without the inconvenience and hassle ordinarily faced in routine transactions
with government. Our applications benefit users by facilitating
automobile-related transactions, such as renewing or obtaining driver's
licenses, vehicle registrations and vanity plates and paying fines for traffic
violations and parking citations; outdoor-related transactions, such as
purchasing hunting and fishing licenses; and business-related transactions, such
as renewing professional and occupational licenses and other corporate licenses.
For governments, we provide the benefits of technologically advanced solutions
that offer user-friendly interaction, while minimizing the overhead costs
associated with maintaining the facilities and personnel needed to manually
process routine G2C and G2B transactions.
By offering both Internet and IVR solutions, we seek to provide access to
e-government applications to the greatest number of potential users, including
those without Internet access and those who prefer to use the telephone to
complete their government transactions. Because our applications are widely
accessible, we believe governments will be more willing to adopt our solutions
than solutions that are solely Internet-based.
Currently, we are operating Internet and/or IVR applications under 11
contracts with state or local agencies in six states, including Alabama,
Arizona, Florida, Georgia, Indiana and Texas, as well as the District of
Columbia. Additionally, we have Internet and/or IVR applications under
development pursuant to nine contracts with five state agencies and four
counties. We believe our applications are suitable for deployment in all 50
states, 3,000 counties, 36,000 municipalities and by the federal government. For
the year ended December 31, 1999, we processed approximately 261,000
transactions.
Our goal is to become the leading provider of Internet and IVR solutions
for G2C and G2B transactions. We have adopted two principal strategies to
achieve this goal:
- First, we strive to develop business by securing long-term, exclusive
contractual relationships with state and local governments.
- Second, we have developed a comprehensive user acquisition strategy to
encourage citizens and businesses to conduct their government
transactions using our applications and destination sites. Our
destination sites will be designed to encourage usage of our applications
by providing users with relevant content, community and e-commerce
opportunities.
Our revenues are derived from fees we receive on each transaction completed
through our Internet and IVR applications. Our transaction fees typically range
from $2.00 to $6.50 and are paid to us by the user or the government. In
addition to our fee-based revenues, we anticipate deriving revenues from the
sale of advertising and sponsorships on our government applications and our
destination sites. Our applications and destination sites will each focus on a
particular subject or vertical industry, which we believe will be attractive as
potential venues for targeted advertising and promotions.
1
<PAGE> 4
We were incorporated in Florida in 1995 and reincorporated in Tennessee in
1999. In February 2000, we completed our acquisition of Link2Gov.com, Inc.,
formerly the "Permit.com" division of iXL Enterprises, Inc., and in March 2000
we changed our name to LINK2GOV Corp. Our executive offices are located at One
Burton Hills Boulevard, Suite 300, Nashville, Tennessee 37215, and our telephone
number is (615) 297-2770.
The names of our three destination sites, Link2Gov.com, Link2Auto.com and
Link2Outdoors.com, as well as our logo are names and service marks that belong
to us. We claim rights in other names and marks, including G2C and G2B
Services(TM). We have registrations for other names and marks used in this
prospectus. This prospectus also contains the trademarks and trade names of
other entities which are the property of their respective owners.
------------------------
Unless otherwise indicated, all information in this prospectus assumes:
- that the underwriters have not exercised their option to purchase
additional shares;
- the conversion of all outstanding shares of the Series A Convertible
Preferred Stock into a total of 1,466,194 shares of common stock upon
completion of this offering; and
- all share and per share amounts reflect the ten-for-one stock split
effected as a stock dividend to shareholders of record on October 4,
1999.
2
<PAGE> 5
THE OFFERING
Shares offered by LINK2GOV......... 5,000,000 shares
Common stock to be outstanding
after this offering................ 26,088,905 shares(1)
Estimated net proceeds to
LINK2GOV........................... $
Use of proceeds.................... General corporate purposes, including
working capital, funds for operations,
capital expenditures, and potential
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................. LNKG
Risk factors....................... See "Risk Factors" for a discussion of
factors you should carefully consider
before deciding to invest in shares of
our common stock.
(1) The number of shares of our common stock that will be outstanding after this
offering is based on 19,622,711 shares of common stock and 1,466,194 shares
of the Series A Convertible Preferred Stock (which will convert into a total
of 1,466,194 shares of common stock at the closing of this offering)
outstanding as of March 21, 2000. It excludes:
- any shares of common stock to be issued upon exercise of the
overallotment option granted to the underwriters;
- 3,463,378 shares of common stock issuable upon exercise of stock options
outstanding as of March 21, 2000 at a weighted average exercise price of
$2.10 per share;
- 2,636,622 shares of common stock available for future grant under our
employee stock option plan as of March 21, 2000; and
- 986,851 shares of common stock issuable upon exercise of warrants
outstanding as of March 21, 2000 at a weighted average exercise price of
$2.32 per share.
3
<PAGE> 6
SUMMARY FINANCIAL DATA
The following summary historical financial data for each of the years in
the three-year period ended December 31, 1999 have been derived from our audited
financial statements included elsewhere in this prospectus. The following
summary pro forma financial data for the year ended December 31, 1999 have been
derived from our pro forma financial information included elsewhere in this
prospectus and present the statements of operations data as if the acquisition
of Link2Gov.com, Inc. had occurred on January 1, 1999, and the balance sheet
data as if the acquisition of Link2Gov.com, Inc. and the issuance of the
Company's Series A Convertible Preferred Stock had occurred on December 31,
1999. The information set forth below should be read along with the audited
financial statements and related notes, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the pro forma financial
information, all as included elsewhere in this prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- ---------
1997 1998 1999 1999(1)
------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net Revenues.................................... $ 542 $ 819 $ 979 $ 996
Operating Expenses.............................. 377 558 780 1,222
Selling, General and Administrative Expenses.... 129 262 1,148 3,183
Depreciation and Amortization................... 1 2 4 2,077
Noncash Compensation Expense.................... 59 57 287 747
------- ------- ------- -------
566 879 2,219 7,229
------- ------- ------- -------
Operating Loss.................................. (24) (60) (1,240) (6,233)
Other Income (Expense), Net..................... (39) (43) (33) 126
------- ------- ------- -------
Net Loss........................................ $ (63) $ (103) $(1,273) $(6,107)
======= ======= ======= =======
Basic and Diluted Net Loss Per Share............ $ (0.01) $ (0.01) $ (0.13) $ (0.38)
======= ======= ======= =======
Weighted Average Shares Outstanding............. 10,000 10,000 9,937 15,983
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(2)
------ ------------ ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents............................. $ 704 $6,790 $
Working Capital (Deficit)............................. (447) 5,158
Total Assets.......................................... 1,250 17,759
Total Borrowings...................................... 698 698
Stockholders' Equity (Deficit)........................ (387) 15,613
</TABLE>
- -------------------------
(1) Reflects the acquisition of Link2Gov.com, Inc. and related issuance of
6,045,773 shares of common stock and the sale of 1,466,194 shares of our
Series A Convertible Preferred Stock effective January 25, 2000, as if each
had occurred on January 1, 1999 for statements of operations data, and on
December 31, 1999 for balance sheet data.
(2) Reflects the sale of 5,000,000 shares of common stock offered by us in this
offering at a public offering price of $ per share, after deducting
the estimated underwriting discounts and commissions and our estimated
offering expenses of $ , and the conversion of all outstanding
shares of Series A Convertible Preferred Stock into 1,466,194 shares of
common stock upon the closing of this offering.
4
<PAGE> 7
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide
whether to buy our common stock. If any of the following risks actually occur,
our business, operating results and financial condition could suffer
significantly. In any such case, the market price of our common stock could
decline, and you may lose all or part of the money you paid to buy our common
stock.
RISKS RELATED TO OUR BUSINESS
WE OPERATE IN A NEW INDUSTRY AND PROVIDE PRODUCTS AND SERVICES IN A MANNER THAT
HAS YET TO GAIN WIDESPREAD ACCEPTANCE.
The market for providing e-government solutions and facilitating government
transactions through the use of Internet and IVR applications is new and
unproven. Moreover, given the limited scope of the market for our e-government
solutions, there is a limited basis upon which you can evaluate the viability of
the market we intend to serve. We cannot assure you that our business model will
succeed in this new industry or that our methods for completing transactions
with governments will be widely accepted.
WE HAVE ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME, AND YOUR BASIS FOR
EVALUATING US IS LIMITED.
Although we were formed in October 1995, we have only been executing our
current business model since mid-January 2000. Accordingly, there is a limited
basis upon which you can evaluate our business and prospects. We cannot assure
you that our management will be able to effectively manage the combined entity
and effectively implement our growth and operating strategies. Moreover, because
of our limited operating history, you have limited operating and financial data
about our business upon which to base an evaluation of our performance and an
investment in our common stock. An investor in our common stock should consider
the risks, expenses and difficulties that we will face as an early stage company
seeking to develop a business model based upon Internet and IVR technologies. We
cannot assure you that we will be successful in accomplishing our objectives,
and our failure to do so could harm our business, operating results and
financial condition.
OUR CONTRACT WITH THE FLORIDA DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES
ACCOUNTED FOR 57.7% OF OUR 1999 REVENUES, AND THE LOSS OF THE FLORIDA DEPARTMENT
OF HIGHWAY SAFETY AND MOTOR VEHICLES AS A CLIENT WOULD HARM OUR BUSINESS,
OPERATING RESULTS AND FINANCIAL CONDITION.
For the year ended December 31, 1999, transaction fees derived from our
contract with the Florida Department of Highway Safety and Motor Vehicles
accounted for 57.7% of our total revenues. In addition, we are currently
negotiating a new contract to provide additional services and extend the term of
our original agreement with the Florida Department of Highway Safety and Motor
Vehicles. If the Florida Department of Highway Safety and Motor Vehicles
terminates these negotiations or elects to discontinue our current contract,
then our business, operating results and financial condition would be harmed.
5
<PAGE> 8
BECAUSE MOST OF OUR CURRENT REVENUES ARE GENERATED FROM SERVICE CONTRACTS WITH A
LIMITED NUMBER OF GOVERNMENT ENTITIES, THE LOSS OF ANY OF THESE CONTRACTS MAY
HARM OUR BUSINESS.
Currently, we have applications operational under 11 contracts with state
or local agencies in six states and the District of Columbia. These contracts
typically have initial terms of three years with optional renewal periods
thereafter. A government may terminate its contract prior to the expiration date
upon specific cause events and, in some instances, simply with notice. The
decision by one or more government agencies to terminate or not to renew an
existing contract would result in significant revenue reductions. If these
reductions in revenue occur, our business and financial condition would be
harmed. We cannot be certain if, when or to what extent government agencies
might terminate or fail to renew any or all of their contracts with us.
THE TRANSACTION FEES WE COLLECT FOR OUR PRODUCTS AND SERVICES ARE SUBJECT TO
REGULATION THAT COULD LIMIT OUR REVENUE GROWTH AND PROFITABILITY.
Depending on the terms of our government contracts, in most applications we
either charge the user a transaction fee or retain a portion of the fee or
ticket being paid to the government by the user. In some of our contracts, the
transaction fee we receive is set or limited by the terms of our contract. We
have limited control over the level of transaction fees we are permitted to
retain. Our business, operating results and financial condition may be harmed if
the level of fees we are permitted to retain in the future is too low or if our
costs rise without a commensurate increase in fees.
IF USERS ARE UNWILLING TO PAY TRANSACTION FEES FOR OUR SERVICES, AND IF
GOVERNMENTS WILL NOT ABSORB ALL OR PART OF OUR TRANSACTION FEES, OUR BUSINESS
MODEL MAY FAIL.
Our business model is dependent, in part, upon users' willingness to pay
transaction fees for the use of our applications in addition to their required
government payments. If users refuse to pay transaction fees, and governments
refuse to absorb all or part of our transaction fees, demand for our services
will decline or fail to grow, which would jeopardize the implementation of our
business plan and harm our business, operating results and financial condition.
OUR BUSINESS WITH VARIOUS GOVERNMENT ENTITIES MIGHT REQUIRE SPECIFIC LEGISLATION
TO BE PASSED FOR US TO INITIATE AND MAINTAIN OUR GOVERNMENT CONTRACTS AND IS
SUBJECT TO OTHER RISKS ASSOCIATED WITH GOVERNMENT CONTRACTING.
Because our business model involves executing contracts with governments
under which we receive transaction fees charged to businesses and citizens, it
may be necessary for governments to draft and adopt specific legislation before
the government can implement our solutions. The repeal or modification of any
enabling legislation could also harm our business, operating results and
financial condition.
We face other risks or challenges associated with government contracting,
generally, including:
- political resistance to the concept of government agencies contracting
with third parties to facilitate the payment of fees to the government
and to distribute public information and services which have
traditionally been offered only by government agencies, often without
charge;
- the internal review process by the government agencies for bid
acceptance;
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<PAGE> 9
- the need to reach a political accommodation among various interest
groups;
- changes to the bidding procedure by the government agencies;
- changes to state legislation authorizing government's contracting with
third parties;
- changes in government administrations or personnel;
- the limited resources of government entities;
- the competition generated by the bidding process; and
- the possibility of cancellation or delay by the government entities.
GOVERNMENTS MAY RESIST OR FIND IT DIFFICULT TO ADOPT OUR INTERNET AND IVR
SOLUTIONS.
The success of our business model depends upon the ability and willingness
of different government entities to accept and implement our advanced Internet
and IVR solutions. A number of factors may cause such government entities to
reject our services, including:
- a lack of the resources necessary to implement and maintain Internet
and/or IVR technologies;
- the financial, operational and technological risks of moving from older,
established systems to rapidly evolving Internet and IVR technologies;
- lengthy political appropriations processes that make it difficult for
governments to acquire resources and to rapidly develop services based
upon advanced technologies; and
- security and privacy concerns relating to the confidential nature of the
information and transactions available from and conducted with
governments and the view that government information is part of the
public trust.
If governments do not adopt our solutions because of these or other
factors, we will be unable to successfully implement our growth strategy, and
our business, operating results and financial condition would be harmed.
THE ENTRANCE OF COMPETITORS INTO THE G2C AND G2B MARKETS WOULD HARM OUR ABILITY
TO MAINTAIN OR IMPROVE OUR POSITION IN THE MARKETS, RESULTING IN LOWER OPERATING
MARGINS AND DECREASED MARKET SHARE.
Many companies exist that provide one or more aspects of the products and
services we offer. Moreover, competition for the provision of e-government
products and services is rapidly increasing. In some cases, the principal
substitute for our services is a government-designed and managed approach that
integrates other vendors' technologies, products and services. Companies that
have expertise in marketing and providing technical services to government
entities may begin to compete with us by further developing their services and
increasing their focus on this piece of their business. In addition, a number of
data and bill processing companies have the technical capability and other
resources to provide e-government products and services and have indicated an
intent to do so.
Examples of companies that are current and potential competitors with us
include the following:
- e-government companies, including two public companies, National
Information Consortium, Inc. and Official Payments Corporation, and other
private companies;
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<PAGE> 10
- large systems integrators, including American Management Systems, Inc.
and Electronic Data Systems Corporation;
- traditional consulting firms and computer hardware manufacturers,
including IBM Corporation, Lockheed Martin Corporation, Science
Applications International Corporation and Compaq Computer Corporation;
and
- web service companies, including USWeb/CKS, AppNet Systems, Inc., Sapient
Corporation and Verio Inc.
Many of our current and potential competitors are national or international
in scope and may have greater resources than we do. These resources could enable
such competitors to initiate price cuts or take other measures in an effort to
gain market share. Additionally, in some geographic areas, we may face
competition from smaller consulting firms with established reputations and
political relationships with potential government clients. If we do not compete
effectively or if we experience any pricing pressures, reduced margins or loss
of market share resulting from increased competition, our business and financial
condition would be harmed.
OUR BUSINESS WOULD BE HARMED IF WE DO NOT DEVELOP STRATEGIC PARTNERSHIPS WITH
LEADING PROVIDERS OF PRODUCTS AND SERVICES THAT COMPLEMENT OUR E-GOVERNMENT
SOLUTIONS OR IF ANY SUCH STRATEGIC PARTNERS DECIDE TO COMPETE WITH US DIRECTLY.
The success of our business model is dependent, in part, upon our ability
to create and maintain strategic partnerships with leading providers of products
and services that complement our e-government solutions. We have established and
intend to continue to pursue relationships with leading companies with a
specific government-sector focus in complementary industries such as banking and
finance, electronic payments, hardware manufacturing, software development,
telecommunications and Internet services in order to enhance our own products
and services and increase our chances of obtaining government contracts. If we
lose our current strategic partners or are unable to gain new strategic
partners, our business could be harmed. In addition, we cannot assure you that
our strategic partners will not decide in the future to compete with us in
providing e-government solutions. If our strategic partners compete with us, our
business, operating results and financial condition would be harmed.
IF WE FAIL TO COORDINATE OR EXPAND OUR OPERATIONAL PROCEDURES AND CONTROLS, WE
MAY NOT EFFECTIVELY MANAGE OUR GROWTH.
Our growth rate may increase rapidly in response to the acceptance of our
products and services under new or existing government contracts. If we cannot
manage our growth effectively, we may not be able to coordinate the activities
of our staffs, and our business could be harmed. We intend to plan for the
acceptance of new bids by a number of government entities so that we may be
ready to begin operations as soon as possible after acceptance of a bid. As part
of this plan of growth, we must implement new operational procedures and
controls to expand, train and manage our employees and to coordinate the
operations of our various subsidiaries. If we acquire new businesses, we also
may have difficulties integrating new operations, technologies and personnel.
WE MAY BE UNABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL.
The recent growth in our business, together with our recent merger, has
resulted in an increase in the responsibilities for both existing and new
management personnel. The loss of any of our executives, particularly Richardson
M. Roberts, our Chief Executive Officer, or Larry C. Wine, our President, would
likely harm our business. We may not be able to retain our current key employees
or attract, integrate or retain other qualified employees in the future. If
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<PAGE> 11
we do not succeed in attracting new personnel or integrating, retaining and
motivating our current personnel, our business could be harmed. In addition, new
employees generally require substantial training in the presentation, policies
and positioning of our e-government products and services. This training will
require substantial resources and management attention. Moreover, a number of
members of our management team have little experience working together. The
failure of key personnel to integrate well would harm our business, operating
results and financial condition.
IF OUR ABILITY TO ACCEPT CREDIT CARDS FOR PAYMENT IS LIMITED OR TERMINATED, OUR
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION WOULD BE HARMED.
Our ability to accept credit cards from users of our applications is
dependent upon a number of factors, including the ability of processing banks to
provide us certain services. We cannot assure you that our ability to accept
credit cards will not be limited or terminated in the future as a result of the
inability of processing banks to provide us with necessary processing services
or any other applicable factors. Any such occurrence would harm our business,
operating results and financial condition.
WE MAY NEED MORE WORKING CAPITAL TO EXPAND OUR BUSINESS.
We may be required to raise additional funds through public or private
financing, strategic relationships or other arrangements. We cannot assure you
that such additional funding, if needed, will be available on terms acceptable
to us or at all. If adequate funds are not available on acceptable terms, our
ability to develop or enhance our products and services, take advantage of
future opportunities or respond to competitive pressures would be significantly
limited. This limitation would harm our business, operating results and
financial condition.
RISKS RELATED TO THE INTERNET
OUR SUCCESS DEPENDS ON THE CONTINUED GROWTH OF THE INTERNET AND E-COMMERCE.
Our future revenues and profits depend upon the widespread acceptance and
use of the Internet and other online services as a medium for commerce by
merchants and consumers. The use of the Internet and e-commerce may not continue
to develop at past rates, and a sufficiently broad base of business and
individual customers may not adopt or continue to use the Internet as a medium
of commerce. The market for the sale of goods and services over the Internet is
a new and emerging market. Demand and market acceptance for recently introduced
services and products over the Internet are subject to a high level of
uncertainty, and there exist few proven services and products. Growth in our
customer base depends on obtaining merchants and consumers who have historically
used traditional means of commerce to purchase goods. For us to be successful,
these market participants must accept and use novel ways of conducting business
and exchanging information.
E-commerce may fail to gain widespread acceptance for the following
reasons, any of which could seriously harm our business:
- the necessary infrastructure for Internet communications may not develop
adequately;
- our potential customers -- governments, citizens and businesses -- may
have security and confidentiality concerns;
- complementary products, such as high-speed modems and high-speed
communication lines, may not be developed;
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<PAGE> 12
- use of the Internet and other online services may not continue to
increase or may increase more slowly than expected;
- the development or adoption of new technology standards and protocols may
be delayed or may not occur; and
- new and burdensome government regulations or taxes may be imposed.
OUR SUCCESS DEPENDS ON THE CONTINUED RELIABILITY OF THE INTERNET.
The Internet continues to experience significant growth in the number of
users, frequency of use and bandwidth requirements. There can be no assurance
that the infrastructure of the Internet and other online services will be able
to support the demands placed upon them. Furthermore, the Internet has
experienced a variety of outages and other delays as a result of unlawful
hacking and damage to portions of its infrastructure and could face such outages
and delays in the future.
In addition, the Internet or other online services could lose their
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of activity or due to increased
government regulation. Changes in or insufficient availability of
telecommunications services or other Internet service providers to support the
Internet or other online services also could result in slower response times and
adversely affect usage of the Internet and other online services generally and
our service in particular. If use of the Internet and other online services does
not continue to grow or grows more slowly than expected, if the infrastructure
of the Internet and other online services does not effectively support growth
that may occur or if the Internet and other online services do not become a
viable commercial marketplace, our business, operating results and financial
condition will be harmed.
NEW TAXES MAY BE IMPOSED ON E-COMMERCE.
We do not collect sales or other similar taxes on goods sold through our
Internet destination sites. However, one or more states may seek to impose sales
tax collection obligations on out-of-state companies that engage in or
facilitate online commerce, and a number of proposals have been made at the
state and local levels that would impose additional taxes on the sale of goods
and services through the Internet. Such proposals, if adopted, could
substantially impair the growth of e-commerce and could adversely affect our
opportunity to derive financial benefit from such activities. Moreover, a
successful assertion by one or more states or any foreign country that we should
collect sales or other taxes on the exchange of merchandise or that merchants
should collect Internet-based taxes could harm our business, operating results
and financial condition.
THERE MAY BE SIGNIFICANT SECURITY RISKS AND PRIVACY CONCERNS RELATING TO
E-COMMERCE.
A significant barrier to e-commerce and communications is the secure
transmission of confidential information over public networks. A compromise or
breach of the technology used to protect our customers' and their end-users'
transaction data could result from, among other things, advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments. Any such compromise could have a material adverse effect on our
reputation and, therefore, on our business, results of operations and financial
condition. Furthermore, a party who is able to circumvent our security measures
could misappropriate proprietary information or cause interruptions in our
operations. We may be required to expend significant capital and other resources
to protect against such security breaches or to alleviate problems caused by
such breaches. Concerns over the security of transactions conducted on the
Internet and other online services and the privacy of users may also inhibit the
growth of
10
<PAGE> 13
the Internet and other online services generally, especially as a means of
conducting commercial transactions. We currently have practices and procedures
in place to protect the confidentiality of our customers' and their end-users'
information. However, our security procedures to protect against the risk of
inadvertent disclosure or intentional breaches of security might fail to
adequately protect information that we are obligated to keep confidential. We
may not be successful in adopting more effective systems for maintaining
confidential information, so our exposure to the risk of disclosure of the
confidential information of others may grow with increases in the amount of
information we possess. To the extent that our activities involve the storage
and transmission of proprietary information, such as credit card numbers,
security breaches could damage our reputation and expose us to a risk of loss or
litigation and possible liability. Our insurance policies may not be adequate to
reimburse us for losses caused by security breaches. There can be no assurance
that our security measures will prevent security breaches or that failure to
prevent such security breaches will not harm our business, operating results and
financial condition.
We may face potential liability for defamation, negligence, invasion of
privacy and other claims based on the nature and content of the material that is
published on our destination sites. These types of claims have been brought,
sometimes successfully, against online services and web sites in the past. We
cannot assure you that our general liability insurance will be adequate to
indemnify us for all liability that may be imposed. Any liability that is not
covered by our insurance or is in excess of our insurance coverage could harm
our business, operating results and financial condition.
OUR BUSINESS OPERATIONS MAY BE ADVERSELY IMPACTED IF THE SOFTWARE, COMPUTERS AND
OTHER SYSTEMS ON WHICH OUR BUSINESS OPERATES EXPERIENCE RESIDUAL PROBLEMS
ASSOCIATED WITH YEAR 2000.
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately distinguish 21st century dates from 20th
century dates because of the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally and
the compliance and remediation work accomplished leading up to 2000 was
effective to prevent any problems. Computer experts have warned that there may
still be residual consequences of the change in centuries. If we or our
suppliers experience any of these difficulties, our business operations could be
interrupted, and we could experience a decrease in transactions, as well as an
increase in allocation of resources to address Year 2000 problems of our
customers without additional revenue commensurate with this dedication of
resources. If our customers experience any of these difficulties, we could
experience litigation costs relating to losses suffered by our customers due to
the Year 2000 problems.
RISKS RELATED TO THIS OFFERING
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK.
Before this offering, there has been no public market for our common stock.
Although we expect our common stock to be quoted on the Nasdaq National Market,
an active trading market for our shares may not develop or be sustained
following this offering. Purchasers in this offering may not be able to resell
their shares at prices equal to or greater than the initial public offering
price. The initial public offering price will be determined through negotiations
between us and the underwriters and may not be indicative of the market price
for these shares following this offering. You should read "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.
11
<PAGE> 14
OUR EXISTING STOCKHOLDERS WILL CONTROL CERTAIN MATTERS REQUIRING A STOCKHOLDER
VOTE.
Upon the closing of this offering, our directors and principal stockholders
will beneficially own approximately 39.5% of our outstanding stock. If all of
these stockholders were to vote together as a group, they would have the ability
to exert significant influence over our board of directors and its policies. For
instance, these stockholders will be able to control the outcome of all
stockholder votes, including votes concerning director elections, certain bylaw
amendments and possible mergers, corporate control contests and other
significant corporate transactions. Accordingly, such concentration of ownership
may have the effect of delaying, deferring or preventing a change of control,
impeding a merger, consolidation, takeover or other business combination
involving our company or discouraging a potential acquirer from making a tender
offer or otherwise attempting to obtain control of our company, which in turn
could harm the market price of our common stock.
PROVISIONS OF TENNESSEE LAW AND OF OUR CHARTER AND BYLAWS MAY MAKE A TAKEOVER
MORE DIFFICULT.
Provisions in our charter and bylaws and in the Tennessee corporate law may
make it difficult and expensive for a third party to pursue a tender offer,
change of control or takeover attempt which is opposed by our management and
board of directors. Public stockholders who might desire to participate in such
a transaction may not have an opportunity to do so. In addition, prior to the
closing of this offering, we will have a staggered board of directors, which
will make it difficult for stockholders to change the composition of the board
of directors in any one year. These anti-takeover provisions could substantially
impede the ability of public stockholders to change our management and board of
directors, which may reduce the market price of our common stock.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price per share will be substantially higher
than the net tangible book value per share immediately after the offering. If
you purchase common stock in this offering, you will incur immediate and
substantial dilution of approximately $ in the net tangible book
value per share of the common stock from the price you paid. We also have a
large number of outstanding warrants and employee stock options to purchase our
common stock with exercise prices significantly below the initial public
offering price of the common stock. To the extent these warrants or options are
exercised, there will be further dilution. In addition, if we make acquisitions
using our stock as currency, you will suffer additional dilution.
OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, following this offering, including:
- failure to meet our development plans;
- revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter;
- loss of an existing client or contract;
- changes in securities analysts' estimates or recommendations;
- technological innovations by competitors or in competing technologies;
12
<PAGE> 15
- investor perception of our industry or our prospects; and
- general technological or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, operating results and
financial condition.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE.
Sales of substantial amounts of our common stock in the public market
following this offering or the perception that a large number of shares are
available for sale, could cause the market price of our common stock to decline.
After this offering, shares owned by our current stockholders and holders of
options and warrants to acquire our common stock, on a fully-diluted basis
assuming exercise of all options and warrants, are expected to constitute
approximately 83.6% of the outstanding shares of our common stock, or 81.6% if
the underwriters' over-allotment option is exercised in full. Following the
expiration of a 180-day "lock-up" period to which a majority of the shares held
by our current stockholders will be subject, the holders of those shares will in
general be entitled to dispose of those shares, subject to applicable holding
requirements under federal securities laws. Moreover, Deutsche Bank Securities
Inc. may, in its sole discretion and at any time without notice, release those
holders from the sale restrictions on their shares. In addition to the adverse
effect a price decline could have on holders of our common stock, such a decline
would likely impede our ability to raise capital through the issuance of
additional shares of our common stock or other equity securities.
After this offering, the holders of approximately 7,295,448 shares of our
common stock (including shares issuable upon the exercise of outstanding
warrants) will have rights, subject to some conditions, to include their shares
in registration statements that we may file on behalf of our company or other
stockholders. By exercising their registration rights and selling a large number
of shares, these holders could cause the price of our common stock to decline.
Furthermore, if we were to include in a LINK2GOV-initiated registration
statement shares held by those holders pursuant to the exercise of their
registration rights, those sales could impair our ability to raise needed
capital by depressing the price at which we could sell our common stock.
WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS FROM THIS OFFERING.
We do not have a quantified business plan for the allocation of the
proceeds from this offering. Our board of directors and our management will have
broad discretion over the use of the net proceeds of this offering. Investors
will be relying on the judgment of our board of directors and our management
regarding the application of the proceeds of this offering.
WE DO NOT INTEND TO PAY CASH DIVIDENDS.
We have never declared or paid any cash dividends on shares of our common
stock. We currently intend to retain our earnings, if any, for future growth
and, therefore, do not anticipate paying any cash dividends in the foreseeable
future.
13
<PAGE> 16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different than any expressed or implied by these forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue" or the negative of these terms
or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results.
This prospectus contains estimates of market growth related to the Internet
and e-commerce. These estimates have been included in studies published by
market research firms and other companies, including International Data
Corporation and Dataquest, Inc. These estimates have been produced by industry
analysts based on trends to date, their knowledge of technologies and markets,
and customer research, but these are forecasts only and are subject to inherent
uncertainty.
14
<PAGE> 17
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of our common stock
in this offering will be approximately $ million ($
million if the underwriters' overallotment option is exercised in full), at an
assumed initial offering price of $ per share and after deducting
the estimated underwriting discounts and commissions and our estimated offering
expenses.
We anticipate that we will use the net proceeds for general corporate
purposes, including:
- working capital;
- funds for operations;
- capital expenditures; and
- potential acquisitions.
Until allocated for specific use, we will invest these proceeds in
short-term government and other investment-grade debt securities.
The amounts we actually spend for these purposes may vary significantly and
will depend on a number of factors, including our future revenue and cash
generated by operations and the other factors described in "Risk Factors."
Therefore, we will have broad discretion in the way we use the net proceeds.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the expansion
of our business and do not expect to pay any cash dividends in the foreseeable
future. Payment of future cash dividends, if any, will be at the discretion of
our board of directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs,
plans for expansion and restrictions imposed by lenders, if any.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis giving effect to (i) the acquisition of
Link2Gov.com, Inc. and the related issuance of 6,045,773 shares, and (ii)
the issuance of 1,466,194 shares of the Series A Convertible Preferred
Stock for cash proceeds of approximately $3,123,000 in January 2000; and
- on a pro forma basis as adjusted to reflect the sale of 5,000,000 shares
of common stock in this offering at an assumed initial public offering
price of $ per share, after deduction of estimated
underwriting discounts and commissions, our estimated offering expenses,
the use of the net proceeds as described in "Use of Proceeds" and the
automatic conversion of all of the shares of the Series A Convertible
Preferred Stock into common stock.
The table excludes:
- 300,000 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1999 at a weighted average exercise price
of $1.00 per share;
- 1,800,000 shares of common stock available for future grant under our
stock option plan as of December 31, 1999; and
- 1,200,000 shares of common stock issuable upon exercise of warrants
outstanding as of December 31, 1999 at a weighted average exercise price
of $0.17 per share.
You should read the following table in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our audited financial statements and related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents.............................. $ 704 $ 6,790 $
======= ======= =======
Total borrowings....................................... $ 698 $ 698 $
Stockholders' equity (deficit):
Series A Convertible Preferred Stock................. -- 3,123
Common stock, no par value, 50,000,000 shares
authorized, 12,530,000 shares issued actual,
18,576,000 shares issued pro forma, and 25,042,000
shares issued pro forma as adjusted............... 780 13,657
Stock warrants....................................... 27 27
Accumulated deficit.................................. (1,194) (1,194)
------- ------- -------
Total stockholders' equity (deficit)......... (387) 15,613
------- ------- -------
Total capitalization......................... $ 311 $16,311 $
======= ======= =======
</TABLE>
16
<PAGE> 19
DILUTION
As of December 31, 1999, we had a pro forma net tangible book value of
$5,321,000 or $0.27 per share of common stock. Pro forma net tangible book value
per share is equal to our total tangible assets less total liabilities, divided
by the pro forma number of shares of our outstanding common stock after giving
effect to the conversion of the Series A Convertible Preferred Stock into shares
of common stock and giving effect to the issuance of 6,045,773 shares of common
stock in connection with our acquisition of Link2Gov.com, Inc. After giving
effect to the issuance of 5,000,000 shares of common stock offered hereby at an
assumed initial public offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and our estimated
offering expenses, our pro forma net tangible book value as adjusted, as of
December 31, 1999, would have been approximately $ or
approximately $ per pro forma share of common stock. This
represents an immediate increase in pro forma net tangible book value of
$ per share to our existing stockholders and an immediate dilution
of $ per share to new investors in this offering. If the initial
public offering price is higher or lower than $ per share, the
dilution to new stockholders will be higher or lower, respectively. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before this
offering............................................... $ 0.27
Increase in pro forma net tangible book value 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 summarizes, on a pro forma basis as of December 31,
1999, the difference between existing stockholders and the new investors with
respect to the number of shares of common stock purchased, the total
consideration paid and the average price per share paid. The table assumes that
the initial public offering price will be $ before deducting
underwriters' discounts and expenses. For purposes of determining the total
consideration paid for the 6,045,773 shares of common stock issuable in
connection with our acquisition of Link2Gov.com, Inc., we have assigned a value
per share of $2.13.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 20,041,957 80.0% $17,017,049 % $ 0.85
New investors................. 5,000,000 20.0
---------- ----- ----------- ----- ---------
Total............... 25,041,957 100.0% $ 100.0% $
========== ===== =========== =====
</TABLE>
The discussion and tables exclude:
- 300,000 shares of common stock issuable upon the exercise of stock
options outstanding at December 31, 1999, at a weighted average exercise
price of $1.00 per share;
- 1,800,000 shares of common stock available for future grant under our
stock option plan as of December 31, 1999; and
- 1,200,000 shares of common stock issuable upon exercise of warrants
outstanding as of December 31, 1999, at a weighted average exercise price
of $0.17 per share.
To the extent the warrants and options are exercised and the underlying
shares are issued, there will be further dilution to new investors. See "Risk
Factors," "Capitalization," "Management," "Description of Capital Stock" and the
notes to our financial statements included elsewhere in this prospectus.
17
<PAGE> 20
SELECTED FINANCIAL DATA
The following selected historical statements of operations data for each of
the years in the three-year period ended December 31, 1999, and balance sheet
data as of December 31, 1998 and 1999, have been derived from our audited
financial statements included elsewhere in this prospectus. The following
selected historical statements of operations data for the year ended December
31, 1996, for the period from inception (October 27, 1995) through December 31,
1995 and balance sheet data as of December 31, 1995, 1996 and 1997 have been
derived from our unaudited financial statements, which include, in the opinion
of our management, all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of financial
position and results of operations. The following selected pro forma financial
data for the year ended December 31, 1999 have been derived from our pro forma
financial information included elsewhere in this prospectus. The information set
forth below should be read along with the audited financial statements and
related notes, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and the pro forma financial information, all as included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------------------- ---------
1995(1) 1996 1997 1998 1999 1999(2)
------- ------ ------ ------ ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net Revenues......................... $ -- $ -- $ 542 $ 819 $ 979 $ 996
Operating Expenses................... -- -- 377 558 780 1,222
Selling, general and administrative
expenses........................... 33 136 129 262 1,148 3,183
Depreciation and amortization........ -- -- 1 2 4 2,077
Noncash compensation expense......... -- -- 59 57 287 747
------- ------ ------ ------ ------- -------
33 136 566 879 2,219 7,229
------- ------ ------ ------ ------- -------
Operating loss....................... (33) (136) (24) (60) (1,240) (6,233)
Other income (expense), net.......... (2) (8) (39) (43) (33) 126
------- ------ ------ ------ ------- -------
Net loss............................. $ (35) $ (144) $ (63) $ (103) $(1,273) $(6,107)
======= ====== ====== ====== ======= =======
Basic and diluted net loss per
share.............................. $ -- $(0.01) $(0.01) $(0.01) $ (0.13) $ (0.38)
======= ====== ====== ====== ======= =======
Weighted average shares outstanding.. 10,000 10,000 10,000 10,000 9,937 15,983
======= ====== ====== ====== ======= =======
BALANCE SHEET DATA:
Cash and cash equivalents............ $ -- $ 3 $ 16 $ 29 $ 704 $ 6,790
Working capital (deficit)............ 1 (6) 118 (98) (447) 5,158
Total assets......................... -- 145 406 444 1,250 17,759
Total borrowings..................... 35 273 486 481 698 698
Stockholders' equity (deficit)....... (34) (138) (142) (188) (387) 15,613
</TABLE>
- -------------------------
(1) The Company was formed on October 27, 1995. These results represent start up
costs incurred between inception and December 31, 1995.
(2) Reflects the acquisition of Link2Gov.com, Inc. and related issuance of
6,045,773 shares of common stock and the sale of 1,466,194 shares of our
Series A Convertible Preferred Stock effective January 25, 2000, as if each
had occurred on January 1, 1999 for statements of operations data, and on
December 31, 1999 for balance sheet data.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read together with "Selected Financial Data" and
our financial statements and related notes appearing elsewhere in this
prospectus. This discussion and analysis contains forward-looking statements
that involve risks, uncertainties and assumptions. The actual results may differ
materially from those anticipated in these forward-looking statements as a
result of many factors, including but not limited to those set forth under "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
We provide Internet and IVR solutions that enable convenient and
inexpensive processing of G2C and G2B transactions. We partner with state and
local government entities to deploy easily accessible e-government applications
that allow citizens and businesses to transact directly with government agencies
without the inconvenience and hassle ordinarily faced in routine transactions
with government. Our applications benefit users by facilitating automobile-
related transactions, such as renewing or obtaining driver's licenses, vehicle
registrations and vanity plates and paying fines for traffic violations and
parking citations; outdoor-related transactions, such as purchasing hunting and
fishing licenses; and business-related transactions, such as renewing
professional and occupational licenses and other corporate licenses. For
governments, we provide the benefits of technologically advanced solutions that
offer user-friendly interaction, while minimizing the overhead costs associated
with maintaining the facilities and personnel needed to manually process routine
G2C and G2B transactions.
By offering both Internet and IVR solutions, we seek to provide access to
e-government applications to the greatest number of potential users, including
those without Internet access and those who prefer to use the telephone to
complete their government transactions. Because our applications are widely
accessible, we believe governments will be more willing to adopt our solutions
rather than solutions that are solely Internet-based.
Our predecessor company, G-Link Corporation, was founded in October 1995
with a focus on providing IVR-based applications to government agencies. In
September 1999, we hired Richardson M. Roberts, an individual with more than
five years of experience leading public companies engaged in electronic
transactions processing, to serve as our Chief Executive Officer. In February
2000, we completed our acquisition of Link2Gov.com, Inc., which we accounted for
as a purchase. This acquisition provided us with online technical expertise,
enabling us to offer more sophisticated Internet-based e-government solutions.
In March 2000, we renamed our company LINK2GOV Corp.
Our revenues are derived from fees we receive on each transaction completed
through our Internet and IVR applications. Our transaction fees typically range
from $2.00 to $6.50 and are paid to us by the user or the government. In
addition to our fee-based revenues, we anticipate deriving revenues from the
sale of advertising and sponsorships on our government applications and our
destination sites. Our applications and destination sites will each focus on a
particular subject or vertical industry, which we believe will be attractive as
potential venues for targeted advertising and promotions.
Currently, we have applications operational under 11 contracts with state
agencies in six states, including Alabama, Arizona, Florida, Georgia, Indiana
and Texas, as well as the District of Columbia. Additionally, we have
applications under development pursuant to nine contracts with five state
agencies and four counties. We believe our applications are suitable for
deployment in all 50 states, 3,000 counties, 36,000 municipalities and by the
federal government.
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<PAGE> 22
Our operating expenses represent the direct costs of processing
transactions including credit card processing costs, telecommunications costs
and commissions, and certain non-transaction specific costs such as program
development and maintenance. Our selling, general and administrative expenses
include corporate administrative costs, business development costs, marketing
costs, finance costs and product development costs.
RESULTS OF OPERATIONS
The following table sets forth, for the periods illustrated, certain
statements of operations data expressed as a percentage of net revenues:
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET
REVENUES
------------------------
YEAR ENDED DECEMBER 31,
------------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Net Revenues................................................ 100.0% 100.0% 100.0%
Operating Expenses.......................................... 69.5 68.1 79.7
Selling, General and Administrative Expenses................ 23.8 32.0 117.2
Depreciation and Amortization............................... 0.2 0.2 0.4
Noncash Compensation Expense................................ 10.9 7.0 29.3
Other Expense, Net.......................................... 7.2 5.3 3.4
----- ----- ------
Net Loss.................................................... (11.6)% (12.6)% (130.0)%
===== ===== ======
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Revenues
Net revenues increased $160,000 to $979,000 for the year ended December 31,
1999 from $819,000 for the year ended December 31, 1998, an increase of 19.5%.
The total number of transactions processed increased from 155,964 in 1998 to
260,654 in 1999. These increases are attributable to the growth of two new
applications begun in 1998 which generated approximately $250,000 of increased
revenues in 1999 and the initiation of certain new applications in 1999, offset
by a reduction of 27.3% in the transaction fee related to our Florida Department
of Highway Safety and Motor Vehicles application. We reduced the transaction fee
to drive greater adoption rates of our applications.
Operating Expenses
Operating expenses increased $222,000 to $780,000 for the year ended
December 31, 1999, from $558,000 for the year ended December 31, 1998, an
increase of 39.8%. Operating expenses represented 79.7% of net revenues for the
year ended December 31, 1999, compared to 68.1% for the year ended December 31,
1998. This increase in operating expenses was primarily due to the additional
processing activity related to the growth of two new applications begun in 1998
and the new applications initiated in 1999. The increase in operating expenses
as a percentage of net revenues was primarily driven by a reduction of 27.3% in
the transaction fee related to our Florida Department of Highway Safety and
Motor Vehicles application. We reduced the transaction fee to drive greater
adoption rates of our applications.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $886,000 to
$1,148,000 for the year ended December 31, 1999, from $262,000 for the year
ended December 31, 1998, an increase of 338.2%. Selling, general and
administrative expenses represented 117.2% of net
20
<PAGE> 23
revenues for the year ended December 31, 1999, compared to 32.0% for the year
ended December 31, 1998. This increase in selling, general and administrative
expenses and the percentage of selling, general and administrative expenses to
net revenues was primarily due to new employees hired in the last half of 1999
as we began increasing the corporate infrastructure to support planned expansion
activities. These expansion activities covered all functions of the
business -- executive, business development, product development, accounting,
and marketing.
Depreciation and Amortization
Depreciation and amortization increased $2,000 to $4,000 for the year ended
December 31, 1999, from $2,000 for the year ended December 31, 1998, an increase
of 100.0%. This increase was related to the increase in infrastructure
development during 1999 which included moving the corporate office into new
space and the related purchase of furniture, fixtures and additional support
equipment.
Noncash Compensation Expense
Noncash compensation expense increased $230,000 to $287,000 for the year
ended December 31, 1999, from $57,000 for the year ended December 31, 1998, an
increase of 403.5%. The noncash compensation expense during 1999 included a
grant of our common stock to the new CEO valued at $72,000 and the forgiveness
of a note receivable from one of our founders totaling $184,000.
Other Expense, Net
Other expense, net decreased $10,000 to $33,000 for the year ended December
31, 1999, from $43,000 for the year ended December 31, 1998, a decrease of
23.3%. Other expense, net represented 3.4% of net revenues for the year ended
December 31, 1999, compared to 5.3% for the year ended December 31, 1998. This
decrease was primarily attributable to lower average borrowings during 1999 as
compared to 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Revenues
Net revenues increased $277,000 to $819,000 for the year ended December 31,
1998, from $542,000 for the year ended December 31, 1997, an increase of 51.1%.
This increase is attributable to an increase in the number of transactions
processed through the Florida Department of Highway Safety and Motor Vehicles
application in 1998 as compared to 1997 and two new applications initiated in
the latter half of 1998. The total number of transactions processed increased
from 100,411 in 1997 to 155,964 in 1998.
Operating Expenses
Operating expenses increased $181,000 to $558,000 for the year ended
December 31, 1998, from $377,000 for the year ended December 31, 1997, an
increase of 48.0%. Operating expenses represented 68.1% of net revenues for the
year ended December 31, 1998, compared to 69.5% for the year ended December 31,
1997. This increase in operating expenses is primarily attributable to an
increase in the number of transactions processed as discussed above.
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<PAGE> 24
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $133,000 to $262,000
for the year ended December 31, 1998, from $129,000 for the year ended December
31, 1997, an increase of 103.1%. Selling, general and administrative expenses
represented 32.0% of net revenues for the year ended December 31, 1998, as
compared to 23.8% for the year ended December 31, 1997. This increase is
primarily attributable to two new employees hired in 1998 in the business
development area, as well as increased travel and entertainment related to
business development activities.
Depreciation and Amortization
Depreciation and amortization increased $1,000 to $2,000 for the year ended
December 31, 1998, from $1,000 for the year ended December 31, 1997, an increase
of 100.0%. Depreciation and amortization represented 0.2% of net revenues for
each of the years ended December 31, 1998 and 1997. This increase is the result
of the purchase of additional support equipment in 1998.
Noncash Compensation Expense
Noncash compensation expense decreased $2,000 to $57,000 for the year ended
December 31, 1998, from $59,000 for the year ended December 31, 1997, a decrease
of 3.4%. Noncash compensation expense represented 7.0% of net revenues for the
year ended December 31, 1998, compared to 10.9% for the year ended December 31,
1997. This decrease was due to the 1997 amount including $6,000 of free rent
which was provided to us by a related party of one of our founders. Subsequent
to 1997, we began paying rent as charged by the related party.
Other Expense, Net
Other expense, net increased $4,000 to $43,000 for the year ended December
31, 1998 from $39,000 for the year ended December 31, 1997, an increase of
10.3%. Other expense, net represented 5.3% of net revenues for the year ended
December 31, 1998, compared to 7.2% for the year ended December 31, 1997. This
increase was primarily attributable to higher average borrowings during 1998 as
compared to 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have experienced operating losses during each period. We
expect to continue to incur losses from operations for the foreseeable future.
Prior to 1999, we funded our operating losses primarily through advances and
loans from parties related to one of our founders and working capital advances
from our contract service provider of IVR transaction processing. Beginning in
late 1999, we began to significantly increase our business development efforts
and expand our corporate infrastructure to prepare for significant future
growth. In connection with these plans, we have obtained a $2 million bank line
of credit (which is personally guaranteed by two of our officers) to fund
working capital needs. In 2000, we received net proceeds of $2.8 million from
the private sale of our Series A Convertible Preferred Stock and completed the
acquisition of Link2Gov.com, Inc. which had approximately $3.3 million in cash
as of December 31, 1999.
Net cash used in operating activities was $121,000 for the year ended
December 31, 1997, which were primarily related to funding our operating losses
and an increase in accounts receivable related to growth in the business. Net
cash provided by operating activities in 1998
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<PAGE> 25
of $106,000 primarily represented a use of cash to fund our operating losses
offset by the receipt of $100,000 cash representing the return of a deposit
previously paid to our primary processor of transactions. Net cash used in
operating activities was $592,000 for the year ended December 31, 1999, which
was primarily related to funding our operating losses.
Net cash provided by financing activities was $135,000 for the year ended
December 31, 1997, and primarily represented borrowings from related parties and
the proceeds from a line of credit with our primary processor of transactions.
During 1998, cash used in financing activities was primarily related to repaying
certain borrowings. Cash flows provided from financing activities were
$1,295,000 for the year ended December 31, 1999, and were primarily related to
the issuance of common stock to certain new officers and members of the board of
directors and proceeds from the new bank line of credit.
In addition to other costs relating to the expansion of our business, we
anticipate making substantial expenditures during the remainder of 2000 as part
of the continued expansion of our services and the build-out of our additional
office space.
We consider all highly liquid investment instruments purchased with an
original maturity of three months or less to be cash equivalents. We invest our
cash and cash equivalents in an overnight investment account, commercial paper
and a money market account. We place our cash and temporary cash investments
with financial institutions which management believes are of high credit
quality.
We have not entered into any financial derivative instruments that expose
us to material market risk.
YEAR 2000 ISSUES
To date we have not experienced Year 2000 problems related to our products
and services. The majority of the computer applications and hardware we
currently use in our internal operations did not require replacement or
modification as a result of the Year 2000 issue.
We believe that our significant vendors and service providers are Year 2000
compliant, and we have not, to date, been made aware that any of our significant
vendors or service providers have suffered Year 2000 disruptions in their
systems.
Accordingly, we do not anticipate incurring material expense or
experiencing any material operational disruptions as a result of any Year 2000
problems.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133) in
June 1998. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as a hedge. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative and the
resulting designation. SFAS No. 133, as amended by SFAS No. 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of this statement is not expected to have a material impact on our
financial statements.
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<PAGE> 26
BUSINESS
OVERVIEW
We provide Internet and IVR solutions that enable convenient and
inexpensive processing of G2C and G2B transactions. We partner with state and
local government entities to deploy easily accessible e-government applications
that allow citizens and businesses to transact directly with government agencies
without the inconvenience and hassle ordinarily faced in routine transactions
with government. Our applications benefit users by facilitating automobile-
related transactions, such as renewing or obtaining driver's licenses, vehicle
registrations and vanity plates and paying fines for traffic violations and
parking citations; outdoor-related transactions, such as purchasing hunting and
fishing licenses; and business-related transactions, such as renewing
professional and occupational licenses and other corporate licenses. For
governments, we provide the benefits of technologically advanced solutions that
offer user-friendly interaction, while minimizing the overhead costs associated
with maintaining the facilities and personnel needed to manually process routine
G2C and G2B transactions.
By offering both Internet and IVR solutions, we seek to provide access to
e-government applications to the greatest number of potential users, including
those without Internet access and those who prefer to use the telephone to
complete their government transactions. Because our applications are widely
accessible, we believe governments will be more willing to adopt our solutions
rather than solutions that are solely Internet-based.
Our goal is to become the leading provider of Internet and IVR solutions
for G2C and G2B transactions. We have adopted two principal strategies to
achieve this goal:
- First, we strive to develop business by securing long-term, exclusive
contractual relationships with state and local governments.
- Second, we have developed a comprehensive user acquisition strategy to
encourage citizens and businesses to conduct their government
transactions using our applications and destination sites. Our
destination sites will be designed to encourage usage of our applications
by providing users with relevant content, community and e-commerce
opportunities.
INDUSTRY BACKGROUND
Growth of the Internet and e-Commerce. The Internet has experienced
significant growth and adoption and has become an important tool for global
communications and commerce. International Data Corporation estimates that there
were 97 million Internet users worldwide at the end of 1998 and predicts that
this number will increase to approximately 320 million by the end of 2002.
Internet-based services of varying kinds continue to grow primarily because of
the speed and convenience of conducting such transactions over the Internet, as
well as the ability of the Internet user to access information "on demand."
International Data Corporation estimates that commerce over the Internet will
increase from approximately $32 billion worldwide in 1998 to approximately $133
billion in 2000 and to $1 trillion by 2003. Moreover, Dataquest, Inc. estimates
that approximately 13.7 million U.S. households will pay their bills online by
2004.
Equally important is the rapid growth of e-commerce. Because e-commerce
allows transactions to be completed more quickly, with greater accuracy and at a
lower cost than more traditional methods, a greater number of individuals and
businesses are engaging in transactions involving e-commerce. Every day,
individuals and businesses perform a wide variety of transactions via telephone
and Internet.
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<PAGE> 27
The Market for G2C and G2B Transactions. The government's regulation of
commercial and consumer activities gives rise to an extraordinary number of
transactions between government agencies and businesses and citizens. According
to the official statistics of the U.S. Census Bureau, federal, state and local
governments collected a total of $470 billion in non-tax charges and
miscellaneous fees from businesses and citizens in 1995, not including fees
collected by state and local governments for motor vehicle licenses and
registrations.
Based on U.S. Census Bureau data, state and local governments collected
approximately $14 billion in fees in 1998 for approximately 212 million motor
vehicle licenses and registrations. State wildlife agencies collected
approximately $1 billion in fees in 1998 for approximately 44 million hunting
and fishing licenses. In addition, states collect substantial fees for corporate
licenses and permits, professional licenses and traffic violations. Other
examples of G2C and G2B transactions include obtaining building permits, paying
utility bills, paying property and income taxes and accessing vital records,
such as birth certificates.
Traditionally, processing these transactions has been labor intensive and
inefficient due to excessive paperwork and insufficient staffing. These
transactions, often made in person or by mail, are prone to human error and
require significant resources to process. Long lines for in-person transactions
are commonplace and "live-operator" telephone transactions can be cumbersome,
inconvenient and time consuming.
Costs associated with these transactions are borne both by government
agencies and users. On the government side, agencies typically bear the cost of
processing transactions through general tax revenue, service fees and charges
for direct access to public records or a combination of these. On the citizen
and business side, costs include out-of-pocket expenses for fees and service
charges. More importantly, users incur costs of compliance in the form of time
lost. Beyond waiting in long lines and waiting for responses by mail or over the
telephone, citizens have to take time off from work to complete the transactions
during limited government business hours. Moreover, many transactions require
visits to more than one government agency, which are often many miles apart from
each other. We believe our ability to reduce these costs through e-government
solutions represents a significant market opportunity.
The growing acceptance of the Internet, IVR and e-commerce presents a
significant opportunity for enabling government agencies to conduct transactions
over the Internet. Driven by the private sector's success in utilizing the
Internet and IVR to improve efficiency, reduce costs and increase profits, the
public sector is under pressure to implement broad Internet-based solutions to
improve service to citizens. Indeed, mandates have been issued by the federal
government and a number of states to implement technological solutions to
process everyday G2C and G2B transactions. The growing acceptance of e-commerce
and the Internet presents a unique opportunity for the private sector to form
alliances with government entities to streamline many inefficient and
paper-based government processes.
By using Internet and IVR solutions, government agencies can increase
efficiency and the satisfaction of their constituents, while decreasing overhead
costs and citizens' frustration. The technical expertise and financial resources
required to develop, implement and support government-operated Internet and IVR
solutions for G2C and G2B transactions represent significant challenges and
impediments that governments typically cannot overcome because of limited
resources and political inertia. Instead, many government agencies are turning
to the private sector to implement e-government solutions.
OUR SOLUTIONS
We provide Internet and IVR solutions that create a more convenient, less
expensive and more enjoyable mechanism for processing G2C and G2B transactions.
We partner with state
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<PAGE> 28
and local government entities to deploy e-government applications that allow
users to transact directly with government agencies. For example, our
applications facilitate automobile-related transactions, such as renewing or
obtaining driver's licenses, vehicle registrations and vanity plates and paying
fines for traffic violations and parking citations; outdoor-related
transactions, such as purchasing hunting and fishing licenses; and
business-related transactions, such as renewing professional and occupational
licenses and completing other corporate filings.
Our G2C and G2B solutions are designed to satisfy the needs of governments
and users.
- For governments, we provide the benefits of technologically advanced
solutions that offer user-friendly interaction, while minimizing overhead
costs associated with maintaining the facilities and personnel needed to
manually process routine G2C and G2B transactions. Moreover, because of
the convenience and value provided to citizens, governments should be
able to experience increased regulatory compliance with their programs.
- For citizens, we offer solutions that are more convenient, less expensive
and more valuable. By reducing time spent in lines and providing easier
access to government, our solutions deliver value to the citizen in G2C
transactions where previously little or none existed.
- For businesses, we deliver solutions that reduce transaction costs and
offer an accessible means of complying with government regulation and
receiving related information and assistance typically unavailable in
conventional G2B transaction processing.
Access Channels for Our Solutions
Our applications are built around a core suite of Internet and IVR
technologies. To facilitate and maximize access by our users, we provide points
of contact to our solutions through the deployment of either Internet or IVR
interfaces, and in many cases, both. Moreover, our contracts with government
entities typically require governments to include information on using our
applications, such as our website addresses or IVR phone numbers, in renewal or
payment due notices sent by the government to its constituents. We design these
technologies to be highly secure, user-friendly and economical, enabling users
to conduct transactions in the comfort of their own home or business 24 hours a
day, 365 days a year.
Internet. We are an application service provider and customize each of our
applications to suit the needs of our government partners. Our graphical user
interfaces are designed to be intuitive and user-friendly. Currently, we
outsource much of our Internet application building and all of our Internet
application hosting to established technology firms, such as iXL Enterprises,
Inc. However, we are in the process of transferring the responsibility for
application development from our outsourcing partners to our own technology
department. In doing so, we expect to colocate our servers with industry-leading
providers of such services. We expect to redeploy our applications using active
server pages built around Windows NT and a functional layer component built
around Microsoft Transaction Server technology. We believe that there will be
adequate firewall protection for our servers. We will employ Secure Socket
Layers (SSL), 128-bit encryption and software designed to prevent damaging
hacker attacks. Our servers and systems will receive 24-hour monitoring and will
be equipped with state-of-the-art backup and redundancy systems.
Interactive Voice Response. To maximize the accessibility of our solutions
to a broad range of users, we commonly deploy IVR systems. Our IVR solutions
provide automated, interactive access to government transactions and allow
anyone with a telephone to perform G2C and G2B transactions using the touch-tone
keypad or even the rotary dial on older telephones. IVR systems are programmed
using a scripted set of questions seeking specified numeric responses from the
user. The IVR application can also be scripted to include advertising and
promotional
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messages. As with our Internet applications, we currently outsource much of our
IVR application building and all of our IVR application hosting to established
IVR technology firms. As with our Internet applications, we are in the process
of transferring the responsibility for application development from our
outsourcing partners to our own technology department. In doing so, we expect to
colocate our IVR servers with industry-leading providers of telecommunications
infrastructure and data services. We expect to redeploy our applications using
Nortel Class 5, fully-redundant digital switches. Our IVR servers and systems
will receive 24-hour monitoring and will be equipped with state-of-the-art
backup and redundancy systems.
We believe one of our competitive strengths is our ability to deploy a
combination of state-of-the-art Internet and IVR technologies in our G2C and G2B
applications. Moreover, we believe this combination of technologies enables us
to promote increased adoption of our solutions by all users, not just those with
Internet access or who are comfortable executing G2C and G2B transactions
online.
Our Applications in Operation. In processing e-government transactions,
our Internet and IVR applications receive data provided by users and transmit
this data to the same processing mechanism. By using the same processing
mechanism for all of our users' government transactions, we can seamlessly and
consistently deploy and provide both Internet and IVR applications as required
or requested by our government partners. Upon completion of their transactions,
users typically pay a transaction fee ranging from $2.00 to $6.50 for utilizing
our applications. Our applications allow users to pay the costs of their
transactions, including the transaction fees, by credit card or through
electronic funds transfer. As a result, we eliminate our users' need to mail
checks, obtain money orders or make payments in person to complete their
government transactions. In both our Internet and IVR applications, we are able
to compare data input from users to a government-provided database to confirm
the appropriateness of the transaction for an individual user. In some
applications, we receive a daily file from the government containing information
from the government's database, and we return to the government a daily file of
transactions processed. In other applications, we have a live, real-time link to
the government's database, allowing us to seamlessly integrate our transaction
processing with government records.
Our Portfolio of Contracted Applications. Currently, we have operational
applications under 11 contracts with state and local agencies in six states,
including Alabama, Arizona, Florida, Georgia, Indiana and Texas, as well as the
District of Columbia. Additionally, we have applications under development
pursuant to nine contracts with five state agencies and four counties. We
believe our applications are suitable for deployment in all 50 states, 3,000
counties, 36,000 municipalities and by the federal government.
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<PAGE> 30
The table below identifies our government partner in each deployed
application; the type of transactions processed; and the application launch date
or the projected launch date.
<TABLE>
<CAPTION>
APPLICATION
GOVERNMENT PARTNER TYPES OF TRANSACTIONS LAUNCH DATE(1)
- ------------------------------------ ------------------------------------ ---------------------
<S> <C> <C>
Florida Department of Highway Safety Driver's license renewals February 1997
and Motor Vehicles
Georgia Department of Natural Hunting & fishing licenses, boating February 1998
Resources(2) registrations
Arizona Game & Fish Department Draws for limited hunting permits June 1998
Florida Department of Labor and Unemployment claims November 1998
Unemployment Security, Division of
Jobs and Benefits
Texas Department of Health, Professional licenses November 1998
Licensing and Certification
Division
Texas Secretary of State, Corporate filings March 1999
Corporations Section
City of Indianapolis, Indiana Parking tickets March 1999
Monroe County, Florida Department of Unemployment claims May 1999
Labor and Unemployment Security
Suwannee County, Florida, Traffic citations August 1999
Corporation Clerk of Court
District of Columbia Department of Vehicle registrations January 2000
Motor Vehicles
City of Mobile, Alabama, Municipal Traffic citations; parking tickets March 2000
Courts
State of Hawaii, The Judiciary Traffic citations Mid-2000 (Projected)
Florida Department of State, Corporate filings Mid-2000 (Projected)
Secretary of State, Division of
Corporations
Clay County, Florida, Corporation Traffic citations Mid-2000 (Projected)
Clerk of Court
Dixie County, Florida, Corporation Traffic citations Mid-2000 (Projected)
Clerk of Court
Osceola County, Florida, Corporation Traffic citations Mid-2000 (Projected)
Clerk of Court
St. Lucie County, Florida, Traffic citations Mid-2000 (Projected)
Corporation Clerk of Court
Florida Department of Highway Safety Vehicle registrations Mid-2000 (Projected)
and Motor Vehicles
Florida Department of Natural Hunting & fishing licenses Mid-2000 (Projected)
Resources
Washington Department of Fish & Hunting & fishing licenses Early 2001
Wildlife (Projected)
</TABLE>
- -------------------------
(1) Projected launch dates represent our current estimate of the period during
which these applications will launch. Factors such as technology
development, testing and the speed of government implementation and
integration may affect the timing of these launches.
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<PAGE> 31
(2) We do not have a written contract with the Georgia Department of Natural
Resources. The parties are operating pursuant to an oral agreement as
reflected by their course of dealing since February 1998.
We believe our Internet and IVR solutions can be deployed in a wide range
of G2C and G2B applications. We work continually to develop partnerships with
state agencies and local governments. Also, we routinely investigate and
evaluate contract opportunities for our solutions in federal government
applications.
Our direct user support includes providing personnel and systems to
accommodate particular user needs regarding our applications. Our commitment to
providing comprehensive services for our government partners and users includes
personal problem solving and application management.
OUR STRATEGY
We achieve growth both by increasing our number of government contracts and
by increasing usage or "adoption" of our solutions. We focus on two primary
strategies to grow our business:
- First, we strive to develop business by securing exclusive, long-term
contractual relationships with state and local government entities. We
plan to execute this strategy by utilizing a national sales force to make
direct contact with government entities, by engaging in coordinated
government relations, government education and lobbying efforts, and by
forming strategic partnerships with leading companies having a specific
government-sector focus in complementary industries such as banking and
finance, electronic payments, hardware manufacturing, software
development, telecommunications and Internet services.
- Second, we have developed a comprehensive user acquisition strategy to
encourage citizens and businesses to conduct their government
transactions using our applications and destination sites. By partnering
with providers of relevant content, community and e-commerce, we will
provide a user-friendly and enjoyable visit to increase user traffic and
enhance customer satisfaction.
Developing our Government Client Base
In order to deploy our Internet and IVR solutions, governments must
recognize the opportunity to provide citizens with e-government solutions, the
benefits of which include reduced overhead costs, increased regulatory
compliance and enhanced political goodwill associated with implementing
progressive, user-friendly solutions.
We work to expand our government client base primarily by utilizing our
regional and local sales network to make direct contact with government
entities, undertaking coordinated government relations, government education and
lobbying efforts and leveraging key strategic partnerships with leading
companies having a specific government-sector focus in complementary industries
such as banking and finance, electronic payments, hardware manufacturing,
software development, telecommunications and Internet services.
Increasing Government Contracts through our National Sales Force. We
believe that a key element of our strategy involves making in-person
solicitations and initiating face-to-face meetings with legislators, executives
and agency administrators. To ensure a national presence, we have organized our
sales force into regions, each at the direction of a regional manager. Regional
managers are responsible for government relations, contract management and
managing our strategic partnerships within their region. They are also expected
to be aware of
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<PAGE> 32
the local request-for-proposal processes conducted within their region. Regional
managers coordinate proposals with senior management and all other strategic
areas of our company, including the board of directors, government relations
personnel, strategic partners and clients who perform a similar function, in
order to submit the best proposal. We plan to rapidly expand our sales force
during the remainder of 2000.
Leveraging our Government Relations, Government Education and Lobbying
Efforts. We believe that an effective way to develop our government client base
is to undertake a comprehensive political outreach and education process with
government associations, state agencies and state political leaders. We strive
to create exclusive, long-term relationships with various government entities by
demonstrating the value of cost-effective and proven e-government solutions.
Our board of directors, which includes former Texas Governor Ann Richards
and former Tennessee Governor Lamar Alexander, reflects our commitment to
government relations. In addition, in February 2000 we hired Everette James,
former Deputy Assistant Secretary for Service Industries and Finance for the
U.S. Department of Commerce, as our Executive Vice President of Government
Affairs. Also, as part of our government relations strategy, we have engaged the
nationally-recognized law firm of Verner, Liipfert, Bernhard, McPherson & Hand,
based in Washington, D.C. This firm includes our director, Ms. Richards, former
U.S. Senators Bob Dole, George Mitchell, Lloyd Bentsen and Dan Coats, to assist
us in developing, implementing and maintaining our government relations and
education efforts. We also engage various lobbying firms from time to time and
continue to develop political connections at the federal, state and local
levels.
Our executive management interacts with the highest levels of state and
local governments in both the executive and legislative branches. Our Chief
Executive Officer and our President routinely attend conventions and association
meetings at which governors, legislators and administrators gather to discuss
the possibilities for digitizing government transactions. We believe that our
government relations effort is a key element of our growth strategy.
Forming our Strategic Partnerships. We have entered into and continue to
pursue key strategic partnerships with leading companies having a specific
government-sector focus in complementary industries such as banking and finance,
electronic payments, hardware manufacturing, software development,
telecommunications and Internet services.
We believe that our strategic partnerships deliver significant and
identifiable benefits when entering the request-for-proposal process or
negotiating for government contracts. Our strategic partners are leading
companies in their respective industries, and oftentimes have a history of
contracting with governments or agencies we are seeking as clients. By
partnering with these companies, we are able to leverage their credibility,
relationships and expertise to more rapidly win contracts and deploy solutions.
Our User Acquisition Strategy
We have developed a customer-centric strategy to grow our business through
acquiring new and repeat users of our applications. Our customer-centric
strategy recognizes that driving the adoption of G2C and G2B transactions is
essential to the success of our business. One aspect of this strategy is our
plan to attract and retain users with content-rich applications about particular
subject matters and interests. By including a combination of relevant content,
community and e-commerce on the applications, we believe our customer-centric
strategy will yield better long-term user acquisition and retention rates than a
government-centric model. Moreover, this strategy allows us to deliver a
targeted audience to advertisers and sponsors. By aggregating users by interest,
rather than just by the necessity of a short-term or one-time
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transaction, we believe we can achieve better operating results through
advertising and sponsorship revenues.
Our Destination Sites. To encourage adoption of our Internet-based G2C and
G2B solutions, we intend to develop and launch three destination sites designed
to aggregate our underlying transaction processing capabilities with relevant
content, community and e-commerce opportunities:
Link2Auto.com [LOGO] Link2Outdoors.com
[LOGO] Link2Gov.com [LOGO]
To enhance the user's experience, we will provide timely and relevant
information about topics appropriate to the site, links to other web sites
offering content, goods and services of interest and targeted advertising from
our advertisers and sponsors. In addition to the e-commerce opportunities
presented by our destination sites, we believe the sites will encourage repeat
usage and increased adoption rates of our e-government solutions. We anticipate
that each of our destination sites will offer us opportunities to receive
revenues from sponsorships and advertising placements from companies providing
products and services related to the focus of each destination as follows:
<TABLE>
<CAPTION>
DESTINATION SITE POTENTIAL ADVERTISEMENTS/SPONSORSHIP
- ---------------- ------------------------------------
<S> <C>
Link2Auto.com Automobile manufacturers; insurance
companies
Link2Gov.com Office supply companies; overnight
parcel delivery service companies
Link2Outdoors.com Hunting and fishing supply companies;
travel and lodging providers
</TABLE>
We expect the rates for these sponsorships and advertising placements to be
significantly above the market rates for untargeted web banner advertising. We
also intend to participate in the affiliate programs of such companies to offer
users of our destination site links to those retailers in exchange for a fixed
fee or a percentage of revenues received by the retailers attributable to
traffic driven from our destination sites.
SALES AND MARKETING
To complement our business strategy, we focus our sales and marketing
efforts on developing our government client base and driving the adoption of our
solutions by users. Our sales efforts are concentrated on our
clients -- governments. Our marketing efforts focus on our users -- citizens and
businesses.
Our National Sales Force. Our client development efforts begin with our
national sales force of regional managers, account managers and local
salespeople. We believe that a key element of our strategy includes making
in-person solicitations and initiating face-to-face meetings with legislators,
executives and agency administrators. To ensure a national presence, we have
organized our sales force into four regions, each at the direction of a regional
manager. Our regional managers are responsible for government relations,
contract management and strategic partnership management within their regions.
Our Board of Directors and Senior Management. In addition to our employee
sales force, members of our board of directors are frequently instrumental in
making introductions on our behalf. These directors bring first-hand knowledge
of the political process and the needs of government, as well as representing us
credibly before our government partners. In turn, our
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senior management, particularly Mr. Roberts, Mr. Wine and Mr. James, are
actively involved with our sales efforts and frequently call on high-level
political officials in state and local governments.
Our Strategic Partnerships. We have entered into and continue to pursue
key strategic partnerships with leading companies having a specific
government-sector focus in complementary industries such as banking and finance,
electronic payments, hardware manufacturing, software development,
telecommunications and Internet services.
We believe that our strategic partnerships deliver significant and
identifiable benefits when entering the request-for-proposal process or
negotiating for government contracts. Our strategic partners are leading
companies in their respective industries, and oftentimes have a history of
contracting with the governments or agencies we are seeking as clients. By
partnering with these companies, we are able to leverage their credibility,
relationships and expertise to more rapidly win contracts and deploy solutions.
Our Marketing Program. Our marketing organization's mission is twofold:
first, to drive traffic to our G2C and G2B applications; second, to provide an
engaging combination of content, community and e-commerce features. We plan to
sell advertising on our Internet and IVR applications. This strategy will enable
direct marketing targeted to a suitable audience. Because these applications are
industry specific, we will pursue partners and merchants whose target
demographic matches the lifestyle interests of our users. We expect that
manufacturers of automobiles and providers of automotive-related products and
services will be interested in advertising on our drivers' license renewal and
vehicle registration applications; providers of small business products and
services, such as office supply companies and web-based small business solution
providers, will be interested in advertising on our corporate filing
applications; and sporting goods retailers and leisure and travel service
providers will be interested in advertising on our hunting and fishing license
applications.
We also plan to sell targeted advertising on and sponsorships of our
destination sites. Because these sites will be centered around a particular
industry or interest, we believe merchants who participate in our sponsorship
program will be willing to compensate us for access to our target audience.
COMPETITION
The competition for providing e-government solutions is becoming more
intense. Our competitors' strategies and models vary significantly in each
market served, as outlined below:
- e-government companies, including two public companies, National
Information Consortium, Inc. and Official Payments Corporation, and other
private companies;
- large systems integrators, including American Management Systems, Inc.
and Electronic Data Systems Corporation;
- traditional consulting firms and computer hardware manufacturers,
including IBM Corporation, Lockheed Martin Corporation, Science
Applications International Corporation and Compaq Computer Corporation;
and
- web service companies, including USWeb/CKS, AppNet Systems, Inc., Sapient
Corporation and Verio Inc.
Many of our potential competitors are national or international in scope
and may have greater resources than we do. These resources could enable such
competitors to initiate price cuts or take other measures in an effort to gain
market share. Additionally, in some geographic areas, we may face competition
from smaller consulting firms with established reputations and
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<PAGE> 35
political relationships with potential government clients. If we do not compete
effectively or if we experience any pricing pressures, reduced margins or loss
of market share resulting from increased competition, our business, operating
results and financial condition may be harmed.
We believe that the principal factors upon which we compete are:
- understanding of government needs;
- the quality of our e-government services;
- the willingness of users to adopt particular e-government solutions; and
- cost.
We believe we compete favorably with respect to the above-listed factors.
Our comprehensive and coordinated government relations and education strategy
gives us a distinct competitive advantage. Our customer-centric strategy and
efforts to drive traffic to our content-rich applications and destination sites
are not currently being duplicated by any competitor. We believe that our
ability to deploy both Internet and IVR applications and to seamlessly integrate
the two gives us the ability to offer a wider range of solutions to a broader
base of users than our competition.
INTELLECTUAL PROPERTY
We utilize intellectual property in our business, some of which we consider
proprietary. We generally rely on trade secret law to protect our proprietary
interests. We cannot guarantee that the steps we have taken to protect our
proprietary rights will be adequate to deter misappropriation of our
intellectual property, and we may not be able to detect unauthorized use and
take appropriate steps to enforce our intellectual property 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 on the
intellectual property rights of others, other parties may assert infringement
claims against us or claim that we have violated their intellectual property
rights. These claims, even if not true, could result in significant legal and
other costs and may be a distraction to management. Protection 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.
A portion of our business involves the development of software applications
for specific client projects. Depending on the terms of the contract, ownership
of client-specific software could be retained by the client, although we might
retain some rights to the applications, processes and intellectual property
developed in connection with client projects.
LAW AND GOVERNMENTAL REGULATION
We are subject to various laws and regulations affecting our business.
Congress has recently passed legislation concerning the availability and
protection of copyrighted works on the Internet and legislation concerning the
gathering and dissemination of personal information about children via the
Internet, and Congress continues to consider laws relating to Internet taxation.
In addition, uniform state laws relating to technology are currently under
consideration in a number of state legislatures. The European Union has recently
enacted regulations relating to online privacy protections.
These laws and regulations are very recent and their impact on us and our
industry has yet to be determined. This impact could include litigation which,
whether successful or not, would
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<PAGE> 36
likely be time-consuming and costly and require substantial management attention
and resources. Also, while there are relatively few laws today that specifically
regulate Internet-related companies and e-commerce in general, the sizeable
growth in Internet usage and e-commerce transactions has prompted many
government bodies to consider legislation in such areas as pricing, content,
data protection, privacy protection, intellectual property protection, taxation
and consumer protection. The enactment of laws or regulations in these areas
could place burdens on us, either directly or as a burden to e-commerce in
general.
EMPLOYEES
As of March 21, 2000, we had 45 full-time employees. None of our employees
are covered by a collective bargaining agreement. We consider our relations with
our employees to be good.
FACILITIES
Our operations are located in two locations: approximately 20,000 square
feet of leased space in an office park located in Nashville, Tennessee and
approximately 1,500 square feet of leased space located in Atlanta, Georgia.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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<PAGE> 37
MANAGEMENT
Our executive officers and directors and their positions and their ages as
of March 21, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richardson M. Roberts........... 42 Chief Executive Officer, Director
Larry C. Wine................... 38 President
Franz J. Hofer.................. 41 Chief Financial Officer
Robert S. Wechsler.............. 29 Chief Operating Officer and General Counsel
Charles E. Rigby, Jr............ 48 Chief Technology Officer
Robert S. Boyer................. 40 Executive Vice President of Marketing
Edward W. Braswell.............. 42 Executive Vice President of Sales
A. Everette James............... 38 Executive Vice President of Government Affairs and
Assistant General Counsel
Mark McDonald................... 44 Chairman, Director
Nollie E. Peeler................ 55 Executive Vice President of Client Development,
Director
A. Lamar Alexander.............. 59 Director
Michael C. McChesney............ 44 Director
Kip R. Caffey................... 44 Director
Ann W. Richards................. 66 Director
</TABLE>
RICHARDSON M. ROBERTS joined us in September 1999 and serves as our Chief
Executive Officer and a director. Prior to joining us, from August 1984 to
September 1998, Mr. Roberts was the founder, Chairman and Chief Executive
Officer of PMT Services, Inc., a publicly-traded credit card processing firm
which merged with Nova Corporation in September 1998.
LARRY C. WINE became our President in January 2000 in connection with our
acquisition of Link2Gov.com, Inc. Prior to joining Link2Gov.com, Inc., he was
Senior Vice President of First Data Corporation from November 1994 to March
1999. Before that, Mr. Wine served as an executive with Eastman Kodak
Corporation from June 1991 to November 1994.
FRANZ J. HOFER became Chief Financial Officer in January 2000 in connection
with our acquisition of Link2Gov.com, Inc. and is serving in this capacity on an
interim basis. Prior to joining Link2Gov.com, Inc., Mr. Hofer was Corporate
Controller of Interim Services, Inc., a publicly-traded human resource solution
company from January 1997 to April 1999. Before that, Mr. Hofer served as Vice
President and Corporate Controller with First Data Merchant Services (formerly
National Bankcard Corporation) from June 1992 to March 1996.
ROBERT S. WECHSLER became Chief Operating Officer and General Counsel in
January 2000 in connection with our acquisition of Link2Gov.com, Inc. He held
the same titles for Link2Gov.com, Inc. from April 1999 to January 2000. Prior to
joining Link2Gov.com, Inc., from April 1998 to April 1999 and from May 1996 to
April 1998, he was an attorney with Morgan, Lewis & Bockius LLP and Homer &
Bonner, P.A., respectively. Prior to that, Mr. Wechsler worked in the legal
department of IVAX Corporation, a public company, from March 1995 to September
1995.
CHARLES E. RIGBY, JR. joined us in January 2000 and serves as Chief
Technology Officer. Prior to joining us, he served as Senior Vice President of
Corporate Strategy Planning & Business Development for Premiere Technologies,
Inc., an Atlanta, Georgia publicly-held telecommunications and Internet company
from July 1999 to March 2000. Prior to that, from
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<PAGE> 38
September 1996 to July 1999, he served in various other executive capacities at
Premiere Technologies. Mr. Rigby also served as Vice President of Sales for
Telet, Inc., a Baltimore, Maryland-based Internet technology company, from
February 1996 to September 1996.
ROBERT S. BOYER became our Executive Vice President of Marketing in January
2000 in connection with our acquisition of Link2Gov.com, Inc. Prior to joining
Link2Gov.com, Inc., Mr. Boyer served as Director of Partnership Marketing for
First Data Corporation from October 1995 to February 1999. Before that, he
served as Vice President of First Financial Management Corporation from
September 1993 to September 1995.
EDWARD W. BRASWELL joined us in October 1999 as our Executive Vice
President of Sales. Prior to joining us, Mr. Braswell was Senior Vice
President -- Global Sales Division of Premier Technologies from October 1996 to
September 1999. From February 1994 to October 1996, he served as Director of
Sales for Glenayre Electronics.
A. EVERETTE JAMES joined us in January 2000 as our Executive Vice President
of Government Affairs and Associate General Counsel. Prior to joining us, Mr.
James served as the Deputy Assistant Secretary for Service Industries and
Finance for the United States Department of Commerce from December 1996 to
January 2000. From March 1993 to December 1996, he served as General Counsel for
United Medical International. Mr. James also chaired the NAFTA Financial
Services Committee and was twice elected Vice-Chair of the Insurance Committee
of the Organization for Economic Cooperation and Development. Before joining the
federal government, Mr. James was Managing Partner in a Ft. Lauderdale-based law
firm specializing in government transactions and healthcare financing.
MARK MCDONALD has served as Chairman and a director since co-founding the
company in October 1995. Mr. McDonald is also a founder and has served as
principal member of Newton, Oldacre & McDonald, a real estate development firm
located in Nashville, Tennessee since April 1991.
NOLLIE E. PEELER has served as a director since co-founding the company in
October 1995 and currently serves as Executive Vice President of Client
Development. Mr. Peeler also served as President of the Company from September
1995 through September 1999. Prior to founding the company, Mr. Peeler was
involved in various real estate and telecommunications businesses.
A. LAMAR ALEXANDER joined us as a director in October 1999. He is the
former Co-Director of Empower America and served as the Secretary of the United
States Department of Education from March 1991 to January 1993, the President of
the University of Tennessee from July 1988 to December 1990 and as Governor of
Tennessee from January 1979 to January 1987.
MICHAEL C. MCCHESNEY joined us as a director in October 1999. He is the
founder and has served as an executive of Security First Network Bank, one of
the nation's first Internet banks, from June 1996 to September 1998. Mr.
McChesney also served as Chief Executive Officer of Security First Technologies
Corp., an affiliate of Security First Network Bank which provides Internet
financial services applications, from January 1995 to September 1998, and served
as Chairman from September 1998 to February 1999.
KIP R. CAFFEY joined us as a director in October 1999. He has served as a
senior level investment banker with The Robinson-Humphrey Company since July
1999. Previously, he held a similar position with J.C. Bradford & Co. from
August 1981 to June 1999.
ANN W. RICHARDS joined us as a director in March 2000. She has served as a
Senior Advisor to the law firm of Verner, Liipfert, Bernhard, McPherson & Hand
since January 1995. Prior to that, Ms. Richards served as Governor of Texas from
November 1990 to January 1995.
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<PAGE> 39
Ms. Richards serves as a director of J.C. Penney Company, Inc., a public
company, the Aspen Institute, a non-profit company, and Brandeis University.
EXPECTED SENIOR MANAGEMENT ADDITIONS
Douglas B. Hadaway has agreed to join us as our Chief Financial Officer.
Mr. Hadaway is expected to assume his duties in this capacity during April 2000.
Prior to joining us, he served as Chief Financial Officer of Netzip, Inc., a
leading provider of Internet utility software, and before that he served as Vice
President of Finance of PTEC Holdings, Inc., an Internet and telecommunications
holding company.
Mimi F. Eckel has agreed to join us as our Executive Vice President of
Business Development. Ms. Eckel is expected to assume her duties in this
capacity during April 2000. Prior to joining us, she worked for McKinsey &
Company, and before that she worked for Goldman Sachs & Co.
BOARD COMPOSITION
We currently have seven directors, and, under our charter, our board of
directors can increase the number of directors up to 11. Our board of directors
is classified into three classes, with the members of each class serving for a
staggered three-year term. Our board of directors consists of three Class I
directors (Ms. Richards, Mr. Caffey and Mr. Peeler), whose terms continue until
the 2001 annual meeting of stockholders, two Class II directors (Mr. Alexander
and Mr. McChesney), whose terms continue until the 2002 annual meeting of
stockholders and two Class III directors (Mr. McDonald and Mr. Roberts), whose
terms continue until the 2003 annual meeting of stockholders.
There are no family relationships among any of our directors or executive
officers.
BOARD COMMITTEES
After the closing of this offering, our audit committee will review our
external and internal auditing procedures, review with our independent auditors
the scope and results of their audit for the year, review related-party
transactions and also review with our management the plan, scope and results of
our operations. The members of our audit committee are Messrs. McDonald,
Alexander and Caffey.
Our compensation committee's functions are to determine the salaries and
other forms of compensation of our officers and employees. The compensation
committee is also charged with granting stock options and restricted stock to
directors, officers, key employees and consultants and addressing stock option
and restricted stock matters generally. The members of our compensation
committee are Messrs. McDonald, Caffey and McChesney.
Mr. Caffey is a managing director of The Robinson-Humphrey Company, LLC, a
representative of the underwriters.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation for their services
as directors, although members are reimbursed for expenses in connection with
attendance at board of directors and committee meetings. Non-employee directors
are eligible to receive options under our 1999 Stock Incentive Plan. To date, no
options have been granted to our non-employee directors.
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<PAGE> 40
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued in
the year ended December 31, 1999, to each individual who served as our chief
executive officer during such period. None of our other executive officers
received aggregate compensation exceeding $100,000 during 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAMES AND FISCAL -------------------
PRINCIPAL POSITION YEAR SALARY BONUS
- ------------------ ------ ------- --------
<S> <C> <C> <C>
Richardson M. Roberts(1)................................... 1999 $66,490 $102,377
Chief Executive Officer
Nollie E. Peeler(1)........................................ 1999 94,180 184,225
Executive Vice President of Business
Development
</TABLE>
- -------------------------
(1) Mr. Peeler served as President of the Company (the effective chief executive
officer) from October 1995 until September 1999. Mr. Roberts joined us as
Chief Executive Officer and President in September 1999.
We have not awarded stock appreciation rights to any of our executive
officers, directors or employees. We have no long-term incentive, defined
benefit or actuarial plans, as those terms are defined in SEC regulations,
covering our employees.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
On September 16, 1999, Mr. Roberts entered into an Employment Agreement as
Chief Executive Officer of the Company until September 16, 2002, unless earlier
terminated. Mr. Roberts' agreement provides for an annual base salary of
$225,000, which is subject to annual review by the Compensation Committee and
bonuses, which amounts will be determined in accordance with certain performance
criteria established and administered by the Compensation Committee.
Mr. Roberts may terminate his employment agreement without cause by giving
the Company two weeks prior written notice. Pursuant to the terms of his
agreement, Mr. Roberts has agreed not to disclose the Company's confidential
information and, if terminated for cause or if voluntarily terminated, not to
compete against the Company during the term of his employment agreement and for
a period of three years thereafter.
In the event of a termination of Mr. Roberts' employment agreement within
six months prior to or two years following a "change of control" (as defined in
his agreement), for any other reason than "cause" (as defined in his agreement),
his death or disability and if he terminates his employment for "good reason"
(as defined in his agreement), he will be paid all accrued base salary and a
"special termination payment." Mr. Roberts' special termination payment shall be
payable in a single lump sum payment and equal to an amount determined by
multiplying the number three by the sum of his maximum annual salary paid during
the five year period preceding the date of termination (inclusive of bonuses
paid or owed to Mr. Roberts during the 12-month period preceding the date of
termination, but excluding unearned bonuses negotiated by him at the time of his
employment).
Mr. Roberts is entitled to receive his accrued base salary, bonus awarded,
expense incurred and other benefits through the date of termination in the event
that the Company terminates his
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<PAGE> 41
employment without cause more than six months prior to or two years after a
change of control. He also will receive as severance compensation pursuant to
the terms of his agreement a termination amount equal to the greater of (a) two
times his base salary and bonus paid (or owed) during the 12-month period
preceding the termination and (b) his base salary payable over the then
remaining balance of the employment form, in either case, payable in
installments as normal payroll over the 24 months following such termination. In
addition, Mr. Roberts is entitled upon such termination to continued coverage
under any employee, medical disability and life insurance plans for the same
period that the termination payment is payable.
In the event Mr. Roberts is terminated for cause (as defined in the his
agreement) except within six months prior to or two years after a "change of
control," he is entitled to receive all accrued base salary, through the date of
termination, but shall receive no other severance benefits. His agreement also
may be terminated if he dies, in which event his estate will receive these same
payments, together with the actual bonus, if any, he would have received for the
year in which his death occurs prorated for such year.
The Company may terminate Mr. Roberts' employment if he becomes disabled
for a period of 90 consecutive business days, in which event, he is entitled to
receive his base salary, insurance, bonus and other benefits until the date that
he becomes eligible for long-term disability benefits through commercially
available insurance policies made available by the Company.
1999 STOCK INCENTIVE PLAN
The 1999 Stock Incentive Plan was adopted by our board of directors on
October 4, 1999 and amended on March 10, 2000. The purpose of the plan is to
attract, retain and reward key employees, consultants and non-employee
directors. This plan allows flexibility in the award of stock-based incentive
compensation to these people. The plan provides for grants of incentive stock
options, non-qualified stock options, stock appreciation rights, restricted
stock and other stock-based awards.
The plan authorizes the issuance of up to 6,000,000 shares of common stock,
subject to increase on an annual basis or upon the occurrence of certain events.
No individual may receive options to purchase more than 400,000 shares of common
stock in any fiscal year. Whenever a share of common stock underlying a stock
option is no longer subject to that option, that share of common stock shall
again be available for distribution under the plan.
This plan will be administered by the compensation committee of the board
of directors. The compensation committee will have the authority to:
- select the individuals who may receive the grant for the option;
- determine the number of shares to be covered by each option or other
award to be granted; and
- determine the terms and conditions of the option, including the exercise
price, vesting schedule and any restrictions or limitations on the
options.
Grants under the plan may consist of options intended to qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1996, as amended, non-qualified stock options that are not
intended to so qualify, stock appreciation rights, restricted stock or other
stock-based awards. Grants can be made to any key employee, consultant and
non-employee director. Incentive stock options may only be granted to our
employees.
The option price for each share of common stock underlying an incentive
stock option shall be at least 100% of the fair market value of the stock at the
date of grant. The option price for
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<PAGE> 42
non-qualified stock options shall be at least 85% of the fair market value of
the underlying stock at the date of grant. No incentive stock option shall be
exercisable after 10 years from the date of grant. Options are not transferable
except to members of the optionee's immediate family or by will or the laws of
descent and distribution.
If an optionee's employment terminates because of death, any option held by
the optionee may be exercised to the extent the option was exercisable at the
time of death. This exercise must occur within one year from the date of death
or until the term of the option expires, whichever is shorter. If an optionee's
employment is terminated because of disability, any option held by the optionee
three years from the date of the disability or until the term of the option
expires for non-qualified options and one year from the date of disability or
until the term of the option expires for incentive stock options, whichever is
shorter. If an optionee's employment terminates because of retirement, any
option held by the optionee may be exercised to the extent the option was
exercisable at the time of the retirement, unless accelerated by the committee.
This exercise must occur within three years from the date of the retirement or
until the term of the option expires for non-qualified options and three months
from the date of the retirement or until the term of the option expires for
incentive stock options, whichever is shorter. If an optionee voluntarily
terminates employment, the option shall thereupon terminate; however, the board
of directors may extend the exercise period for three months or until the term
of the option expires, whichever is shorter.
Stock appreciation rights can be granted in connection with all or part of
any stock option granted. They will terminate and no longer be exercisable when
the related stock option terminates. They are only exercisable at the time and
to the extent that the stock options to which they relate are exercisable.
Shares of restricted stock can be issued alone, in addition to or with other
awards granted under the plan. The committee can place limitations on the sale
or transfer of the restricted stock. Other stock-based awards can be granted by
the committee at its discretion.
The compensation committee can adjust the number of shares reserved for
issuance under the plan if there is a merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure. If there is a change in control any awarded
option shall become fully exercisable and vested. This change of control can
occur if any person or entity acquires more than 50% of the voting power of our
capital stock or if our existing shareholders hold less than 50% of our
outstanding securities after a cash tender or exchange offer, merger or other
business combination, sale of assets or contested election of directors.
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<PAGE> 43
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, as to the named executive officers,
information concerning stock options granted during the fiscal year ended
December 31, 1999.
The information regarding stock options granted to named executive officers
as a percentage of total options granted to employees in the fiscal year, as
disclosed in the table, is based upon options to purchase an aggregate of
200,000 shares of common stock that were granted in the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUALS GRANTS REALIZABLE VALUE
----------------------------------------------------------------- AT ASSUMED
PERCENT OF ANNUAL RATE OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS DEEMED FAIR APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE MARKET VALUE OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER ON DATE OF EXPIRATION -----------------
GRANTED FISCAL YEAR SHARE GRANT DATE 5% 10%
---------- ------------ --------- ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Richardson M. Roberts 200,000 100% $1.00 $1.00 10/4/09 $ $
</TABLE>
The 5% and 10% assumed annual rates of compounded stock appreciation are
mandated by the rules of the Securities and Exchange Commission based on the
deemed value of the common stock used by us for accounting purposes and do not
represent our estimate or projection of our future stock prices.
All options indicated in the table above have a ten year term, vest as to
25% of the shares on the date of grant and vest at the rate of 1/4 of the shares
on each anniversary thereafter, so that all shares are vested on the third
anniversary of the date of grant, subject to continued service as an employee or
consultant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning unexercised options
for the fiscal year ended December 31, 1999 with respect to the named executive
officers.
The value realized represents the difference between the deemed value of
the common stock on the date of exercise used by us for accounting purposes and
the exercise price of the option.
The value of unexercised in-the-money options was calculated by determining
the difference between $ (the assumed initial public offering
price) and the exercise price of the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richardson M. Roberts -- -- 50,000 150,000 $ $
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to this offering, our board of directors and senior management were
directly involved in setting compensation for our executives.
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<PAGE> 44
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 21, 2000 and as adjusted to
reflect the sale of common stock offered for (1) each person who we know to
beneficially own more than 5% of our common stock, (2) each of our directors,
(3) each of the named executive officers and (4) all directors and executive
officers as a group. Except as indicated in the table below or the footnotes
thereto, the stockholders named in the table have sole voting and investment
power with respect to the shares set forth opposite each stockholder's name.
<TABLE>
<CAPTION>
PERCENTAGE
OF SHARES
OUTSTANDING
NUMBER OF SHARES -------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWNED(1) OFFERING OFFERING
- ---------------- ---------------- -------- --------
<S> <C> <C> <C>
Cyber Lab Ventures, Inc.................................... 5,212,750 24.7% 20.0%
316 N.E. 4th Street
Fort Lauderdale, Florida 33301
Mark McDonald(2)........................................... 2,832,398 13.4 10.8
One Burton Hills Blvd., Suite 300
Nashville, Tennessee 37215
Nollie E. Peeler........................................... 3,500,000 16.6 13.4
One Burton Hills Blvd., Suite 300
Nashville, Tennessee 37215
Thomas Newton(3)........................................... 1,811,496 8.6 6.9
One Burton Hills Blvd., Suite 300
Nashville, Tennessee 37215
William Oldacre(4)......................................... 1,797,996 8.5 6.9
One Burton Hills Blvd., Suite 300
Nashville, Tennessee 37215
Richardson M. Roberts(5)................................... 3,423,729 16.1 13.0
One Burton Hills Blvd., Suite 300
Nashville, Tennessee 37215
Kip R. Caffey(6)........................................... 150,000 * *
Michael McChesney(7)....................................... 412,910 1.9 1.6
A. Lamar Alexander(8)...................................... 120,000 * *
Ann W. Richards(9)......................................... 86,948 * *
All directors and named executive officers as a group
(seven persons)(10)...................................... 10,525,985 48.6 39.5
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding shares of common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person or entity and the percentage ownership of
that person or entity, shares of our common stock subject to options or
warrants held by that person or entity that are currently exercisable or
exercisable within 60 days of March 21, 2000 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purposes of computing
the percentage ownership of each other person or entity. Percentage
ownership is based on 21,088,905 shares of common stock outstanding at
March 21, 2000, assuming the conversion of all outstanding shares of our
Series A Convertible Preferred Stock into common stock. The inclusion in
this prospectus of such shares does not, however, constitute an admission
by the named stockholder that he, she or it is a direct or indirect
beneficial owner of such shares.
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<PAGE> 45
(2) Includes 100,000 shares issuable upon exercise of a warrant held by Mr.
McDonald which is exercisable before October 4, 2009. Includes a total of
13,800 shares held by Mr. McDonald as Custodian under the Tennessee Uniform
Transfer to Minors Act for certain individuals, as to which shares Mr.
McDonald disclaims beneficial ownership.
(3) Includes a total of 31,500 shares held by Mr. Newton as Custodian for
certain individuals, as to which shares Mr. Newton disclaims beneficial
ownership.
(4) Includes a total of 31,000 shares held by Mr. Oldacre as Custodian under
the Tennessee Uniform Transfer to Minors Act for certain individuals, as to
which shares Mr. Oldacre disclaims beneficial ownership.
(5) Includes 100,000 shares issuable upon exercise of a warrant held by Mr.
Roberts which is exercisable before October 4, 2009. Includes 103,829
shares issuable upon exercise of stock options held by Mr. Roberts
exercisable within 60 days of March 21, 2000. Includes 1,374,000 shares
held by Roberts Investments, L.P. and Mr. Roberts' wife, as to which Mr.
Roberts disclaims beneficial ownership except to the extent of his economic
interest therein. Includes 19,500 shares owned by Mr. Roberts as Custodian
under the Tennessee Uniform Transfers to Minors Act, as to which shares Mr.
Roberts disclaims beneficial ownership.
(6) Includes 50,000 shares issuable upon exercise of a warrant held by Mr.
Caffey which is exercisable before January 25, 2003.
(7) Includes 187,793 shares of Series A Convertible Preferred Stock which will
automatically convert into 187,793 shares of common stock upon the closing
of this offering. Includes 50,000 shares issuable upon exercise of a
warrant held by Mr. McChesney which is exercisable before January 25, 2003
and 75,117 shares issuable upon exercise of a warrant held by Mr. McChesney
which is exercisable before January 25, 2003.
(8) Includes 50,000 shares issuable upon exercise of a warrant held by Mr.
Alexander which is exercisable before January 25, 2003. Includes 20,000
shares owned by a family limited partnership.
(9) Includes 40,000 shares issuable upon exercise of a warrant held by Ms.
Richards which is exercisable before March 10, 2003.
(10) Includes options to purchase an aggregate of 103,829 shares that are
exercisable within 60 days of March 21, 2000. Includes 465,117 shares
issuable upon the exercise of warrants which are exercisable within 60 days
of March 21, 2000.
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<PAGE> 46
CERTAIN TRANSACTIONS WITH RELATED PARTIES
From March 1996 to January 1999, the Company advanced cash to Nollie
Peeler, one of its founders, who also served as an executive officer during this
period. Interest accrued annually at the rate of 8% on the outstanding advances.
The aggregate amount of cash advances and the related accrued interest, totaling
$184,000, were forgiven by the board of directors in December 1999 and recorded
as non-cash compensation expense on our income statement.
From October 1997 to December 1999, the Company leased office space from
Newton, Oldacre and McDonald, LLC, a Tennessee limited liability company whose
members include Mark McDonald, Chairman, director and a principal shareholder of
the Company, and Thomas Newton and William Oldacre, both principal shareholders
of the Company. Rent expense for each of 1997, 1998 and 1999 totaled $6,000,
$32,000 and $29,000, respectively.
From time to time, Messrs. Newton, Oldacre, and McDonald made advances to
the Company for working capital and to fund its operating losses. These advances
were made either by those individuals, the limited liability company through
which they conduct business or certain affiliated entities. Effective January
15, 1999, each of Messrs. Newton and Oldacre agreed to exchange $27,485 of debt
owed to each of them for 1,500,000 shares of common stock each. In addition,
effective April 15, 1999, Mr. McDonald agreed to exchange $27,485 of
indebtedness owed to him and agreed to make further advances to the Company of
up to $150,000 in exchange for a warrant to purchase 1,000,000 shares of common
stock at an aggregate purchase price of $100.
During 1999, Messrs. Newton, Oldacre and McDonald continued to make
advances to the Company. As of September 30, 1999, such advances by Messrs.
Newton, Oldacre and McDonald totaled $146,330, $146,330 and $146,330,
respectively. On September 30, 1999, each of them agreed to exchange the
indebtedness owed to them for 146,330 shares of common stock each.
On September 30, 1999, we issued 2,641,000 shares of common stock to Mr.
Roberts in connection with his acceptance of our offer of employment.
On October 4, 1999, we authorized the sale of 100,000 shares of our common
stock at $1.00 per share to each of Messrs. Caffey, McChesney, Roberts and
Alexander, and 50,000 shares at $1.00 per share to Mr. Braswell.
In connection with the Company entering into a revolving Promissory Note
with Bank of America, N.A. in the principal amount of $2,000,000 and bearing
interest at a variable rate equal to the prime rate minus 1%, each of Messrs.
McDonald and Roberts executed a Continuing and Unconditional Guaranty covering
all obligations of the Company under the Promissory Note. It is anticipated that
these Continuing and Unconditional Guaranties will be released upon completion
of this offering. As consideration for agreeing to execute the Continuing and
Unconditional Guaranties, on October 4, 1999, the board of directors issued
warrants to purchase 100,000 shares of our common stock to each of Messrs.
McDonald and Roberts. The warrants are exercisable in whole or in part until
October 4, 2009 at an exercise price of $1.00 per share.
On January 25, 2000, we issued warrants to purchase 50,000 shares of our
common stock at $2.13 per share to each of Messrs. Caffey, McChesney and
Alexander, as consideration for their agreement to join our board of directors.
In connection with the Company's offering of its Series A Convertible
Preferred Stock, the Company sold 187,793 shares of its Series A Convertible
Preferred Stock to Michael McChesney for a total price of $400,000. Mr.
McChesney is a stockholder and director of the Company. All of the outstanding
shares of the Company's Series A Convertible Preferred Stock
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<PAGE> 47
will be converted to shares of our common stock upon completion of this
offering. Additionally, Mr. McChesney was granted a warrant to purchase 75,117
shares of our common stock at an exercise price of $2.84 per share.
On February 10, 2000, the Company loaned Cyber Lab Ventures, Inc., a
principal stockholder of the Company, $750,000 pursuant to a secured promissory
note. The loan bears interest at a rate of 10% and matures on April 10, 2000,
unless extended by the Company at its sole option to May 10, 2000. This loan is
secured by a stock certificate representing 463,935 shares of our common stock.
On March 10, 2000, we sold to Ms. Richards, a director, 46,948 shares of
our common stock at $2.13 per share, and we issued to Ms. Richards a warrant to
purchase 50,000 shares of our common stock at $2.13 per share as consideration
for her agreement to join our board of directors.
One of the Company's directors, Mr. Caffey, is a managing director of The
Robinson-Humphrey Company, LLC, a representative of the underwriters.
One of the Company's directors, Ms. Richards, serves as a senior advisor to
the law firm of Verner, Liipfert, Bernhard, McPherson & Hand, which is providing
certain services to the Company.
On March 13, 2000, the board of directors adopted a policy that any
transactions between the Company and any of its officers, directors or principal
stockholders or affiliates thereof, must be on terms no less favorable than
those which could be obtained from unaffiliated parties and must be approved by
a majority of the disinterested members of the board of directors. The audit
committee of the board of directors will be responsible for reviewing all
related party transactions on a continuing basis and potential conflict of
interest situations where appropriate.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
As of March 21, 2000 there were 21,088,905 shares of common stock issued
and outstanding after giving effect to the issuance of 1,466,194 shares of
common stock upon the conversion of all outstanding Series A Convertible
Preferred Stock immediately prior to the closing of this offering. Following the
offering, our authorized capital stock will consist of 100,000,000 shares of
common stock, of which 26,088,905 will be issued and outstanding and 5,000,000
shares of undesignated preferred stock issuable in one or more series designated
by our board of directors, of which no shares will be issued and outstanding.
Voting Rights. The holders of our common stock have one vote per share.
Holders of our common stock are not entitled to vote cumulatively for the
election of directors. Generally, all matters to be voted on by stockholders
must be approved by a majority or, in the case of election of directors, by a
plurality, of the votes entitled to be cast at a meeting at which a quorum is
present by all shares of common stock present in person or represented by proxy,
voting together as a single class, subject to any voting rights granted to
holders of any then outstanding preferred stock. Except as otherwise provided by
law, amendments to our charter, which will be effective upon consummation of
this offering, must be approved by a majority of the voting power of the common
stock.
Dividends. Holders of common stock will share ratably in any dividends
declared by our board of directors, subject to the preferential rights of any
preferred stock then outstanding.
PREFERRED STOCK
Our charter provides that shares of preferred stock may be issued from time
to time in one or more series. Our board of directors is authorized to fix the
voting rights, if any, designations, powers, preferences, qualifications,
limitations and restrictions thereof, applicable to the shares of each series.
Our board of directors may, without stockholder approval, issue preferred stock
with voting and other rights that could adversely affect the voting power and
other rights of the holders of the common stock and could have anti-takeover
effects. We have no current plans to issue any shares of preferred stock. The
ability of our board of directors to issue preferred stock without stockholder
approval could have the effect of delaying, deferring or preventing a change of
control of LINK2GOV or the removal of existing management.
REGISTRATION RIGHTS
We have entered into a Registration Rights Agreement dated January 25,
2000, as amended (the "Registration Rights Agreement"), with the 24 purchasers
of the Series A Convertible Preferred Stock and 12 former stockholders of the
company we acquired in February 2000 who exchanged their shares for our common
stock in connection with the acquisition of the former Delaware corporation,
Link2Gov.com, Inc., which is now our wholly-owned subsidiary. Pursuant to the
Registration Rights Agreement, at any time after one year following the closing
of this offering, the holders of at least 51% of certain of the Registrable
Shares (as that term is defined in the Registration Rights Agreement), may by
written notice demand registration on Form S-1 or any similar long-form
registration under the Securities Act of up to all of the Registrable Shares
owned by such holders. These holders of Registrable Shares are entitled to only
one such long-form demand registration. In addition, any holder or holders of
Registrable Shares may seek a "piggyback" registration of any or all of their
Registrable Shares at any time that the Company proposes to file a registration
statement within three years following this offering, subject to certain
limitations generally imposed by the managing underwriter regarding the number
of shares to be included in the offering.
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<PAGE> 49
WARRANTS
As of March 21, 2000, we had outstanding warrants to purchase an aggregate
of 986,851 shares of our common stock. The weighted average exercise price of
the warrants is $2.32 per share. Any warrant may be exercised by applying the
value of a portion of the warrant, which is equal to the number of shares
issuable under the warrant being exercised multiplied by the fair market value
of the security receivable upon exercise of the warrant, less the per share
exercise price, in lieu of payment of the per share exercise price. These
warrants contain customary antidilution provisions which become effective in the
event of certain transactions by the Company, such as stock splits and stock
dividends.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our charter provides that, to the fullest extent permitted by the Tennessee
Business Corporation Act (the "TBCA"), a director will not be liable to us or
our shareholders for monetary damages resulting from a breach of his or her
fiduciary duty as a director. Under the TBCA, directors have a fiduciary duty
which is not eliminated by this provision in our charter. In some circumstances,
equitable remedies such as injunctive or other forms of nonmonetary relief will
remain available. In addition, each director will continue to be subject to
liability under the TBCA for breach of the director's duty of loyalty, for acts
or omissions which are found by a court of competent jurisdiction to be not in
good faith or knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends that are
prohibited by the TBCA. This provision does not affect the directors'
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
The TBCA provides that a corporation may indemnify any director or officer
against liability incurred in connection with a proceeding if the director or
officer acted in good faith or reasonably believed, in the case of conduct in
his of her official capacity with the corporation, that the conduct was in the
corporation's best interest. In all other civil cases, a corporation may
indemnify a director or officer who reasonably believed that his or her conduct
was not opposed to the best interest of the corporation. In connection with any
criminal proceeding, a corporation may indemnify any director or officer who had
no reasonable cause to believe that his or her conduct was unlawful.
In actions brought by or in the right of the corporation, however, the TBCA
does not allow indemnification if the director or officer is adjudged to be
liable to the corporation. Similarly, the TBCA prohibits indemnification in
connection with any proceeding charging improper personal benefit to a director
or officer if the director or officer is adjudged liable because a personal
benefit was improperly received.
In cases where the director or officer is wholly successful, on the merits
or otherwise, in the defense of any proceeding instigated because of his or her
status as a director or officer of a corporation, the TBCA mandates that the
corporation indemnify the director or officer against reasonable expenses
incurred in the proceeding. Notwithstanding the foregoing, the TBCA provides
that a court may order a corporation to indemnify a director or officer for
reasonable expense if, in consideration of all relevant circumstances, the court
determines that the individual is fairly and reasonably entitled to
indemnification, whether or not the standard of conduct set forth above was met.
Our bylaws provide that we shall indemnify and advance expenses to our
directors and officers to the fullest extent permitted by the TBCA. We also
intend to acquire and maintain insurance to protect any director or officer
against any liability.
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<PAGE> 50
ANTI-TAKEOVER PROVISIONS
The provisions of our charter and bylaws described below, as well as the
ability of our board of directors to issue shares of preferred stock and to set
the voting rights, preferences and other terms thereof, may be deemed to have an
anti-takeover effect and may discourage takeover attempts not first approved by
our board of directors, including takeovers which particular stockholders may
deem to be in their best interests. These provisions also could have the effect
of discouraging open market purchases of our common stock because they may be
considered disadvantageous by a stockholder who desires subsequent to such
purchases to participate in a business combination transaction with us or elect
a new director to our Board.
Classified Board of Directors. Our board of directors is divided into
three classes serving staggered three-year terms, with one-third of the Board
being elected each year. Our classified board, together with certain other
provisions of our charter authorizing the board of directors to fill vacant
directorships or increase the size of the Board, may prevent a stockholder from
removing or delay the removal of, incumbent directors and simultaneously gaining
control of the board of directors by filling vacancies created by such removal
with its own nominees.
Director Vacancies and Removal. Our bylaws provide that vacancies in our
board of directors shall be filled only by the affirmative vote of a majority of
the remaining directors. Our bylaws provide that directors may be removed from
office by the affirmative vote of 75% or more of the outstanding shares entitled
to vote at special meetings called for the purpose the shareholders only at a
meeting called for the purpose of removing him.
No Stockholder Action by Written Consent. Our bylaws provide that any
action required or permitted to be taken by our stockholders at an annual or
special meeting of stockholders must be effected at a duly called meeting and
may not be taken or effected by a written consent of stockholders.
Special Meetings of Stockholders. Our bylaws provide that a special
meeting of stockholders may be called only by the Chairman or a majority of our
board of directors. Our bylaws provide that only those matters included in the
notice of the special meeting may be considered or acted upon at that special
meeting unless otherwise provided by law.
Advance Notice of Director Nominations and Stockholder Proposals. Our
bylaws include advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders. A stockholder's notice of a
director nomination or proposal will be timely if delivered to our secretary at
our principal executive offices not later than the close of business on the
later of the 120th day prior to the scheduled date of such annual meeting or the
10th day following the day on which notice of such annual meeting is first given
to our stockholders.
Amendment of the Charter. Any amendment to our charter provision relating
to our classified Board must first be approved by 75% of the outstanding shares
entitled to vote at a special meeting called for the purpose of amending the
charter provision.
Amendment of Bylaws. Our bylaws may be amended or repealed by our board of
directors or by the stockholders. Such action by the board of directors requires
the affirmative vote of a majority of the directors then in office. Such action
by the stockholders requires the affirmative vote of a majority of the shares
present in person or represented by proxy at the meeting. However, our bylaws
provisions relating to our classified Board may only be altered, amended or
repealed at a meeting of the stockholders by the affirmative vote of at least
75% of the shares present in person or represented by proxy at such meeting.
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<PAGE> 51
ABILITY TO ADOPT STOCKHOLDER RIGHTS PLAN
Our board of directors may in the future resolve to issue shares of
preferred stock or rights to acquire such shares to implement a stockholder
rights plan. A stockholder rights plan typically creates voting or other
impediments to discourage persons seeking to gain control of LINK2GOV by means
of a merger, tender offer, proxy contest or otherwise if our board of directors
determines that such change of control is not in the best interests of LINK2GOV
and our stockholders. Our board of directors has no present intention of
adopting a stockholder rights plan and is not aware of any attempt to effect a
change of control of LINK2GOV.
STATUTORY BUSINESS COMBINATION PROVISION
The Tennessee Business Combination Act (the "Combination Act") provides
that any corporation to which the Combination Act applies, including LINK2GOV,
shall not engage in any "business combination" with an "interested shareholder"
for a period of five years following the date that such shareholder became an
interested shareholder unless prior to such date the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the shareholder becoming an interested shareholder.
The Combination Act defines "business combination," generally to mean any:
(i) merger or consolidation; (ii) share exchange; (iii) sale, lease, exchange,
pledged mortgage or other transfer (in one transaction or a series of
transactions) of assets representing 10% or more of (A) the market value of
consolidated assets, (B) the market value of the corporation's outstanding
shares or (C) the corporation's consolidated net income; (iv) issuance or
transfer of shares from the corporation to the interested shareholder; (v) plan
of liquidation; (vi) transaction in which the interested shareholder's
proportionate share of the outstanding shares of any class of securities is
increased; or (vii) financing arrangements pursuant to which the interested
shareholder, directly or indirectly, receives a benefit except proportionately
as a shareholder.
The Combination Act defines "interested shareholder," generally, to mean
any person who is the beneficial owner, either directly or indirectly, of 10% or
more of any class or series of the outstanding voting stock or any affiliate or
associate of the corporation who has been the beneficial owner, either directly
or indirectly, of 10% or more of the voting power of any class or series of the
corporation's stock at any time within the five-year period preceding the date
in question.
Consummation of a business combination that is subject to the five-year
moratorium is permitted after such period if the transaction (i) complies with
all applicable charter, as amended, and bylaw requirements and applicable
Tennessee law and (ii) is approved by at least two thirds of the outstanding
voting stock not beneficially owned by the interested shareholder or when the
transaction meets certain fair price criteria. The fair price criteria include,
among others, the requirement that the per share consideration received in any
such business combination by each of the shareholders is equal to the highest of
(i) the highest per share price paid by the interested shareholder during the
preceding five-year period for shares of the same class or series plus interest
thereon from such date at a treasury bill rate less the aggregate amount of any
cash dividends paid and the market value of any dividends paid other than in
cash since such earliest date, up to the amount of such interest, (ii) the
highest preferential amount, if any, such class or series is entitled to receive
on liquidation or (iii) the market value of the shares on either the date the
business combination is announced or the date when the interested shareholder
reaches the 10% threshold, whichever is higher, plus interest thereon less
dividends as noted above.
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<PAGE> 52
The Tennessee Greenmail Act (the "Greenmail Act") prohibits us from
purchasing or agreeing to purchase any of its securities, at a price in excess
of fair market value, from a holder of 3% or more of any class of such
securities who has beneficially owned such securities for less than two years,
unless such purchase has been approved by the affirmative vote of a majority of
the outstanding shares of each class of voting stock issued by us or if we make
an offer of at least equal value per share to all holders of shares of such
class.
The effects of such legislation may be to render more difficult a change of
control of LINK2GOV by delaying, deferring or preventing a tender offer or
takeover attempt that a shareholder might consider to be in such shareholder's
best interest, including those attempts that might result in the payment of a
premium over the market price for the shares held by such shareholder and may
promote the continuity of our management by making it more difficult for
shareholders to remove or change the incumbent members of the board of
directors.
LISTING ON THE NASDAQ NATIONAL MARKET SYSTEM
We will apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "LNKG."
NO PREEMPTIVE RIGHTS
No holder of any class of our stock has any preemptive right to subscribe
for or purchase any kind or class of our securities. Holders of the Series A
Convertible Preferred Stock have certain rights to acquire securities of the
Company that are sold privately. These rights do not apply to this offering of
common stock and will expire upon the consummation of this offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock will be
.
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<PAGE> 53
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock
and we cannot predict the effect, if any, that sales of common stock or the
availability of common stock for sale will have on the market price of our
common stock prevailing from time to time. Nonetheless, substantial sales of
common stock in the public market following this offering or the perception that
such sales could occur, could lower the market price of our common stock or make
it difficult for us to raise additional equity capital in the future.
Following this offering, there will be approximately 30,539,134 shares of
our common stock outstanding on a fully-diluted basis assuming the exercise of
all outstanding options and warrants. Of these shares, the 5,000,000 shares
which are being sold in this offering generally will be freely transferable
without restriction or further registration under the Securities Act, except
that any shares held by our "affiliates" as is defined in Rule 144 under the
Securities Act may be sold only in compliance with the limitations described
below. The remaining 25,539,134 shares of common stock which will be outstanding
after the offering will be "restricted securities" as defined in Rule 144 and
may be sold in the future without registration under the Securities Act subject
to compliance with the provisions of Rule 144 or any other applicable exemption
under the Securities Act.
In connection with this offering, our existing officers, directors and
certain holders of our outstanding common stock, who hold % of the currently
outstanding shares of common stock (or securities exercisable for or convertible
into common stock) and will own an aggregate of shares of common stock
after this offering, have agreed with the underwriters that, subject to
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. The underwriters' representatives may, in
their sole discretion and at any time without notice, release all or any portion
of the shares subject to such restrictions. Subject to these lock-up agreements,
the shares of common stock outstanding upon the closing of this offering will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES DESCRIPTION
---------------- -----------
<C> <S>
5,000,000 After the date of this prospectus, freely tradeable shares
sold in the offering.
After 180 days from the date of this prospectus, the lock-up
period will expire and these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations),
Rule 144(k) or under a registration statement to register
for resale, shares of common stock issued upon the exercise
of stock options or warrants or the conversion of preferred
stock.
</TABLE>
In general, under Rule 144, as currently in effect, a person or persons
whose shares are required to be aggregated, including an affiliate of ours and
who has beneficially owned shares for at least one year is entitled to sell,
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of 1% of the
then outstanding shares of common stock, which is expected to be approximately
260,889 shares upon the completion of this offering, or the average weekly
trading volume of the common stock during the four calendar weeks preceding the
date on which notice of such sale is filed, subject to certain restrictions. In
addition, a person who is not deemed to have been an affiliate of ours at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years would be entitled to sell such
shares under Rule 144(k) without regard to the requirements described above. To
the extent that
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<PAGE> 54
shares were acquired from an affiliate of ours, such person's holding period for
the purpose of effecting a sale under Rule 144 commences on the date of transfer
from the affiliate.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue and grant options to purchase shares of common stock under the 1999
Stock Incentive Plan. See "Risk Factors -- Future sales of our common stock
could adversely affect our stock price."
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to sell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with the holding period and notice filing requirements of Rule 144 and,
in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice filing provisions of Rule 144.
The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted securities
and, subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold by persons other than
"affiliates" (as defined in Rule 144) subject only to the manner of sale
provisions of Rule 144 and by "affiliates" under Rule 144 without compliance
with its one year minimum holding period requirements.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, for whom Deutsche Bank Securities Inc., Prudential
Securities Incorporated, The Robinson-Humphrey Company, LLC and J.C. Bradford &
Co. are acting as representatives, have severally but not jointly agreed to
purchase from LINK2GOV the following respective number of shares of common
stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
Deutsche Bank Securities Inc................................
Prudential Securities Incorporated..........................
The Robinson-Humphrey Company, LLC..........................
J.C. Bradford & Co. ........................................
---------
Total..................................................... 5,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to approval of certain conditions precedent and that
the underwriters will be obligated to purchase all of the shares of the common
stock offered hereby, other than those shares covered by the over-allotment
option described below, if any are purchased. The underwriting agreement
provides that, in the event of a default by an underwriter, in certain
circumstances the purchase commitments of non-defaulting underwriters may be
increased or the underwriting agreement may be terminated.
The following table summarizes the compensation to be paid to the
underwriters by LINK2GOV and the expenses payable by LINK2GOV assuming no
exercise of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
PER
SHARE TOTAL
----- ------
<S> <C> <C>
Underwriting discounts and commissions payable by
LINK2GOV.................................................. $ $
Expenses payable by LINK2GOV................................ $ $
</TABLE>
LINK2GOV has granted to the underwriters an option expiring on the 30th day
after the date of this prospectus to purchase up to 750,000 additional shares of
common stock at the initial public offering price, less the underwriting
discounts and commissions. Such option may be exercised only to cover
over-allotments in the sale of shares of common stock. To the extent such option
is exercised, each underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of common stock as it was obligated to purchase pursuant to the
underwriting agreement.
LINK2GOV has been advised by the representatives that the underwriters
propose to offer the shares of common stock to the public initially at the
public offering price set forth on the cover page of this prospectus and,
through the underwriters, to selling group members at such price less a
concession of $ per share and the underwriters and such selling
group members may allow a discount of $ per share on sales to
certain other broker-dealers. After the offering, the public offering price and
concession and discount to dealers may be changed by the representatives.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
LINK2GOV, its officers and directors and certain other existing
stockholders and optionholders of LINK2GOV have agreed that they will not offer,
sell, contract to sell, pledge or otherwise dispose of or transfer, directly or
indirectly or, in the case of LINK2GOV, file with the
53
<PAGE> 56
Securities and Exchange Commission a registration statement relating to, any
shares of common stock or securities exchangeable or exercisable for or
convertible into shares of common stock or publicly disclose the intention to do
any of the foregoing, without the prior written consent of Deutsche Bank
Securities Inc. for a period of 180 days after the date of this prospectus,
except under certain circumstances.
The underwriters have reserved for sale, at the initial public offering
price, up to 375,000 shares of the common stock for employees, directors and
certain other persons associated with LINK2GOV who have expressed an interest in
purchasing such shares of common stock in the offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same basis as other
shares offered hereby. LINK2GOV intends, through Deutsche Bank Securities Inc.,
to seek indications of interest from designated persons who may include
employees, customers and others with whom LINK2GOV has or may seek to develop
business relationships.
LINK2GOV has agreed to indemnify the underwriters against liabilities,
including civil liabilities under the Securities Act or to contribute to
payments which the underwriters may be required to make in respect thereof.
We will apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "LNKG."
Prior to this offering, there has been no public market for the common
stock. The initial public offering price has been determined by negotiation
between LINK2GOV and the representatives. The principal factors considered in
determining the initial public offering price include:
- the information set forth in this prospectus and otherwise available to
the representatives;
- the history of and the prospects for LINK2GOV and the industry in which
it competes;
- an assessment of LINK2GOV's management;
- the prospects for and the timing of future earnings of LINK2GOV;
- the present state of LINK2GOV's development and its current financial
condition;
- the general condition of the securities markets at the time of the
offering;
- the recent market prices of and the demand for publicly-traded common
stock of companies in businesses similar to those of LINK2GOV;
- market conditions for initial public offerings; and
- other relevant factors.
There can be no assurance that an active trading market will develop for
the common stock or that the common stock will trade in the market after this
offering at or above the initial public offering price.
The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
shares of the common stock in
54
<PAGE> 57
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representatives to reclaim a
selling concession from a syndicate member when shares of the common stock
originally sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
common stock to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on the Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed
upon for LINK2GOV by Waller Lansden Dortch & Davis, A Professional Limited
Liability Company, Nashville, Tennessee. The underwriters have been represented
by Bass, Berry and Sims PLC, Nashville, Tennessee. Members of Bass, Berry and
Sims PLC beneficially own 6,000 shares of our common stock.
EXPERTS
The audited financial statements of LINK2GOV Corp. for the years ended
December 31, 1997, 1998 and 1999, and of Link2Gov.com, Inc. for the years ended
December 31, 1998 and 1999, included in this prospectus 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.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission or SEC, a
registration statement on Form S-1 (including the exhibits and schedules
thereto) under the Securities Act and the rules and regulations thereunder, for
the registration of the common stock offered hereby. This prospectus is part of
the registration statement. This prospectus does not contain all the information
included in the registration statement because we have omitted certain parts of
the registration statement as permitted by the SEC rules and regulations. For
further information about us and our common stock, you should refer to the
registration statement. Statements contained in this prospectus as to any
contract, agreement or other document referred to are not necessarily complete.
Where the contract or other document is an exhibit to the registration
statement, each statement is qualified by the provisions of that exhibit. You
can inspect and copy the registration statement and the exhibits and schedules
thereto at the public reference facility maintained by the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the SEC at
1-800-732-0330 for further information about the operation of the public
reference rooms. Copies of all or any portion of the registration statement can
be obtained from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the registration
statement is publicly available through the SEC's site on the Internet's World
Wide Web, located at http://www.sec.gov.
We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can also request copies of these
documents, for a copying fee, by writing to the SEC. We intend to furnish to our
stockholders annual reports containing audited financial statements for each
fiscal year.
55
<PAGE> 58
LINK2GOV CORP.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LINK2GOV Corp. -- Pro Forma
Unaudited Pro Forma Financial Information................. F-2
Pro Forma Statement of Operations for the Year Ended
December 31, 1999...................................... F-3
Pro Forma Balance Sheet as of December 31, 1999........... F-4
Notes to Unaudited Pro Forma Financial Information........ F-5
LINK2GOV Corp. (Registrant) -- Historical
Report of Independent Public Accountants.................. F-6
Balance Sheets as of December 31, 1998 and 1999........... F-7
Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999.................................... F-8
Statements of Stockholders' Deficit for the Years Ended
December 31, 1997, 1998 and 1999....................... F-9
Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999.................................... F-10
Notes to Financial Statements............................. F-11
Link2Gov.com, Inc. (Acquired Company) -- Historical
Report of Independent Public Accountants.................. F-18
Balance Sheets as of December 31, 1998 and 1999........... F-19
Statements of Operations for the Period from Inception
(February 1998) through December 31, 1998, and the Year
Ended December 31, 1999................................ F-20
Statements of Stockholders' Equity for the Period from
Inception (February 1998) through December 31, 1998 and
the Year Ended December 31, 1999....................... F-21
Statements of Cash Flows for the Period from Inception
(February 1998) through December 31, 1998 and the Year
Ended December 31, 1999................................ F-22
Notes to Financial Statements............................. F-23
</TABLE>
F-1
<PAGE> 59
LINK2GOV CORP.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Effective January 26, 2000, LINK2GOV Corp. (the "Company") issued 5,604,902
shares of its common stock to acquire 93% of the issued and outstanding capital
stock of Link2Gov.com, Inc., a Delaware corporation ("Link2Gov.com"). In
February 2000, the Company completed its acquisition of Link2Gov.com by issuing
440,871 shares of common stock in exchange for the remaining outstanding shares
of Link2Gov.com. The acquisition was accounted for as a purchase.
The purchase method of accounting prescribes that the assets and
liabilities of Link2Gov.com be adjusted to estimated fair market value with any
excess of cost over fair value being recorded as an intangible asset to be
amortized over the respective life of the intangible. The fair market values of
the assets and liabilities of Link2Gov.com have been determined based upon
preliminary estimates and are subject to change as additional information is
obtained. Management does not anticipate that the preliminary allocation of
purchase cost based upon the estimated fair market value of the assets and
liabilities will materially change; however, the allocation of purchase cost
reflected in the following unaudited pro forma financial information is subject
to final determination and may differ from the amounts ultimately determined.
Effective January 25, 2000, the Company issued 1,466,194 shares of Series A
Convertible Preferred Stock for cash proceeds of $3,123,000.
The unaudited pro forma statement of operations is presented as if the
acquisition of Link2Gov.com had occurred as of January 1, 1999 and therefore
incorporates certain assumptions that are included in the Notes to Pro Forma
Financial Information. The unaudited pro forma balance sheet is presented as if
the acquisition of Link2Gov.com and the issuance of preferred stock had occurred
on December 31, 1999, and therefore incorporates certain assumptions that are
included in the Notes to Pro Forma Financial Information. The unaudited pro
forma financial information does not purport to represent what the Company's
financial position or results of operations actually would have been had the
acquisition of Link2Gov.com and the preferred stock issuance, in fact, occurred
on such date or at the beginning of the period indicated, or to project the
Company's financial position or results of operations at any future date or for
any future period.
F-2
<PAGE> 60
LINK2GOV CORP.
PRO FORMA STATEMENT OF OPERATIONS
UNAUDITED
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
LINK2GOV(1) LINK2GOV.COM(2) ADJUSTMENTS PRO FORMA
----------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues, net.............. $ 979,000 $ 17,000 $ -- $ 996,000
Operating Expenses......... 780,000 442,000 -- 1,222,000
Selling, General and
Administrative Expenses.. 1,148,000 2,035,000 -- 3,183,000
Depreciation and
Amortization............. 4,000 15,000 2,058,000(3) 2,077,000
Noncash Compensation
Expense.................. 287,000 460,000 -- 747,000
----------- ----------- ----------- -----------
2,219,000 2,952,000 2,058,000 7,229,000
----------- ----------- ----------- -----------
Operating Loss............. (1,240,000) (2,935,000) (2,058,000) (6,233,000)
Other Income (Expense),
Net...................... (33,000) 159,000 -- 126,000
----------- ----------- ----------- -----------
Net Loss................... $(1,273,000) $(2,776,000) $(2,058,000) $(6,107,000)
=========== =========== =========== ===========
Basic and Diluted Net Loss
Per Share................ $ (0.13) $ (0.19) $ (0.38)
=========== =========== ===========
Weighted Average Shares
Outstanding.............. 9,937,000 14,362,000 15,983,000
=========== =========== ===========
</TABLE>
F-3
<PAGE> 61
LINK2GOV CORP.
PRO FORMA BALANCE SHEET
UNAUDITED
AS OF DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
LINK2GOV(1) LINK2GOV.COM(2) ADJUSTMENTS PRO FORMA
----------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents................. $ 704,000 $ 3,337,000 $ 2,749,000(4) $ 6,790,000
Receivables............................... 483,000 -- -- 483,000
Other Current Assets...................... 3,000 28,000 -- 31,000
----------- ----------- ----------- -----------
Total Current Assets.................. 1,190,000 3,365,000 2,749,000 7,304,000
Property and Equipment, net................. 30,000 103,000 -- 133,000
Intangible Assets........................... -- -- 10,292,000(5) 10,292,000
Other Noncurrent Assets..................... 30,000 -- -- 30,000
----------- ----------- ----------- -----------
Total Assets.......................... $ 1,250,000 $ 3,468,000 $13,041,000 $17,759,000
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable.......................... $ 264,000 $ 111,000 $ -- $ 375,000
Other Current Liabilities................. 675,000 272,000 126,000(6) 1,073,000
Short-term Borrowings..................... 698,000 -- -- 698,000
----------- ----------- ----------- -----------
Total Current Liabilities............. 1,637,000 383,000 126,000 2,146,000
Long-term Debt.............................. -- -- -- --
----------- ----------- ----------- -----------
Total Liabilities..................... 1,637,000 383,000 126,000 2,146,000
Stockholders' Equity (Deficit):
Common Stock.............................. 780,000 18,000 12,859,000(7) 13,657,000
Preferred Stock........................... -- -- 3,123,000(4) 3,123,000
Stock Warrants............................ 27,000 -- -- 27,000
Additional Paid-in-Capital................ -- 6,111,000 (6,111,000)(7) --
Accumulated Deficit....................... (1,194,000) (3,044,000) 3,044,000(7) (1,194,000)
----------- ----------- ----------- -----------
Total Stockholders' Equity
(Deficit)........................... (387,000) 3,085,000 12,915,000 15,613,000
----------- ----------- ----------- -----------
Total Liabilities and Stockholders'
Equity (Deficit).................... $ 1,250,000 $ 3,468,000 $13,041,000 $17,759,000
=========== =========== =========== ===========
</TABLE>
F-4
<PAGE> 62
LINK2GOV CORP.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma statement of operations combines the Company's
historical results of operations for the year ended December 31, 1999 with
Link2Gov.com's historical results of operations for the year ended December 31,
1999, as if the acquisition had occurred on January 1, 1999. The unaudited pro
forma balance sheet gives effect to the acquisition of Link2Gov.com and the
issuance of Series A Convertible Preferred Stock as if they had taken place on
December 31, 1999.
The unaudited pro forma financial information has been prepared on the
basis of assumptions described in these notes and includes assumptions related
to the allocation of the consideration paid for the assets and liabilities of
Link2Gov.com based on preliminary estimates of fair value. The actual allocation
of such consideration may differ from that reflected in the unaudited pro forma
financial information.
(1) This column represents the Company's historical results of operations
or balance sheet for the year ended December 31, 1999 as derived from
the audited financial statements included elsewhere in this prospectus.
(2) This column represents Link2Gov.com's historical results of operations
or balance sheet for the year ended December 31, 1999 as derived from
the audited financial statements included elsewhere in this prospectus.
(3) The pro forma adjustment represents intangible amortization expense for
the year ended December 31, 1999, resulting from the application of
purchase accounting to the Link2Gov.com acquisition. The intangible
primarily relates to Internet technology and contractual relationships
acquired and is thus being amortized over five years.
(4) The pro forma adjustment represents the Company's issuance of 1,466,194
shares of Series A Convertible Preferred Stock for cash proceeds of
$3,123,000 in January 2000. The Company had received $374,000 of this
cash before December 31, 1999 and recorded this cash receipt as a
current liability in the December 31, 1999 historical balance sheet.
(5) The pro forma adjustment represents the estimated intangible asset
arising from the acquisition of Link2Gov.com which will be amortized
over a five-year period.
(6) The pro forma adjustment represents the accrual of $500,000 of
estimated transaction costs related to the acquisition of Link2Gov.com,
offset by the $374,000 of preferred stock proceeds received by the
Company in 1999 (see note 4).
(7) The pro forma adjustment represents the issuance of 6,045,773 shares of
common stock to consummate the acquisition of Link2Gov.com.
F-5
<PAGE> 63
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To LINK2GOV Corp.:
We have audited the accompanying balance sheets of LINK2GOV CORP. (a
Tennessee corporation and formerly Concord Communications Consultants, Inc. and
G-Link Corporation) as of December 31, 1998 and 1999, and the related statements
of operations, stockholders' deficit and cash flows for each of the three years
in the period ended 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 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 LINK2GOV Corp. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
/s/ Arthur Andersen LLP
Nashville, Tennessee
March 21, 2000
F-6
<PAGE> 64
LINK2GOV CORP.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 29,000 $ 704,000
Accounts receivable, net of allowance for doubtful
accounts of $0 and $89,000 in 1998 and 1999,
respectively........................................... 241,000 179,000
Subscription receivables.................................. -- 250,000
Employee receivable....................................... -- 54,000
Receivable and related interest from stockholder.......... 167,000 --
Prepaid expenses and other current assets................. 1,000 3,000
--------- -----------
Total current assets.............................. 438,000 1,190,000
--------- -----------
Equipment, at cost:
Office equipment.......................................... 8,000 36,000
Less accumulated depreciation............................. (2,000) (6,000)
--------- -----------
Net equipment..................................... 6,000 30,000
--------- -----------
Other assets:
Deposits.................................................. -- 30,000
--------- -----------
Total assets...................................... $ 444,000 $ 1,250,000
========= ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Line of credit borrowings................................. $ 135,000 $ 662,000
Short-term borrowings -- related parties.................. 250,000 36,000
Accounts payable.......................................... 97,000 264,000
Deposits on preferred stock............................... -- 374,000
Accrued expenses --
Payroll and payroll taxes.............................. 34,000 166,000
Other.................................................. 20,000 135,000
--------- -----------
Total current liabilities......................... 536,000 1,637,000
--------- -----------
Noncurrent liabilities:
Long-term notes payable and related interest -- related
parties................................................ 96,000 --
--------- -----------
Total noncurrent liabilities...................... 96,000 --
--------- -----------
Total liabilities................................. 632,000 1,637,000
--------- -----------
Stockholders' deficit:
Common stock, no par value, 50,000,000 shares authorized,
10,000,000 and 12,530,000 shares issued and outstanding
in 1998 and 1999, respectively......................... 157,000 780,000
Stock warrants............................................ -- 27,000
Accumulated deficit....................................... (345,000) (1,194,000)
--------- -----------
Total stockholders' deficit....................... (188,000) (387,000)
--------- -----------
Total liabilities and stockholders' deficit....... $ 444,000 $ 1,250,000
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 65
LINK2GOV CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues, net.................................. $ 542,000 $ 819,000 $ 979,000
Costs and expenses:
Operating expenses........................... 377,000 558,000 780,000
Selling, general and administrative
expenses.................................. 129,000 262,000 1,148,000
Depreciation expense......................... 1,000 2,000 4,000
Noncash compensation expense................. 59,000 57,000 287,000
----------- ----------- -----------
566,000 879,000 2,219,000
----------- ----------- -----------
Loss from operations........................... (24,000) (60,000) (1,240,000)
Interest expense, net.......................... (39,000) (43,000) (33,000)
----------- ----------- -----------
Loss before income taxes....................... (63,000) (103,000) (1,273,000)
Income tax (expense) benefit................... -- -- --
----------- ----------- -----------
Net loss....................................... $ (63,000) $ (103,000) $(1,273,000)
=========== =========== ===========
Basic and diluted net loss per share........... $ (0.01) $ (0.01) $ (0.13)
=========== =========== ===========
Weighted average shares outstanding............ 10,000,000 10,000,000 9,937,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 66
LINK2GOV CORP.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK TOTAL
----------------------- STOCK -------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT WARRANTS SHARES AMOUNT DEFICIT DEFICIT
---------- ---------- -------- ---------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996........................ 10,000,000 $ 41,000 $ -- -- $ -- $ (179,000) $ (138,000)
Noncash compensation.......... -- 59,000 -- -- -- -- 59,000
Net loss for the year......... -- -- -- -- -- (63,000) (63,000)
---------- ---------- ------- ---------- ------- ----------- -----------
Balance at December 31,
1997........................ 10,000,000 100,000 -- -- -- (242,000) (142,000)
Noncash compensation.......... -- 57,000 -- -- -- -- 57,000
Net loss for the year......... -- -- -- -- -- (103,000) (103,000)
---------- ---------- ------- ---------- ------- ----------- -----------
Balance at December 31,
1998........................ 10,000,000 157,000 -- -- -- (345,000) (188,000)
Purchase of treasury stock.... -- -- -- 4,000,000 -- -- --
Issuance of treasury stock in
exchange for debt
outstanding................. -- 55,000 -- (3,000,000) -- -- 55,000
Treasury stock cancelled...... (1,000,000) -- -- (1,000,000) -- -- --
Noncash compensation.......... 2,641,000 103,000 -- -- -- -- 103,000
Common stock issued in
exchange for debt
outstanding................. 439,000 439,000 -- -- -- -- 439,000
Issuance of common stock...... 450,000 450,000 -- -- -- -- 450,000
Stock warrants issued in
exchange for debt
outstanding................. -- -- 27,000 -- -- -- 27,000
Net loss for the year......... -- -- -- -- -- (1,273,000) (1,273,000)
Reclassification of cumulative
S Corporation losses........ -- (424,000) -- -- -- 424,000 --
---------- ---------- ------- ---------- ------- ----------- -----------
Balance at December 31,
1999........................ 12,530,000 $ 780,000 $27,000 -- $ -- $(1,194,000) $ (387,000)
========== ========== ======= ========== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 67
LINK2GOV CORP.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (63,000) $(103,000) $(1,273,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Noncash compensation.................................... 59,000 57,000 287,000
Depreciation expense.................................... 1,000 2,000 4,000
Changes in assets and liabilities:
Accounts receivable................................... (188,000) (54,000) 62,000
Employee receivable................................... -- -- (54,000)
Interest receivable - related party................... (5,000) (10,000) --
Prepaid expenses...................................... -- -- (2,000)
Other assets.......................................... -- 100,000 (30,000)
Accounts payable...................................... 35,000 62,000 167,000
Accrued expenses...................................... 16,000 28,000 247,000
Interest payable...................................... 24,000 24,000 --
--------- --------- -----------
Net cash provided by (used in) operating
activities....................................... (121,000) 106,000 (592,000)
--------- --------- -----------
Cash flows from investing activities:
Additions to property and equipment....................... (1,000) (6,000) (28,000)
--------- --------- -----------
Net cash used in investing activities.............. (1,000) (6,000) (28,000)
--------- --------- -----------
Cash flows from financing activities:
Advances to stockholder................................... (53,000) (57,000) (17,000)
Deposits on preferred stock............................... -- -- 374,000
Proceeds from issuance of common stock.................... -- -- 200,000
Proceeds from borrowings.................................. 63,000 40,000 221,000
Repayments of borrowings.................................. -- (80,000) (10,000)
Proceeds from lines of credit, net........................ 125,000 10,000 527,000
--------- --------- -----------
Net cash provided by (used in) financing
activities....................................... 135,000 (87,000) 1,295,000
--------- --------- -----------
Net increase in cash and cash equivalents................... 13,000 13,000 675,000
Cash and cash equivalents, beginning of year................ 3,000 16,000 29,000
--------- --------- -----------
Cash and cash equivalents, end of year...................... $ 16,000 $ 29,000 $ 704,000
========= ========= ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................ $ 17,000 $ 29,000 $ 9,000
========= ========= ===========
Income taxes............................................ $ -- $ -- $ --
========= ========= ===========
Noncash financing activities:
Common stock/stock warrants issued in exchange for debt
outstanding........................................... $ -- $ -- $ 521,000
========= ========= ===========
Common stock issued through subscription receivables.... $ -- $ -- $ 250,000
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 68
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
LINK2GOV Corp. (the "Company") was originally incorporated in the state of
Florida in October of 1995 as Concord Communications Consultants, Inc. In
September of 1999, the Company reincorporated in the state of Tennessee and
simultaneously changed its name to G-Link Corporation. Effective March 21, 2000,
the name was changed to LINK2GOV Corp.
The Company provides telephony and interactive voice response (IVR)
solutions that enable convenient and inexpensive processing of
government-to-citizen and government-to-business transactions. The Company
partners directly with state and local government entities to deploy
e-government applications that allow users to renew driver's licenses, vehicle
registrations and professional licenses; and complete other transactions, such
as paying fines for traffic violations and parking citations. As of December 31,
1999, the company provides telephony or IVR solutions under contracts with state
or local agencies in five states.
In connection with an acquisition of Link2Gov.com, Inc. in January 2000
(see Note 7), the Company began offering e-government applications through the
Internet. The market for providing e-government solutions and facilitating
government transactions through the use of Internet and IVR applications is new
and unproven, and is characterized by risk and uncertainty as a result of
emerging competition, government relationships and regulations, and the
willingness of consumers, businesses and government entities to accept
e-government solutions as a viable alternative.
OPERATIONS
The Company has incurred net operating losses and negative cash flows from
operating activities, and projects that it will continue to incur losses in
future periods, resulting in the continuing need for additional cash. Management
continuously evaluates the Company's operating results and alternatives to
obtain additional financing proceeds, if necessary. Currently, management
expects available cash and cash equivalents to be sufficient to meet its
existing level of operating expenses and capital requirements through 2000;
however, additional capital will be needed to pursue and accomplish the
Company's growth plans.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentration of
credit risk consists primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash and cash equivalents in bank accounts
which, at times, exceed the federally insured limits. However, the Company has
not experienced any losses in these accounts and believes it is not exposed to
any significant credit risk on cash and cash equivalents. Concentration of
credit risk with respect to accounts receivable is limited because the majority
F-11
<PAGE> 69
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
of customers pay at the time a transaction is completed through the use of a
credit card. During 1999, the Company did bill some customers directly after
completion of transactions and experienced a high level of bad debts; thus, this
billing practice was discontinued.
EQUIPMENT
Equipment is recorded at cost less accumulated depreciation. The Company
uses the straight-line method of depreciation over the expected useful lives of
property and equipment estimated as follows: equipment, five years; software,
five years; and furniture, seven years.
Maintenance and repairs are charged against income as incurred. The cost
and accumulated depreciation of assets sold or otherwise disposed of are removed
from the accounts and the resulting gain or loss is reflected in the statement
of operations.
REVENUE RECOGNITION
The Company's revenues are principally derived from fees received on each
transaction completed through telephony or IVR applications. The Company records
revenue in the period the transaction is completed. The transaction fee is
typically paid to the Company in addition to the amount due to the government
entity for the license, permit or ticket. Such amounts due to the government
entity, which are collected by the Company and then remitted to the government
entity totaled $1,468,000, $2,043,000, and $2,671,000 in 1997, 1998, and 1999,
respectively. These amounts are not included in the net revenues reported by the
Company.
The Company contracts with state and local governments to provide telephony
or IVR services. These contracts typically have initial terms of three years, or
shorter, with optional renewal periods thereafter. A government entity may
terminate its contract prior to the expiration date upon specific cause events
and, in some instances, simply with notice. The decision by one or more
government entities not to renew an existing contract or to terminate one or
more of these contracts could result in significant revenue decreases for the
Company. The Company's contract with the Florida Department of Highway Safety
and Motor Vehicles (DMV) accounted for 100%, 83%, and 58% of the Company's
revenues in 1997, 1998, and 1999, respectively.
INCOME TAXES
The Company accounts for income taxes utilizing the asset and liability
method as prescribed by the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred tax assets
and liabilities are determined based on differences between the 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. In periods prior to September 1999, the Company was taxed
as an S Corporation with all income or loss passing through to the stockholders.
In September 1999, the Company reincorporated as a C Corporation and was no
longer taxed as an S Corporation. The inception-to-date net losses of the S
Corporation through September 1999, of $424,000, were netted against common
stock upon the change in tax status.
F-12
<PAGE> 70
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE
SFAS No. 128, "Earnings Per Share," establishes standards for computing and
presenting earnings per share. Under the standards established by SFAS No. 128,
earnings per share is measured at two levels: basic earnings per share and
diluted earnings per share. Basic earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding during the
year. Diluted earnings per share is computed by dividing net income by the
weighted average number of common shares after considering the additional
dilution related to convertible preferred stock, convertible debt, options and
warrants. In computing diluted earnings per share, the outstanding stock
warrants and stock options are not considered as they are antidilutive.
STOCK BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method as prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB Opinion No. 25"), and related Interpretations. Under APB
Opinion No. 25, no compensation cost related to stock options is recognized if
options are granted with exercise prices equal to or greater than the fair
market value at the date of grant.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes the fair values of the Company's cash, cash
equivalents, accounts payable, and debt instruments approximate their carrying
values due to their short maturity.
COMPREHENSIVE LOSS
The Company's comprehensive loss as defined by SFAS No. 130, "Reporting
Comprehensive Income," has been the same as reported net losses since inception.
2. LINES OF CREDIT
At December 31, 1998, the Company maintained a $5,000,000 line of credit
available with its primary IVR service provider with $135,000 drawn under the
line of credit. The line of credit was repaid in full and canceled during 1999.
This IVR service provider also served as the primary processor of transactions
for the Company during 1997 and 1998.
In October 1999, the Company obtained a $2,000,000 line of credit agreement
with the Bank of America, N.A., which bears interest at 7.5% payable monthly.
The Company had
F-13
<PAGE> 71
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$662,000 outstanding on the line of credit at December 31, 1999, which matures
on October 6, 2000. The line of credit is personally guaranteed by two directors
of the Company. On February 11, 2000, the Company repaid the entire outstanding
balance of its line of credit agreement with Bank of America, N.A.
3. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is subject to claims and legal actions in the normal course of
business. Currently, management is not aware of any pending or threatened claims
or litigation, which could have a material impact on the Company.
OPERATING LEASES
The Company maintains operating leases for the use of office space and
business equipment. The future minimum annual rental commitments on
non-cancelable operating leases for the next five years and thereafter are
approximately $363,000, $407,000, $419,000, $428,000, $440,000, and $1,037,000.
Rental expense for all operating leases was approximately $6,000, $32,000
and $39,000 for the years ended December 31, 1997, 1998, and 1999, respectively.
EMPLOYMENT AGREEMENTS
The Company has employment contracts with several individuals which provide
for annual base salaries and bonuses that are subject to annual review by the
Compensation Committee of the Board of Directors. These contracts contain
certain change of control, termination and severance clauses which require the
Company to make payments to these employees equal to one to three years of their
annual compensation.
4. STOCKHOLDERS' DEFICIT
COMMON STOCK
In connection with the Company's incorporation in 1995, the Company issued
10,000,000 shares of common stock in return for subscription receivables of
$1,000, which were subsequently paid.
In January of 1999, the Company repurchased 4,000,000 shares of common
stock from existing stockholders at a cost of $400. Subsequently, the Company
reissued 3,000,000 of those treasury shares as repayment of $55,000 of
outstanding debt. The remaining 1,000,000 shares of treasury stock were canceled
by the Company.
In September of 1999, the Company issued 439,000 shares of common stock to
existing stockholders as repayment of outstanding debt of approximately
$439,000.
In December of 1999, the Company issued 450,000 shares of common stock for
$200,000 in cash and $250,000 in note receivables. The receivables are
identified as stock subscription receivables in the current assets section of
the balance sheet as these amounts were collected subsequent to December 31,
1999.
F-14
<PAGE> 72
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On October 4, 1999, the Company's board of directors authorized a 10 for 1
split of all of the outstanding shares of the Company's common stock. Share and
per share information has been restated for all periods presented to give effect
to this stock split.
NONCASH COMPENSATION
During 1997, 1998, and part of 1999, one of the Company's founders, who
also served as an officer, did not receive cash compensation for his services.
For the periods prior to receipt of cash compensation, an estimate of the fair
value of these services has been recorded in the statements of operations as
noncash compensation expense with a corresponding increase to common stock
($59,000 in 1997, $57,000 in 1998, and $5,000 in 1999).
In September of 1999, the Company entered into an employment agreement with
its new chief executive officer under which 2,641,000 shares of common stock
were issued. Compensation of $72,000 was recorded in connection with this stock
issuance.
During December 1999, 100,000 vested stock options were granted to an
external consulting party with an exercise price of $1.00. The Company has
recognized the fair value of these options ($26,000) as noncash compensation
expense.
STOCK PURCHASE WARRANTS
In April of 1999, the Company issued stock purchase warrants for 1,000,000
shares of common stock with an exercise price of $.0001 per share to an existing
stockholder as repayment of $27,000 of indebtedness and as consideration for
establishing a line of credit from the stockholder to the Company for $150,000.
In October of 1999, the Company issued two members of the board of
directors stock purchase warrants for 200,000 shares of common stock at $1.00
per share as consideration for agreeing to guarantee the Company's bank line of
credit.
STOCK INCENTIVE PLAN
Effective October 4, 1999, the Company's board of directors approved the
adoption of the 1999 Stock Incentive Plan (the "Plan"). Under the Plan,
2,000,000 shares of common stock have been reserved for issuance upon exercise
of options granted thereunder. At each plan anniversary date, the number of
shares available for issuance shall be increased equal to the lesser of (i)
1,000,000 shares, (ii) two percent of the outstanding common shares on such
date, or (iii) a number determined by the Board. The maximum term of any option
granted pursuant to the Plan is ten years and vests over periods of time
determined by the Compensation Committee. Shares subject to options granted
under the Plan which expire, terminate or are cancelled without having been
exercised in full become available again for future grants.
F-15
<PAGE> 73
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Information with respect to the Plan for the year ended December 31, 1999
is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE
--------- -----
<S> <C> <C>
OUTSTANDING AT DECEMBER 31, 1998............................ -- --
Granted................................................... 200,000 $1.00
Exercised................................................. -- --
Cancelled................................................. -- --
--------- -----
OUTSTANDING AT DECEMBER 31, 1999............................ 200,000 $1.00
========= =====
EXERCISABLE AT DECEMBER 31, 1999............................ 50,000 $1.00
========= =====
Available for grant at the end of the year.................. 1,800,000
=========
</TABLE>
Subsequent to December 31, 1999, the Company amended the 1999 Stock Option
Plan to increase the number of shares available to be issued under the plan from
2,000,000 to 6,000,000.
Under the disclosure provisions of SFAS No. 123, the Company's net loss in
1999 would have been increased to a pro forma amount of $1,289,000 and $0.13 per
share, compared to the reported amounts of $1,273,000 and $0.13 per share, had
compensation cost for the 1999 grants been determined based on the fair value of
awards consistent with the provisions of SFAS No. 123.
In determining these pro forma disclosures, the fair value of each grant is
estimated on the date of grant using the minimum value option-pricing method
allowed under SFAS No. 123 with the following assumptions: dividend yield of
0.0%; volatility of 0.0; expected lives of five years; and a risk-free interest
rate of 5.85%.
5. INCOME TAXES
The Company has net deferred tax assets of $523,000, which relate primarily
to a net operating loss carryforward of $346,000 and net cash to accrual
differences of $177,000. Management has determined, based on the Company's
history of losses and projections of future activities, that a valuation
allowance should be recorded related to these deferred tax assets. The ultimate
realization of these deferred tax assets depends on the Company's ability to
generate sufficient taxable income in the future.
No income tax provision or benefit has been recorded due to the Company
being taxed as an S Corporation through September 1999 and due to its history of
tax net operating losses. At December 31, 1999, the Company's tax net operating
losses as a C Corporation approximate $865,000.
6. RELATED PARTY TRANSACTIONS
During 1996 through 1999, the Company advanced cash to one of its founders,
who was also serving as an officer. Interest was accrued annually at 8% on the
outstanding advances. These advances and the related accrued interest were
forgiven by the board of directors in 1999, with the total of $184,000 recorded
as noncash compensation expense.
Long-term notes payable-related parties and short-term borrowings-related
parties at December 31, 1998, represent cash advances from stockholders or
parties related to stockholders, which bear interest at 8% for 1997 and 1998 and
12% for 1999. All of the outstanding debt and accrued interest at December 31,
1998 was satisfied in 1999 in exchange for common stock.
F-16
<PAGE> 74
LINK2GOV CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During 1997, 1998, and a portion of 1999, the Company leased office space
from a related party with rent expense totaling $6,000, $32,000, and $29,000,
respectively.
7. SUBSEQUENT EVENTS
On January 26, 2000, the Company acquired 93% of the issued and outstanding
shares of Link2Gov.com, Inc., a Delaware corporation ("Link2Gov.com"), in
exchange for 5,604,902 shares of common stock of the Company. Subsequent to the
initial purchase, the Company began the process of acquiring the remaining
outstanding shares (7%) of Link2Gov.com from miscellaneous shareholders. In
February 2000, the Company completed its acquisition of Link2Gov.com by issuing
440,871 shares of common stock in exchange for the remaining outstanding shares
(7%) of Link2Gov.com common stock that was not acquired in the January 25, 2000
exchange noted above. In addition, several key members of Link2Gov.com's
management team have subsequently signed employment agreements with the Company.
The following unaudited summary pro forma financial data for the year ended
December 31, 1999 is presented as if the acquisition of Link2Gov.com had
occurred as of January 1, 1999.
<TABLE>
<CAPTION>
PRO FORMA
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
---------------------
<S> <C>
Net Revenues................................................ $ 996
=======
Net Loss.................................................... $(6,107)
=======
Basic and Diluted Net Loss Per Share........................ $ (0.38)
=======
Weighted Average Shares Outstanding......................... 15,983
=======
</TABLE>
On January 25, 2000, the Company issued 1,466,194 shares of its Series A
Convertible Preferred Stock at $2.13 per share. These preferred shares are
convertible, at the option of the holder, into common stock on a one-for-one
basis. The preferred shares also automatically convert into common stock
immediately prior to the Company's closing of an initial public offering. The
preferred shares also carry a liquidation preference upon dissolution of the
Company. Cash of $374,000 related to this sale of preferred stock was received
by the Company in 1999 and is recorded in the accompanying balance sheet as
deposits on preferred stock. In connection with the issuance of the preferred
stock, certain preferred stockholders were issued warrants to purchase 586,851
shares of common stock at $2.84 per share.
In January 2000, the Company issued warrants to purchase 150,000 shares of
common stock at $2.13 per share to three new Board members as consideration for
their agreement to join the board of directors.
In March 2000, the Company sold 46,948 shares of common stock at $2.13 per
share to a new member of the board of directors. The new member was also issued
warrants to purchase 50,000 shares of common stock at $2.13 per share.
Between January 1, 2000 and March 21, 2000, the Company has issued
additional options to purchase 3,163,378 shares of common stock under the 1999
Stock Incentive Plan to certain employees of the Company at exercise prices
ranging between $2.13 and $4.00 per share.
Effective March 21, 2000, the Company's number of common shares authorized
increased from 50,000,000 to 100,000,000.
F-17
<PAGE> 75
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Link2Gov.com, Inc.:
We have audited the accompanying balance sheets of LINK2GOV.COM, INC. (a
Delaware corporation) as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for the period
from inception (February 1998) through December 31, 1998 and the year ended
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 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 Link2Gov.com, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the period from inception (February 1998) through December 31, 1998 and the
year ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States.
/s/ Arthur Andersen LLP
Nashville, Tennessee
March 16, 2000
F-18
<PAGE> 76
LINK2GOV.COM, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 20,000 $ 3,337,000
Other current assets...................................... -- 28,000
--------- -----------
Total current assets.............................. 20,000 3,365,000
--------- -----------
Equipment, net.............................................. -- 103,000
--------- -----------
Total assets...................................... $ 20,000 $ 3,468,000
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 19,000 $ 111,000
Accrued expenses
Payroll and payroll taxes.............................. -- 27,000
Consulting............................................. -- 127,000
Other.................................................. -- 118,000
--------- -----------
Total current liabilities......................... 19,000 383,000
--------- -----------
Stockholders' equity:
Common stock, $0.001 par value, 200,000,000 shares
authorized, 2,000,000 and 18,000,000 shares issued and
outstanding as of December 31, 1998 and 1999,
respectively........................................... 2,000 18,000
Additional paid-in capital................................ 267,000 6,111,000
Accumulated deficit....................................... (268,000) (3,044,000)
--------- -----------
Total stockholders' equity........................ 1,000 3,085,000
--------- -----------
Total liabilities and stockholders' equity.................. $ 20,000 $ 3,468,000
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 77
LINK2GOV.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 1998)
THROUGH DECEMBER 31, 1998, AND THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Revenues, net.............................................. $ 7,000 $ 17,000
Costs and expenses:
Operating expenses....................................... 162,000 442,000
Selling, general and administrative expenses............. 210,000 2,035,000
Depreciation expense..................................... -- 15,000
Noncash compensation expense............................. -- 460,000
---------- -----------
372,000 2,952,000
---------- -----------
Loss from operations....................................... (365,000) (2,935,000)
Interest income............................................ -- 159,000
---------- -----------
Loss before income taxes................................... (365,000) (2,776,000)
Income tax (expense) benefit............................... -- --
---------- -----------
Net loss................................................... $ (365,000) $(2,776,000)
========== ===========
Basic and diluted net loss per share....................... $ (0.18) $ (0.19)
========== ===========
Weighted average shares outstanding........................ 2,000,000 14,362,000
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 78
LINK2GOV.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 1998)
THROUGH DECEMBER 31, 1998, AND THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN ACCUMULATED DIVISIONAL STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY EQUITY
---------- ------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at Inception................ -- $ -- $ -- $ -- $ -- $ --
Parent contribution of divisional
equity and net loss of
division........................ -- -- -- (97,000) 97,000 --
Incorporation of division......... 2,000,000 2,000 (2,000) 97,000 (97,000) --
Capital contribution from
stockholders.................... -- -- 269,000 -- -- 269,000
Net loss subsequent to
incorporation................... -- -- -- (268,000) -- (268,000)
---------- ------- ---------- ----------- -------- -----------
Balance at December 31, 1998........ 2,000,000 2,000 267,000 (268,000) -- 1,000
Stock options issued.............. -- -- 460,000 -- -- 460,000
Issuance of common stock.......... 16,000,000 16,000 5,384,000 -- -- 5,400,000
Net loss.......................... -- -- -- (2,776,000) -- (2,776,000)
---------- ------- ---------- ----------- -------- -----------
Balance at December 31, 1999........ 18,000,000 $18,000 $6,111,000 $(3,044,000) $ -- $ 3,085,000
========== ======= ========== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 79
LINK2GOV.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 1998)
THROUGH DECEMBER 31, 1998, AND THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................. $ (365,000) $(2,776,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.......................................... -- 15,000
Noncash compensation expense.......................... -- 460,000
Changes in assets and liabilities:
Other assets........................................ -- (28,000)
Accounts payable.................................... 19,000 92,000
Accrued expenses.................................... -- 272,000
---------- -----------
Net cash used in operating activities............ (346,000) (1,965,000)
---------- -----------
Cash flows from investing activities:
Additions to property and equipment, net................. -- (118,000)
---------- -----------
Net cash used in investing activities............ -- (118,000)
---------- -----------
Cash flows from financing activities:
Parent contribution of divisional equity................. 97,000 --
Capital contribution from stockholders................... 269,000 --
Issuance of common stock................................. -- 5,400,000
---------- -----------
Net cash provided by financing activities........ 366,000 5,400,000
---------- -----------
Net increase in cash and cash equivalents.................. 20,000 3,317,000
Cash and cash equivalents, beginning of period............. -- 20,000
---------- -----------
Cash and cash equivalents, end of period................... $ 20,000 $ 3,337,000
========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................ $ -- $ --
========== ===========
Income taxes........................................ $ -- $ --
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 80
LINK2GOV.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Link2Gov.com, Inc. (the "Company") was originally formed as a separate
operating division of iXL Corporation ("iXL") in February of 1998. On June 29,
1998, the division of iXL was separately incorporated as Permit.com, Inc.
("Permit") in the state of Delaware, as a wholly owned subsidiary of iXL. As a
dividend to the shareholders of iXL, iXL's management distributed 100% of
Permit's common stock to the individual shareholders of iXL. Subsequently in
March of 1999, Permit issued 16,000,000 shares of its common stock to Digital
Data Corporation for $5,400,000 in cash. During 1999, Permit changed its name to
Transsport.com and then to Link2Gov.com, Inc. As the separate operating division
of iXL was the predecessor to the Company, the 1998 financial statements are
presented from the inception of the division including the periods of the
divisional operations and the results after incorporation. The net revenues and
direct expenses of the division through June 29, 1998 were approximately $3,000
and $100,000, respectively.
The Company provides an alternative method for consumers in the State of
Georgia to purchase boating registrations and hunting and fishing licenses
through the Internet.
CASH AND CASH EQUIVALENTS
The Company considers cash on hand, deposits in banks, certificates of
deposits, and short-term marketable securities with original maturities of less
than 90 days to be cash equivalents.
EQUIPMENT
Equipment is recorded at cost less accumulated depreciation. Depreciation
is calculated using the straight-line method over the estimated useful lives of
the assets. The Company has determined the estimated useful lives of their
assets to be three to seven years.
Maintenance and repairs are charged against income as incurred. The cost
and accumulated depreciation of assets sold or otherwise disposed of are removed
from the accounts and the resulting gain or loss is reflected in the statement
of operations.
REVENUE RECOGNITION
Transaction fees are paid by consumers for purchasing hunting and fishing
licenses, as well as, registering boats through Internet applications. The
Company records revenue in the period the transaction is consummated. The
Company receives funds from the consumers, using credit cards, for the
state-required fees plus the transaction fee charged by the Company. The Company
then remits the state-required fee to the state through wire transfers. Such
amounts, which are remitted to the government totaled $104,000 and $300,000 in
1998 and 1999, respectively. These amounts are not included in the net revenues
reported by the Company.
The Company has one existing revenue agreement with the Georgia Department
of Natural Resources, which represents 100% of the Company's revenues. The state
may terminate its agreement at any time.
F-23
<PAGE> 81
LINK2GOV.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Company accounts for income taxes utilizing the asset and liability
method prescribed by the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred tax assets
and liabilities are determined based on differences between the 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.
STOCK BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method as prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB Opinion No. 25"), and related Interpretations. Under APB
Opinion No. 25, no compensation cost related to stock options is recognized if
options are granted with exercise prices equal to or greater than the fair
market value at the date of grant.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's cash, cash equivalents and accounts
payable approximate their carrying values due to their short maturity.
EARNINGS PER SHARE
SFAS No. 128, "Earnings Per Share", establishes standards for computing and
presenting earnings per share. Under the standards established by SFAS No. 128,
earnings per share is measured at two levels: basic earnings per share and
diluted earnings per share. Basic earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding during the
year. Diluted earnings per share is computed by dividing net income by the
weighted average number of common shares after considering the additional
dilution related to convertible preferred stock, convertible debt, options and
warrants. In computing diluted earnings per share, the outstanding stock options
are not considered as they would be antidilutive.
F-24
<PAGE> 82
LINK2GOV.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. EQUIPMENT
Equipment is summarized as follows:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Computer equipment.......................................... $ 59,000
Furniture and fixtures...................................... 40,000
Leasehold improvements...................................... 13,000
Office equipment............................................ 3,000
Software.................................................... 3,000
--------
118,000
Less accumulated depreciation and amortization.............. (15,000)
--------
$103,000
========
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company maintains operating leases for the use of office space and
business equipment. The future minimum annual rental commitment on
non-cancelable operating leases for the next three years are approximately
$14,000; $4,000; and $2,000.
Rental expense for all operating leases was approximately $0 and $15,000
for the period ended December 31, 1998 and the year ended December 31, 1999,
respectively.
LITIGATION
The Company is subject to claims and legal actions in the normal course of
business. Currently, management is not aware of any pending or threatened claims
or litigation which could have a material impact on the Company.
EMPLOYMENT AGREEMENTS
The Company maintained employment contracts with several individuals, which
provide for annual base salaries and potential bonuses. These contracts
contained certain change of control, termination and severance clauses which
required the Company to make payments to these employees equal to six months to
two years of their annual compensation. However, these contracts were terminated
prior to the acquisition discussed in Note 7.
4. STOCKHOLDERS' EQUITY
COMMON STOCK
In connection with the Company's incorporation in June of 1998, the Company
issued 2,000 shares of $0.001 common stock to iXL as founding shares and issued
1,998,000 shares of common stock to iXL in exchange for certain intangible
assets, which were deemed to have nominal value for financial statement
purposes.
Effective February 10, 1999, the Company sold 16,000,000 shares of common
stock to Digital Data Corporation for $0.3375 per share. The Company received
net proceeds of $5,400,000 from this sale of common stock.
F-25
<PAGE> 83
LINK2GOV.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On November 3, 1999, the Company's Board of Directors authorized a 20 for 1
split of all of the issued and outstanding shares of the Company's common stock.
The 900,000 shares of common stock outstanding were converted into 18,000,000
shares of common stock with a new assigned par value of $0.001 per share. All
share and per share information has been restated for all periods presented to
give effect to this stock split.
NONQUALIFIED STOCK OPTION PLAN
Effective August 19, 1999, the Company's Board of Directors approved the
adoption of the 1999 Stock Option Plan (the "Plan"). Under the Plan, 2,880,000
shares of common stock have been reserved for issuance upon exercise of options
granted thereunder. The maximum term of any option granted pursuant to the Plan
is ten years. Shares subject to options granted under the Plan which expire,
terminate or are cancelled without having been exercised in full become
available again for future grants. Information with respect to the Plan for the
year ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE RANGE
--------- -----------
<S> <C> <C>
Outstanding at December 31, 1998.......................... -- --
Granted................................................. 2,470,000 $0.05-0.34
Exercised............................................... -- --
Cancelled............................................... -- --
--------- ----------
Outstanding at December 31, 1999.......................... 2,470,000 $0.05-0.34
========= ==========
Exercisable at December 31, 1999.......................... 1,130,000 $ 0.05
========= ==========
Available for grant at the end of the year................ 410,000
=========
</TABLE>
During 1999, 2,330,000 stock options were granted to Company employees to
purchase the Company's common stock with an exercise price less than the market
value on the date of the grant. The options vest over different periods of time,
ranging from immediately to four years. The Company is recognizing the expense
ratably over the vesting schedules. As of December 31, 1999, the Company has
expensed approximately $460,000 of the approximately $664,000 of total
compensation expense related to these 1999 options, and the remaining deferred
compensation of $204,000 is reflected as a reduction of additional paid-in
capital.
The Company has adopted the disclosure provisions of SFAS No. 123. Had
compensation cost for the 1999 grants been determined based on the fair value of
awards on the grant date consistent with the provisions of SFAS No. 123, the
Company's net loss and net loss per share would have been increased to the pro
forma amount of $ 2,810,000 and $0.20, respectively, compared to the reported
net loss and net loss per share of $2,776,000 and $0.19, respectively for the
year ended 1999.
The fair value of each grant is estimated on the date of grant using the
Minimum Value option-pricing method with the following assumptions used for
grants in 1999: dividend yield of 0.0%; volatility of 0.0; expected lives of 10
years; and risk-free interest rates from 5.17% to 6.21%.
F-26
<PAGE> 84
LINK2GOV.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
Due to the Company's history of net operating losses, no income tax
provision or benefit has been recorded. At December 31, 1998 and 1999, the
Company had net tax operating losses of approximately $268,000 and $3,044,000
expiring in 2018 and 2019. Due to the historical losses, for financial reporting
purposes, a valuation allowance equal to these amounts has been recognized to
offset the deferred tax assets at December 31, 1998 and 1999, respectively.
6. RELATED PARTY TRANSACTIONS
During 1998 and 1999, the Company used the services of iXL to support a
significant amount of its operations. During 1998, no amounts were recorded
related to the general overhead support services provided to the Company by iXL.
During 1999, approximately $343,000 was charged by iXL to the Company for
services rendered which is recorded as operating and selling, general and
administrative expense in the 1999 statement of operations. During 1998, iXL
funded the majority of the Company's operating losses, which funding was treated
as divisional equity or capital contributions during 1998.
7. SUBSEQUENT EVENT
In January 2000, 93% of the Company's common stock was acquired by G-Link
Corporation ("G-Link") in exchange for 5,604,902 shares of G-Link's common
stock. In February 2000, G-Link completed its acquisition by issuing another
440,871 shares of G-Link's common stock in exchange for the remaining 7%
ownership interest.
F-27
<PAGE> 85
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. WE ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Special Note Regarding Forward-
Looking Statements and Industry
Data................................ 14
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 24
Management............................ 35
Principal Stockholders................ 42
Certain Transactions with Related
Parties............................. 44
Description of Capital Stock.......... 46
Shares Eligible For Future Sale....... 51
Underwriting.......................... 53
Validity of Common Stock.............. 55
Experts............................... 55
Where You Can Find More Information... 55
Table of Contents -- Financial
Statements.......................... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATION: UNTIL , 2000 (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THE 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 AN UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENT OR SUBSCRIPTIONS.
- ---------------------------------------------------------
LINK2GOV CORP.
5,000,000 SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
THE ROBINSON-HUMPHREY
COMPANY
J.C. BRADFORD & CO.
PROSPECTUS
, 2000
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
- ----------------- ------
<S> <C>
SEC registration fee........................................ $15,180
NASD filing fee............................................. 6,250
Nasdaq National Market listing fee.......................... 95,000
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing expenses........................................... *
Blue sky qualification fees and expenses.................... *
Transfer agent's fee........................................ *
Miscellaneous............................................... *
-------
Total..................................................... $ *
=======
</TABLE>
- -------------------------
* To be completed by amendment.
The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Tennessee Business Corporation Act (the "TBCA"), there is no
specific provision either expressly permitting or prohibiting a corporation from
limiting the liability of its directors for monetary damages. Our charter
provides that, to the fullest extent permitted by the TBCA, a director will not
be liable to the corporation or its shareholders for monetary damages for breach
of his or her fiduciary duty as a director.
The TBCA provides that a corporation may indemnify any director or officer
against liability incurred in connection with a proceeding if the director or
officer acted in good faith or reasonably believed, in the case of conduct in
his or her official capacity with the corporation, that the conduct was in the
corporation's best interest. In all other civil cases, a corporation may
indemnify a director or officer who reasonably believed that his or her conduct
was not opposed to the best interest of the corporation. In connection with any
criminal proceeding, a corporation may indemnify any director or officer who had
no reasonable cause to believe that his or her conduct was unlawful.
In actions brought by or in the right of the corporation, however, the TBCA
does not allow indemnification if the director or officer is adjudged to be
liable to the corporation. Similarly, the TBCA prohibits indemnification in
connection with any proceeding charging improper personal benefit to a director
or officer if the director or officer is adjudged liable because a personal
benefit was improperly received.
In cases when the director or officer is wholly successful, on the merits
or otherwise, in the defense of any proceeding instigated because of his or her
status as a director or officer of a
II-1
<PAGE> 87
corporation, the TBCA mandates that the corporation indemnify the director or
officer against reasonable expenses incurred in the proceeding. Notwithstanding
the foregoing, the TBCA provides that a court may order a corporation to
indemnify a director or officer for reasonable expense if, in consideration of
all relevant circumstances, the court determines that the individual is fairly
and reasonably entitled to indemnification, whether or not the standard of
conduct set forth above was met.
Our bylaws provide that we will indemnify and advance expenses to our
directors and officers to the fullest extent permitted by the TBCA. We also
intend to acquire and maintain insurance to protect any director or officer
against any liability.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under our charter. We are not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, we
have issued the following securities that were not registered under the
Securities Act:
(a) Issuances of Capital Stock
(1) On January 15, 1999, our predecessor corporation, Concord
Communications, Inc., issued 150 shares to each of Messrs. Oldacre and
Newton in exchange for $27,485 in debt owed to each of them.
(2) On September 16, 1999, in connection with our reincorporation,
Messrs. Peeler, McDonald, Oldacre and Newton received 4,500,000 shares,
1,500,000 shares, 1,500,000 shares and 1,500,000 shares, respectively, of
our common stock in exchange for their 450 shares, 150 shares, 150 shares
and 150 shares, respectively, of the common stock of our predecessor
corporation, Concord Communications, Inc.
(3) On September 16, 1999, we issued 2,641,000 shares of common stock
to Mr. Roberts in connection with his acceptance of employment with us.
(4) On September 30, 1999, we issued an aggregate of 438,990 shares of
our common stock to Messrs. Newton, Oldacre and McDonald as payment of
indebtedness owed to them by us totaling $438,990.
(5) On October 4, 1999, we authorized the sale of 100,000 shares of
our common stock to each of Messrs. Caffey, McChesney, Alexander and
Roberts and 50,000 shares to Mr. Braswell for $1.00 per share.
(6) On January 25, 2000, we sold an aggregate of 1,466,194 shares of
our Series A Convertible Preferred Stock (convertible on a one-for-one
basis) for $2.13 per share to 24 purchasers.
(7) On January 26, 2000, we acquired 93% of the outstanding common
stock of Link2Gov.com, Inc., a Delaware corporation, or 16,687,560 of their
shares, in exchange for an aggregate of 5,604,902 shares of our common
stock.
(8) In February 2000, we completed our acquisition of Link2Gov.com,
Inc., a Delaware corporation, by issuing 440,871 shares of our common stock
in exchange for the remaining 1,312,440 shares of Link2Gov.com, Inc. common
stock we did not acquire in the January 2000 exchange.
(9) On March 10, 2000, we sold 46,948 shares of our common stock to
Ms. Richards for $2.13 per share.
II-2
<PAGE> 88
No underwriters or placement agents were engaged in connection with the
foregoing sales of securities. Except for the issuance of our common stock in
connection with our acquisition of Link2Gov.com, Inc., the foregoing issuances
of our common stock were made in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act as transactions by an issuer not
involving a public offering. The sale of our Series A Convertible Preferred
Stock and the issuances of our common stock in connection with the acquisition
of Link2Gov.com, Inc. were made in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act and Regulation D promulgated
under the Securities Act.
(b) Issuances of Warrants
(1) On April 15, 1999, our predecessor corporation, Concord
Communications, Inc., issued to Mr. McDonald a warrant to purchase
1,000,000 shares of our common stock at $0.0001 per share in exchange for
the cancellation of certain debt owed to Mr. McDonald and as consideration
for a loan from Mr. McDonald. Mr. McDonald exercised this warrant on March
17, 2000.
(2) On October 4, 1999, we issued warrants to purchase 100,000 shares
of our common stock at $1.00 per share to each of Messrs. McDonald and Mr.
Roberts as consideration for their agreement to guarantee a Promissory Note
from us to Bank of America, N.A.
(3) On January 25, 2000, we issued warrants to purchase 50,000 shares
of our common stock at $2.13 per share to each of Messrs. Caffey, McChesney
and Alexander, as consideration for their agreement to join our board of
directors.
(4) On January 25, 2000, we issued warrants to purchase an aggregate
of 586,851 shares of our common stock at $2.84 per share to ten purchasers
of our Series A Convertible Preferred Stock (including Mr. McChesney) as
consideration for their participation in our offering and sale of the
Series A Convertible Preferred Stock.
(5) On March 10, 2000, we issued to Ms. Richards a warrant to purchase
50,000 shares of our common stock at $2.13 per share as consideration for
her agreement to join our board of directors.
No underwriters or placement agents were engaged in connection with
the foregoing sales or transactions. The foregoing issuances of warrants to
purchase our common stock were made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act as transactions
by an issuer not involving a public offering.
(c) Grants of Stock Options
(1) On October 4, 1999, we authorized the grant to Mr. Roberts of
stock options to purchase 200,000 shares of our common stock pursuant to
our 1999 Stock Option Plan. This grant became immediately effective, vests
over time and has an exercise price of $1.00.
(2) On December 3, 1999, we granted to The Whitworth Group stock
options to purchase 100,000 shares of our common stock at an exercise price
of $1.00 per share in connection with our entering into a consulting
agreement with The Whitworth Group, all of which shares vested immediately.
(3) On January 25, 2000, an option to purchase 200,000 shares was
granted to Mr. Roberts, which vests over time and has an exercise price of
$2.13.
(4) On March 10, 2000, we granted to Martin Maddeloni options to
purchase 25,000 shares of our common stock at an exercise price of $2.13
per share as consideration for consulting services.
II-3
<PAGE> 89
(5) On March 10, 2000, we granted to T. Richard Butera options to
purchase 25,000 shares of our common stock at an exercise price of $2.13
per share as consideration for consulting services.
(6) On March 6, 2000, we granted to Verner, Liipfert, Bernhard,
McPherson & Hand options to purchase 25,000 shares of our common stock at
an exercise price of $2.13 per share as consideration for consulting
services.
(7) Between January 25, 2000 and March 10, 2000, and pursuant to our
1999 Stock Incentive Plan, we granted to certain other of our employees
options to purchase an aggregate of 2,888,378 shares of our common stock.
These options vest over time and have exercise prices ranging between $2.13
and $4.00.
As of March 21, 2000, no stock options have been exercised.
The issuance of these options is exempt from registration either
pursuant to Rule 701 promulgated under the Securities Act, as a transaction
pursuant to a compensatory benefit plan, or pursuant to Section 4(2) of the
Securities Act, as transactions by an issuer not involving a public
offering. The recipients of securities in each transaction represented
their intent to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other
instruments issued in such transactions. All recipients either received
adequate information about us or had access to such information through
employment or other relationships.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
NO. DESCRIPTION OF DOCUMENT
--- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Charter of LINK2GOV Corp., as amended (the "Company")
3.2 Amended and Restated Bylaws of the Company
*4.1 Form of Specimen Certificate for the common stock of
LINK2GOV Corp.
4.2 Registration Rights Agreement, dated January 25, 2000,
between the Company and the shareholders named therein, as
amended
4.3 Shareholders' Agreement, dated September 16, 1999, between
the Company and the shareholders named therein, as amended
*5.1 Opinion of Waller Lansden Dortch & Davis, PLLC regarding the
legality of the securities being registered
10.1 1999 Stock Incentive Plan, as amended
10.2 Form of Lease Agreement dated , 2000, between
Cornerstone Suburban Office, L.P. and the Company
10.3 Contractual Services Agreement between Concord
Communications and the Department of Highway Safety and
Motor Vehicles, State of Florida, dated September 27, 1996,
as amended
10.4 Employment Agreement dated September 16, 1999 between the
Company and Richardson M. Roberts
10.5 Form of Stock Purchase Warrant, dated October 4, 1999,
issued to Messrs. Roberts and McDonald in connection with
their guarantee of the Company's Promissory Note to Bank of
America, N.A.
</TABLE>
II-4
<PAGE> 90
<TABLE>
<CAPTION>
NO. DESCRIPTION OF DOCUMENT
--- -----------------------
<C> <S>
10.6 Form of Stock Purchase Warrant issued to certain
non-employee directors of the Company
10.7 Form of Stock Purchase Warrant, dated January 25, 2000,
issued to certain purchasers of the Series A Convertible
Preferred Stock
*10.8 Form of Employment Agreement dated January 26, 2000 between
the Company and each of Larry C. Wine, Robert S. Wechsler,
Robert S. Boyer, and Franz J. Hofer
*10.9 Form of Employment Agreement between the Company and each of
Everette James and Charles Rigby
21.1 Subsidiaries of the Registrant
*23.1 Consent of Waller Lansden Dortch & Davis, PLLC (included in
Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included on the signature pages hereto)
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
- -------------------------
* To be filed by amendment to this registration statement.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because they are not required or because
the required information is given in the financial statements or the notes to
those statements.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Nashville, state of Tennessee, on
March 21, 2000.
LINK2GOV CORP.
By: /s/ RICHARDSON M. ROBERTS
---------------------------------------
Richardson M. Roberts
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Richardson M. Roberts and Larry C. Wine
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act) and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ MARK MCDONALD Chairman and Director March 20, 2000
- ------------------------------------------
Mark McDonald
/s/ RICHARDSON M. ROBERTS Chief Executive Officer and Director March 20, 2000
- ------------------------------------------ (Principal Executive Officer)
Richardson M. Roberts
/s/ LARRY C. WINE President (Principal Executive March 20, 2000
- ------------------------------------------ Officer)
Larry C. Wine
/s/ FRANZ J. HOFER Chief Financial Officer (Principal March 21, 2000
- ------------------------------------------ Accounting Officer and Controller)
Franz J. Hofer
/s/ MICHAEL MCCHESNEY Director March 20, 2000
- ------------------------------------------
Michael McChesney
/s/ NOLLIE E. PEELER Director March 20, 2000
- ------------------------------------------
Nollie E. Peeler
</TABLE>
II-6
<PAGE> 92
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ A. LAMAR ALEXANDER Director March 19, 2000
- ------------------------------------------
A. Lamar Alexander
/s/ KIP R. CAFFEY Director March 20, 2000
- ------------------------------------------
Kip R. Caffey
/s/ ANN W. RICHARDS Director March 17, 2000
- ------------------------------------------
Ann W. Richards
</TABLE>
II-7
<PAGE> 93
EXHIBIT INDEX
<TABLE>
NO. DESCRIPTION OF DOCUMENT
- ----- ------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Charter of LINK2GOV Corp., as amended (the "Company")
3.2 Amended and Restated Bylaws of the Company
*4.1 Form of Specimen Certificate for the common stock of
LINK2GOV Corp.
4.2 Registration Rights Agreement, dated January 25, 2000,
between the Company and the shareholders named therein, as
amended
4.3 Shareholders' Agreement, dated September 16, 1999, between
the Company and the shareholders named therein, as amended
*5.1 Opinion of Waller Lansden Dortch & Davis, PLLC regarding the
legality of the securities being registered
10.1 1999 Stock Incentive Plan, as amended
10.2 Form of Lease Agreement dated , 2000, between
Cornerstone Suburban Office, L.P. and the Company
10.3 Contractual Services Agreement between Concord
Communications and the Department of Highway Safety and
Motor Vehicles, State of Florida, dated September 27, 1996,
as amended
10.4 Employment Agreement dated September 16, 1999 between the
Company and Richardson M. Roberts
10.5 Form of Stock Purchase Warrant, dated October 4,1999, issued
to Messrs. Roberts and McDonald in connection with their
guarantee of the Company's Promissory Note to Bank of
America, N.A.
10.6 Form of Stock Purchase Warrant issued to certain
non-employee directors of the Company
10.7 Form of Stock Purchase Warrant, dated January 25, 2000,
issued to certain purchasers of the Series A Convertible
Preferred Stock
*10.8 Form of Employment Agreement dated January 26, 2000 between
the Company and each of Larry C. Wine, Robert S. Wechsler,
Robert S. Boyer and Franz J. Hofer
*10.9 Form of Employment Agreement between the Company and each of
Everette James and Charles Rigby
21.1 Subsidiaries of the Registrant
*23.1 Consent of Waller Lansden Dortch & Davis, PLLC (included in
Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included on the signature pages hereto)
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
- -------------------------
* To be filed by amendment to this registration statement.
II-8
<PAGE> 1
EXHIBIT 3.1
CHARTER
OF
G-LINK CORPORATION
1. The name of the corporation is G-Link Corporation.
2. The corporation is for profit.
3. The duration of the corporation is perpetual.
4. The street address and zip code of the corporation's
principal office will be:
3841 Green Hills Village Drive, Suite 410
Nashville, Tennessee 37215
County of Davidson
5. (a) The name of the corporation's registered agent is Nollie
Peeler.
(b) The street address, zip code and county of the
corporation's registered office and registered agent in Tennessee shall be:
3841 Green Hills Village Drive, Suite 410
Nashville, Tennessee 37215
County of Davidson
6. The corporation is organized to do any and all things and to
exercise any and all powers, rights, and privileges that a corporation may now
or hereafter be organized to do or to exercise under the Tennessee Business
Corporation Act, as amended from time to time.
7. The maximum number of shares of stock the corporation is
authorized to issue is:
a. Fifty million (50,000,000) shares of common stock, no par
value per share, which shall be entitled to one vote per share and, upon
dissolution of the corporation, shall be entitled to receive the net assets of
the corporation.
b. Five million (5,000,000) shares of preferred stock without
par value. Shares of preferred stock may be issued from time to time in one or
more classes or series, each such class or series to be so designated as to
distinguish the shares thereof from the shares of all other classes and series.
The Board of Directors is hereby vested with the authority to divide preferred
stock into classes or series and to fix and determine the relative rights,
preferences, qualifications, and limitations of the shares of any class or
series so established.
8. The shareholders of the corporation shall not have preemptive
rights.
9. To the fullest extent permitted by the Tennessee Business
Corporation Act (the "Act") as in effect on the date hereof, and as hereafter
amended from time to time, a director of the corporation shall not be liable to
the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director. If the Act or any successor statute is amended
after adoption of this provision of this provision to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Act, as so amended from time to
time, or such successor statute. Any repeal or modification of this Article 9
by the shareholders of the corporation shall not affect
<PAGE> 2
adversely any right or protection of a director of the corporation existing at
the time of such repeal or modification or with respect to events occurring
prior to such time.
10. The corporation shall indemnify every person who is or was a
party or is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, by
reason of the fact that he or she is or was a director or officer or is or was
serving at the request of the corporation as a director, officer, employee,
agent, or trustee of another corporation or of a Partnership, joint venture,
trust, employee benefit plan, or other enterprise, including service on a
committee formed for any purpose (and, in each case, his or her heirs,
executors, and administrators), against all expense, liability, and loss
(including counsel fees, judgments, fines, ERISA excise taxes, penalties, and
amounts paid in settlement) actually and reasonably incurred or suffered in
connection with such action, suit, or proceedings, to the fullest extent
permitted by applicable law, as in effect on the date hereof and as hereafter
amended. Such indemnification may include advancement of expenses in advance of
final disposition of such action, suit, or proceeding, subject to the provision
of any applicable statute.
The indemnification and advancement of expenses provisions of this
Article 10 shall not be exclusive of any other right that any person (and his
or her heirs, executors, and administrators) may have or hereafter acquire
under any statute, this Charter, the corporation's Bylaws, resolution adopted
by the shareholders, resolution adopted by the Board of Directors, agreement,
or insurance, purchased by the corporation or otherwise, both as to action in
his or her official capacity and as to action in another capacity. The
corporation is hereby authorized to provide for indemnification and advancement
of expenses through its Bylaws, resolution of shareholders, resolution of the
Board of Directors, or agreement, in addition to that provided by this Charter.
11. The corporation shall hold a special meeting of shareholders
only in the event of a call of the Board of Directors of the corporation or the
officers authorized to do so by the Bylaws of the corporation.
Notwithstanding any other provision of this Charter, the affirmative
vote of holders of two-thirds of the voting power of the shares entitled to
vote at an election of directors shall be required to amend, alter, change or
repeal, or to adopt any provisions as part of this Charter or as part of the
corporation's Bylaws inconsistent with the purpose and intent of this Article
II.
Dated: September 10, 1999 /s/ F. Mitchell Walker, Jr.
--------------------------------------
F. Mitchell Walker, Jr., Incorporator
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<PAGE> 3
ARTICLES OF AMENDMENT TO THE CHARTER
OF
G-LINK CORPORATION
Pursuant to the provisions of Section 48-16-102 and Section 48-20-106
of the Tennessee Business Corporation Act, the undersigned Corporation adopts
the following articles of amendment to its Charter:
1. NAME OF CORPORATION. The name of the Corporation is G-Link
Corporation. The original Charter of the Corporation was filed with the
Tennessee Secretary of State on September 10, 1999.
2. TEXT OF AMENDMENT. Article 7 of the Charter of the
Corporation is amended and restated to read in its entirety as follows:
"7. The maximum number of shares of stock that the
Corporation is authorized to issue is:
(a) Fifty million shares of common stock, no par value
per share, which shall be entitled to one vote per share and, upon dissolution
of the Corporation, shall be entitled to receive the net assets of the
Corporation (the "Common Stock").
(b) Five million shares of preferred stock, no par
value per share (the "Preferred Stock"). One Million Six Hundred Thousand shares
of the Preferred Stock shall be designated Series A Convertible Preferred Stock
(the "Series A Preferred Stock").
The preferences, limitations and relative rights of the above classes
of stock shall be as follows:
I. SERIES A PREFERRED STOCK. The Series A Preferred Stock,
shall have the powers, preferences, rights, privileges, qualifications,
limitations and restrictions as follows:
a. Dividends. Holders of Series A Preferred Stock, in
preference to the holders of any other capital stock of the Corporation, shall
be entitled to receive dividends, when and as declared by the Board of
Directors, but only out of funds that are legally available therefor.
b. Voting. Except as otherwise required by law or by the
provisions of this charter, the shares of Series A Preferred Stock shall be
voted with the shares of the Corporation's Common Stock at any annual or special
meeting of shareholders of the Corporation, or may act by written consent in the
same manner as the Corporation's Common Stock, upon the following basis: each
holder of shares of Series A Preferred Stock shall be entitled to such number of
votes for the Series A Preferred Stock held by the holder on the record date
fixed for such meeting, or on the effective date of such written consent, as
shall be equal to the whole number of shares of the Corporation's Common Stock
into which all of the holder's shares of Series A Preferred Stock are
convertible immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent. Notwithstanding the
foregoing, the holders of the Series A Preferred Stock shall have the right,
voting as a separate class, to elect one director to the Board of Directors and
to fill such position in the event of a vacancy.
c. Liquidation.
<PAGE> 4
(1) In the Event of any voluntary or involuntary
dissolution, liquidation, sale of all or substantially all of the
Corporation's assets or winding-up of the affairs of the Corporation (a
"Liquidating Event") and after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of shares
of Series A Preferred Stock shall be entitled before any distribution
is made upon any capital stock of the Corporation other that the Series
A Preferred Stock, to receive a preferential payment from the assets of
the Corporation of cash or property (to the extent of funds legally
available therefor), equal to $2.30 for each share of Series A
Preferred Stock then held thereby (the "Series A Base Preference
Amount") plus an amount up to all accrued and unpaid dividends (if any)
computed to the date of payment thereof for each share, such amount
payable with respect to one share of Series A Preferred Stock being
sometimes referred to as the "Series A Liquidation Payment" and with
respect to all shares of Series A Preferred Stock being sometimes
referred to as the "Series A Liquidation Payments." After payment to
the holders of the Series A Preferred Stock of the full amount of the
Series A Liquidation Payments, the entire remaining assets and funds of
the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Common Stock in proportion to the
shares of Common Stock then held by such holders.
(2) If upon any Liquidating Event, the assets of the
Corporation distributable as aforesaid among the holders of Series A
Preferred Stock shall be insufficient to permit the payment to them of
the full Series A Liquidation Payments to which they are entitled, then
the entire assets of the Corporation shall be distributed ratably among
the holders of the Series A Preferred Stock in the proportion that the
amount of such assets bears to the aggregate Series A Liquidation
Payments owing thereto by the Corporation.
(3) Written notice of a Liquidating Event, stating a
payment date and, to the extent known, the amount of the Series A
Liquidation Payments, and the place where said payments shall be
payable, shall be given by first class mail (postage prepaid), by
telecopier, by overnight courier, or by telex, not less than 20
calendar days prior to the payment date stated therein, to the holders
of record of the Series A Preferred Stock, such notice to be addressed
to each such holder at the address shown on the stock transfer records
of the Corporation.
(4) If upon the merger or consolidation of the
Corporation into or with any other corporation or other entity or the
merger of any other corporation or entity into the Corporation (other
than any merger to reincorporate the Corporation in a different
jurisdiction, or a merger or consolidation in which the outstanding
voting stock of the Corporation immediately prior to such consolidation
or merger constitutes a majority of the voting stock of the surviving
entity), the capital stock of the Corporation is to be converted into
or exchanged for cash or other property or securities of a corporation
other than the Corporation, the allocation of any such cash, securities
or other property into which shares of capital stock of the Corporation
are to be converted or for which it is to be exchanged shall be made in
accordance with the provisions of Subsection I(c)(1) above as if such
merger or consolidation were a liquidation of the Corporation. Nothing
herein shall be construed as requiring or permitting a merger or
consolidation to be treated as a liquidation for any purpose other than
the allocation provided for in this Subsection I(c)(4).
(5) In case outstanding shares of Series A Preferred
Stock shall be subdivided into a greater number of shares of Series A
Preferred Stock, the Series A Base Preference Amount and Series A
Liquidation Payment, in effect immediately prior to such a subdivision
shall, simultaneously with the effectiveness of such subdivision, be
proportionately reduced (as appropriate), and conversely, in case
outstanding shares of Series A Preferred Stock shall be combined into a
smaller number of shares of Series A
<PAGE> 5
Preferred Stock, the Series A Base Preference Amount and Series A
Liquidation Payment, in effect immediately prior to each such
combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased (as appropriate).
d. Conversion.
(1) Right of Conversion. At any time, and from time to
time, a holder of shares of Series A Preferred Stock may elect to
convert all or part of the shares of Series A Preferred Stock held
thereby into shares of fully paid and nonassessable shares of Common
Stock, at the conversion rate of one share of Common Stock for each
share of Series A Preferred Stock (the "Initial Conversion Rate"). The
option to convert shares of the Series A Preferred Stock may be
exercised by surrendering to the Corporation the certificate of
certificates for the shares of Series A Preferred Stock so to be
converted, properly endorsed in blank or accompanied by proper
instruments of assignment. Shares of Series A Preferred Stock shall be
deemed to have been converted immediately prior to the close of
business on the day of surrender of such shares in the manner herein
prescribed for conversion and the person entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such Common Stock at such time.
(2) Automatic Conversion.
(A) Immediately prior to the effectiveness of a
firm commitment underwritten public offering pursuant to a
registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the
account of the Corporation in which the aggregate price to the
public of the shares sold for the Corporation is equal to or
greater than twenty million dollars ($20,000,000) and in which
the price to the public per share of Common Stock equals or
exceeds $10.00 (a "Qualified Public Offering"), all
outstanding shares of Series A Preferred Stock shall be
converted automatically into the number of shares of Common
Stock into which such shares of Series A Preferred Stock are
then convertible pursuant to this Subsection I(d)(2)
immediately prior to the effectiveness of the Qualified Public
Offering, without any further action by the holders of such
shares of Series A Preferred Stock and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. In
order to receive a Common Stock certificate, the holders of
the shares of Series A Preferred Stock shall surrender the
certificates representing such shares to the Corporation or
its transfer agent for the Common Stock at which time
certificates representing the shares of Common Stock into
which the Series A Preferred Stock were converted will be
issued.
(B) Notwithstanding the foregoing paragraph, in
the event the registration statement relating to the
Qualified Public Offering is declared effective by the
Securities and Exchange Commission but the Qualified Public
Offering does not close for any reason whatsoever, then the
shares of Common Stock into which the shares of Series A
Preferred Stock were converted pursuant to this Subsection
I(d)(2) shall be reconverted automatically into the series and
number of shares of Series A Preferred Stock outstanding with
respect to such shares of Common Stock immediately prior to
the effectiveness of such Qualified Public Offering, without
any further action by the Corporation or the holders of such
shares of Series A Preferred Stock and whether or not the
certificates representing such shares of Common Stock are
surrendered to the Corporation or its transfer agent.
<PAGE> 6
(3) Adjustment of Conversion Rate. In case outstanding
shares of Series A Preferred Stock shall be subdivided into a greater
number of shares of Series A Preferred Stock, the Initial Conversion
Rate in effect immediately prior to such a subdivision shall,
simultaneously with the effectiveness of such subdivision, be
proportionately increased (as appropriate), and conversely, in case
outstanding shares of Series A Preferred Stock shall be combined into a
smaller number of shares of Series A Preferred Stock, the Initial
Conversion Rate in effect immediately prior to each such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately reduced (as appropriate).
(4) No Fractional Shares to be Issued. No fractional
shares of Common Stock nor scrip representing fractional shares shall
be issued upon the conversion of shares of Series A Preferred Stock. If
more than one certificate for shares of Series A Preferred Stock shall
be surrendered for conversion at one time by the same holder, the
number of full shares which shall be issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares so
surrendered by such holder.
(5) Corporation Will Reserve Stock for Conversion. The
Corporation covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issue upon conversion of the Series A Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series A
Preferred Stock. The Corporation covenants that all shares of Common
Stock which shall be so issuable shall be duly authorized and, when
issued upon conversion of the Series A Preferred Stock, shall be
validly-issued and fully-paid and nonassessable.
e. Notice of Record Date. In the event of:
(1) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any share of stock of any class or any other securities or
property, or to receive any other right; or
(2) any recapitalization of the Corporation, any
reclassification of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other
corporation, or any other entity or person; or
(3) any voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then, in each such event the Corporation shall mail or cause to be mailed to
each holder of Series A Preferred Stock a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and (iii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or other
securities) shall deliver such Common Stock or other securities for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation merger, dissolution, liquidation or
winding-up. Such notice shall be mailed by first class mail, postage prepaid, or
sent by telecopier or overnight courier, at least fifteen (15) days prior to the
date specified in such notice on which such action is to be taken.
Notwithstanding anything to the
<PAGE> 7
contrary contained in this Charter, any other notice to be given shall be given
in accordance with the specific terms set forth in such Section or Subsection,
as the case may be.
II. Preferred Stock.
Shares of the Preferred Stock may be issued from time to
time in one or more series, each such series to be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
The Board of Directors is hereby vested with the authority to divide any or all
classes of Preferred Stock into series and to fix and determine the relative
rights and preferences of the shares of any series so established.
4. The amendment to the Charter of the Corporation as set forth
above was duly adopted by the Board of Directors on December 21, 1999.
5. The undersigned acknowledges these Articles of Amendment to
be the corporate act of the Corporation and as to all matters or facts required
to be verified under oath, the undersigned acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties of
perjury.
6. These Articles may be executed in two counterparts, each of
which shall be deemed as original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed in its name and on its behalf by its president and
attested to by its secretary on this 21st day of December, 1999.
ATTEST: G-LINK CORPORATION
/s/ Mark McDonald By: /s/ Richardson M. Roberts
- ------------------------ --------------------------------
Mark McDonald, Secretary Richardson M. Roberts, President
<PAGE> 8
ARTICLES OF AMENDMENT TO THE AMENDED CHARTER
OF
G-LINK CORPORATION
To the Secretary of State of the State of Tennessee:
Pursuant to the provisions of Section 48-20-106 of the Tennessee
Business Corporation Act, as amended, the undersigned corporation (the
"Corporation") submits these Articles of Amendment to its Amended Charter (the
"Charter"):
1. The name of the corporation is G-Link Corporation.
2. Article 1 of the Charter is hereby amended and restated in its
entirety to read as follows:
"The name of the Corporation is LINK2GOV Corp."
3. Article 4 of the Charter is hereby amended and restated in its
entirety to read as follows:
"The street address and zip code of the corporation's
principal office is:
One Burton Hills Boulevard, Suite 300
Nashville, Tennessee 37215
County of Davidson
4. Article 5 of the Charter is hereby amended and restated in its
entirety to read as follows:
"(a) The name of the corporation's registered agent is
Robert S. Wechsler.
(b) The street address, zip code, and county of the
corporation's registered office and registered agent in Tennessee is:
One Burton Hills Boulevard, Suite 300
Nashville, Tennessee 37215
County of Davidson
5. Article 7 of the Charter is amended by deleting from the first
paragraph thereof the words "Fifty million shares" and substituting in their
place and stead the following words: "One hundred million shares."
6. The Charter is hereby amended to include a new Article 12 to
read as follows:
12. (a) The business and affairs of the Corporation
shall be managed by a Board of Directors, consisting of not less than
three (3) nor more than
<PAGE> 9
twelve (12) persons, the exact number to be fixed and determined from
time to time by resolution of a majority of the Board of Directors or
by the vote of at least 75% of the voting power of the shares entitled
to vote at a special meeting called for the purpose; provided, however,
that in the event all of the outstanding shares of the Corporation are
held by fewer than three holders, then the number of directors shall
equal the number of shareholders and not be divided into classes as
provided in Article 12(b). Directors need not be residents of the State
of Tennessee or shareholders of the Corporation.
(b) Beginning upon the date of filing of these
Articles of Amendment with the Tennessee Secretary of State, the Board
of Directors shall be divided into three (3) classes of as nearly equal
size as possible. Each director shall be classified in the following
manner: (a) the directors of Class I shall hold one year terms, (b) the
directors of Class II shall hold two year terms and (c) the directors
of Class III shall hold three year terms. At each annual meeting of
shareholders beginning in 2001, the directors of the class whose term
expires at the time of such annual meeting shall be elected to hold
office until the third succeeding annual meeting after their election
or until their successors shall be elected and qualified.
(c) Directors may be removed from office only for
cause by either (i) an affirmative vote of holders of 75% or more of
the voting power of the shares entitled to vote at a special meeting
called for the purpose, or (ii) a majority of the entire Board of
Directors at a special meeting called for the purpose.
(d) If a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of
directors or a vacancy resulting from the removal of a director, the
Board of Directors may fill such vacancy by an affirmative vote of a
majority of the Board of Directors then in office, even though the
directors remaining in office may constitute fewer than a quorum of the
Board of Directors.
(e) Notwithstanding any other provision of this
Charter, the affirmative vote of holders of at least 75% of the voting
power of the shares entitled to vote at any election of directors shall
be required to amend, alter, change or repeal, or to adopt any part of
the Charter inconsistent with the purpose and intent of, this Article
12.
7. These amendments were duly adopted by the Board of Directors
of the corporation at a meeting on March 10, 2000 and by the shareholders of the
corporation at a special meeting of the shareholders on March 21, 2000.
8. Except as otherwise set forth herein, all other provisions of
the corporation's Charter shall remain in full force and effect.
(SIGNATURES BEGIN ON FOLLOWING PAGE)
2
<PAGE> 10
IN WITNESS WHEREOF, G-LINK CORPORATION has caused these Articles of
Amendment to be signed in its name and on its behalf by its president and
secretary on this 21st day of March, 2000.
ATTEST: G-LINK CORPORATION
/s/ Robert S. Wechsler By: /s/ Richardson M. Roberts
- ---------------------- -------------------------
Robert S. Wechsler, Richardson M. Roberts,
Secretary Chief Executive Officer
3
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
LINK2GOV CORP.
ARTICLE I
CORPORATE OFFICES
The registered office of the Corporation within the State of Tennessee
shall be located at One Burton Hills Boulevard, Suite 300, Nashville, Tennessee.
The Corporation may also have such other offices, including its principal
office, at such places, within or without the State of Tennessee, as the board
of directors may from time to time designate or the business of the Corporation
may require.
ARTICLE II
SHAREHOLDERS' MEETING
Section 1. Annual Meetings. The annual meeting of shareholders shall be
held on such date during the year and at such time as may be designated by the
board of directors and stated in the notice of meeting, for the purpose of
electing directors and transacting such other business as may be properly
brought before the meeting.
Section 2. Special Meetings. The Corporation shall hold a special
meeting of shareholders only in the event of a call of the Board of Directors of
the corporation or by the Chief Executive Officer or President of the
Corporation.
Section 3. Notice of Meetings. A written notice of each meeting of
shareholders stating the place, date and time of the meeting, and, in the case
of a special meeting, describing the purpose or purposes for which the meeting
is called, shall be given to each shareholder entitled to notice of such meeting
not less than ten days nor more than two months before the date of the meeting.
Section 4. Place of Meetings. Meetings of shareholders shall be held at
such places, within or without the State of Tennessee, as may be designated by
the board of directors and stated in the notice of meeting.
Section 5. Quorum. The holders of shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum exists
with respect to that matter. Unless the charter or the Act provides otherwise,
the holders of a majority of the votes entitled to be cast on a matter by a
voting group constitute a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, the holder is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting.
Section 6. Voting. Directors shall be elected by a plurality of the
votes cast by shareholders entitled to vote in the election at a meeting at
which a quorum is present. Shareholder action on any other matter is approved by
a voting group, if the votes cast by
<PAGE> 2
shareholders within the voting group in favor of the action exceed the votes
cast by shareholders within the voting group in opposition to such action,
unless the charter or the Act provides otherwise. If two or more groups are
entitled to vote separately on a matter, action on the matter is approved only
when approved by each voting group.
Section 7. Adjournment. If a meeting of shareholders is adjourned to
another date, time or place, notice need not be given of the adjourned meeting
if the new date, time and place are announced at the meeting before the
adjournment. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the time originally designated for the
meeting if a quorum existed at the time originally designated for the meeting;
provided, however, if a new record date is or must be fixed under the Act or
these bylaws, a notice of the adjourned meeting must be given to shareholders as
of the new record date.
Section 8. Proxies. A shareholder may appoint a proxy to vote at a
meeting of shareholders or otherwise act for him by signing an appointment form,
either personally or by his attorney-in-fact. An appointment of a proxy is
effective when received by the secretary or other officer or agent authorized to
tabulate votes. An appointment is valid for eleven months, unless another period
is expressly provided for in the appointment form. An appointment of a proxy is
revocable by the shareholder, unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest.
Section 9. Action by Written Consent. Any action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting, if
all shareholders consent to the taking of such action without a meeting by
signing one or more written consents describing the action taken and indicating
each shareholder's vote or abstention on the action. The affirmative vote of the
number of shares which would be necessary to authorize or take action at a
meeting of shareholders is the act of the shareholders without a meeting. The
written consent or consents shall be included in the minutes or filed with the
corporate records reflecting the action taken. Action taken by written consent
is effective when the last shareholder signs the consent, unless the consent
specifies a different effective date.
Section 10. Notice of Nominations. Nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors authorized to make such nominations or by any shareholder
entitled to vote in the election of directors generally. However, any such
shareholder nomination may be made only if written notice of such nomination has
been given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not later than (a) with respect to
an election to be held at an annual meeting of shareholders, one hundred twenty
(120) days prior to the first anniversary of the date the Corporation's notice
of annual meeting was provided with respect to the previous year's annual
meeting, and (b) with respect to an election to be held at a special meeting of
shareholders for the election of directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to
shareholders. In the case of any nomination by the Board of Directors or a
committee appointed by the Board of Directors authorized to make such
nominations, compliance with the proxy rules of the Securities and Exchange
Commission shall constitute compliance with the notice provisions of the
preceding sentence.
2
<PAGE> 3
In the case of any nomination by a shareholder, each such notice shall
set forth: (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies with
respect to nominees for election as directors, pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (including without limitation
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected); and (b) as to the shareholder giving
the notice (i) the name and address, as they appear on the Corporation's books,
of such shareholder, (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder, (iii) a representation that
the shareholder is a record or beneficial holder of at least one percent (1%) or
$1,000 in market value of stock of the Corporation entitled to vote at such
meeting; has held such stock for at least one year and shall continue to own
such stock through the date of such meeting; and intends to appear in person or
by proxy at the meeting to present the nomination; and (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The Chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Section 11. Notice of New Business. At an annual meeting of the
shareholders only such new business shall be conducted, and only such proposals
shall be acted upon, as shall have been properly brought before the meeting. To
be properly brought before the annual meeting such new business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a shareholder. For a proposal to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of the Corporation
and the proposal and the shareholder must comply with Regulation 14A under the
Securities Exchange Act of 1934. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred twenty (120) calendar days prior to the
first anniversary of the date the Corporation's notice of annual meeting was
provided with respect to the previous year's annual meeting. If the Company did
not hold an annual meeting the previous year, or if the date of the annual
meeting has been changed to be more than thirty (30) calendar days earlier than
or sixty (60) calendar days after that anniversary, then, in order to be timely,
a shareholder's notice must be received at the principal executive offices of
the Corporation not more than ninety (90) calendar days before nor later than
the later of sixty (60) days prior to the date of such annual meeting or the
tenth day following the date on which public announcement of such annual meeting
is first made. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a shareholder's
notice as described above.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the
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proposal desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, (d) a representation that the shareholder
is a record or beneficial holder of at least one percent (1%) or $1,000 in
market value of stock of the Corporation entitled to vote at such meeting; has
held such stock for at least one year and shall continue to own such stock
through the date of such meeting; and intends to appear in person or by proxy at
the meeting to present the proposal specified in the notice, and (e) any
financial interest of the shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Section 11. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that new business or any
shareholder proposal was not properly brought before the meeting in accordance
with the provisions of this Section 11, and if he should so determine, he shall
so declare to the meeting that any such business or proposal not properly
brought before the meeting shall not be acted upon at the meeting. This
provision shall not prevent the consideration and approval or disapproval at the
annual meeting of reports of officers, directors and committees, but in
connection with such reports no new business shall be acted upon at such annual
meeting unless stated and filed as herein provided.
Section 12. Conduct of Meetings. Meetings of the shareholders generally
shall follow accepted rules of parliamentary procedure, subject to the
following:
(a) The Chairman of the meeting shall have absolute authority
over the matters of procedure, and there shall be no appeal from the ruling of
the Chairman. If, in his absolute discretion, the Chairman deems it advisable to
dispense with the rules of parliamentary procedure as to any meeting of
shareholders or part thereof, he shall so state and shall state the rules under
which the meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which prevents the continuation
of the legitimate business of the meeting, the Chairman may quit the chair and
announce the adjournment of the meeting; and upon so doing, the meeting is
immediately adjourned.
(c) The Chairman may ask or require that anyone not a bona
fide shareholder or proxy leave the meeting.
(d) The resolution or motion shall be considered for vote only
if proposed by a shareholder or a duly authorized proxy and seconded by a
shareholder or duly authorized proxy other than the individual who proposed the
resolution or motion.
(e) Except as the Chairman may permit, no matter shall be
presented to the meeting which has not been submitted for inclusion in the
agenda at least thirty (30) days prior to the meeting.
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ARTICLE III
RECORD DATE
In order that the Corporation may determine the shareholders entitled
to notice of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the board of directors may fix, in advance, a record date, which shall not be
more than seventy nor less than ten days before the date of such meeting, nor
more than seventy days prior to any other action. If no record date is fixed,
(i) the record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
before the day on which the first notice is given to such shareholders and (ii)
the record date for determining shareholders for any other purpose shall be at
the close of business on the day that the board of directors authorizes the
action. A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting,
unless the board of directors fixes a new record date. The board of directors
must fix a new record date, if the meeting is adjourned to a date more than four
months after the date fixed for the original meeting.
ARTICLE IV
DIRECTORS
Section 1. Number and Term. The business and affairs of the Corporation
shall be managed by a Board of Directors, consisting of not less than three (3)
nor more than twelve (12) persons, the exact number to be fixed and determined
from time to time by resolution of a majority of the Board of Directors or by
the vote of at least 75% of the voting power of the shares entitled to vote at a
special meeting called for the purpose; provided, however, that in the event all
of the outstanding shares of the Corporation are held by fewer than three
holders, then the number of directors shall equal the number of shareholders and
not be divided into classes as provided in this Article IV, Section 1. Directors
need not be residents of the State of Tennessee or shareholders of the
Corporation. The Board of Directors shall be divided into three (3) classes of
as nearly equal size as possible. On the date of the adoption of these Amended
and Restated Bylaws, each director shall be classified in the following manner:
(a) the directors of Class I shall hold one year terms, (b) the directors of
Class II shall hold two year terms and (c) the directors of Class III shall hold
three year terms. At each annual meeting of shareholders beginning in 2001, the
directors of the class whose term expires at the time of such annual meeting
shall be elected to hold office until the third succeeding annual meeting after
their election or until their successors shall be elected and qualified.
Section 2. Committees. The board of directors, with the approval of a
majority of all the directors in office when the action is taken, may create one
or more committees. A committee shall consist of one or more directors who serve
at the pleasure of the board of directors. Any such committee, to the extent
specified by the board of directors, may exercise the authority of the board of
directors in supervising the management of the business and affairs of the
Corporation, except that a Committee may not: (i) authorize distributions,
except according to a formula or method prescribed by the board of directors;
(ii) approve or propose to shareholders action required by law to be approved by
shareholders; (iii) fill vacancies on the board of directors or any of its
committees; (iv)
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amend the charter; (v) adopt, amend or repeal bylaws; (vi) approve a plan of
merger not requiring shareholder approval; (vii) authorize or approve
reacquisition of shares, except according to a formula or method prescribed by
the board of directors; or (vii) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
board of directors may authorize a committee or senior executive officer of the
Corporation to do so within limits specifically prescribed by the board of
directors. The provisions of Sections 7, 8, 9, 10, 11 and 12 of this Article IV
and of Article V applicable to the board of directors shall also apply to
committees.
Section 3. Compensation. Directors shall receive such compensation as
shall be fixed by the board of directors and shall be entitled to reimbursement
for any reasonable expenses incurred in attending meetings and otherwise
carrying out their duties. Directors may also serve the Corporation in any other
capacity and receive compensation therefor.
Section 4. Removal. Directors may be removed from office only for cause
by either (i) an affirmative vote of holders of 75% or more of the voting power
of the shares entitled to vote at a special meeting called for the purpose, or
(ii) a majority of the entire Board of Directors at a special meeting called for
the purpose.
Section 5. Resignation. A director may resign at any time by delivering
written notice to the Corporation, the board of directors, the chairman or the
president. A resignation is effective when the notice is delivered, unless the
notice specifies a later effective date.
Section 6. Vacancies. If a vacancy occurs on the board of directors,
including a vacancy resulting from an increase in the number of directors or a
vacancy resulting from the removal of a director, the board of directors may
fill such vacancy by an affirmative vote of a majority of the board of directors
then in office, even though the directors remaining in office may constitute
fewer than a quorum of the board of directors.
Section 7. Quorum and Voting. A quorum of the board of directors
consists of a majority of the number of directors fixed by the board of
directors pursuant to Section 1 of this Article IV. If a quorum is present when
a vote is taken, the affirmative vote of a majority of directors present is the
act of the board of directors, unless the charter requires the vote of a greater
number of directors.
Section 8. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such places, within or without the State of
Tennessee, on such dates and at such times as the board of directors may
determine from time to time. Notice of a regular meeting shall be given if the
purpose, or one of the purposes, of the meeting is to remove a director or
directors pursuant to Section 4 of this Article IV.
Section 9. Special Meetings. Special meetings of the board of directors
may be called by the chairman of the board, the chief executive officer or the
president and shall be held at such places, within or without the State of
Tennessee, on such dates and at such times as may be stated in the notice of
meeting.
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Section 10. Notices. Special meetings of the board of directors must be
preceded by at least one days' notice of the date, time and place of the
meeting. The notice need not describe the purpose of the meeting, unless the
purpose, or one of the purposes, of the meeting is to remove a director or
directors pursuant to Section 4 of this Article IV. Notice of an adjourned
meeting need not be given, if the time and place to which the meeting is
adjourned are fixed at the meeting at which the adjournment is taken and if the
period of any one adjournment does not exceed one month.
Section 11. Meeting by Telephone. Any or all directors may participate
in a regular or special meeting by conference telephone or any other means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
Section 12. Action by Written Consent. Any action required or permitted
to be taken at a meeting of the board of directors may be taken without a
meeting, if all directors consent to the taking of such action without a meeting
by signing one or more written consents describing the action taken and
indicating each director's vote or abstention on the action. The affirmative
vote of the number of directors that would be necessary to authorize or take
action at a meeting is the act of the board of directors without a meeting. The
written consent or consents shall be included in the minutes or filed with the
corporate records reflecting the action taken. Action taken by written consent
is effective when the last director signs the consent, unless the consent
specifies a different effective date.
ARTICLE V
WAIVER OF NOTICE
A shareholder or director may waive any notice required to be given by
the Act, the charter or these bylaws before or after the date and time stated in
the notice. The waiver must be in writing, signed by the shareholder or director
entitled to the notice and delivered to the Corporation and filed in the
Corporation's minutes or corporate records, except that a shareholder's or
director's attendance at or participation in a meeting may constitute a waiver
of notice under the Act. Neither the business to be transacted at, nor the
purpose of, any meeting of the shareholders or directors need be specified in
any waiver of notice.
ARTICLE VI
OFFICERS
Section 1. Election and Term. At the first meeting of the board of
directors following the annual meeting of shareholders, or as soon thereafter as
is conveniently possible, the board of directors shall elect a president and a
secretary and such other officers as the board of directors may determine,
including a chairman of the board, a chief executive officer, one or more vice
presidents (any one or more of which may be designated as a senior or executive
vice president), a treasurer, a controller and one or more assistant vice
presidents, assistant treasurers, assistant controllers and assistant
secretaries. The board of directors may elect officers at such additional times
as it deems advisable. Each officer of the Corporation shall serve until his
successor is elected and qualified or until his
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earlier resignation or removal. Any number of offices may be held by the same
person, except that the president may not serve as the secretary.
Section 2. Compensation. The salaries and other compensation of the
officers of the Corporation shall be determined by the board of directors.
Section 3. Removal. The board of directors may remove any officer at
any time, with or without cause, but no such removal shall affect the contract
rights, if any, of the person so removed.
Section 4. Resignation. An officer of the Corporation may resign at any
time by delivering notice to the Corporation. A resignation is effective when
the notice is delivered, unless the notice specifies a later effective date. If
a resignation is made effective at a later date and the Corporation accepts the
future effective date, the board of directors may fill the pending vacancy
before the effective date if it provides that the successor does not take office
until the effective date. An officer's resignation does not affect the
Corporation's contract rights, if any, with the officer.
Section 5. Duties. The duties and powers of the officers of the
corporation shall be as follows:
(a) Chairman of the Board - The chairman of the board shall (i) be
chosen from among the members of the board of directors, (ii) preside at all
meetings of shareholders and the board of directors, (iii) have authority to
make contracts on behalf of the Corporation in the ordinary course of the
Corporation's business and (iv) perform such other duties as from time to time
may be assigned by the board of directors.
(b) Chief Executive Officer - The chief executive officer shall (i) be
primarily responsible for the general management of the business affairs of the
Corporation and for implementing the policies and directives of the board of
directors, (ii) preside at all meetings of shareholders and the board of
directors during the absence or disability of the chairman of the board, (iii)
have authority to make contracts on behalf of the Corporation in the ordinary
course of the Corporation's business, and (iv) perform such other duties as from
time to time may be assigned by the board of directors. The same person may
simultaneously hold the offices of chairman of the board and chief executive
officer.
(c) President - The president shall (i) preside at all meetings of the
shareholders and the board of directors during the absence or disability of both
the chairman of the board and the chief executive officer, (ii) be primarily
responsible for the general management of the business of the Corporation and
for implementing the policies and directives of the board of directors during
the absence or disability of both the chairman of the board and the chief
executive officer, (iii) have authority to make contracts on behalf of the
Corporation in the ordinary course of the Corporation's business and (iv)
perform such other duties as from time to time may be assigned by the chairman
of the board, the chief executive officer or the board of directors.
(d) Vice Presidents - The vice presidents in the order designated by
the board of directors, shall exercise the functions of the president during the
absence or disability of the
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president and shall perform such other duties as may be assigned by the chairman
of the board, the chief executive officer, the president or the board of
directors.
(e) Treasurer - The treasurer shall (i) have general supervision over
the funds of the Corporation and the investment or deposit thereof, (ii) advise
the officers and, if requested, the board of directors regarding the financial
condition of the Corporation and (iii) perform such other duties as may be
assigned by the chairman of the board, the chief executive officer or the board
of directors.
(f) Controller - The controller shall (i) be the chief accounting
officer of the Corporation with general supervision over the accounting books
and records of the Corporation, (ii) be responsible for maintaining proper
internal controls over the assets of the Corporation and preparing accurate
financial statements and (iii) perform such other duties as may be assigned by
the chairman of the board, the chief executive officer, the president, an
officer designated by the board of directors as chief financial officer of the
Corporation or the board of directors.
(g) Secretary - The secretary shall (i) attend the meetings of the
shareholders, the board of directors and committees of the board of directors
and prepare minutes of all such meetings in a book to be kept for that purpose,
(ii) give, or cause to be given, such notice as may be required of all meetings
of the shareholders, board of directors and committees of the board of
directors, (iii) authenticate records of the Corporation and (iv) perform such
other duties as may be assigned by the chairman of the board, the chief
executive officer, or the board of directors.
ARTICLE VII
LIMITATIONS ON LIABILITY
To the maximum extent permitted by the Act, a director of the
Corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director. If the Act or any
successor statue is amended after adoption of this provision to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Act, as so amended
from time to time, or such successor statute. Any repeal or modification of this
Article VII by the shareholders of the Corporation shall not affect adversely
any right or protection of a director of the Corporation existing at the time of
such repeal or modification or with respect to events occurring prior to such
time.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify every person who is or was a party or
is or was threatened to be made a party to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the fact
that he or she is or was a director or officer or is or was serving at the
request of the Corporation as a director, officer, employee, agent, or trustee
of another corporation or of a partnership, joint venture, trust, employee
benefit plan, or other enterprise, including service on a committee formed for
any purpose (and, in each case, his or her heirs, executors, and
administrators), against all expense,
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liability, and loss (including counsel fees, judgments, fines, ERISA, excise
taxes, penalties, and amounts paid in settlement) actually and reasonably
incurred or suffered in connection with such action, suit, or proceeding, to the
fullest extent permitted by applicable law, as in effect on the date hereof and
as hereafter amended. Such indemnification may include advancement of expenses
in advance of final disposition of such action, suit, or proceeding, subject to
the provision of any applicable statute.
The indemnification and advancement of expenses provisions of this
Article VIII shall not be exclusive of any other right that any person (and his
or her heirs, executors, and administrators) may have or hereafter acquire under
any statute, the Charter, these Bylaws, resolution adopted by the shareholders,
resolution adopted by the Board of Directors, agreement, or insurance, purchased
by the Corporation or otherwise, both as to action in his or her official
capacity and as to action in another capacity. The Corporation is hereby
authorized to provide for indemnification and advancement of expenses through
the Charter, resolution of shareholders, resolution of the Board of Directors,
or agreement, in addition to that provided by these Bylaws.
ARTICLE IX
CORPORATE SEAL
The Corporation may have a corporate seal, but the use of or failure to
use any such seal shall not have any legal effect on any action taken or
instrument executed by or on behalf of the Corporation. The seal may be used by
impressing or affixing it to an instrument or by causing a facsimile thereof to
be printed or otherwise reproduced thereon.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall begin the first day of January
each year.
ARTICLE XI
EMERGENCY BYLAW
In the event that a quorum of directors cannot be readily assembled
because of a catastrophic event, the board of directors may take action by the
affirmative vote of a majority of those directors present at a meeting and may
exercise any emergency power granted to a board of directors under the act not
inconsistent with this bylaw. If less than three regularly elected directors are
present, the director present having the greatest seniority as a director may
appoint one or more persons (not to exceed the number most recently fixed by the
board pursuant to Section 1 of Article IV) from among the officers or other
executive employees of the Corporation to serve as substitute directors. If no
regularly elected director is present, the officer present having the greatest
seniority as an officer shall serve as a substitute director, shall appoint up
to four additional persons from among the officers or other executive employees
of the Corporation to serve as substitute directors. Special meetings of the
board of directors may be called in an emergency by the director or, if no
director is present at the Corporation's principal offices, by the officer
present having the greatest seniority as an officer
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ARTICLE XII
AMENDMENT
These Bylaws may be altered, amended or repealed and new Bylaws adopted
by the affirmative vote of the holders of a majority of the outstanding voting
power of the Corporation at any regular meeting of the shareholders or special
meeting called for the purpose, or by the affirmative vote of a majority of the
entire Board of Directors at any regular or special meeting of the Board;
provided, however, that the proposal may not be voted upon by shareholders
unless notice of the proposed amendment was given at least ten (10) days prior
to the meeting at which the vote is to be taken. Any amendment, modification,
repeal or addition to these Bylaws adopted by the Board of Directors may be
amended or repealed by the shareholders.
Notwithstanding any other provision of these Bylaws, the affirmative
vote of holders of at least 75% of the voting power of the shares entitled to
vote at any election of directors shall be required to amend, alter, change or
repeal, or to adopt any part of the Bylaws inconsistent with the purpose and
intent of Sections 1, 4 and 6 of Article IV and this Article XII.
ARTICLE XIII
DEFINITION
The term "Act" as used in these bylaws refers to the Tennessee Business
Corporation Act, as amended from time to time. Terms defined in the Act shall
have the same meanings when used in these bylaws.
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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of this 25th day of January, 2000 and is by and among G-Link
Corporation, a Tennessee corporation (the "Company"), and the individuals and
entities listed on Exhibit A who or which are signatories hereto (individually,
a "Shareholder," and collectively, the "Shareholders").
WHEREAS, the Company desires to grant registration rights to certain
Shareholders in connection with various transactions.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Registration Rights.
1.1 Certain Definitions. As used in this Section 1 and elsewhere
in this Agreement, the terms set forth below shall have the following respective
meanings:
"Commission" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means the shares of Common Stock, no par value per
share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Registration Statement" means a registration statement filed by
the Company with the Commission for a public offering and sale of securities of
the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose (not including any
issuance of securities of the Company for cash consideration), or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"Registration Expenses" means the expenses described in
Section 1.6.
"Registrable Shares" means (i) certain shares of Common Stock
issued in connection with mergers or other business combinations; (ii) the
shares of Common Stock issued or issuable upon conversion of the Series A
Preferred Stock; (iii) any shares of Common Stock acquired by any of the
Shareholders pursuant to the Shareholders' respective rights of first refusal as
set forth in any related acquisition or purchase agreement and any shares of
Common Stock issuable upon the conversion or exercise of capital stock or other
securities of the Company acquired by any of the Shareholders pursuant to such
rights of first refusal; and (iv) any other shares of Common Stock of
<PAGE> 2
the Company issued in respect of such shares described in clauses (i), (ii) and
(iii) of this definition (because of stock splits, stock dividends,
reclassification, recapitalization, or similar events); provided, however, that
shares of Common Stock that are Registrable Shares shall cease to be Registrable
Shares (y) upon any sale pursuant to a Registration Statement or Rule 144 under
the Securities Act or (z) upon any sale in any manner to a person or entity
that, by virtue of Section 3, is not entitled to the rights provided by this
Section 1. Wherever reference is made in this Agreement to a request or consent
of holders of a certain percentage of Registrable Shares, the determination of
such percentage shall include shares of Common Stock issuable upon conversion of
the Registrable Shares even if such conversion has not yet been effected.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Series A Preferred Stock" means the shares of Series A
Convertible Preferred Stock, no par value per share, of the Company.
"Shareholders" means the Shareholders and any persons or entities
to whom the rights granted under this Section 1 are transferred by any
Shareholders, or their successors or assigns, pursuant to Section 3.
1.2 Sale or Transfer of Registrable Shares; Legend.
(a) The Registrable Shares and shares issued in respect
of the Registrable Shares shall not be sold or transferred unless either (i)
they first shall have been registered under the Securities Act or (ii) the
Company first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or transfer
is exempt from the registration requirements of the Securities Act.
(b) Each certificate representing the Registrable Shares
and shares issued in respect of the Registrable Shares shall bear a legend
substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED,
OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED.
The foregoing legend shall be removed from the certificates
representing any Registrable Shares, at the request of the holder thereof, at
such time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act. No representation contained elsewhere herein or in any document
executed in connection with the transactions contemplated hereby shall be
construed to preclude the Shareholders from effecting at any time a resale of
any of the
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Registrable Shares (or the underlying Common Stock upon conversion) pursuant to
the provisions of Rule 144A.
1.3 Required Registration.
(a) At any time after one year following the closing of
the Company's first underwritten public offering of shares of Common Stock
pursuant to a Registration Statement, a Shareholder or Shareholders holding in
the aggregate at least fifty-one percent (51%) of the then outstanding
Registrable Shares may request, in writing, that the Company effect the
registration on Form S-1, Form S-2, or Form S-3, as applicable, (or any
successor form) of Registrable Shares owned by such Shareholder or Shareholders,
provided that such registration is expected to yield not less than $7,500,000 in
gross proceeds in the case of a registration on Form S-1 or S-2, or $2,000,000
in gross proceeds in the case of a registration on Form S-3. Upon receipt of any
request for registration pursuant to this Section 1.3(a), the Company shall
promptly give written notice of such proposed registration to all Shareholders.
Such Shareholders shall have the right, by giving written notice to the Company
within 20 days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Shares as such Shareholders may
request in such notice of election; provided, however, that if the underwriter
(if any) managing the offering determines in good faith that, because of
marketing factors, all of the Registrable Shares requested to be registered by
all Shareholders may not be included in the offering, then all Shareholders
shall participate in the offering pro rata based upon the number of Registrable
Shares that they have requested to be so registered. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration, on Form S-1, Form S-2, or Form S-3, as applicable, (or any
successor form) of all Registrable Shares that the Company has been requested to
so register.
(b) Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.3:
(i) during the period starting with the date 60 days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date 180 days after the effective date of, a Company-initiated registration
(but in any event no greater than 360 days after a request is made under this
Section 1.3); provided that the Company is actively employing in good faith all
reasonable efforts to cause such Registration Statement to become effective;
(ii) if in the case of a Registration Statement on
Form S-1 or S-2 the requesting holders do not request that such offering be
firmly underwritten by underwriters selected by the requesting holders (subject
to the consent of the Company, which consent will not be unreasonably withheld);
(iii) if the Company and the requesting holders are
unable to obtain the commitment of the underwriter described in clause (ii)
above to firmly underwrite the offering; or
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<PAGE> 4
(iv) if in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, in which case the Company shall furnish to such holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company for such registration statement to be filed in the near future and
that it is, therefore, essential to defer the filing of such registration
statement, then the Company shall have the right to defer such filing for a
period of not more than 180 days after receipt of the request of the requesting
holders, and, provided further, that the Company shall not defer its obligation
in this manner more than once in any twelve-month period.
(c) The Company shall be obligated to register
Registrable Shares pursuant to this Section 1.3 on one occasion only.
1.4 Incidental Registration.
(a) Whenever the Company proposes to file a Registration
Statement (excluding any Registration Statement to be filed pursuant to Section
1.3) at any time within three years following the closing of the Company's first
underwritten offering of shares of Common Stock pursuant to a Registration
Statement, it will, prior to such filing, give written notice to all
Shareholders of its intention to do so and, upon the written request of a
Shareholder or Shareholders given within 15 days after the Company provides such
notice (which request shall state the intended method of disposition of such
Registrable Shares), the Company shall use its best efforts to cause all
Registrable Shares that the Company has been requested by such Shareholder or
Shareholders to register to be registered under the Securities Act to the extent
necessary to permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of such Shareholder or
Shareholders; provided, however, that the Company shall have the right to
postpone or withdraw any registration effected pursuant to this Section 1.4
without obligation to any Shareholder.
(b) In connection with any offering by the Company under
this Section 1.4 involving an underwriting, the Company shall not be required to
include any Registrable Shares in such offering unless the holders thereof
accept the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company, and then only in such quantity as will
not, in the good faith opinion of the underwriters, jeopardize the success of
the offering by the Company. If in the opinion of the managing underwriter the
registration of all, or part of, the Registrable Shares that the holders have
requested to be included would adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, that the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than the
total number of shares that the holders of Registrable Shares have requested to
be included, then the holders of Registrable Shares who have requested
registration
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<PAGE> 5
shall participate in the underwriting pro rata based upon their respective total
ownership of shares of Common Stock of the Company (giving effect to the
conversion into Common Stock of all securities convertible thereunto). If any
holder would thus be entitled to include more shares than such holder requested
to be registered, the excess shall be allocated among other requesting holders
pro rata based upon their total ownership of Registrable Shares, together as one
group.
1.5 Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) file with the Commission a Registration Statement
with respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(b) as expeditiously as reasonable, prepare and file with
the Commission any amendments and supplements to the Registration Statement and
the prospectus included in the Registration Statement as may be necessary to
keep the Registration Statement effective, in the case of a firm commitment
underwritten public offering, until each underwriter has completed the
distribution of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares covered
thereby or 45 days after the effective date thereof;
(c) as expeditiously as reasonable, furnish to each
selling Shareholder such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as the selling Shareholder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares owned by the selling Shareholder; and
(d) as expeditiously as reasonable, use its best efforts
to register or qualify the Registrable Shares covered by the Registration
Statement under the securities or Blue Sky laws of such states as the selling
Shareholders shall reasonably request, and do any and all other acts and things
that may be necessary or desirable to enable the selling Shareholders to
consummate the public sale or other disposition in such states of the
Registrable Shares owned by the selling Shareholders; provided, however, that
the Company shall not (i) be required in connection with this Section 1.5(d) to
qualify as a foreign corporation or execute a general consent to service of
process in any jurisdiction or (ii) take such action that in the good faith
opinion of the underwriters would jeopardize the success of the offering by the
Company and the selling Shareholders.
If the Company has delivered preliminary or final prospectuses to
the selling Shareholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Shareholders and, if requested, the selling Shareholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Shareholders with
5
<PAGE> 6
revised prospectuses and, following receipt of the revised prospectuses, the
selling Shareholders shall be free to resume making offers of the Registrable
Shares.
1.6 Allocation of Expenses. The Company will pay all Registration
Expenses of all registrations under this Agreement; provided, however, that if a
registration under Section 1.3 is withdrawn at the request of the Shareholders
requesting such registration (other than as a result of information concerning
the business or financial condition or prospects of the Company that is made
known to the Shareholders after the date on which such registration was
requested) and if the requesting Shareholders elect not to have such
registration counted as a registration requested under Section 1.3, the
requesting Shareholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares included in
such registration. For purposes of this Agreement, the term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with this
Section 1, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees, and expenses of counsel for the
Company, state Blue Sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but excluding underwriting
discounts, selling commissions, and the fees and expenses of selling
Shareholders' counsel.
1.7 Indemnification and Contribution. In the event of any
registration of any of the Registrable Shares under the Securities Act pursuant
to this Agreement, the Company will indemnify and hold harmless each seller of
such Registrable Shares, each underwriter of such Registrable Shares, and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act or the Exchange Act against any losses, claims, damages,
or liabilities, joint or several, to which such seller, underwriter, or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus, or final
prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter, and each such controlling
person for any legal or any other expenses reasonably incurred by such seller,
underwriter, or controlling person in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
Company will not be liable to any Indemnified Party (as hereinafter defined) in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus, or final prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of Indemnified Party
specifically for use in the preparation thereof.
6
<PAGE> 7
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company
and each other Shareholder, each of its directors and officers, and each
underwriter (if any) and each person, if any, who controls the Company or any
such underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities, joint or several, to which
the Company, such directors and officers, underwriter, or controlling person may
become subject under the Securities Act, Exchange Act, state securities or Blue
Sky laws, 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 a material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if, and only to the extent, the statement or
omission was made in reliance upon and in conformity with information relating
to such seller furnished in writing to the Company by or on behalf of such
seller specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment, or supplement; and will reimburse
the Company, such directors and officers, such underwriter, and each such
controlling person for any legal or any other expenses reasonably incurred by
such parties in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the obligations of each
selling Shareholder hereunder shall be limited to an amount equal to the net
proceeds to such Shareholders from the Registrable Shares sold in connection
with such registration.
Each party entitled to indemnification under this Section 1.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld or delayed); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1. After the
Indemnifying Party has assumed such defense, the Indemnified Party may
participate in such defense at the Indemnified Party's expense; provided,
however, that the Indemnifying Party shall pay such expense if representation of
such Indemnified Party by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any
7
<PAGE> 8
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party.
In order to provide for just and equitable contribution to joint
liability under the Securities Act or otherwise, in any case in which either (i)
any holder of Registrable Shares exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 1.7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 1.7 provides for indemnification in such case, or (ii) contribution
may be required on the part of any such selling Shareholder or any such
controlling person in circumstances for which indemnification is provided under
this Section 1.7; then, in each such case, the Company and such Shareholder will
contribute to the aggregate losses, claims, damages, or liabilities to which
they may be subject (after contribution from others) in such proportions so that
such holder is responsible for the portion represented by the percentage that
the public offering price of its Registrable Shares offered by the Registration
Statement bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the net proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement and (B) no
person or entity guilty of fraudulent misrepresentation, within the meaning of
Section 11(f) of the Securities Act, shall be entitled to contribution from any
person or entity who is not guilty of such fraudulent misrepresentation.
1.8 Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration Statement in
an underwritten offering pursuant to Section 1.3(a), the Company agrees to enter
into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants and agreements to be
performed by such issuer, including, without limitation, customary provisions
with respect to indemnification by the Company of the underwriters of such
offering.
1.9 Information by Holder. Each holder of Registrable Shares
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification, or compliance referred to in this Section 1.
2. Successors and Assigns. Except as provided in Section 3, the
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the respective successors, assigns, heirs, executors, and administrators of the
parties hereto.
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<PAGE> 9
3. Transfers of Certain Rights.
3.1 Permissible Transfers. Subject to the provisions of Section
3.2, the rights granted to a Shareholder under Section 1 may be transferred by
such Shareholder to another Shareholder, to any affiliate of the Company, or to
any person or entity; provided, however, that the registration rights conferred
herein shall only inure to the benefit of a transferee of Registrable Shares if
the Company is given written notice by the transferee at the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which such rights are being assigned; provided,
further, that no rights granted hereunder shall be transferable unless in
connection with the transfer of the Registrable Shares to which such rights
relate.
3.2 Transferees. Any transferee (other than a Shareholder) to
whom rights under Section 1 are transferred shall, as a condition to such
transfer, deliver to the Company a written instrument by which such transferee
agrees to be bound by the obligations imposed upon Shareholders under this
Agreement, to the same extent as if such transferee were a Shareholder
hereunder.
3.3 Subsequent Transferees. A transferee to whom rights are
transferred pursuant to this Section 3 may not again transfer such rights to any
other person or entity, other than as provided in Sections 3.1 or 3.2 above.
3.4 Partners and Shareholders. Notwithstanding anything to the
contrary herein, any Shareholder that is a partnership or corporation may
transfer rights granted to such Shareholder under Section 1 to any partner or
shareholder thereof to whom Registrable Shares are transferred pursuant to
Section 1.2 and who delivers to the Company an opinion of counsel as to the
transfer of such securities under applicable state and federal securities laws
(as described in Section 1.2(a)) and a written instrument in accordance with
Section 1.2(b). In the event of such transfer, such partner or shareholder shall
be deemed a Shareholder for purposes of this Section 3 and may again transfer
such rights to any other person or entity that acquires Registrable Shares from
such partner or shareholder, in accordance with, and subject to, the provisions
of Sections 3.1, 3.2, or 3.3.
4. Additional Investors. The parties hereto acknowledge that (a)
other parties may purchase shares of Common Stock or Series A Preferred Stock
after the date hereof and (b) such parties may, with the issuance or transfer of
shares of Common Stock or Series A Preferred Stock to them, be granted the
rights and benefits under this Agreement and execute a counterpart of this
Agreement. Upon execution of such a counterpart of this Agreement, (i) such new
shareholder of the Company shall be deemed to be a Shareholder under this
Agreement and shall be entitled to all of the rights and benefits afforded
thereto hereunder; and (ii) Exhibit A shall be amended to reflect the purchase
of shares of Common Stock or Series A Preferred Stock by such party and shall be
distributed to each of the Shareholders of the Company.
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<PAGE> 10
5. Miscellaneous.
5.1 Survival of Agreements. All agreements contained herein shall
survive the execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
5.2 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid to the following address or, in any case, at such
other address or addresses as may have been furnished in writing by such party
to the others:
To the Company: 3841 Green Hills Village Drive
Suite 400
Nashville, TN 37215
Attention: President
with a copy to: Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attention: F. Mitchell Walker, Jr.
To a Shareholder: At her, his or its address set forth
on Exhibit A.
5.3 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of at least fifty-one percent (51%) of
the outstanding Registrable Shares only in a manner that affects all Registrable
Shares in the same fashion. Any amendment or waiver effected in accordance with
this Section 5.3 shall be binding upon each holder of any Registrable Shares
(including shares of Common Stock into which such Registrable Shares have been
converted), each future holder of all such securities, and the Company. No
waivers of or exceptions to any term, condition, or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition, or provision.
5.4 Limitations on Sales. If requested in writing by the
underwriters for the initial underwritten public offering of securities of the
Company, each holder of Registrable Shares who is a party to this Agreement
shall agree not to sell publicly any Registrable Shares or any other shares of
Common Stock, without the consent of such underwriters, for a period of not more
than 180 days following the effective date of the Registration Statement
relating to such offering.
5.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 11
5.6 Sections and Exhibits. The headings of sections in this
Agreement are provided for convenience only and will not affect the Agreement's
construction or interpretation. Unless otherwise indicated, all references to
"Section," "Sections," or "Exhibit" refer to the corresponding section,
sections, or exhibit, respectively, of this Agreement.
5.7 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
5.8 Governing Law and Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee applicable
to contracts made and to be performed wholly within such state without regard to
its conflict of laws rules.
5.9 Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
[Remainder of page left intentionally blank; signature pages follow]
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<PAGE> 12
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
G-LINK CORPORATION
By: /s/ Richardson Roberts
--------------------------------------
Richardson Roberts
/s/ T. Richard Butera
------------------------------
T. Richard Butera
/s/ C. Michael Armstrong /s/ William Grabe
- -------------------------------- ------------------------------
C. Michael Armstrong William Grabe
/s/ Michael C. McChesney /s/ Francis Leahy
- ----------------------------- ------------------------------
Michael C. McChesney Francis Leahy
/s/ Walter Buckley /s/ Kenneth Fox
- ----------------------------- ------------------------------
Walter Buckley Kenneth Fox
/s/ Andy Hecht /s/ Arthur Becker
- ----------------------------- ------------------------------
Andy Hecht Arthur Becker
/s/ Ed Bradley /s/ Patricia Raynes
- ----------------------------- ------------------------------
Ed Bradley Patricia Raynes
/s/ John C. Butera /s/ Kenneth Butera
- ----------------------------- ------------------------------
John C. Butera Kenneth Butera
/s/ Raymond L. Butera /s/ Robert Butera
- ----------------------------- ------------------------------
Raymond L. Butera Robert Butera
/s/ Doug Carlson /s/ Reginald Jackson
- ----------------------------- ------------------------------
Doug Carlson Reginald Jackson
/s/ Philip D. Topper, Jr. /s/ T. Richard Butera
- ----------------------------- ------------------------------
Philip D. Topper, Jr. as Custodian T. Richard Butera as Custodian and
and Investment Representative for Investment Representative for
James Matan Christina Butera
12
<PAGE> 13
/s/ T. Richard Butera /s/ T. Richard Butera
- ----------------------------- ------------------------------
T. Richard Butera as Custodian T. Richard Butera as Custodian and
and Investment Representative for Investment Representative for
Caroline Murphy Barbara Ferriter
/s/ T. Richard Butera /s/ T. Richard Butera
- ----------------------------- ------------------------------
T. Richard Butera as Custodian T. Richard Butera as Custodian and
and Investment Representative for Investment Representative for
Matthew Ferguson Stanley Snyder
/s/ Harold Whitcomb
- -----------------------------
Harold Whitcomb
13
<PAGE> 14
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
The undersigned, Cyber Lab Ventures, Inc., a Delaware corporation
formerly known as DigitalData, Inc. ("Cyber Lab"), and Ashish Bahl, holders of
5,212,750 shares and 161,219 shares, respectively, of the common stock of G-Link
Corporation, Inc., a Tennessee corporation ("Parent"), acquired pursuant to that
certain Stock Purchase Agreement, dated January 26, 2000, among Parent, Cyber
Lab, Link2Gov.com, Inc., and certain other stockholders of Link2Gov.com, Inc.,
agree to become a party to, and hereby agree to be bound by the terms and
conditions of, this Registration Rights Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
January 26, 2000.
CYBER LAB VENTURES, INC.
/s/ J. Edward Houston
--------------------------------
By: J. Edward Houston
----------------------------
Its: President
---------------------------
/s/ Ashish Bahl
--------------------------------
ASHISH BAHL
AGREED TO AND ACCEPTED BY:
G-LINK CORPORATION
/s/ Richardson M. Roberts
- ---------------------------------
BY: Richardson M. Roberts
-----------------------------
TITLE: Chief Executive Officer
--------------------------
<PAGE> 15
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
The undersigned, Kelso Equity Partners V, L.P. and Kelso Investment
Associates V, L.P. (together, "Kelso"), holders of 12,273 shares and 218,660
shares, respectively, of the common stock of G-Link Corporation, Inc., a
Tennessee corporation ("Parent"), acquired pursuant to that certain Stock
Purchase Agreement, dated January 26, 2000, among Parent, Cyber Lab Ventures,
Inc., a Delaware corporation formerly known as DigitalData, Inc., Link2Gov.com,
Inc., a Delaware corporation, and certain other stockholders of Link2Gov.com,
Inc., agree to become a party to, and hereby agree to be bound by the terms and
conditions of, this Registration Rights Agreement for a holding period of one
year from the date hereof, in accordance with Rule 144 under the Securities Act.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
January 26, 2000.
KELSO EQUITY PARTNERS V, L.P.
/s/ Frank K. Bynum, Jr.
-----------------------------------
By: Frank K. Bynum, Jr.
-------------------------------
Its: Managing Director
------------------------------
AGREED TO AND ACCEPTED BY: KELSO INVESTMENT
ASSOCIATES V, L.P.
G-LINK CORPORATION
/s/ Richardson M. Roberts /s/ Frank K. Bynum, Jr.
- ----------------------------------- -----------------------------------
BY: Richardson M. Roberts By: Frank K. Bynum, Jr.
------------------------------- -------------------------------
TITLE: Chief Executive Officer Its: Managing Director
---------------------------- ------------------------------
<PAGE> 16
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
The undersigned, being a holder of common stock, no par value per share
of G-Link Corporation, Inc., a Tennessee corporation (the "Corporation"), hereby
agrees to become a party to, and to be bound by the terms and conditions of,
that certain Registration Rights Agreement dated as of January 25, 2000, (the
"Agreement") by and among the Corporation and certain other stockholders of the
Corporation, for a holding period of one year from the date hereof, in
accordance with Rule 144 under the Securities Act. A copy of the Agreement is
attached hereto as Exhibit "A".
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
February ___, 2000.
CB CAPITAL INVESTORS, L.P.
________________________________
BY: ___________________________
TITLE: ________________________
U. Bertram Ellis, Jr.
________________________________
General Electric Capital Corporation
________________________________
BY: ___________________________
TITLE: ________________________
Thomson U.S., Inc.
________________________________
BY: ___________________________
TITLE: ________________________
Flatiron Partners, LLC
________________________________
BY: ___________________________
TITLE: ________________________
<PAGE> 17
Mellon Ventures II, L.P.
________________________________
BY: ___________________________
TITLE: ________________________
Louis and Patricia Kelso Trust
________________________________
BY: ___________________________
TITLE: ________________________
Greylock IX Limited Partnership
________________________________
BY: ___________________________
TITLE: ________________________
AGREED TO AND ACCEPTED BY:
G-LINK CORPORATION
__________________________
By:_______________________
Title:____________________
<PAGE> 1
EXHIBIT 4.3
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of September
16, 1999, is by and among G-Link Corporation, a Tennessee corporation (the
"Company"), and each of the holders of Capital Stock as of the date hereof and
as set forth on Exhibit A (individually, a "Shareholder," and collectively, the
"Shareholders"), and each of the individuals whose names and addresses appear
from time to time on Exhibit A.
W I T N E S S E T H:
WHEREAS, the Company has an authorized capitalization consisting of (i)
50,000,000 shares of common stock, no par value per share (the "Common Stock"),
and (ii) 5,000,000 shares of preferred stock, no par value per share (the
"Preferred Stock").
WHEREAS, the record and beneficial ownership of the issued and
outstanding shares of the Capital Stock held by the Shareholders are set forth
on Exhibit A, (such shares of capital stock listed on Exhibit A are hereinafter
collectively referred to as the "Existing Stock"); and
WHEREAS, the Company and the Shareholders desire to provide for
continuity and harmony in the management of the Company and to restrict the sale
and other disposition of Existing Stock now held by any of the Shareholders and
any shares of capital stock of the Company hereafter issued to or otherwise
acquired by the Shareholders (the Existing Stock, together with such
subsequently issued or acquired capital stock, including any securities
convertible into or exchangeable or exercisable for, directly or indirectly, any
capital stock, whether or not currently convertible, exchangeable, or
exercisable, being hereinafter referred to collectively as the "Capital Stock")
and to create other rights and duties inter se.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, each of the parties
covenants and agrees as follows:
ARTICLE I
STOCK CERTIFICATES
Section 1.1 Stock Certificates. The Shareholders agree that the stock
certificate or certificates from time to time representing the respective shares
of Capital Stock shall be registered in the individual name of the Shareholders
and shall bear, in addition to any other legend required to be placed thereon, a
conspicuous legend to the effect that the shares of Capital Stock represented
thereby are subject to legal restrictions against transfer and are held under
and subject to the terms and provisions of this Agreement. Upon execution and
delivery of this Agreement, the Shareholders agree to return to the Secretary of
the Company any stock certificate or certificates previously delivered to it so
that such legend shall be placed thereon.
-1-
<PAGE> 2
ARTICLE II
TRANSFER RIGHTS AND RESTRICTIONS
Section 2.1 General Restriction. Notwithstanding anything to the
contrary herein, including, without limitation, Section 2.2, none of the
Shareholders may sell, exchange, give, devise, or otherwise dispose of
("Transfer"), either voluntarily or involuntarily or by operation of law
(including any Transfer pursuant to equitable distribution proceedings or
pursuant to a divorce decree) any of the Capital Stock, or any rights or
interest appertaining thereto, whether now owned or hereafter acquired, except
as permitted by this Agreement.
Notwithstanding the preceding sentence, the Shareholders may pledge or
encumber Capital Stock, or any rights or interest appertaining thereto, whether
now owned or hereafter acquired and such transaction shall not constitute a
Transfer; provided, however, that such transaction shall be deemed a Transfer in
the event of a foreclosure by a third party of a security interest in any
Capital Stock, and in such event the Eligible Offeree Shareholders (as
hereinafter defined) and the Company shall have the rights of first refusal as
set forth in Section 2.2(a), subject to the same notice, purchase, and time
provisions provided therein; provided, further, that any pledgee shall
acknowledge and agree prior to any such pledge or encumbrance that any Capital
Stock so pledged or encumbered by a Shareholder is subject to the provisions of
this Agreement. If the Eligible Offeree Shareholders and the Company elect not
to purchase the Capital Stock in the event of a Transfer pursuant to a
foreclosure by a third party of a security interest, the Capital Stock may
thereafter be sold or transferred to a third party consistent with the
foreclosure proceeding.
Section 2.2 Voluntary Transfer. A Shareholder may voluntarily Transfer
Capital Stock under and as permitted by this Section 2.2, but not otherwise.
(a) First Offer Rights. If a Shareholder shall desire to Transfer any
Capital Stock held by him, such Shareholder (the "Selling Shareholder") shall
first offer such Capital Stock (the "Offered Stock") to the Company and then to
the Eligible Offeree Shareholders (as hereinafter defined) in accordance with
the provisions hereof.
(b) Notice. The Selling Shareholder shall give written notice to each
of the Company and the Eligible Offeree Shareholders (defined herein) setting
forth (y) the terms and conditions (the "Offer Terms") upon which the Selling
Shareholder proposes to Transfer Capital Stock (the "Offered Stock") and (z) the
name of the proposed transferee. The term "Eligible Offeree Shareholder" shall
mean any Shareholder other than the Selling Shareholder. As used herein, the
term "Common Stock Equivalent Shares" held by any person shall be all shares of
the Company's Common Stock held by such person and all shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable security
held by such person or issuable upon exercise of any option, warrant, or other
right held by such person, in each case whether or not such security, option,
warrant, or right is by its terms then convertible, exchangeable, or
exercisable.
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<PAGE> 3
(c) Option to Company. The Company shall have the exclusive right
during the period of twenty (20) days following receipt of such notice to elect
to purchase any or all of the Offered Stock proposed to be sold in accordance
with the Offer Terms and Section 2.2(f); provided, however, that, as set forth
in Section 2.2(e), an election by the Company to purchase less than all of the
Offered Stock shall not be effective unless the option in Section 2.2(d) is
exercised as to all of the Offered Stock not elected to be purchased by the
Company under this Section 2.2(c).
(d) Option to the Eligible Offeree Shareholders. If the Company does
not exercise its right to purchase all of the Offered Stock proposed to be sold,
the Eligible Offeree Shareholders shall have the exclusive right during the
period of ten (10) days next following the twenty (20) day period provided for
in Section 2.2(c) to elect to purchase all (but not less than all) of the
Offered Stock proposed to be sold and not purchased by the Company pursuant to
Section 2.2(c) in accordance with the Offer Terms and Section 2.2(f). In the
event that more than one Eligible Offeree Shareholder wishes to purchase the
Offered Stock to be sold, the right to purchase shall be allocated among such
Eligible Offeree Shareholders in proportion to their ownership of Common Stock
Equivalent Shares.
(e) Non-Exercise. If there shall be any default in making payment in
full for all of the Offered Stock to be sold as aforesaid, in accordance with
the applicable requirements of this Section 2.2, then no Eligible Offeree
Shareholder nor the Company may purchase any of the Offered Stock and the
Selling Shareholder may (subject to the co-sale rights of the other Shareholders
in Section 2.3, if any) sell the shares of Offered Stock so offered hereunder to
any person on terms no more favorable to such person than the Offer Terms.
However, if the Selling Shareholder does not effect such sale within 90 days
after the termination (by passage of time or default) of the first refusal
rights created under Sections 2.2(a) through (d), the Selling Shareholder may
not thereafter transfer any such shares without again complying with the
provisions of this Section 2.2.
(f) Closing. All purchase transactions between and among the parties
hereto (or their assignees) pursuant to this Section 2.2 shall be consummated at
a closing to be held not later than five (5) days after the expiration of the
ten (10) day option period provided for in Section 2.2(d). At the closing, the
purchaser shall deliver to the seller the consideration (cash or other, as
agreed to by the parties to the Transfer) against delivery of the appropriate
stock certificate(s) (or voting trust certificate(s)) duly endorsed for
transfer.
(g) Exempted Transfers. The provisions of this Section 2.2 shall not
apply to the transfer or retransfer of, and the Shareholders may transfer or
retransfer, any Capital Stock held by such Shareholder to or for the benefit of
(i) any spouse, parent, child, brother, sister, grandchild, or lineal descendant
(including adopted children and stepchildren) of such holder (including, without
limitation, trustee(s) of a trust for the benefit of the Shareholder or any of
the foregoing); (ii) any trustee of a voting trust for purposes of transferring
shares into such voting trust; or (iii) any legal representative, devisee, or
heir of a Shareholder upon his or her death, provided all such transferees shall
take such Offered Stock subject to all the restrictions, terms,
-3-
<PAGE> 4
and conditions of this Agreement and shall execute and deliver to the Secretary
of the Company a written statement confirming the same prior to acquiring such
shares and there shall be no further transfer of such shares except in
accordance with this Agreement.
Section 2.3 Right of Co-Sale.
(a) No Selling Shareholder shall enter into any transaction that would
result in the sale or contract for sale by him of any Capital Stock now or
hereafter owned by him (including, without limitation, any sale to another
Shareholder or a third party pursuant to the terms of Section 2.2, but not
including a sale of shares to the Company pursuant to the first offer rights
contained in Section 2.2 or a transfer exempt from Section 2.2 under Section
2.2(g)) unless prior to such sale or contract or option for sale and
simultaneously with the giving of notice required by Section 2.2(b) the Selling
Shareholder shall give notice to each Eligible Offeree Shareholder of his
intention to effect such sale or contract or option for sale in order that the
Eligible Offeree Shareholders may exercise their rights under this Section 2.3
as hereinafter described. Such notice shall set forth (i) the number of shares
to be sold, contracted to be sold, or optioned by the Selling Shareholder; (ii)
the principal terms of the sale, including the price at which the shares are
intended to be sold; (iii) the percentage such number of shares constitutes with
respect to the aggregate number of Common Stock Equivalent Shares then held by
the Selling Shareholder (the "Sale Portion"); and (iv) an offer by the Selling
Shareholder to cause to be included with the shares to be sold by him in the
sale, on the same terms and conditions, that number of Common Stock Equivalent
Shares then held by each Eligible Offeree Shareholder, which number shall be
equal to (x) the Sale Portion of the Common Stock Equivalent Shares then held by
the Eligible Offeree Shareholder, (y) at the option of the Eligible Offeree
Shareholder, a lesser number of shares, or (z) such number of shares as
determined in Section 2.3(c).
(b) Subject to the provisions of Section 2.2, with respect to each
Eligible Offeree Shareholder who shall not have accepted such co-sale offer in
writing within the ten (10) days next following the twenty (20) day period
provided for in Section 2.2(c), the Selling Shareholder shall thereafter be free
for a period of ninety (90) days to sell up to the number of shares specified in
such notice, at a price not other than the price set forth in such notice and on
otherwise no more favorable terms to the Selling Shareholder than as set forth
in such notice, without any further obligation to such other Shareholder in
connection with such sale under this Section 2.3. In the event that the Selling
Shareholder fails to consummate such sale within such 90-day period, the shares
specified in such notice shall continue to be subject to this Agreement. If any
Eligible Offeree Shareholder does not timely deliver notice of his or its
acceptance within such thirty (30) day period, he or it shall be deemed to have
irrevocably waived such right of co-sale under this Section 2.3 with respect to
the foregoing 90-day period only to the extent of the shares subject to such
notice.
(c) Subject to the provisions of Section 2.2, with respect to each
Eligible Offeree who shall have accepted such co-sale offer in writing within
such twenty (20) business day period set forth in Section 2.2(c) (a
"Participating Shareholder"), such acceptance by such Participating Shareholder
shall be irrevocable unless the Selling Shareholder shall be unable to
-4-
<PAGE> 5
cause to be included in his sale the number of shares set forth in such
Participating Shareholder's written acceptance, in which case the Selling
Shareholder and all of the Participating Shareholders shall participate in the
sale pro rata, with the Selling Shareholder and each Participating Shareholder
selling the number of shares to be sold in the sale as shall equal the product
obtained by multiplying (x) the total number of such shares to be sold in the
sale by (y) a fraction, the numerator of which shall be the number of shares
desired to be included in the sale by the Selling Shareholder or by such
Participating Shareholder, as the case may be, and the denominator of which
shall be the total number of shares desired to be sold in the sale by the
Selling Shareholder and all of the Participating Shareholders.
Section 2.4 Certain Exclusions. Notwithstanding the foregoing, the
provisions of Sections 2.2 and 2.3 shall not apply to any sale by a Shareholder
in an underwritten public offering under an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), nor shall any
Shareholder purchasing any Capital Stock pursuant to Section 2.2 be permitted to
exercise the right of co-sale under Section 2.3 with respect to the same
transaction.
ARTICLE III
TERM AND AMENDMENT
Section 3.1 Term. This Agreement will terminate upon the consummation
by the Company of a firm commitment underwritten initial public offering of its
Common Stock.
Section 3.2 Amendment. This Agreement shall not be changed, waived,
discharged, or terminated except by written agreement signed by Shareholders
holding not less than sixty-six and two thirds percent (66 2/3%) of the shares
of Capital Stock (voting as one class on an as converted basis) then held by the
Shareholders.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Parties. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their heirs, personal
representatives, successors, and permitted assigns; provided, however, that no
person, firm, or corporation not a party hereto shall have any rights hereunder
or the power to enforce any of the duties created hereby unless such person,
firm, or corporation shall have become bound to the provisions hereof.
Section 4.2 Additional Investors. The parties hereto acknowledge that
(a) other parties may become a shareholder of the Company after the date hereof
and (b) such parties may be required, as a condition to the issuance or transfer
of shares of Capital Stock to them, to execute a counterpart of this Agreement.
Upon execution of such a counterpart of this Agreement, such new shareholder of
the Company shall be entitled to all of the rights and benefits afforded thereto
hereunder and Exhibit A shall be amended to reflect the purchase of shares of
Capital Stock by such party and shall be distributed to each of the Shareholders
by the Company.
-5-
<PAGE> 6
Section 4.3 Specific Performance. The parties hereto agree that a
breach or violation of any of the terms, covenants, or other obligations under
this Agreement will result in immediate and irreparable harm to the
non-breaching parties in an amount that will be impossible to ascertain at the
time of the breach or violation and that the award of monetary damages will not
be adequate relief to the non-breaching parties. Therefore, the failure on the
part of any party to perform all of the terms, covenants, and obligations
established by this Agreement shall give rise to a right to the other parties to
obtain enforcement of this Agreement in a court of equity by a decree of
specific performance, a writ of mandamus, or other injunctive relief. This
remedy, however, shall be cumulative and in addition to any other remedy the
parties may have.
Section 4.4 Severability If any provision of this Agreement or the
application thereof shall be invalid or unenforceable, the parties hereto shall
take such action as may be necessary to effectuate the intent of such provision,
and the remainder of this Agreement and any other application of such provision
shall not be affected thereby.
Section 4.5 Sections and Exhibits. The headings of sections in this
Agreement are provided for convenience only and will not affect the Agreement's
construction or interpretation. Unless indicated otherwise, references to
"Section," "Sections," "Exhibit," or "Exhibits" refer to the corresponding
section, sections, exhibit, or exhibits, respectively, of this Agreement.
Section 4.6 Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed to have been given, made, or delivered
when actually received (regardless of the manner of transmission) or five (5)
days after deposited in the mail and sent by registered or certified mail,
postage prepaid; by facsimile transmission when transmitted with confirmation of
receipt; or, in the case of telegraphic notice, when delivered to the telegraph
company, charges prepaid, addressed as the case may be as follows:
If to the Company: G-Link Corporation
3841 Green Hills Village Drive, Suite 410
Nashville, TN 37215
Attention: President
With a copy to: Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
Attention: F. Mitchell Walker, Jr.
If to each of the
Shareholders: (as set forth on Exhibit A hereto)
or to such other address as such party shall have furnished to other parties in
writing in accordance with the provisions hereof.
-6-
<PAGE> 7
Section 4.7 Confidentiality. Each party to this Agreement agrees to at
all times hold in confidence and keep secret and inviolate all of the
Corporation's confidential information, including, without limitation, all
unpublished matters relating to the business, property, accounts, books,
records, customers and contracts of the Corporation which such party may now or
hereafter come to know; provided, that any party to this Agreement may disclose
any such information which has otherwise entered the public domain (not as a
result of violation of this Agreement) or which he or it is required to disclose
to any governmental authority by law or subpoena or judicial process.
Section 4.8 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
Section 4.9 Governing Law. This Agreement is executed in and shall be
construed and enforced in accordance with the laws of the State of Tennessee
applicable to contracts made and to be performed wholly within such state
without regard to its conflict of laws rules.
Section 4.10 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Shareholders relating to the subject
matter hereof and there are no other terms other than those contained herein.
Section 4.11 Arbitration. All disputes relative to interpretation of
the provisions of this Agreement shall be resolved by binding arbitration
pursuant to the rules of the American Arbitration Association then pertaining.
Arbitration proceedings shall be held in Nashville, Tennessee.
The parties may, if they are able to do so, agree upon one arbitrator;
otherwise, there shall be three arbitrators selected to resolve disputes
pursuant to this Section 4.11, one named in writing by each party within 15 days
after notice of arbitration is served upon either party by the other and a third
arbitrator selected by the two arbitrators selected by the parties within 15
days thereafter.
If the two arbitrators cannot select a third arbitrator within such 15
days, either party may request that the American Arbitration Association select
such third arbitrator. If one party does not choose an arbitrator within 15
days, the other party shall request that the American Arbitration Association
name such other arbitrator. No one shall serve as arbitrator who is in any way
financially interested in this Agreement or in the affairs of either party.
Each of the parties hereto shall pay its own expenses of arbitration
and one-half of the expenses of the arbitrators. If any position by either party
hereunder, or any defense or objection thereto, is deemed by the arbitrators to
have been unreasonable, the arbitrators shall assess, as part of their award
against the unreasonable party or reduce the award to the unreasonable party,
all or part of the arbitration expenses (including reasonable attorneys' fees)
of the other party and of the arbitrators.
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<PAGE> 8
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
G-LINK CORPORATION /s/ William A. Oldacre
----------------------------------
William A. Oldacre as Custodian
for Ann Carson Oldacre under
By: /s/ Richardson M. Roberts Tennessee Uniform Transfers to
------------------------------- Minors Act
Title: Chief Executive Officer
---------------------------
/s/ William A. Oldacre
----------------------------------
/s/ Nollie Peeler William A. Oldacre as Custodian
- ---------------------------------- for Oliver Kneeland Oldacre under
Nollie Peeler Tennessee Uniform Transfers to
Minors Act
/s/ Mark McDonald
- ----------------------------------
Mark McDonald
/s/ William A. Oldacre
----------------------------------
William A. Oldacre as Custodian
/s/ Thomas E. Newton for William O. Sellers under
- ---------------------------------- Tennessee Uniform Transfers to
Thomas E. Newton Minors Act
/s/ William A. Oldacre, Jr.
- ----------------------------------
William A. Oldacre, Jr. /s/ William A. Oldacre
----------------------------------
William A. Oldacre as Custodian
for Leslie M. Boozer under
/s/ Richardson M. Roberts Tennessee Uniform Transfers to
- ---------------------------------- Minors Act
Richardson M. Roberts
/s/ William A. Oldacre /s/ William A. Oldacre
- ---------------------------------- ----------------------------------
William A. Oldacre as Custodian William A. Oldacre as Custodian
for Hunter Oldacre under for Trent R. Boozer, Jr. under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
/s/ William A. Oldacre /s/ William A. Oldacre
- ---------------------------------- ----------------------------------
William A. Oldacre as Custodian William A. Oldacre as Custodian
for Allison Chandler Oldacre under for Alexander M. Boozer under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
-9-
<PAGE> 9
/s/ William A. Oldacre /s/ William A. Oldacre
- ---------------------------------- ----------------------------------
William A. Oldacre as Custodian William A. Oldacre as Custodian
for Conner C. Bhandari under for Robert W. Poellnitz, III under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
/s/ William A. Oldacre /s/ William A. Oldacre
- ---------------------------------- ----------------------------------
William A. Oldacre as Custodian William A. Oldacre as Custodian
for William Steele McDonald under for Edward A. Floyd under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
/s/ William A. Oldacre /s/ William A. Oldacre
- ---------------------------------- ----------------------------------
William A. Oldacre as Custodian William A. Oldacre as Custodian
for Carey C. Floyd under for Charles M. Taylor under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
/s/ William A. Oldacre /s/ William A. Oldacre
- ---------------------------------- ----------------------------------
William A. Oldacre as Custodian William A. Oldacre as Custodian
for Leah Catherine Taylor under for Douglas C. Sellers, Jr. under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
/s/ Mark McDonald /s/ Mark McDonald
- ---------------------------------- ----------------------------------
Mark McDonald, as Custodian Mark McDonald, as Custodian
for Katherine Dale McDonald under for John Butera McDonald under
Tennessee Uniform Transfers to Tennessee Uniform Transfers to
Minors Act Minors Act
/s/ Mark McDonald /s/ Mark McDonald
- ---------------------------------- ----------------------------------
Mark McDonald, as custodian for Mark McDonald, as custodian for
John Butera McDonald under William Steele McDonald under
Tennessee Uniform Transfer to Tennessee Uniform Transfer to
Minors Act Minors Act
By: /s/ Richard M. Roberts /s/ Anne Bryn Roberts
------------------------------ ----------------------------------
Richard M. Roberts Anne Bryn Roberts
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<PAGE> 10
/s/ Lucille Bradford Roberts /s/ Anne Bryn Worthen
- ---------------------------------- ----------------------------------
Lucille Bradford Roberts Anne Bryn Worthen
/s/ Thomas Newton /s/ Thomas Newton
- ---------------------------------- ----------------------------------
Thomas Newton, as Custodian for Thomas Newton, as Custodian for
Robert M. Newton George E. Newton
/s/ Thomas Newton /s/ Thomas Newton
- ---------------------------------- ----------------------------------
Thomas Newton, as Custodian for Thomas Newton, as Custodian for
Sarah K. Newton Charles Kenneth Sande
/s/ Thomas Newton /s/ Thomas Newton
- ---------------------------------- ----------------------------------
Thomas Newton, as Custodian for Thomas Newton, as Custodian for
Ellen W. Hudson Carmen Falcione
/s/ Thomas Newton /s/ Thomas Newton
- ---------------------------------- ----------------------------------
Thomas Newton, as Custodian for Thomas Newton, as Custodian for
Buford M. Cannon Buford Allen Cannon
/s/ Thomas Newton /s/ Thomas Newton
- ---------------------------------- ----------------------------------
Thomas Newton, as Custodian for Thomas Newton, as Custodian for
Alan L. Dehart Henry L. Smith, Sr.
/s/ Thomas Newton /s/ Andrew Franklin Alexander
- ---------------------------------- ----------------------------------
Thomas Newton, as Custodian for Andrew Franklin Alexander
Jeffrey Scott Lindsay
/s/ Leslee Taylor Alexander /s/ Kathryn Rankin Alexander
- ---------------------------------- ----------------------------------
Leslee Taylor Alexander Kathryn Rankin Alexander
/s/ William Houston Alexander /s/ T. Richard Butera
- ---------------------------------- ----------------------------------
William Houston Alexander T. Richard Butera
/s/ C. Michael Armstrong /s/ William Grabe
- ---------------------------------- ----------------------------------
C. Michael Armstrong William Grabe
-11-
<PAGE> 11
/s/ Michael C. McChesney /s/ Francis Leahy
- ---------------------------------- ----------------------------------
Michael C. McChesney Francis Leahy
/s/ Walter Buckley /s/ Kenneth Fox
- ---------------------------------- ----------------------------------
Walter Buckley Kenneth Fox
/s/ Andy Hecht /s/ Arthur Becker
- ---------------------------------- ----------------------------------
Andy Hecht Arthur Becker
/s/ Ed Bradley /s/ Patricia Raynes
- ---------------------------------- ----------------------------------
Ed Bradley Patricia Raynes
/s/ John C. Butera /s/ Kenneth Butera
- ---------------------------------- ----------------------------------
John C. Butera Kenneth Butera
/s/ Raymond L. Butera /s/ Robert Butera
- ---------------------------------- ----------------------------------
Raymond L. Butera Robert Butera
/s/ Doug Carlson /s/ Reginald Jackson
- ---------------------------------- ----------------------------------
Doug Carlson Reginald Jackson
/s/ Philip D. Topper, Jr. /s/ T. Richard Butera
- ---------------------------------- ----------------------------------
Philip D. Topper, Jr. as Custodian T. Richard Butera as Custodian
and Investment Representative for and Investment Representative for
James Matan Christina Butera
/s/ T. Richard Butera /s/ T. Richard Butera
- ---------------------------------- ----------------------------------
T. Richard Butera as Custodian and T. Richard Butera as Custodian and
Investment Representative for Investment Representative for
Caroline Murphy Barbara Ferriter
/s/ T. Richard Butera /s/ T. Richard Butera
- ---------------------------------- ----------------------------------
T. Richard Butera as Custodian and T. Richard Butera as Custodian and
Investment Representative for Investment Representative for
Matthew Ferguson Stanley Snyder
/s/ Harold Whitcomb
- ----------------------------------
Harold Whitcomb
-12-
<PAGE> 12
AMENDMENT TO SHAREHOLDERS' AGREEMENT
This Amendment (the "Amendment"), to Shareholders' Agreement (the
"Agreement") effective as of January 25, 2000, is by and among G-Link
Corporation, a Tennessee Corporation (the "Company"), and the holders of Capital
Stock of the Company.
WITNESSETH:
WHEREAS, the Company and the Shareholders desire to amend the Agreement
to provide for the Amendment described herein and the Company and the required
percentage of Shareholders (the "Required Shareholders") have approved this
Amendment in accordance with Section 3.2 of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, each of the parties
covenants and agrees as follows:
Section 2.2(g) is amended to read as follows:
(g) Exempted Transfers. The provisions of this Section 2.2 shall not
apply to the transfer or retransfer of, and the Shareholders may transfer or
retransfer, any Capital Stock held by such Shareholder to or for the benefit of
(i) any spouse, parent, child, brother, sister, grandchild, brother-in-law,
sister-in-law, father-in-law, mother-in-law, nieces, nephews or lineal
descendant (including adopted children and stepchildren) of such holder
(including, without limitation, trustee(s) of a trust for the benefit of the
Shareholder or any of the foregoing); (ii) any trustee of a voting trust for
purposes of transferring shares into such voting trust; (iii) any legal
representative, devisee, or heir of a Shareholder upon his or her death, or (iv)
any other person, provided that the aggregate exempted transfers which may be
made pursuant to this clause (iv) shall be limited to 10% of the number of
shares of Capital Stock (adjusted for subsequent stock splits) held by such
Shareholder at the time such Shareholder becomes a party to this Agreement and
provided further that transfers under this clause (iv) shall be subject to the
receipt by the Company of an opinion of counsel that such transfers are exempt
from registration under applicable federal or state securities laws; provided
all such transferees under this Subsection (g) shall take such Offered Stock
subject to all the restrictions, terms, and conditions of this Agreement and
shall execute and deliver to the Secretary of the Company a written statement
confirming the same prior to acquiring such shares and there shall be no further
transfer of such shares except in accordance with this Agreement;
<PAGE> 13
IN WITNESS WHEREOF, the Company and the Required Shareholders have
hereunto set their hands as of the day and year first above written.
G-LINK CORPORATION
By: /s/ Richardson M. Roberts
-------------------------------
/s/ Nollie Peeler
------------------------------------
Nollie Peeler
/s/ Mark McDonald
------------------------------------
Mark McDonald
/s/ Thomas E. Newton
------------------------------------
Thomas E. Newton
/s/ William A. Oldacre, Jr.
------------------------------------
William A. Oldacre, Jr.
/s/ Richardson M. Roberts
------------------------------------
Richardson M. Roberts
/s/ Kip Caffey
------------------------------------
Kip Caffey
/s/ Michael McChesney
------------------------------------
Michael McChesney
/s/ Lamar Alexander
------------------------------------
Lamar Alexander
<PAGE> 14
JOINDER TO SHAREHOLDERS' AGREEMENT
Each of the undersigned, Cyber Lab Ventures, Inc., a Delaware
corporation formerly known as DigitalData, Inc. ("Cyber Lab"), Ashish Bahl,
Kelso Equity Partners V, L.P. and Kelso Investment Associates V, L.P.
(collectively, the "Shareholders"), holders in the aggregate of 5,604,902 shares
of common stock of G-Link Corporation, Inc., a Tennessee corporation ("Parent"),
acquired pursuant to that certain Stock Purchase Agreement, dated January 26,
2000, among Parent, the Shareholders and Link2Gov.com, Inc., agree to become a
party to, and hereby agree to be bound by the terms and conditions of, this
Shareholders' Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
January 26, 2000.
CYBER LAB VENTURES, INC.
/s/ J. Edward Houston
---------------------------------
By: J. Edward Houston
-----------------------------
Its: President
----------------------------
/s/ Ashish Bahl
---------------------------------
ASHISH BAHL
KELSO EQUITY PARTNERS V, L.P.
/s/ Frank K. Bynum, Jr.
---------------------------------
By: Frank K. Bynum, Jr.
-----------------------------
Its: Managing Director
----------------------------
AGREED TO AND ACCEPTED BY: KELSO INVESTMENT
ASSOCIATES V, L.P.
G-LINK CORPORATION
/s/ Richardson M. Roberts /s/ Frank K. Bynum, Jr.
- --------------------------------- ---------------------------------
BY: Richardson M. Roberts By: Frank K. Bynum, Jr.
----------------------------- -----------------------------
TITLE: Chief Executive Officer Its: Managing Director
------------------------- ----------------------------
<PAGE> 1
EXHIBIT 10.1
G-LINK CORPORATION
1999 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the G-Link Corporation 1999 Stock Incentive Plan (the
"Plan") is to enable G-Link Corporation (the "Corporation") to attract, retain
and reward key employees of and consultants to the Corporation and its
Subsidiaries and Affiliates, and directors who are not also employees of the
Corporation, and to strengthen the mutuality of interests between such key
employees, consultants, and directors by awarding such key employees,
consultants, and directors performance-based stock incentives and/or other
equity interests or equity-based incentives in the Corporation, as well as
performance-based incentives payable in cash. The creation of the Plan shall not
diminish or prejudice other compensation programs approved from time to time by
the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Corporation and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Corporation directly or indirectly owns at least 20%
of the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 9(b) of the
Plan.
E. "Change in Control Price" has the meaning provided in Section 9(d)
of the Plan.
F. "Common Stock" means the Corporation's Common Stock, no par value
per share.
G. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of the Plan.
I. "Corporation" means G-Link Corporation, a corporation organized under
the laws of the State of Tennessee or any successor corporation.
J. "Disability" means disability as determined under the Corporation's
insurance plans.
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K. "Early Retirement" means retirement, for purposes of this Plan with
the express consent of the Corporation at or before the time of such retirement,
from active employment with the Corporation and any Subsidiary or Affiliate
prior to age 65, in accordance with any applicable early retirement policy of
the Corporation then in effect or as may be approved by the Committee.
L. "Effective Date" has the meaning provided in Section 13 of the Plan.
M. "Equity Issuance" means an issuance of Common Stock by the
Corporation following the Effective Date of this Plan in connection with a
public or private offering, including in connection with an acquisition, merger
or similar transaction, but excluding issuances of Common Stock under this Plan
or in any other compensatory transaction with an officer, employee, or director
of, or consultant to, the Corporation or its Subsidiaries or Affiliates.
N. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
O. "Fair Market Value" means with respect to the Common Stock, as of any
given date or dates, unless otherwise determined by the Committee in good faith,
the reported closing price of a share of Common Stock on the national securities
market or exchange on which the Common Stock is principally traded, or, if no
such sale of a share of Common Stock is reported on a national securities
exchange or principal trading market on such date, the fair market value of a
share of Common Stock as determined by the Committee in good faith.
P. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
Q. "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
R. "Non-Employee Director" means a member of the Board who is a
Non-Employee Director within the meaning of Rule 16b-3(b)(3) promulgated under
the Exchange Act and an outside director within the meaning of Treasury
Regulation Sec. 162-27(e)(3) promulgated under the Code.
S. "Non-Qualified Stock Option" means any stock option that is not an
incentive Stock Option.
T. "Normal Retirement" means retirement from active employment with the
Corporation and any Subsidiary or Affiliate on or after age 65.
U. "Other Stock-Based Award" means an award under Section 8 below that
is valued in whole or in part by reference to, or is otherwise based on, the
Common Stock.
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V. "Plan" means this G-Link Corporation 1999 Stock Incentive Plan, as
amended from time to time.
W. "Restricted Stock" means an award of shares of Common Stock that is
subject to restrictions under Section 7 of the Plan.
X. "Restriction Period" has the meaning provided in Section 7 of the
Plan.
Y. "Retirement" means Normal or Early Retirement.
Z. "Section 162(m) Maximum" has the meaning provided in Section 3(a)
hereof.
AA. "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to surrender to the Corporation all (or a portion)
of a Stock Option in exchange for an amount equal to the difference between (i)
the Fair Market Value, as of the date such Stock Option (or such portion
thereof) is surrendered, of the shares of Common Stock covered by such Stock
Option (or such portion thereof), subject, where applicable, to the pricing
provisions in Section 6(b)(ii), and (ii) the aggregate exercise price of such
Stock Option (or such portion thereof).
BB. "Stock Option" or "Option" means any option to purchase shares of
Common Stock (including Restricted Stock, if the Committee so determines)
granted pursuant to Section 5 below.
CC. "Subsidiary" means any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. The functions of the Committee specified in the
Plan may be exercised by an existing Committee of the Board composed exclusively
of Non-Employee Directors. The initial Committee shall be the Compensation
Committee. In the event there are not at least two Non-Employee Directors on the
Board, the Plan shall be administered by the Board and all references herein to
the Committee shall refer to the Board.
The Committee shall have authority to grant, pursuant to the terms of
the Plan, to officers, other key employees and consultants eligible under
Section 4: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, and/or (iv) Other Stock-Based Awards.
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In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:
(a) to select the officers, key employees of and consultants to
the Corporation and its Subsidiaries and Affiliates to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, and/or Other
Stock-Based Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, and/or Other Stock-Based Awards, or any combination
thereof, are to be granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each such
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or
any vesting acceleration or waiver of forfeiture restrictions regarding
any Stock Option or other award and/or the shares of Common Stock
relating thereto, based in each case on such factors as the Committee
shall determine, in its sole discretion); and to amend or waive any such
terms and conditions to the extent permitted by Section 10 hereof;
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or Restricted Stock under Section 5(m), as
applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what
circumstances Option grants and/or other awards under the Plan are to be
made, and operate, on a tandem basis vis-a-vis other awards under the
Plan and/or cash awards made outside of the Plan;
(g) to determine whether, to what extent, and under what
circumstances shares of Common Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including providing
for and determining the amount (if any) of any deemed earnings on any
deferred amount during any deferral period);
(h) to determine whether to require payment of tax withholding
requirements in shares of Common Stock subject to the award; and
(i) to impose any holding period required to satisfy Section 16
under the Exchange Act.
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The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan; provided, however, that, to
the extent that this Plan otherwise requires the approval of the Board or the
shareholders of the Corporation, all decisions of the Committee shall be subject
to such Board or shareholder approval. Subject to the foregoing, all decisions
made by the Committee pursuant to the provisions of the Plan shall be made in
the Committee's sole discretion and shall be final and binding on all persons,
including the Corporation and Plan participants.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) As of the Effective Date, the aggregate number of shares of Common
Stock that may be issued under the Plan shall be 2,000,000 shares plus an annual
increase to be added on each anniversary date of the adoption of the Plan equal
to the lesser of (i)1,000,000 shares, (ii) two percent of the outstanding shares
on such date or (iii) a number determined by the Board. The shares of Common
Stock issuable under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. No officer of the Corporation or other
person whose compensation may be subject to the limitations on deductibility
under Section 162(m) of the Code shall be eligible to receive awards pursuant to
this Plan relating to in excess of 400,000 shares of Common Stock in any fiscal
year (the "Section 162(m) Maximum").
(b) If any shares of Common Stock that have been optioned cease to be
subject to a Stock Option, or if any shares of Common Stock that are subject to
any Restricted Stock or Other Stock-Based Award granted hereunder are forfeited
prior to the payment of any dividends, if applicable, with respect to such
shares of Common Stock, or any such award otherwise terminates without a payment
being made to the participant in the form of Common Stock, such shares shall
again be available for distribution in connection with future awards under the
Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the maximum number of shares that
may be awarded under the Plan, in the number and option price of shares subject
to outstanding Options granted under the Plan, the Section 162(m) Maximum and in
the number of shares subject to other outstanding awards granted under the Plan
as may be determined to be appropriate by the Committee, in its sole discretion,
provided that the number of shares subject to any award shall always be a whole
number. An adjusted option price shall also be used to determine the amount
payable by the Corporation upon the exercise of any Stock Appreciation Right
associated with any Stock Option.
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SECTION 4. ELIGIBILITY.
Directors, officers and other key employees of and consultants to the
Corporation and its Subsidiaries and Affiliates who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Corporation and/or its Subsidiaries and Affiliates are eligible to be granted
awards under the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the Plan.
Any Stock Option granted under the Plan shall be in such form as the Committee
may from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. Incentive Stock Options may
be granted only to individuals who are employees of the Corporation or any
Subsidiary of the Corporation.
The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
Options granted to officers, key employees, Outside Directors and
consultants under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant but shall be not less than 100% (or, in the case of
any employee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or of
any of its Subsidiaries, not less than 110%) of the Fair Market Value of
the Common Stock at grant, in the case of Incentive Stock Options, and
not less than 85% of the Fair Market Value of the Common Stock at grant,
in the case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Incentive Stock Option shall be exercisable more
than ten years (or, in the case of an employee who owns stock possessing
more than 10% of the total combined voting power of all classes of stock
of the Corporation or any of its Subsidiaries or parent corporations,
more than five years) after the date the Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant; provided, however, that
except as provided in Section 5(g) and (h) and
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Section 9, unless otherwise determined by the Committee at or after
grant, no Stock Option shall be exercisable prior to the first
anniversary date of the granting of the Option. The Committee may
provide that a Stock Option shall vest over a period of future service
at a rate specified at the time of grant, or that the Stock Option is
exercisable only in installments. If the Committee provides, in its sole
discretion, that any Stock Option is exercisable only in installments,
the Committee may waive such installment exercise provisions at any time
at or after grant, in whole or in part, based on such factors as the
Committee shall determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
restrictions apply under Section 5(c), Stock Options may be exercised in
whole or in part at any time during the option period, by giving written
notice of exercise to the Corporation specifying the number of shares to
be purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, note, or such other instrument as the
Committee may accept. As determined by the Committee, in its sole
discretion, at or (except in the case of an Incentive Stock Option)
after grant, payment in full or in part may also be made in the form of
shares of Common Stock already owned by the optionee or, in the case of
a Non-Qualified Stock Option, shares of Restricted Stock or shares
subject to such Option or another award hereunder (in each case valued
at the Fair Market Value of the Common Stock on the date the Option is
exercised). If payment of the exercise price is made in part or in full
with Common Stock, the Committee may award to the employee a new Stock
Option to replace the Common Stock which was surrendered. If payment of
the option exercise price of a Non-Qualified Stock Option is made in
whole or in part in the form of Restricted Stock, such Restricted Stock
(and any replacement shares relating thereto) shall remain (or be)
restricted in accordance with the original terms of the Restricted Stock
award in question, and any additional Common Stock received upon the
exercise shall be subject to the same forfeiture restrictions, unless
otherwise determined by the Committee, in its sole discretion, at or
after grant. No shares of Common Stock shall be issued until full
payment therefor has been made. An optionee shall generally have the
rights to dividends or other rights of a shareholder with respect to
shares subject to the Option when the optionee has given written notice
of exercise, has paid in full for such shares, and, if requested, has
given the representation described in Section 12(a).
(e) Transferability of Options. No Non-Qualified Stock Option
shall be transferable by the optionee without the prior written consent
of the Committee other than (i) transfers by the Optionee to a member of
his or her Immediate Family or a trust for the benefit of the optionee
or a member of his or her Immediate Family, or (ii) transfers by will or
by the laws of descent and distribution. No Incentive Stock Option shall
be transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Incentive Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.
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<PAGE> 8
(f) Bonus for Taxes. In the case of a Non-Qualified Stock Option
or an optionee who elects to make a disqualifying disposition (as
defined in Section 422(a)(1) of the Code) of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option, the Committee in
its discretion may award at the time of grant or thereafter the right to
receive upon exercise of such Stock Option a cash bonus calculated to
pay part or all of the federal and state, if any, income tax incurred by
the optionee upon such exercise.
(g) Termination by Death. Subject to Section 5(k), if an
optionee's employment by the Corporation and any Subsidiary or (except
in the case of an Incentive Stock Option) Affiliate terminates by reason
of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent such option was exercisable at the time of
death or (except in the case of an Incentive Stock Option) on such
accelerated basis as the Committee may determine at or after grant (or
except in the case of an Incentive Stock Option, as may be determined in
accordance with procedures established by the Committee) by the legal
representative of the estate or by the legatee of the optionee under the
will of the optionee, for a period of one year (or such other period as
the Committee may specify at or after grant) from the date of such death
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section 5(k),
if an optionee's employment by the Corporation and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate terminates
by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination or (except in the case of an
Incentive Stock Option) on such accelerated basis as the Committee may
determine at or after grant (or, except in the case of an Incentive
Stock Option, as may be determined in accordance with procedures
established by the Committee), for a period of (i) three years (or such
other period as the Committee may specify at or after grant) from the
date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter, in
the case of a Non-Qualified Stock Option and (ii) one year from the date
of termination of employment or until the expiration of the stated term
of such Stock Option, whichever period is shorter, in the case of an
Incentive Stock Option; provided however, that, if the optionee dies
within the period specified in (i) above (or other such period as the
committee shall specify at or after grant), any unexercised
Non-Qualified Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of
death for a period of twelve months from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period
is shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise period applicable to Incentive Stock Options,
but before the expiration of any period that would apply if such Stock
Option were a Non-Qualified Stock Option, such Stock Option will
thereafter be treated as a NonQualified Stock Option.
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(i) Termination by Reason of Retirement. Subject to Section 5(k),
if an optionee's employment by the Corporation and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate terminates
by reason of Normal or Early Retirement, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of such Retirement or (except in the case of
an Incentive Stock Option) on such accelerated basis as the Committee
may determine at or after grant (or, except in the case of an Incentive
Stock Option, as may be determined in accordance with procedures
established by the Committee), for a period of (i) three years (or such
other period as the Committee may specify at or after grant) from the
date of such termination of employment or the expiration of the stated
term of such Stock Option, whichever period is the shorter, in the case
of a Non-Qualified Stock Option and (ii) three months from the date of
such termination of employment or the expiration of the stated term of
such Stock Option, whichever period is the shorter, in the event of an
Incentive Stock Option; provided however, that, if the optionee dies
within the period specified in (i) above (or other such period as the
Committee shall specify at or after grant), any unexercised
Non-Qualified Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of
death for a period of twelve months from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period
is shorter. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise period applicable to Incentive Stock Options,
but before the expiration of the period that would apply if such Stock
Option were a Non-Qualified Stock Option, the option will thereafter be
treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k), unless otherwise
determined by the Committee (or pursuant to procedures established by
the Committee) at or (except in the case of an Incentive Stock Option)
after grant, if an optionee's employment by the Corporation and any
Subsidiary or (except in the case of an Incentive Stock Option)
Affiliate is involuntarily terminated for any reason other than death,
Disability or Normal or Early Retirement, or if optionee voluntarily
terminates employment, the Stock Option shall thereupon terminate,
except that such Stock Option may be exercised, to the extent otherwise
then exercisable, for the lesser of three months or the balance of such
Stock Option's term if the involuntary termination is without Cause. The
Committee has the option to extend the exercise period until the lesser
of six months or the balance of such Stock Option's term if the
involuntary termination is without Cause. However, any Incentive Stock
Option not exercised within three months will be treated as a
NonQualified Stock Option. For purposes of this Plan, "Cause" means (i)
a felony conviction of a participant or the failure of a participant to
contest prosecution for a felony, or (ii) a participant's willful
misconduct or dishonesty, which is directly and materially harmful to
the business or reputation of the Corporation or any Subsidiary or
Affiliate. If an optionee voluntarily terminates employment with the
Corporation and any Subsidiary or (except in the case of an Incentive
Stock Option) Affiliate (except for Disability, Normal or Early
Retirement), the Stock Option shall thereupon terminate;
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provided, however, that the Committee at grant or (except in the case
of an Incentive Stock Option) thereafter may extend the exercise period
in this situation for the lesser of three months or the balance of such
Stock Option's term.
(k) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock
Options shall be interpreted, amended, or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without the
consent of the optionee(s) affected, to disqualify any Incentive Stock
Option under such Section 422. No Incentive Stock Option shall be
granted to any participant under the Plan if such grant would cause the
aggregate Fair Market Value (as of the date the Incentive Stock Option
is granted) of the Common Stock with respect to which all Incentive
Stock Options are exercisable for the first time by such participant
during any calendar year (under all such plans of the Company and any
Subsidiary) to exceed $100,000. To the extent permitted under Section
422 of the Code or the applicable regulations thereunder or any
applicable Internal Revenue Service pronouncement:
(i) if (x) a participant's employment is terminated by reason
of death, Disability, or Retirement and (y) the portion of any
Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Section 5(g), (h) or (i),
applied without regard to the $100,000 limitation contained in
Section 422(d) of the Code, is greater than the portion of such
Option that is immediately exercisable as an "Incentive Stock
Option" during such post-termination period under Section 422,
such excess shall be treated as a Non-Qualified Stock Option; and
(ii) if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control, any portion of such
Option that is not exercisable as an Incentive Stock Option by
reason of the $100,000 limitation contained in Section 422(d) of
the Code shall be treated as a Non-Qualified Stock Option.
(l) Buyout Provisions. The Committee may at any time offer to buy
out for a payment in cash, Common Stock, or Restricted Stock an Option
previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the optionee at the time that such
offer is made.
(m) Settlement Provisions. If the option agreement so provides at
grant or (except in the case of an Incentive Stock Option) is amended
after grant and prior to exercise to so provide (with the optionee's
consent), the Committee may require that all or part of the shares to be
issued with respect to the spread value of an exercised Option take the
form of Restricted Stock, which shall be valued on the date of exercise
on the basis of the Fair Market Value (as determined by the Committee)
of such Restricted Stock determined without regards to the forfeiture
restrictions involved.
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(n) Performance and Other Conditions. The Committee may condition
the exercise of any Option upon the attainment of specified performance
goals or other factors as the Committee may determine, in its sole
discretion. Unless specifically provided in the option agreement, any
such conditional Option shall vest six months prior to its expiration if
the conditions to exercise have not theretofore been satisfied.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted
in conjunction with all or part of any Stock Option granted under the
Plan. In the case of a Non-Qualified Stock Option, such rights may be
granted either at or after the time of the grant of such Stock Option.
In the case of an Incentive Stock Option, such rights may be granted
only at the time of the grant of such Stock Option. A Stock Appreciation
Right or applicable portion thereof granted with respect to a given
Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, subject to such
provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number
of shares covered by a related Stock Option. A Stock Appreciation Right
may be exercised by an optionee, subject to Section 6(b), in accordance
with the procedures established by the Committee for such purpose. Upon
such exercise, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options
relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights
have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the
provisions of the Plan, as shall be determined from time to time by the
Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only
at such time or times and to the extent that the Stock Options to
which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash and/or
shares of Common Stock equal in value to the excess of the Fair
Market Value of one share of Common Stock over the option price
per share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right
shall have been exercised, with the Committee having the right to
determine the form of payment. When payment is to be made in
shares, the number of shares to be paid shall be calculated on
the basis of the Fair Market Value of the shares on the date of
exercise. When payment is to be made in cash, such amount shall
be calculated
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on the basis of the Fair Market Value of the Common Stock on
the date of exercise.
(iii) Stock Appreciation Rights shall be transferable
only when and to the extent that the underlying Stock Option
would be transferable under Section 5(e) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation
Right is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on
the number of shares of Common Stock to be issued under the Plan.
(v) The Committee, in its sole discretion, may also provide
that, in the event of a Change in Control and/or a Potential
Change in Control, the amount to be paid upon the exercise of a
Stock Appreciation Right shall be based on the Change in Control
Price, subject to such terms and conditions as the Committee may
specify at grant.
(vi) The Committee may condition the exercise of any Stock
Appreciation Right upon the attainment of specified performance
goals or other factors as the Committee may determine, in its
sole discretion.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued
either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside the Plan. The Committee
shall determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares of
Restricted Stock to be awarded to any person, the price (if any) to be
paid by the recipient of Restricted Stock (subject to Section 7(b)), the
time or times within which such awards may be subject to forfeiture, and
the other terms, restrictions and conditions of the awards in addition
to those set forth in Section 7(c). The Committee may condition the
grant of Restricted Stock upon the attainment of specified performance
goals or such other factors as the Committee may determine, in its sole
discretion. The provisions of Restricted Stock awards need not be the
same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement
evidencing the award and has delivered a fully executed copy thereof to
the Corporation, and has otherwise complied with the applicable terms
and conditions of such award.
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<PAGE> 13
(i) The purchase price for shares of Restricted Stock shall
be established by the Committee and may be zero.
(ii) Awards of Restricted Stock must be accepted within
a period of 60 days (or such shorter period as the Committee may
specify at grant) after the award date, by executing a Restricted
Stock Award Agreement and paying whatever price (if any) is
required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the
name of such participant (or a transferee permitted by Section
12(h) hereof), and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such award.
(iv) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Corporation
until the restrictions thereon shall have lapsed, and that, as
a condition of any Restricted Stock award, the participant shall
have delivered a stock power, endorsed in blank, relating to the
shares of Common Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) In accordance with the provisions of this Plan and the
award agreement, during a period set by the Committee commencing
with the date of such award (the "Restriction Period"), the
participant shall not be permitted to sell, transfer, pledge,
assign, or otherwise encumber shares of Restricted Stock awarded
under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions, in
whole or in part, based on service, performance, such other
factors or criteria as the Committee may determine in its sole
discretion.
(ii) Except as provided in this paragraph (ii) and Section
7(c)(i), the participant shall have, with respect to the shares
of Restricted Stock, all of the rights of a shareholder of the
Corporation, including the right to vote the shares, and the
right to receive any cash dividends. The Committee, in its sole
discretion, as determined at the time of award, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested, subject to Section 12(e), in
additional Restricted Stock to the extent shares are available
under Section 3, or otherwise reinvested. Pursuant to Section 3
above, stock dividends issued with respect to Restricted Stock
shall be treated as additional shares of Restricted Stock that
are subject to the same restrictions and other terms and
conditions that apply to the shares with respect to which such
dividends are
13
<PAGE> 14
issued. If the Committee so determines, the award agreement may
also impose restrictions on the right to vote and the right to
receive dividends.
(iii) Subject to the applicable provisions of the award
agreement and this Section 7, upon termination of a participant's
employment with the Corporation and any Subsidiary or Affiliate
for any reason during the Restriction Period, all shares still
subject to restriction will vest, or be forfeited, in accordance
with the terms and conditions established by the Committee at or
after grant.
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such
Restriction Period, certificates for an appropriate number of
unrestricted shares shall be delivered to the participant (or a
transferee permitted by Section 12(h) hereof) promptly.
(d) Minimum Value Provisions. In order to better ensure that
award payments actually reflect the performance of the Corporation and
service of the participant, the Committee may provide, in its sole
discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Common Stock to the
recipient of a restricted stock award, subject to such performance,
future service, deferral, and other terms and conditions as may be
specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other Stock-Based Awards, including, without
limitation, performance shares, convertible preferred stock, convertible
debentures, exchangeable securities and Common Stock awards or options
valued by reference to earnings per share or Subsidiary performance, may
be granted either alone, in addition to, or in tandem with Stock
Options, Stock Appreciation Rights, or Restricted Stock granted under
the Plan and cash awards made outside of the Plan; provided that no such
Other Stock-Based Awards may be granted in tandem with Incentive Stock
Options if that would cause such Stock Options not to qualify as
Incentive Stock Options pursuant to Section 422 of the Code. Subject to
the provisions of the Plan, the Committee shall have authority to
determine the persons to whom and the time or times at which such awards
shall be made, the number of shares of Common Stock to be awarded
pursuant to such awards, and all other conditions of the awards. The
Committee may also provide for the grant of Common Stock upon the
completion of a specified performance period. The provisions of Other
Stock-Based Awards need not be the same with respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant
to this Section 8 shall be subject to the following terms and
conditions:
14
<PAGE> 15
(i) Shares subject to awards under this Section 8 and the
award agreement referred to in Section 8(b)(v) below, may not be
sold, assigned, transferred, pledged, or otherwise encumbered
prior to the date on which the shares are issued, or, if later,
the date on which any applicable restriction, performance, or
deferral period lapses.
(ii) Subject to the provisions of this Plan and the award
agreement and unless otherwise determined by the Committee at
grant, the recipient of an award under this Section 8 shall be
entitled to receive, currently or on a deferred basis, interest
or dividends or interest or dividend equivalents with respect to
the number of shares covered by the award, as determined at the
time of the award by the Committee, in its sole discretion, and
the Committee may provide that such amounts (if any) shall be
deemed to have been reinvested in additional shares of Common
Stock or otherwise reinvested.
(iii) Any award under Section 8 and any shares of Common
Stock covered by any such award shall vest or be forfeited to the
extent so provided in the award agreement, as determined by the
Committee in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability, or death, or in cases of special circumstances, the
Committee may, in its sole discretion, waive in whole or in part
any or all of the remaining limitations imposed hereunder (if
any) with respect to any or all of an award under this Section 8.
(v) Each award under this Section 8 shall be confirmed by,
and subject to the terms of, an agreement or other instrument
by the Corporation and the participant.
(vi) Common Stock (including securities convertible into
Common Stock) issued on a bonus basis under this Section 8 may be
issued for no cash consideration. Common Stock (including
securities convertible into Common Stock) purchased pursuant to a
purchase right awarded under this Section 8 shall be priced at
least 85% of the Fair Market Value of the Common Stock on the
date of grant.
SECTION 9. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 9(b); or
15
<PAGE> 16
(2) a "Potential Change in Control" as defined in Section
9(c), but only if and to the extent so determined by the
Committee or the Board at or after grant (subject to any right of
approval expressly reserved by the Committee or the Board at the
time of such determination),
(i) Subject to the limitations set forth below in this
Section 9(a), the following acceleration provisions shall apply:
(a) Any Stock Appreciation Rights, any Stock Option
awarded under the Plan not previously exercisable and vested
shall become fully exercisable and vested.
(b) The restrictions applicable to any Restricted Stock
and Other Stock-Based Awards, in each case to the extent not
already vested under the Plan, shall lapse and such shares
and awards shall be deemed fully vested.
(ii) Subject to the limitations set forth below in this
Section 9(a), the value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock and Other Stock-Based
Awards, in each case to the extent vested, shall, unless
otherwise determined by the Board or by the Committee in its sole
discretion prior to any Change in Control, be cashed out on the
basis of the "Change in Control Price" as defined in Section 9(d)
as of the date such Change in Control or such Potential Change in
Control is determined to have occurred or such other date as the
Board or Committee may determine prior to the Change in Control.
(iii) The Board or the Committee may impose additional
conditions on the acceleration or valuation of any award in the
award agreement.
(b) Definition of Change in Control. For purposes of Section
9(a), a "Change in Control" means the happening of any of the following:
(i) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, other than the Corporation
or a wholly-owned subsidiary thereof or any employee benefit plan
of the Corporation or any of its Subsidiaries, becomes the
beneficial owner of the Corporation's securities having 50% or
more of the combined voting power of the then outstanding
securities of the Corporation that may be cast for the election
of directors of the Corporation (other than as a result of an
issuance of securities initiated by the Corporation in the
ordinary course of business); or
(ii) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sales of assets or contested election, or any combination of the
foregoing transactions, less than a majority of
16
<PAGE> 17
the combined voting power of the then outstanding securities of
the Corporation or any successor corporation or entity entitled
to vote generally in the election of the directors of the
Corporation or such other corporation or entity after such
transaction are held in the aggregate by the holders of the
Corporation's securities entitled to vote generally in the
election of directors of the Corporation immediately prior to
such transaction; or
(iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board
cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the
Corporation's shareholders, of each director of the Corporation
first elected during such period was approved by a vote of at
least two-thirds of the directors of the Corporation then still
in office who were directors of the Corporation at the beginning
of any such period.
(c) Definition of Potential Change in Control. For purposes of
Section 9(a), a "Potential Change in Control" means the happening of any
one of the following:
(i) The approval by shareholders of an agreement by the
Corporation, the consummation of which would result in a Change
in Control of the Corporation as defined in Section 9(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Corporation or a Subsidiary or any Corporation employee benefit
plan (including any trustee of such plan acting as such trustee))
of securities of the Corporation representing 5% or more of the
combined voting power of the Corporation's outstanding securities
and the adoption by the Committee of a resolution to the effect
that a Potential Change in Control of the Corporation has
occurred for purposes of this Plan.
(d) Change in Control Price. For purposes of this Section 9,
"Change in Control Price" means the highest price per share paid in any
transaction reported on a national securities exchange or market on
which the Common Stock is traded, or paid or offered in any bona fide
transaction related to a Potential or actual Change in Control of the
Corporation at any time during the 60 day period immediately preceding
the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as
determined by the Committee except that, in the case of Incentive Stock
Options and Stock Appreciation Rights relating to Incentive Stock
Options, such price shall be based only on transactions reported for the
date on which the optionee exercises such Stock Appreciation Rights or,
where applicable, the date on which a cash out occurs under Section
9(a)(ii).
17
<PAGE> 18
SECTION 10. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Corporation's shareholders,
no amendment or alteration may be made which would (a) increase the maximum
number of shares that may be issued under the Plan or increase the Section
162(m) Maximum, (b) change the provisions governing Incentive Stock Options
except as required or permitted under the provisions governing incentive stock
options under the Code, or (c) make any change for which applicable law or
regulatory authority (including the regulatory authority of any national
securities market or exchange on which the Common Stock is traded) would require
shareholder approval or for which shareholder approval would be required to
secure full deductibility of compensation received under the Plan under Section
162(m) of the Code. No amendment, alteration, or discontinuation shall be made
which would impair the rights of an optionee or participant under a Stock
Option, Stock Appreciation Right, Restricted Stock, or Other Stock-Based Award
theretofore granted, without the participant's consent.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices. Solely
for purposes of computing the Section 162(m) Maximum, if any Stock Options or
other awards previously granted to a participant are canceled and new Stock
Options or other awards having a lower exercise price or other more favorable
terms for the participant are substituted in their place, both the initial Stock
Options or other awards and the replacement Stock Options or other awards will
be deemed to be outstanding (although the canceled Stock Options or other awards
will not be exercisable or deemed outstanding for any other purposes).
SECTION 11. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements is consistent with the "unfunded" status of
the Plan.
18
<PAGE> 19
SECTION 12. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent to
and agree with the Corporation in writing that the optionee or
participant is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock or other securities
delivered under the Plan shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock
exchange upon which the Common Stock is then listed, and any applicable
Federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference
to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee
of the Corporation or any Subsidiary or Affiliate any right to continued
employment with the Corporation or a Subsidiary or Affiliate, as the
case may be, nor shall it interfere in any way with the right of the
Corporation or a Subsidiary or Affiliate to terminate the employment of
any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall
pay to the Corporation, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state, or local taxes
of any kind required by law to be withheld with respect to such amount.
The Committee may require withholding obligations to be settled with
Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the
Corporation under the Plan shall be conditional on such payment or
arrangements and the Corporation and its Subsidiaries or Affiliates
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or other types of Plan
awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Stock Options and
other Plan awards).
19
<PAGE> 20
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of Tennessee.
(g) The members of the Committee and the Board shall not be
liable to any employee or other person with respect to any determination
made hereunder in a manner that is not inconsistent with their legal
obligations as members of the Board. In addition to such other rights of
indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken
or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal
counsel selected by the Corporation) or paid by them in satisfaction of
a judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or
misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding, the
Committee member shall in writing offer the Corporation the opportunity,
at its own expense, to handle and defend the same.
(h) In addition to any other restrictions on transfer that may be
applicable under the terms of this Plan or the applicable award
agreement, no Stock Option, Stock Appreciation Right, Restricted Stock
award, or Other Stock-Based Award or other right issued under this Plan
is transferable by the participant without the prior written consent of
the Committee, other than (i) transfers by an optionee to a member of
his or her Immediate Family or a trust for the benefit of the optionee
or a member of his or her Immediate Family or (ii) transfers by will or
by the laws of descent and distribution. The designation of a
beneficiary will not constitute a transfer.
(i) The Committee may, at or after grant, condition the receipt
of any payment in respect of any award or the transfer of any shares
subject to an award on the satisfaction of a six-month holding period,
if such holding period is required for compliance with Section 16 under
the Exchange Act.
SECTION 13. EFFECTIVE DATE OF PLAN.
The Plan was approved by the Board and the shareholders of the
Corporation and became effective on October 4, 1999 (the "Effective Date").
SECTION 14. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock Award or
Other Stock-Based Award shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date of the Plan, but awards granted prior to
such tenth anniversary may be extended beyond that date.
20
<PAGE> 21
AMENDMENT TO G-LINK CORPORATION
1999 STOCK INCENTIVE PLAN
WHEREAS, on October 4, 1999, LINK2GOV Corp., formerly known as G-Link
Corporation (the "Corporation"), adopted the 1999 Stock Incentive Plan (the
"Plan"); and
WHEREAS, the Board of Directors desires to increase the number of
authorized shares available for issuance under the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows, effective March
21, 2000:
Section 3(a) of the Plan is hereby amended by deleting the reference
to "2,000,000 shares" and replacing such reference with "6,000,000
shares".
IN WITNESS WHEREOF, the undersigned officer has executed this
Amendment pursuant to authority granted by the Board of Directors of the
Corporation on this 21st day of March, 2000.
LINK2GOV CORP.
By: /s/ Richardson M. Roberts
------------------------------------
Title: Chief Executive Officer
---------------------------------
<PAGE> 1
EXHIBIT 10.2
OFFICE LEASE
BY AND BETWEEN
CORNERSTONE SUBURBAN OFFICE, L.P.
AND
LINK2GOV Corp.
For: Burton Hills I Building
One Burton Hills Blvd.
Nashville, TN 37215
<PAGE> 2
OFFICE LEASE
THIS LEASE is made as of this ______ day of March, 2000 by and between
CORNERSTONE SUBURBAN OFFICE, L.P., a Delaware limited partnership ("Landlord")
through its general partner's managing member CORNERSTONE REAL ESTATE ADVISERS,
INC., having an address at Suite 300, 5607 Glenridge Drive, Atlanta, Georgia
30342, and LINK2GOV CORP., a Tennessee corporation ("Tenant") having its
principal office at One Burton Hills Boulevard, Suite 300, Nashville, Tennessee
37215.
INDEX
ARTICLE TITLE
1. Basic Provisions
2. Premises, Term and Commencement Date
3. Rent
4. Taxes and Operating Expenses
5. Landlord's Work, Tenant's Work, Alterations and Additions
6. Use
7. Services
8. Insurance
9. Indemnification
10. Casualty Damage
11. Condemnation
12. Repair and Maintenance
13. Inspection of Premises
14. Surrender of Premises
15. Holding Over
16. Subletting and Assignment
17. Subordination, Attornment and Mortgagee Protection
18. Estoppel Certificate
19. Defaults
20. Remedies
21. Quiet Enjoyment
22. Accord and Satisfaction
23. Security Deposit
24. Brokerage Commission
25. Force Majeure
26. Parking
27. Hazardous Materials
28. Additional Rights Reserved by Landlord
29. Defined Terms
30. Miscellaneous Provisions
EXHIBITS
Exhibit A Plan Showing Property and Premises
Exhibit B Landlord's Work Letter
Exhibit C Tenant's Work
Exhibit D Building's Rules and Regulations
Exhibit E Commencement Date Confirmation
Exhibit F Special Stipulations
<PAGE> 3
ARTICLE 1.
BASIC PROVISIONS
A. Tenant's Tradename: LINK2GOV Corp.
---------------------------------------------------
B. Tenant's Address: One Burton Hills Boulevard, Suite 300,
-----------------------------------------------------
Nashville, TN 37215
-----------------------------------------------------------------------
C. Office Building Name: Burton Hills I
Address: One Burton Hills Boulevard
Nashville, TN 37215
D. Premises: Suite/Unit No.: 300 ; Approximate Square feet (Rentable):
19,686
-----------------------------------------------------------------------
E. Landlord: CORNERSTONE SUBURBAN OFFICE, L.P.
F. Landlord's Address: c/o: Cornerstone Real Estate Advisers, Inc.
Suite 300, 5607 Glenridge Drive
Atlanta, GA 30342
G. Building Manager/Address: First Management Services Inc., 333 Union
---------------------------------------------
Street Suite 400, Nashville, TN 37219
-----------------------------------------------------------------------
H. Commencement Date: April 1, 2000
----------------------------------------------------
I. Expiration Date: March 31, 2007
------------------------------------------------------
J. Security Deposit: Tenant will provide Landlord a Letter of Credit in
-----------------------------------------------------
the amount of $304,417.12 as set forth in Exhibit F attached hereto
-----------------------------------------------------------------------
K. Monthly Rent: See the Monthly Rent schedule below:
<TABLE>
<CAPTION>
Period Period Rent Monthly Rent
------ ----------- ------------
<S> <C> <C>
4/1/00 - 8/31/00 $146,860.00 $24,476.67
9/1/00 - 3/31/01 $196,860.00 $32,810.00
4/1/01 - 3/31/02 $405,531.60 $33,794.30
4/1/02 - 3/31/03 $417,697.56 $34,808.13
4/1/03 - 3/31/04 $430,228.44 $35,852.37
4/1/04 - 3/31/05 $443,135.28 $36,927.94
4/1/05 - 3/31/06 $456,429.36 $38,035.78
4/1/06 - 3/31/07 $470,122.32 $39,176.86
</TABLE>
L. Operating Expenses Base: 2000 Base Year
----------------------------------------------
M. Tax Base: 2000 Base Year
------------------------------------------------------------
N. Tenant's Pro Rata Share: 17.18 %. Tenant's Pro Rata Share shall be
determined by and adjusted by Landlord from time to time (but shall not
be readjusted sooner than the commencement of the second Lease Year),
by dividing the Tenant's Rentable Square Feet of the Premises by the
rentable area of the Building (currently 114,567 rentable square feet)
and multiplying the resulting quotient, to the second decimal place, by
one hundred.
O. Normal Business Hours of Building:
Monday through Friday: 6:00 a.m. to 7:00 p.m.
Saturday: 7:00 a.m. to 2:00 p.m.
Sunday: N/A a.m. to N/A p.m.
<PAGE> 4
P. Use: General office and administrative use for a technology company
--------------------------------------------------------------
Q. Brokers: Eakin & Smith Real Estate - Landlord / Colliers Turley Martin
---------------------------------------------------------------
- Tenant
-----------------------------------------------------------------------
R. Parking Ratio or Spaces/Fee: 3.5 spaces per 1,000 rentable square feet
------------------------------------------
on a nonexclusive, first come, first served basis / no charge
-----------------------------------------------------------------------
The foregoing provisions shall be interpreted and applied in accordance with the
other provisions of this Lease set forth below. The capitalized terms, and the
terms defined in Article 29, shall have the meanings set forth herein or therein
(unless otherwise modified in the Lease) when used as capitalized terms in other
provisions of the Lease.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE> 5
ARTICLE 2.
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases and demises to the Tenant and Tenant hereby takes and
leases from Landlord that certain space identified in Article 1(D) and shown on
a plan attached hereto as Exhibit A and known as the Premises for a term
("Term") commencing on the Commencement Date and ending on the Expiration Date
set forth in Article 1, unless sooner terminated as provided herein, subject to
the provisions herein contained. The Commencement Date set forth in Article 1
shall be advanced to such earlier date as Tenant commences occupancy of the
Premises for the conduct of its business. Such date shall be confirmed by
execution of the Commencement Date Confirmation in the form as set forth in
Exhibit E. If Landlord delays delivering possession of the Premises or
substantial completion of any Landlord's Work under Exhibit B, this Lease shall
not be void or voidable, except as provided in Article 5, and Landlord shall
have no liability for loss or damage resulting therefrom.
ARTICLE 3.
RENT
A. MONTHLY RENT. Tenant shall pay Monthly Rent in advance on or before the first
day of each month of the Term. If the Term shall commence and end on a day other
than the first day of a month, the Monthly Rent for the first and last partial
month shall be prorated on a per diem basis. Upon the execution of this Lease,
Tenant shall pay one installment of Monthly Rent for the first full month of the
Term and a prorated Monthly Rent for any partial month which may precede it.
B. ADDITIONAL RENT. All costs and expenses which Tenant assumes or agrees to pay
and any other sum payable by Tenant pursuant to this Lease, including, without
limitation, its share of Taxes and Operating Expenses, shall be deemed
Additional Rent.
C. RENT. Monthly Rent and Additional Rent which Tenant is or becomes obligated
to pay Landlord under this Lease are herein referred to collectively as "Rent",
and all remedies applicable to the nonpayment of Rent shall be applicable
thereto. Landlord may apply payments received from Tenant to any obligations of
Tenant then accrued, without regard to such obligations as may be designated by
Tenant.
D. PLACE OF PAYMENT, LATE CHARGE, DEFAULT INTEREST. Rent and other charges
required to be paid under this Lease, no matter how described, shall be paid by
Tenant to Landlord at the Building Manager's address listed in Article 1, or to
such other person and/or address as Landlord may designate in writing, without
any prior notice or demand therefor and without deduction or set-off or
counterclaim and without relief from any valuation or appraisement laws. In the
event Tenant fails to pay Rent due under this Lease by the close of business on
the tenth (10th) day of the month or by the tenth (10th) day following the due
date of such payment of Rent if not due on the first day of the month, Tenant
shall pay to Landlord a late charge of seven and one-half percent (7 1/2%) of
the amount overdue. Any Rent not paid when due shall also bear interest at the
Default Rate. This provision shall in no way be construed to modify Tenant's
obligation to pay Rent on or before the first (1st) day of the month.
2
<PAGE> 6
ARTICLE 4.
TAXES AND OPERATING EXPENSES
A. PAYMENT OF TAXES AND OPERATING EXPENSES.
(a) Payment of Escalations. It is agreed that during each calendar year
of the Lease Term beginning on January 1 of the calendar year following the
calendar year used to determine the Operating Expenses Base and Tax Base as set
forth in Article 1 herein and each month thereafter during the original Lease
Term, or any extension thereof, Tenant shall pay to Landlord as Additional Rent,
at the same time as the Monthly Rent is paid, an amount equal to one-twelfth
(1/12) of Landlord's estimate (as determined by Landlord in its reasonable
discretion) of Tenant's Pro Rata Share of any projected increase in the Taxes or
Operating Expenses for the particular calendar year of the Lease Term (the
"Estimated Escalation Increase"). If during any calendar year the Estimated
Escalation Increase is less than the Estimated Escalation Increase for the
previous calendar year on which Tenant's share of Taxes and Operating Expenses
were based for said year, such Additional Rent payments, attributable to
Estimated Escalation Increase, to be paid by Tenant for the new Lease Year shall
be decreased accordingly; provided, however, in no event will the Rent paid by
Tenant hereunder ever be less than the Monthly Rent. A final adjustment (the
"Escalation Reconciliation") shall be made between the parties as soon as
practicable following the end of each calendar year, but in no event later than
one hundred twenty (120) days after the end of each calendar year.
(b) Escalation Reconciliation. As soon as practicable following the end
of each calendar year, Landlord shall submit to Tenant a statement setting forth
the Estimated Escalation Increase, if any (the "Escalation Statement").
Beginning with the Escalation Statement for the second calendar year of the
Lease Term, it shall also set forth the Escalation Reconciliation for the
calendar year just completed. To the extent that the increase in either Taxes or
Operating Expenses (the "Operating Expense or Tax Escalation", as applicable) is
greater than the Estimated Escalation Increase upon which Tenant paid Rent
during the calendar year just completed, Tenant shall pay Landlord the
difference in cash within thirty (30) days following receipt by Tenant from
Landlord of the Escalation Statement. If the Operating Expense or Tax Escalation
is less, then Tenant shall receive a credit on future Rent owing hereunder (or
cash if there is no future Rent owing hereunder) as the case may be. Until
Tenant receives the Escalation Statement, Tenant's Rent for the new Lease Year
shall continue to be paid at the rate being paid for the particular Lease Year
just completed. Tenant shall commence payment to Landlord of the monthly
installment of Additional Rent on the basis of said Escalation Statement
beginning on the first day of the month following the month in which Tenant
receives the Escalation Statement.
(c) Changes in Escalations During Lease Year. In addition to the above,
if, during any particular calendar year, there is a change in the information on
which Landlord based the Escalation Statement so that the Estimated Escalation
Increase furnished to Tenant is no longer accurate, Landlord shall be permitted
to revise such Estimated Escalation Increase by notifying Tenant thereof. There
shall be such adjustments made in the Additional Rent on the first day of the
month following the serving of such notice on Tenant as shall be necessary by
either increasing or decreasing, as the case may be, the amount of Additional
Rent then being paid by Tenant for the balance of the calendar year; however, in
no event shall any such decrease result in a reduction of the Rent below the
Monthly Rent. Landlord's and Tenant's responsibilities with respect to the Tax
and Operating Expense adjustments described herein shall survive the expiration
or early termination of this Lease.
B. DISPUTES OVER TAXES OR OPERATING EXPENSES.
(a) Selection of Accountants. If Tenant disputes the amount of an
adjustment or the proposed estimated increase or decrease in Taxes or Operating
Expenses, Tenant shall give Landlord written notice of such dispute within
thirty (30) days after Landlord advises Tenant of such adjustment or proposed
increase or decrease. Tenant's failure to give such notice shall waive its right
to dispute the amounts so determined. Tenant shall also not be entitled to
dispute the foregoing amounts if Tenant is then in default hereunder. If Tenant
is entitled to and timely objects, Tenant shall
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have the right to engage its own accountants ("Tenant's Accountants") for the
purpose of verifying the accuracy of the statement in dispute, or the
reasonableness of the adjustment or estimated increase or decrease. If Tenant's
Accountants determine that an error has been made, Landlord and Tenant's
Accountants shall endeavor to agree upon the matter. If they cannot agree within
twenty (20) days from the date Tenant's Accountants commence reviewing
Landlord's records, Landlord and Tenant's Accountants shall jointly select an
independent certified public accounting firm (the "Independent Accountant")
which firm shall conclusively determine whether the adjustment or estimated
increase or decrease is reasonable, and if not, what amount is reasonable. Both
parties shall be bound by such determination. If Tenant's Accountants do not
participate in choosing the Independent Accountant within 20 days from the date
Landlord and Tenant's Accountant's determine that they cannot agree as to
whether or not an error has been made, then Landlord's determination of the
adjustment or estimated increase or decrease shall be conclusively determined to
be reasonable and Tenant shall be bound thereby.
(b) Payment of Costs. All costs incurred by Tenant in obtaining
Tenant's Accountants and the cost of the Independent Accountant shall be paid by
Tenant unless Tenant's Accountants disclose an error, acknowledged by Landlord
(or found to have conclusively occurred by the Independent Accountant), of more
than ten percent (10%) in the computation of the total amount of Taxes or
Operating Expenses as set forth in the statement submitted by Landlord with
respect to the matter in dispute; in which event Landlord shall pay the
reasonable costs incurred by Tenant in obtaining such audits. No subtenant shall
have the right to conduct an audit and no assignee shall conduct an audit for
any period during which such assignee was not in possession of the Premises.
(c) Continuation of Payments Pending Determination. Tenant shall
continue to timely pay Landlord the amount of the prior year's adjustment and
adjusted Additional Rent determined to be incorrect as aforesaid until the
parties have concurred as to the appropriate adjustment or have deemed to be
bound by the determination of the Independent Accountant in accordance with the
preceding terms. Landlord's delay in submitting any statement contemplated
herein for any Lease Year shall not affect the provisions of this Paragraph, nor
constitute a waiver of Landlord's rights as set forth herein for said Lease Year
or any subsequent Lease Years during the Lease Term or any extensions thereof.
ARTICLE 5.
LANDLORD'S WORK, TENANT'S WORK,
ALTERATIONS AND ADDITIONS
A. LANDLORD'S WORK. Landlord shall construct the Premises in accordance with
Landlord's obligations as set forth in the work letter attached hereto as or
other information contained in, Exhibit B, and hereinafter referred to as
"Landlord's Work." Landlord will deliver the Premises to Tenant with all of
Landlord's Work completed (except for minor and non-material punch list items
which in Landlord's reasonable judgment will not delay completion of Tenant's
Work, as defined in subparagraph B of this Article) on or before the
Commencement Date or other date specified in Exhibit B and Tenant agrees
thereupon to commence and complete Tenant's Work on or before the Commencement
Date. If Landlord is delayed in completing Landlord's Work by strike, shortages
of labor or materials, delivery delays, delays caused by Tenant or other matters
beyond the reasonable control of Landlord, then Landlord shall give notice
thereof to Tenant and the date on which Landlord is to turn the Premises over to
Tenant for Tenant's Work and the Commencement Date shall be postponed for an
equal number of days as the delay as set forth in the notice. Providing,
however, if such delays exceed one hundred and twenty (120) days, then either
Landlord or Tenant upon notice to the other shall have the right to terminate
this Lease without liability to either party. If the Commencement Date is
postponed as aforesaid, Tenant agrees upon request of Landlord to execute a
writing confirming the Commencement Date on such form as set forth in Exhibit E
attached hereto.
B. TENANT'S WORK. On and after the date specified in the immediately preceding
subparagraph A for delivery of the Premises to Tenant for Tenant's Work, Tenant,
at its sole cost and expense, shall perform and complete all other improvements
to the Premises (herein called "Tenant's Work") including, but not limited to,
all improvements, work
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and requirements required of Tenant under the foregoing work letter or as
described on the attached Exhibit C. Tenant shall complete all of Tenant's Work
in a good and workmanlike manner, fully paid for and free from liens, in
accordance with the plans and specifications approved by Landlord and Tenant as
provided in Exhibit C, on or prior to the scheduled Commencement Date. Tenant
shall also have the right during this period to come onto the Premises to
install its fixtures and prepare the Premises for the operation of Tenant's
business. Notwithstanding the fact that the foregoing activities by Tenant will
occur prior to the scheduled Commencement Date, Tenant agrees that all of
Tenant's obligations provided for in this Lease shall apply during such period
with the exception of any obligation to pay Rent.
C. ALTERATIONS. Except as provided in the immediately preceding subparagraph,
Tenant shall make no alterations or additions to the Premises without the prior
written consent of the Landlord, which consent Landlord may not unreasonably
withhold.
D. LIENS. Tenant shall give Landlord at least ten (10) days prior written notice
(or such additional time as may be necessary under applicable laws) of the
commencement of any Tenant's Work, to afford Landlord the opportunity of posting
and recording notices of non-responsibility. Tenant will not cause or permit any
mechanic's, materialman's or similar liens or encumbrances to be filed or exist
against the Premises or the Building or Tenant's interest in this Lease in
connection with work done under this Article or in connection with any other
work. Tenant shall remove any such lien or encumbrance by bond or otherwise
within twenty (20) days from the date of their existence. If Tenant fails to do
so, Landlord may pay the amount or take such other action as Landlord deems
necessary to remove any such lien or encumbrance, without being responsible to
investigate the validity thereof. The amounts so paid and costs incurred by
Landlord shall be deemed Additional Rent under this Lease and payable in full
upon demand.
E. COMPLIANCE WITH ADA. Notwithstanding anything to the contrary contained in
this Lease, Landlord and Tenant agree that responsibility for compliance with
the Americans With Disabilities Act of 1990 (the "ADA") shall be allocated as
follows: (i) Landlord shall be responsible for compliance with the provisions of
Title III of the ADA for all Common Areas, including exterior and interior areas
of the Building not included within the Premises or the premises of other
tenants; (ii) Landlord shall be responsible for compliance with the provisions
of Title III of the ADA for any construction, renovations, alterations and
repairs made within the Premises if such construction, renovations, alterations
or repairs are made by Landlord for the purpose of improving the Building
generally or are done as Landlord's Work and the plans and specifications for
the Landlord's Work were prepared by Landlord's architect or space planner and
were not provided by Tenant's architect or space planner; (iii) Tenant shall be
responsible for compliance with the provisions of Title III of the ADA for any
construction, renovations, alterations and repairs made within the Premises if
such construction, renovations, alterations and repairs are made by Tenant, its
employees, agents or contractors, at the direction of Tenant or done pursuant to
plans and specifications prepared or provided by Tenant or Tenant's architect or
space planner.
ARTICLE 6.
USE
A. USE. Tenant shall use the Premises for the purposes set forth in Article 1(P)
herein, and for no other purpose whatsoever, subject to and in compliance with
all other provisions of this Lease, including without limitation, the Building's
Rules and Regulations attached as Exhibit D hereto. Tenant and its invitees
shall also have the non-exclusive right, along with other tenants of the
Building and others authorized by Landlord, to use the Common Areas subject to
such rules and regulations as Landlord in its discretion may impose from time to
time. Landlord makes no representation that the Premises are suitable for
Tenant's purposes.
B. RESTRICTIONS. Tenant shall not at any time use or occupy, or suffer or permit
anyone to use or occupy, the Premises or do or permit anything to be done in the
Premises which: (a) causes or is likely to cause injury to persons, to the
Building or its equipment, facilities or systems; (b) impairs or tends to impair
the character, reputation or appearance of the Building as a first class office
building; (c) impairs or tends to impair the proper and economic maintenance,
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operation and repair of the Building or its equipment, facilities or systems; or
(d) annoys or inconveniences or tends to annoy or inconvenience other tenants or
occupants of the Building.
C. COMPLIANCE WITH LAWS. Tenant shall keep and maintain the Premises, its use
thereof and its business in compliance with all governmental laws, ordinances,
rules and regulations. Tenant shall comply with all Laws relating to the
Premises and Tenant's use thereof, including without limitation, Laws requiring
the Premises to be closed on Sundays or any other days or hours and Laws in
connection with the health, safety and building codes, and any permit or license
requirements.
ARTICLE 7.
SERVICES
A. CLIMATE CONTROL. Landlord shall furnish heat or air conditioning to the
Premises during Normal Business Hours of Building as set forth in Article 1(O)
as required in Landlord's reasonable judgment for the comfortable use and
occupation of the Premises. If Tenant requires heat or air conditioning at any
other time, Landlord shall use reasonable efforts to furnish such service upon
reasonable notice from Tenant, and Tenant shall pay all of Landlord's charges
therefor on demand.
The performance by Landlord of its obligations under this Article is subject to
Tenant's compliance with the terms of this Lease including any connected
electrical load established by Landlord. Tenant shall not use the Premises or
any part thereof in a manner exceeding the heating, ventilating or
air-conditioning ("HVAC") design conditions (including any occupancy or
connected electrical load conditions), including the rearrangement of
partitioning which may interfere with the normal operation of the HVAC
equipment, or the use of computer or data processing machines or other machines
or equipment in excess of that normally required for a standard office use of
the Premises. If any such use requires changes in the HVAC or plumbing systems
or controls servicing the Premises or portions thereof in order to provide
comfortable occupancy, such changes may be made by Landlord at Tenant's expense
and Tenant agrees to promptly pay any such amount to Landlord as Additional
Rent.
B. ELEVATOR SERVICE. If the Building is equipped with elevators, Landlord,
during Normal Business Hours of Building, shall furnish elevator service to
Tenant to be used in common with others. At least one elevator shall remain in
service during all other hours. Landlord may designate a specific elevator for
use as a service elevator.
C. JANITORIAL SERVICES. Landlord shall provide janitorial and cleaning services
to the Premises. Tenant shall pay to Landlord on demand the reasonable costs
incurred by Landlord for (i) any cleaning of the Premises in excess of the
specifications established by Landlord for any reason including, without
limitation, cleaning required because of (A) misuse or neglect on the part of
Tenant or Tenant's agents, contractors, invitees, employees and customers, (B)
the use of portions of the Premises for special purposes requiring greater or
more difficult cleaning work than office areas, (C) interior glass partitions or
unusual quantities of interior glass surfaces, and (D) non-building standard
materials or finishes installed by Tenant or at its request; and (ii) removal
from the Premises of any refuse and rubbish of Tenant in excess of that
ordinarily accumulated in general office occupancy or at times other than
Landlord's standard cleaning times.
D. WATER AND ELECTRICITY. Landlord shall make available domestic water in
reasonable quantities to the common areas of the Building and the Premises and
cause electric service sufficient for lighting the Premises and for the
operation of Ordinary Office Equipment. "Ordinary Office Equipment" shall mean
office equipment wired for 120 volt electric service and rated and using less
than 6 amperes or 750 watts of electric current or other office equipment
approved by Landlord in writing. Landlord shall have the exclusive right to make
any replacement of lamps, fluorescent tubes and lamp ballasts in the Premises.
Landlord may adopt a system of relamping and ballast replacement periodically on
a group basis in accordance with good management practice. Tenant's use of
electric energy in the Premises shall not at any time exceed the capacity of any
of the risers, piping, electrical
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conductors and other equipment in or serving the Premises. In order to insure
that such capacity is not exceeded and to avert any possible adverse effect upon
the Building's electric system, Tenant shall not, without Landlord's prior
written consent in each instance, connect appliances or heavy duty equipment,
other than Ordinary Office Equipment, to the Building's electric system or make
any alteration or addition to the Building's electric system. Should Landlord
grant its consent in writing, all additional risers, piping and electrical
conductors or other equipment therefor shall be provided by Landlord and the
cost thereof shall be paid by Tenant within 10 days of Landlord's demand
therefor. As a condition to granting such consent, Landlord may require Tenant
to agree to an increase in Monthly Rent to offset the expected cost to Landlord
of such additional service, that is, the cost of the additional electric energy
to be made available to Tenant based upon the estimated additional capacity of
such additional risers, piping and electrical conductors or other equipment. If
Landlord and Tenant cannot agree thereon, such cost shall be determined by an
independent electrical engineer, to be selected by Landlord and paid equally by
both parties.
E. SEPARATE METERS. If the Premises are separately metered for any utility,
Tenant shall pay a utility charge to Landlord (or directly to the utility
company, if possible) based upon the Tenant's actual consumption as measured by
the meter. Landlord also reserves the right to install separate meters for the
Premises to register the usage of all or any one of the utilities and in such
event Tenant shall pay for the cost of utility usage as metered to the Premises
and which is in excess of the usage reasonably anticipated by Landlord for
normal office usage of the Premises. Tenant shall reimburse Landlord for the
cost of installation of meters if Tenant's actual usage exceeds the anticipated
usage level by more than 10 percent. In any event, Landlord may require Tenant
to reduce its consumption to the anticipated usage level. The term "utility" for
purposes hereof may refer to but is not limited to electricity, gas, water,
sewer, steam, fire protection system, telephone or other communication or alarm
service, as well as HVAC, and all taxes or other charges thereon.
F. INTERRUPTIONS. Landlord does not warrant that any of the services referred to
above, or any other services which Landlord may supply, will be free from
interruption and Tenant acknowledges that any one or more of such services may
be suspended by reason of accident, repairs, inspections, alterations or
improvements necessary to be made, or by strikes or lockouts, or by reason of
operation of law, or causes beyond the reasonable control of Landlord. Any
interruption or discontinuance of service shall not be deemed an eviction or
disturbance of Tenant's use and possession of the Premises, or any part thereof,
nor render Landlord liable to Tenant for damages by abatement of the Rent or
otherwise, nor relieve Tenant from performance of Tenant's obligations under
this Lease. Landlord shall however, exercise reasonable diligence to restore any
service so interrupted.
G. UTILITIES PROVIDED BY TENANT. Tenant shall make application in Tenant's own
name for all utilities not provided by Landlord and shall: (i) comply with all
utility company regulations for such utilities, including requirements for the
installation of meters, and (ii) obtain such utilities directly from, and pay
for the same when due directly to, the applicable utility company. The term
"utilities" for purposes hereof shall include but not be limited to electricity,
gas, water, sewer, steam, fire protection, telephone and other communication and
alarm services, as well as HVAC, and all taxes or other charges thereon. Tenant
shall install and connect all equipment and lines required to supply such
utilities to the extent not already available at or serving the Premises, or at
Landlord's option shall repair, alter or replace any such existing items. Tenant
shall maintain, repair and replace all such items, operate the same, and keep
the same in good working order and condition. Tenant shall not install any
equipment or fixtures, or use the same, so as to exceed the safe and lawful
capacity of any utility equipment or lines serving the same. The installation,
alteration, replacement or connection of any utility equipment and lines shall
be subject to the requirements for alterations of the Premises set forth in
Article 5. Tenant shall ensure that all Tenant's HVAC equipment is installed and
operated at all times in a manner to prevent roof leaks, damage, or noise due to
vibrations or improper installation, maintenance or operation.
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ARTICLE 8.
INSURANCE
A. TENANT'S REQUIRED INSURANCE. Tenant shall maintain insurance policies, with
responsible companies licensed to do business in the state where the Building is
located and satisfactory to Landlord, naming Landlord, Landlord's Building
Manager, Cornerstone Real Estate Advisers, Inc., Tenant and any Mortgagee of
Landlord, as their respective interests may appear, at its own cost and expense
including (i) "all risk" property insurance which shall be primary on the lease
improvements referenced in Article 5 and Tenant's property, including its goods,
equipment and inventory, in an amount adequate to cover their replacement cost;
(ii) business interruption insurance, (iii) commercial general liability
insurance on an occurrence basis with limits of liability in an amount not less
than $1,000,000 (One Million Dollars) combined single limit for each occurrence.
On or before the Commencement Date of the Lease, Tenant shall furnish to
Landlord and its Building Manager, certificates of insurance evidencing the
aforesaid insurance coverage, including naming Landlord, Cornerstone Real Estate
Advisers, Inc. and Landlord's Building Manager as additional insureds. Renewal
certificates must be furnished to Landlord at least thirty (30) days prior to
the expiration date of such insurance policies showing the above coverage to be
in full force and effect.
All such insurance shall provide that it cannot be canceled except upon thirty
(30) days prior written notice to Landlord. Tenant shall comply with all rules
and directives of any insurance board, company or agency determining rates of
hazard coverage for the Premises, including but not limited to the installation
of any equipment and/or the correction of any condition necessary to prevent any
increase in such rates.
B. LANDLORD'S INSURANCE. Landlord shall maintain, during the Term of this Lease,
property and commercial general liability insurance covering the Building. The
property insurance shall include fire and extended coverage insurance, with All
Risk rider, covering all structures and improvements for full replacement value,
with replacement cost endorsement, above foundation walls. The commercial
general liability insurance shall insure against claims for bodily injury and
property damage occurring in or about the Building. Such insurance may be
blanketed with other insurance carried by Landlord so long as such blanketing
with other insurance does not reduce the amount of insurance available to pay
any claim with respect to the Building.
C. WAIVER OF SUBROGATION. Any provision of this Lease to the contrary
notwithstanding, Landlord and Tenant hereby release the other from any and all
claims for loss or damage to the property of the releasing party, including,
without limitation, the Building and its contents and the Premises and its
contents, all to the extent that the releasing party's loss or damage is
insured, or if not insured, was insurable, under commercially available "All
Risk" property damage insurance policies and even if such loss or damage shall
be caused by or result from the fault or negligence of the releasing party and
even if the releasing party is self-insured or the amount of the releasing
party's insurance is inadequate to cover the loss or damage. It is the intention
of the Landlord and the Tenant that each shall look solely to its respective
property insurance carriers for recovery against any such loss or damage to its
respectively-owned Building and contents and Premises and contents, without such
insurance carrier having any rights of subrogation against the other party.
D. WAIVER OF CLAIMS. Except for claims arising from Landlord's willful
misconduct or gross negligence that are not covered by Tenant's insurance
required hereunder, Tenant waives all claims against Landlord for injury or
death to persons, damage to property or to any other interest of Tenant
sustained by Tenant or any party claiming, through Tenant resulting from: (i)
any occurrence in or upon the Premises, (ii) leaking of roofs, bursting,
stoppage or leaking of water, gas, sewer or steam pipes or equipment, including
sprinklers, (iii) wind, rain, snow, ice, flooding, freezing, fire, explosion,
earthquake, excessive heat or cold, or other casualty, (iv) the Building,
Premises, or the operating and mechanical systems or equipment of the Building,
being defective, or failing, and (v) vandalism, malicious mischief, theft or
other acts or omissions of any other parties including without limitation, other
tenants, contractors and invitees at the Building. Tenant agrees that Tenant's
property loss risks shall be borne by its insurance, and Tenant agrees to look
solely to and seek recovery only from its insurance carriers in the event of
such losses. For purposes hereof, any deductible amount shall be treated as
though it were recoverable under such policies. In no event will Landlord be
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responsible for any consequential damages incurred by Tenant, including but not
limited to, lost profits or interruption of business as a result of any alleged
default by Landlord hereunder.
ARTICLE 9.
INDEMNIFICATION
A. TENANT INDEMNITY OF LANDLORD. Tenant shall defend, indemnify and hold
Landlord and its agents, successors and assigns, including its Building Manager,
harmless from and against all claims, causes of action, liabilities, losses,
costs and expenses arising from or in connection with any injury or other damage
to any person or property (i) which occurs in the Premises (except to the extent
caused by the gross negligence or willful misconduct of Landlord or any employee
or other agent of Landlord) or (ii) which occurs in any part of the Building
other than the Premises and is caused by the negligence or willful misconduct of
Tenant, its agents, contractors, employees, customers, and invitees. This
indemnification shall survive the expiration or termination of the Lease Term.
B. LANDLORD INDEMNITY OF TENANT. Landlord shall defend, indemnify and hold
Tenant harmless from and against all claims, causes of action, liabilities,
losses, costs and expenses arising from or in connection with any injury or
other damage to any person or property in the Building resulting from the gross
negligence or willful misconduct of Landlord, its employees, agents, contractors
or invitees. This indemnification shall survive the expiration or termination of
the Lease Term.
C. INDEMNITY LIMITATIONS. The indemnity obligations set forth in sections A and
B above shall not apply (i) to any costs or expenses not reasonably incurred by
the indemnitee or (ii) to any claims, causes of action, liabilities, losses,
costs and expenses resulting from a default by the indemnitee hereunder.
D. INDEMNITEES; ACCEPTABLE ATTORNEYS. Whenever, in this Article and throughout
this Lease, Landlord or Tenant is required to defend, indemnify and hold the
other harmless, such obligations shall extend to the successors, assigns,
officers, partners, directors, employees and other agents of the indemnitee. In
any instance where this Lease requires either party to defend the other, such
defense shall involve an attorney or attorneys reasonably acceptable to the
indemnitee.
E. LIMITATION ON LIABILITY. Landlord shall not be liable to Tenant for any
damage by or from any act or negligence of any co-tenant or other occupant of
the Building, or by any owner or occupants of adjoining or contiguous property.
Landlord shall not be liable for any injury or damage to persons or property
resulting in whole or in part from the criminal activities or willful misconduct
of others. To the extent not covered by all risk property insurance, Tenant
agrees to pay for all damage to the Building, as well as all damage to persons
or property of other tenants or occupants thereof, caused by the negligence,
fraud or willful misconduct of Tenant or any of its agents, contractors,
employees, customers and invitees. Nothing contained herein shall be construed
to relieve Landlord from liability for any personal injury resulting from its
gross negligence, fraud or willful misconduct.
ARTICLE 10.
CASUALTY DAMAGE
Tenant shall promptly notify Landlord or the Building Manager of any fire or
other casualty to the Premises or to the extent it knows of damage, to the
Building. In the event the Premises or any substantial part of the Building is
wholly or partially damaged or destroyed by fire or other casualty which is
covered by Landlord's insurance, the Landlord will proceed to restore the same
to substantially the same condition existing immediately prior to such damage or
destruction unless (i) such damage or destruction is incapable of repair or
restoration within one hundred eighty (180) days; or (ii) the insurance proceeds
recovered by reason of the damage or destruction are, in Landlord's sole
judgment, inadequate to complete the restoration of the Building; or (iii)
Landlord elects not to repair or restore the Building, in
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any of which events Landlord may, at Landlord's option and by written notice
given to Tenant within sixty (60) days of such damage or destruction, declare
this Lease terminated as of the happening of such damage or destruction. To the
extent after fire or other casualty that Tenant shall be deprived of the use and
occupancy of the Premises or any portion thereof as a result of any such damage,
destruction or the repair thereof, if Tenant caused the fire or other casualty,
then so long as and to the extent Landlord's recovery of Rent as the result of a
casualty is covered by insurance, Tenant shall be relieved of the same ratable
portion of the Monthly Rent hereunder as the amount of damaged or useless space
in the Premises bears to the rentable square footage of the Premises until such
time as the Premises may be restored. Landlord shall reasonably determine the
amount of damaged or useless space and the square footage of the Premises
referenced in the prior sentence and whether or not its insurance covers the
payment of Rent.
ARTICLE 11.
CONDEMNATION
In the event of a condemnation or taking of the entire Premises by a public or
quasi-public authority, this Lease shall terminate as of the date title vests in
the public or quasi-public authority. In the event of (i) a taking or
condemnation of fifteen percent (15%) or more (but less than the whole) of the
Building and without regard to whether the Premises are part of such taking or
condemnation; (ii) a taking or condemnation which results in Landlord electing
not to restore the Building; or (iii) a taking or condemnation which results in
Landlord electing to change the use of the land upon which the Building is
located, Landlord may elect to terminate this Lease by giving notice to Tenant
within sixty (60) days of Landlord receiving notice of such condemnation. All
compensation awarded for any condemnation shall be the property of Landlord,
whether such damages shall be awarded as a compensation for diminution in the
value of the leasehold or to the fee of the Premises, and Tenant hereby assigns
to Landlord all of Tenant's right, title and interest in and to any and all such
compensation. Providing, however that in the event this Lease is terminated,
Tenant shall be entitled to make a separate claim for the taking of Tenant's
personal property (including fixtures paid for by Tenant), and for costs of
moving. Notwithstanding anything herein to the contrary, any condemnation award
to Tenant shall be available only to the extent such award is payable separately
to Tenant and does not diminish the award available to Landlord or any Lender of
Landlord. Any additional portion of such award shall belong to Landlord.
ARTICLE 12.
REPAIR AND MAINTENANCE
A. TENANT'S OBLIGATIONS. Tenant shall keep the Premises in good working order,
repair and condition (which condition shall be neat, clean and sanitary) and in
compliance with all Laws now or hereafter adopted pertaining to the Premises and
shall diligently maintain and repair all nonstructural aspects of the Premises
not included in Landlord's obligations below.
B. LANDLORD'S OBLIGATIONS. Landlord shall maintain (i) the foundations, roof,
perimeter walls and exterior windows, and all structural aspects of the
Building, and (ii) all nonstructural aspects of the Building which relate to the
Common Areas or to more than one tenant's premises, or which no tenant of the
Building is required to maintain and repair, including all systems and
facilities necessary for the operation of the Building and the provision of
services and utilities as required herein (except to the extent that any of the
foregoing items are installed by or on behalf of, or are the property of,
Tenant). Landlord shall also make any necessary repairs to the Building standard
mechanical, HVAC, electrical, and plumbing systems in or servicing the Premises
(the cost of which shall be included in Operating Expenses under Article 4),
excluding repairs required to be made by Tenant pursuant to this Article.
Landlord shall have no responsibility to make any repairs unless and until
Landlord receives written notice of the need for such repair or otherwise
becomes aware. Landlord shall not be liable for any failure to make repairs or
to perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need for such repairs or maintenance is
received by Landlord from Tenant or after Landlord otherwise becomes aware.
Landlord shall make every
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reasonable effort to perform all such repairs or maintenance in such a manner
(in its judgment) so as to cause minimum interference with Tenant and the
Premises but Landlord shall not be liable to Tenant for any interruption or loss
of business pertaining to such activities. Landlord shall have the right to
require that any damage caused by the willful misconduct of Tenant or any of
Tenant's agents, contractors, employees, invitees or customers, be paid for and
performed by the Tenant (without limiting Landlord's other remedies herein).
C. GENERAL OBLIGATIONS. Alterations to the Premises required from time to time
to comply with applicable laws, requirements of any board of property insurance
underwriters or similar entity, or reasonable requirements of Landlord's or
Tenant's insurers shall be made by the party to this Lease responsible for
maintaining and repairing the applicable aspect of the Premises hereunder.
Notwithstanding the foregoing, in the event that Landlord is required to make
any such alteration as the result of any use of the Premises by Tenant (i) which
was not contemplated at the time this Lease was signed and (ii) which is not
common to 50% or more of the tenants of the Building, Tenant shall reimburse
Landlord upon demand for all expenses reasonably incurred by Landlord in
connection therewith. If reasonably necessary to comply with changes in
applicable laws and requirements, Landlord may take back a portion or portions
of the Premises provided that the Monthly Rent and Additional Rent shall be
abated in proportion to any resulting impairment of Tenant's use of the
Premises. Landlord warrants to Tenant that, as of the Commencement Date, all
aspects of the Premises comprising Landlord's Work, if any, shall comply with
all applicable laws, with the requirements of Landlord's insurers, and with the
requirements of all boards of property insurance underwriters and similar
entities.
D. SIGNS AND OBSTRUCTIONS. Tenant shall not obstruct or permit the obstruction
of light, halls, Common Areas, roofs, parapets, stairways or entrances to the
Building or the Premises and will not affix, paint, erect or inscribe any sign,
projection, awning, signal or advertisement of any kind to any part of the
Building or the Premises, including the inside or outside of the windows or
doors, without the written consent of Landlord. Landlord shall have the right to
withdraw such consent at any time and to require Tenant to remove any sign,
projection, awning, signal or advertisement to be affixed to the Building or the
Premises if such sign, etc. is later determined to obstruct the foregoing areas.
If such work is done by Tenant through any person, firm or corporation not
designated by Landlord, or without the express written consent of Landlord,
Landlord shall have the right to remove such signs, projections, awnings,
signals or advertisements without being liable to the Tenant by reason thereof
and to charge the cost of such removal to Tenant as Additional Rent, payable
within ten (10) days of Landlord's demand therefor.
E. OUTSIDE SERVICES. Tenant shall not permit, except by Landlord or a person or
company reasonably satisfactory to and approved by Landlord: (i) the
extermination of vermin in, on or about the Premises; (ii) the servicing of
heating, ventilating and air conditioning equipment; (iii) the collection of
rubbish and trash other than in compliance with local government health
requirements and in accordance with the rules and regulations established by
Landlord, which shall minimally provide that Tenant's rubbish and trash shall be
kept in containers located so as not to be visible to members of the public and
in a sanitary and neat condition; or (iv) window cleaning, janitorial services
or similar work in or about the Premises.
ARTICLE 13.
INSPECTION OF PREMISES
Tenant shall permit the Landlord, the Building Manager and its authorized
representatives to enter the Premises to show the Premises during Normal
Business Hours of Building and at other reasonable times to inspect the Premises
and to make such repairs, improvements, alterations or additions in the Premises
or in the Building of which they are a part as Landlord may deem necessary or
appropriate.
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ARTICLE 14.
SURRENDER OF PREMISES
Upon the expiration of the Term, or sooner termination of the Lease, Tenant
shall quit and surrender to Landlord the Premises, broom clean, in good order
and condition, normal wear and tear and damage by fire and other casualty
excepted. All leasehold improvements and other fixtures, such as light fixtures
and HVAC equipment, wall coverings, carpeting and drapes, in or serving the
Premises, whether installed by Tenant or Landlord, shall be Landlord's property
and shall remain, all without compensation, allowance or credit to Tenant. Any
property not removed shall be deemed to have been abandoned by Tenant and may be
retained or disposed of by Landlord at Tenant's expense free of any and all
claims of Tenant, as Landlord shall desire. All property not removed from the
Premises by Tenant may be handled or stored by Landlord at Tenant's expense and
Landlord shall not be liable for the value, preservation or safekeeping thereof.
At Landlord's option all or part of such property may be conclusively deemed to
have been conveyed by Tenant to Landlord as if by bill of sale without payment
by Landlord. The Tenant hereby waives to the maximum extent allowable the
benefit of all laws now or hereafter in force in this state or elsewhere
exempting property from liability for rent or for debt.
ARTICLE 15.
HOLDING OVER
Tenant shall pay Landlord 150% for the first (1st) month and 200% thereafter of
the amount of Rent then applicable prorated on a per diem basis for each day
Tenant shall retain possession of the Premises or any part thereof after
expiration or earlier termination of this Lease, together with all damages
sustained by Landlord on account thereof. Notwithstanding the foregoing, if
Tenant and Landlord are in good faith negotiations to extend the Term of the
Lease or Landlord has otherwise given its written consent to permit Tenant to
holdover at an agreed-upon rate, then Tenant shall not be liable to pay the
foregoing holdover Rent during such period. However, if Tenant and Landlord are
not negotiating in good faith as of the expiration of the Term, or do not enter
into an amendment to extend the Term within thirty (30) days following the
expiration of the Term, using good faith efforts, then Tenant shall pay the
holdover rates specified herein. The foregoing provisions shall not serve as
permission for Tenant to hold-over, nor serve to extend the Term (although
Tenant shall remain bound to comply with all provisions of this Lease until
Tenant vacates the Premises) and Landlord shall have the right at any time
thereafter to enter and possess the Premises and remove all property and persons
therefrom. No acceptance by Landlord of any Rent during or for any period
following the expiration of termination of the Lease shall operate or be
construed as an extension or renewal of the Lease Term. Should Tenant remain in
the Premises on a month-to-month basis with Landlord's approval, such
month-to-month tenancy may be cancelled by either party with thirty (30) days'
prior written notice or such lesser time period as may be permitted by law.
ARTICLE 16.
SUBLETTING AND ASSIGNMENT
A. LANDLORD'S CONSENT. Tenant shall not assign its interests hereunder, sublease
all or any portion of the Premises (for purposes of this Lease, a license shall
be deemed to be a sublease), or allow any other person to use or occupy any
portion of the Premises, without the prior written consent of Landlord, which
shall not be unreasonably withheld, except that Landlord shall not, under any
circumstances, be obligated to consent to any assignment or subletting by Tenant
(i) to any other tenant of the Building, (ii) by operation of law, or (iii) to
any person who fails to meet any of the other reasonable criteria of Landlord
that Tenant was required to meet prior to the execution of this Lease,
including, without limitation, the following:
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a. The financial strength of the proposed assignee or
subtenant, both in terms of net worth and in terms of reasonably
anticipated cash flow over the Lease term, is not materially less than
Tenant's financial strength at the time this Lease was signed or at the
time of such assignment or sublease, whichever is greater.
b. The proposed assignee or subtenant will not burden the
Premises and/or Common Areas to an extent substantially
disproportionate to typical tenants of the Building, whether through
disproportionate demand for landlord services or utilities,
disproportionate bearing weights on floor areas, disproportionate
parking requirements, deterioration of floors or other elements of the
Building, or otherwise.
c. The proposed assignee or subtenant does not intend to make
substantial alterations to the Premises which would, in Landlord's
reasonable judgment, result in a material net decrease in the value of
the Premises as improved.
d. The proposed assignee's or subtenant's use of the Premises
will, in Landlord's sole judgment, be compatible with the uses of the
other tenants in the Building or will be appropriate for a first class
office building.
e. Any other basis on which Landlord can reasonably refuse to
withhold its consent to the proposed assignment or sublease, including
any failure of the proposed assignee or subtenant to meet any of the
reasonable criteria of Landlord that Tenant was required to meet prior
to the execution of this Lease.
With respect to any proposed assignment or subleasing requiring Landlord's
consent, Tenant shall submit to Landlord in writing, at least 60 days prior to
the effective date of the assignment or sublease, (i) a notice of application to
assign or sublease, setting forth the proposed effective date, which shall be
not less than 60 or more than 90 days after the delivery of such notice; (ii)
the name of the proposed transferee; (iii) the nature of the proposed
transferee's business to be carried on in the Premises; (iv) the terms of the
proposed sublease or assignment; and (v) a current financial statement of the
proposed transferee. Tenant shall not submit any such application to Landlord
until Tenant has received a bona fide offer from the proposed transferee, and
Tenant shall furnish Landlord, in addition to the foregoing, with all other
information reasonably required by Landlord with respect to such transfer and
transferee. Any transfer (or sequence of transfers resulting, in the aggregate,
in the transfer) of 50% or more of the beneficial ownership of Tenant shall
constitute an assignment for purposes of this Article.
B. TRANSFERS NOT REQUIRING CONSENT. Notwithstanding the foregoing, Landlord's
consent shall not be required with respect to (i) any assignment resulting from
a consolidation, merger or purchase of substantially all of Tenant's assets; or
(ii) any assignment or sublease to a person (a) who wholly owns Tenant or who
wholly owns the person who wholly owns Tenant (in either case, a "Parent"), or
who is wholly owned by Tenant or a Parent, or is wholly owned by a person who is
wholly owned by Tenant or a Parent, and (b) whose financial strength, both in
terms of net worth and in terms of reasonably anticipated cash flow over the
Lease term, is not materially less than Tenant's financial strength at the time
this Lease was executed or at the time of such assignment or sublease, whichever
is greater. With respect to any assignment or subletting to which Landlord's
consent is not required, the following provisions shall apply:
1. Tenant shall give Landlord written notice of the assignment
or subletting no less than 45 days prior to the effective date thereof, which
notice shall set forth the identity of the proposed transferee, the reason(s)
why Landlord's consent is not required, and the nature of the proposed
transferee's business to be carried on in the Premises.
2. Tenant shall furnish Landlord (a) no less than 30 days
prior to the effective date of the assignment or subletting, with a current
financial statement of the proposed transferee reasonably acceptable to
Landlord, and (b) within three (3) days following Landlord's demand, with all
other information reasonably requested by Landlord with respect to such
transferee.
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Any assignment or subletting to which Landlord's consent is not required and
with respect to which the provisions of this paragraph are not complied with
shall, at Landlord's option, be void.
C. RECAPTURE. Except for transfers under Article 16B above, Landlord shall have
the option to be exercised within fifteen (15) business days from the submission
of the aforesaid information to cancel this Lease with respect to the space to
be assigned or the space to be sublet for the duration of the proposed sublease.
In the event that Landlord exercises its right hereunder to terminate this Lease
and recapture the space, Landlord agrees that Tenant shall be released as of the
effective date of the termination from all obligations hereunder with respect to
the space assigned or sublet, except for those obligations which survive Lease
termination or expiration.
D. NET REVENUES.
1. SUBLEASE REVENUES. In the event that Tenant subleases all
or any portion of the Premises and the total of all amounts payable to Tenant
for any month under any such sublease exceeds the total of all amounts payable
to Landlord hereunder for such month for the same space, such net sublease
revenues ("Net Sublease Revenues") received by Tenant for any month shall be
paid to Landlord within 5 business days thereafter.
2. ASSIGNMENT REVENUES. In the event that Tenant assigns this
Lease with respect to all or any portion of the Premises (the "assigned
premises"), Tenant shall pay to Landlord the amount, if any, by which all
amounts paid to Tenant in consideration of such assignment exceed the sum of (a)
all Monthly Rent and Additional Rent paid by Tenant for the assigned premises
for the period from the date Tenant vacated the same (and provided Landlord with
written notice of such vacation) until the effective date of the assignment and
(b) all brokerage commissions reasonably incurred by the assigning tenant in
connection with such assignment.
E. CONTINUING LIABILITY; VOIDABLE TRANSFERS. No assignment of this Lease (other
than an assignment to Landlord resulting from Landlord's right of recapture),
and no subletting of all or any portion of the Premises, shall release Tenant or
any guarantor with respect to any post-transfer obligations, unless Landlord
agrees otherwise in writing in its absolute discretion and any such assignment
or sublease shall, at Landlord's option, be void in the event that Tenant and
each such guarantor, if any, does not expressly acknowledge and affirm its
continuing liability in form and substance reasonably satisfactory to Landlord.
The continuing liability of the assigning Tenant shall be primary, and Landlord
shall be entitled to exercise its rights and remedies against any such assignor
with respect to any Tenant Default without exhausting its rights and remedies
against any successor of such assignor. In the event that it is ever held,
notwithstanding the contrary intention of the parties hereto, that any such
assignor's continuing liability is that of a guarantor (rather than primary),
Tenant hereby waives any and all suretyship rights and defenses to which it
would otherwise be entitled in connection with such continuing liability.
Notwithstanding the foregoing, in the event that, following any assignment
(other than an assignment described in Section B, above), Landlord and such
assignee modify this Lease in such a way as to increase Tenant's total
obligations hereunder, neither the assigning Tenant nor any guarantor whose
guaranty pre-dated such assignment shall be liable for the incremental portion
of Tenant's obligations corresponding to such increase. The acceptance of any
assignment by an assignee shall automatically constitute the assumption by such
assignee of all obligations of Tenant with respect to the assigned premises that
accrue following the assignment; provided, however, that any assignment of this
Lease shall, at Landlord's option, be void in the event that the assignee does
not expressly acknowledge and affirm the effectiveness of the foregoing
assumption in form and substance reasonably satisfactory to Landlord. Any
assignment or subletting by Tenant to which Landlord's consent is required but
not obtained shall, at Landlord's option, be void. Following Landlord's consent,
or refusal to consent, to any assignment or sublease, Tenant shall pay Landlord,
upon demand, a reasonable charge (not to exceed $500.00) to cover Landlord's
administrative and out-of-pocket costs in connection therewith.
F. OTHER PROVISIONS APPLICABLE TO TRANSFERS. No assignment or subletting shall
be deemed to modify any provision of this Lease, with respect to permitted or
restricted uses of the Premises or otherwise, unless Landlord then agrees
otherwise in writing in its absolute discretion. Tenant shall promptly furnish
Landlord with a copy of each
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executed assignment or sublease, and with copies of any supplements or
modifications thereto which may be executed from time to time.
G. ASSIGNMENT OF SUBLEASE REVENUES. Tenant hereby absolutely assigns to Landlord
all of Tenant's right, title and interest in and to all revenues from each
sublease of all or any portion of the Premises; provided, however, that Landlord
hereby grants Tenant a license, which shall remain in effect so long as no
Tenant default remains uncured, to collect all such revenues (subject to
Tenant's obligation to deliver certain of such revenues to Landlord under this
Article). Upon the occurrence of any Tenant default, Landlord may revoke such
license by written notice to Tenant and may, by written notice to any subtenant
of Tenant, demand that such subtenant pay all such revenues directly to
Landlord. In such event Tenant hereby irrevocably authorizes and directs any
such subtenant to pay such revenues to Landlord, and further agrees (a) that any
such subtenant shall be obligated and entitled to pay such revenues to Landlord
notwithstanding any contrary contentions or instructions later received from
Tenant and (b) that no such subtenant shall have any liability to Tenant for any
such revenues paid to Landlord in accordance with the foregoing. Landlord shall
not be entitled to use or enjoy any such revenues except for the purpose of
applying such revenues against unfulfilled obligations of Tenant hereunder with
respect to which the applicable cure periods have expired, or to reimburse
Landlord for costs reasonably incurred as a result of any Tenant default, or to
compensate Landlord for other losses suffered by Landlord as a result of any
Tenant default. Any such revenues remaining in Landlord's possession following
the cure of all Tenant defaults and the reimbursement of all such costs and
losses shall be delivered to Tenant upon demand. No such notice to any subtenant
or receipt of revenues from any subtenant shall be deemed to constitute either
(i) Landlord's consent to such sublease or (ii) the assumption by Landlord of
any obligation of Tenant under such sublease, nor shall any such notice or
receipt create privity of contract between Landlord and the applicable subtenant
or be construed as a nondisturbance or similar agreement between Landlord and
such subtenant.
H. TRANSFERS BY SUBTENANTS. The provisions of this Article shall also apply to
assignments and subleases by subtenants, sub-subtenants and so on.
I. ASSIGNMENT OF OPTIONS. Without limiting the generality of any provision of
this Lease which states that any option or other right of Tenant is personal to
the original Tenant hereunder or may only be assigned under certain conditions,
no option or similar right of Tenant hereunder, including without limitation any
option to extend or renew, option to expand, first offer or first refusal right,
or first right to lease, may be assigned except in connection with an assignment
under Article 16B above, and any attempt to assign such right shall be null and
void.
J. ENCUMBRANCE. Tenant shall not assign its interests hereunder as security for
any obligation without Landlord's prior written consent, which may be withheld
in Landlord's absolute discretion, and any such assignment without such consent
shall, at Landlord's option, be void.
ARTICLE 17.
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter placed
upon the Building, and all other encumbrances and matters of public record
applicable to the Building, including without limitation, any reciprocal
easement or operating agreements, covenants, conditions and restrictions and
Tenant shall not act or permit the Premises to be operated in violation thereof.
If any foreclosure or power of sale proceedings are initiated by any Lender or a
deed in lieu is granted (or if any ground lease is terminated), Tenant agrees,
upon written request of any such Lender or any purchaser at such foreclosure
sale and upon receipt of a reasonably satisfactory subordination,
non-disturbance and attornment agreement, to attorn and pay Rent to such party
and to execute and deliver any instruments necessary or appropriate to evidence
or effectuate such attornment. In the event of attornment, no Lender shall be:
(i) liable for any act or omission of Landlord, or subject to any offsets or
defenses which Tenant might have against Landlord (prior to such Lender becoming
Landlord under such attornment), (ii) liable for any security deposit or bound
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by any prepaid Rent not actually received by such Lender, or (iii) bound by any
future modification of this Lease not consented to by such Lender. Any Lender
may elect to make this Lease prior to the lien of its Mortgage, and if the
Lender under any prior Mortgage shall require, this Lease shall be prior to any
subordinate Mortgage; such elections shall be effective upon written notice to
Tenant. Tenant agrees to give any Lender by certified mail, return receipt
requested, a copy of any notice of default served by Tenant upon Landlord,
provided that prior to such notice Tenant has been notified in writing (by way
of service on Tenant of a copy of an assignment of leases, or otherwise) of the
name and address of such Lender. Tenant further agrees that if Landlord shall
have failed to cure such default within the time permitted Landlord for cure
under this Lease, any such Lender whose address has been so provided to Tenant
shall have an additional period of thirty (30) days in which to cure (or such
additional time as may be required due to causes beyond such Lender's control,
including time to obtain possession of the Building by power of sale or judicial
action or deed in lieu of foreclosure). The provisions of this Article shall be
self-operative; however, Tenant shall execute such documentation as Landlord or
any Lender may request from time to time in order to confirm the matters set
forth in this Article in recordable form. To the extent not expressly prohibited
by Law, Tenant waives the provisions of any Law now or hereafter adopted which
may give or purport to give Tenant any right or election to terminate or
otherwise adversely affect this Lease or Tenant's obligations hereunder if such
foreclosure or power of sale proceedings are initiated, prosecuted or completed.
ARTICLE 18.
ESTOPPEL CERTIFICATE
Tenant shall from time to time, upon written request by Landlord or Lender,
deliver to Landlord or Lender, within ten (10) days from receipt of such
request, a statement in writing certifying: (i) that this Lease is unmodified
and in full force and effect (or if there have been modifications, identifying
such modifications and certifying that the Lease, as modified, is in full force
and effect); (ii) the dates to which the Rent has been paid; (iii) that Landlord
is not in default under any provision of this Lease (or if Landlord is in
default, specifying each such default); and, (iv) the address to which notices
to Tenant shall be sent; it being understood that any such statement so
delivered may be relied upon in connection with any lease, mortgage or transfer.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that: (i) this Lease is in full force and effect and not modified
except as Landlord may represent; (ii) not more than one month's Rent has been
paid in advance; (iii) there are no defaults by Landlord; and, (iv) notices to
Tenant shall be sent to Tenant's Address as set forth in Article 1 of this
Lease. Notwithstanding the presumptions of this Article, Tenant shall not be
relieved of its obligation to deliver said statement.
ARTICLE 19.
DEFAULTS
A. TENANT DEFAULTS. The occurrence of any of the following shall constitute a
"default" by Tenant hereunder:
(a) Tenant fails to pay when due any installment or other payment of
Rent, or any other amount owing to Landlord, within five (5) days of
its receipt of written notice of such failure; however, Landlord shall
only be obligated to provide written notice to Tenant once in each
Lease Year; thereafter, no notice shall be due from Landlord to Tenant
and Tenant shall be in default if it fails to pay such amounts when
due, or
(b) Tenant fails to keep in effect any insurance required to be
maintained, and such failure continues for thirty (30) days after
notice thereof given by or on behalf of Landlord, or
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(c) Tenant abandons the Premises, or
(d) Tenant becomes insolvent, makes an assignment for the benefit of
creditors, files a voluntary petition in bankruptcy or an involuntary
petition is filed against Tenant which petition is not dismissed within
sixty (60) days of its filing, or if a receiver shall be appointed for
its business or its assets and the appointment of such receiver is not
vacated within sixty (60) days after such appointment, or
(e) Tenant fails to perform or observe any of the other covenants,
conditions or agreements contained herein on Tenant's part to be kept
or performed or breaches a representation made hereunder, and such
failure shall continue for thirty (30) days after notice thereof given
by or on behalf of Landlord, or if such default is curable but cure
cannot reasonably be effected within such thirty (30) day period, such
default shall not be a default hereunder so long as Tenant promptly
commences cure within ten (10) days and thereafter diligently
prosecutes such cure to completion, or
(f) If the interest of Tenant shall be offered for sale or sold under
execution or other legal process or if Tenant makes any transfer,
assignment, conveyance, sale, pledge, disposition of all or a
substantial portion of Tenant's property, or
(g) The chronic delinquency by Tenant in the payment of Monthly Rent,
or any other periodic payments required to be paid by Tenant under the
Lease. "Chronic delinquency" shall mean failure by Tenant to pay Rent,
or any other periodic payments required to be paid by Tenant under this
Lease within five (5) days after written notice thereof for any three
(3) months (consecutive or nonconsecutive) during any twelve (12) month
period. In the event of a chronic delinquency, at Landlord's option,
Landlord shall have the additional right to require that Rent be paid
by Tenant quarter-annually, in advance. This provision shall in no way
modify Tenant's obligation to pay Rent on the first (1st) day of the
month.
B. LANDLORD DEFAULTS. If any alleged default on the part of the Landlord
hereunder occurs, Tenant shall give written notice to Landlord in the manner
herein set forth and shall afford Landlord a period of thirty (30) days within
which to cure such default, or such reasonable extended period of time if such
cure can be completed but cannot reasonably be effected within such thirty (30)
day period so long as Landlord diligently pursues such cure to completion. In
addition, Tenant shall send notice of such default by certified or registered
mail, postage prepaid, to the holder of any Mortgage whose address Tenant has
been notified of in writing, and shall afford such Mortgage holder a reasonable
opportunity to cure any alleged default on Landlord's behalf.
ARTICLE 20.
REMEDIES
A. LANDLORD REMEDIES. The remedies provided Landlord under this Lease are
cumulative. Upon the occurrence of any default by Tenant, and in addition to any
and all other rights provided a Landlord under law or equity for breach of a
lease or tenancy by a Tenant, Landlord shall have the right to pursue one or
more of the following remedies:
(a) Landlord may serve notice on Tenant that the Term and the estate
hereby vested in Tenant and any and all other rights of Tenant hereunder shall
cease on the date specified in such notice and on the specified date this Lease
shall cease and expire as fully and with the effect as if the Term had expired
for passage of time.
(b) Without terminating this Lease in case of a default or if this
Lease shall be terminated for default as provided herein, Landlord may re-enter
the Premises, remove Tenant, or cause Tenant to be removed from the Premises in
such manner as Landlord may deem advisable, with legal process.
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In the event of re-entry without terminating this Lease, Tenant shall continue
to be liable for all rents and other charges accruing or coming due under this
Lease which Rent if not paid in accordance with the terms herein shall
automatically accelerate and become immediately due and payable.
(c) If Landlord, without terminating this Lease, shall re-enter the
Premises or if this Lease shall be terminated as provided in paragraph (a)
above:
(i) All Rent due from Tenant to Landlord shall thereupon
become due and shall be paid up to the time of
re-entry, dispossession or expiration, together with
reasonable costs and expenses (including, without
limitation, any legal fees and expenses) of Landlord
(ii) Landlord, without any obligation to do so except as
may be required by applicable law, may relet the
Premises or any part thereof for a term or terms
which may at Landlord's option be less than or exceed
the period which would otherwise have constituted the
balance of the Term and may grant such concessions in
reletting as Landlord, in the exercise of its
reasonable business judgment, deems desirable. In
connection with such reletting, Tenant shall be
liable for all costs of the reletting including,
without limitation, leasing commissions, legal fees
and alteration and remodeling costs;
(iii) If Landlord shall have terminated this Leaes, Tenant
shall also be liable to Landlord for all damages
provided for in law and under this Lease resulting
from Tenant's breach including, without limitation,
the difference between the aggregate Rents reserved
under the terms of this Lease for the balance of the
Term together with all other sums payable hereunder
as Rent for the balance of the Term, less the fair
rental value of the Premises for that period
determined as of the date of such termination. For
purposes of this paragraph, Tenant shall be deemed to
include any guarantor or surety of the Lease.
(d) Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations (and with the
understanding that Landlord is under no obligation to relet the Premises under
any conditions so long as there is comparable space available in the Building
for lease).
(e) Whether or not Landlord terminates this Lease, Landlord shall have
the right, as Landlord chooses in its absolute discretion, (i) to terminate any
or all subleases, licenses, concessions and other agreements entered into by
Tenant in connection with its occupancy of the Premises and/or (ii) to maintain
any or all such agreements in effect and succeed to Tenant's interests in
connection therewith (in which event Tenant shall cease to have any interest in
any such agreement).
B. TENANT REMEDIES. Upon the occurrence of any default by Landlord, Tenant
shall, except as otherwise expressly provided herein, have all rights and
remedies provided hereunder and by law from time to time; provided, however,
that Tenant shall in no event have the right to terminate this Lease except as
expressly provided herein or as provided by law.
ARTICLE 21.
QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that so long as Tenant pays the Rent
and observes and performs all the terms, covenants, and conditions of this Lease
on Tenant's part to be observed and performed, Tenant may peaceably
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and quietly enjoy the Premises subject, nevertheless, to the terms and
conditions of this Lease, and Tenant's possession will not be disturbed by
anyone claiming by, through, or under Landlord.
ARTICLE 22.
ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of an amount less than full payment
of Rent then due and payable shall be deemed to be other than on account of the
Rent then due and payable, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
provided for in this Lease or available at law or in equity.
ARTICLE 23.
SECURITY DEPOSIT
To secure the faithful performance by Tenant of all of the covenants, conditions
and agreements set forth in this Lease to be performed by it, including, without
limitation, the foregoing covenants, conditions and agreements in this Lease
which become applicable upon its termination by re-entry or otherwise, Tenant
has deposited with Landlord the sum shown in Article 1 as a "Security Deposit"
on the understanding:
(a) that the Security Deposit or any portion thereof may be
applied to the curing of any default that may exist, without
prejudice to any other remedy or remedies which the Landlord
may have on account thereof, and upon such application Tenant
shall pay Landlord on demand the amount so applied which shall
be added to the Security Deposit so the same will be restored
to its original amount;
(b) that should the Premises be conveyed by Landlord, the Security
Deposit or any balance thereof may be turned over to the
Landlord's grantee, and if the same be turned over as
aforesaid, Tenant hereby releases Landlord from any and all
liability with respect to the Security Deposit and its
application or return, and Tenant agrees to look solely to
such grantee for such application or return;
(c) that Landlord may commingle the Security Deposit with other
funds and not be obligated to pay Tenant any interest;
(d) that the Security Deposit shall not be considered as advance
payment of Rent or a measure of damages for any default by
Tenant, nor shall it be a bar or defense to any actions by
Landlord against Tenant;
(e) that if Tenant shall faithfully perform all of the covenants
and agreements contained in this Lease on the part of the
Tenant to be performed, the Security Deposit or any then
remaining balance thereof, shall be returned to Tenant,
without interest, within thirty (30) days after the expiration
of the Term. Tenant further covenants that it will not assign
or encumber the money deposited herein as a Security Deposit
and that neither Landlord nor its successors or assigns shall
be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance.
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ARTICLE 24.
BROKERAGE COMMISSION
Landlord and Tenant represent and warrant to each other that neither has dealt
with any broker, finder or agent except for the Broker(s) identified in Article
1. Tenant and Landlord represent and warrant to the other that (except with
respect to the Broker(s) identified in Article 1) no broker, agent, commission
salesperson, or other person has represented either party in the negotiations
for and procurement of this Lease and of the Premises and that no commissions,
fees, or compensation of any kind are due and payable in connection herewith to
any broker, agent, commission salesperson, or other person. Each party agrees to
indemnify the other and hold the other harmless from any and all claims, suits,
or judgments (including, without limitation, reasonable attorneys' fees and
court costs incurred in connection with any such claims, suits, or judgments, or
in connection with the enforcement of this indemnity) for any fees, commissions,
or compensation of any kind which arise out of or are in any way connected with
any claimed agency relationship not referenced in Article 1. Landlord shall pay
its Broker a commission pursuant to a separate agreement, and Landlord's Broker
shall pay Tenant's Broker a commission pursuant to a separate agreement between
Landlord's Broker and Tenant's Broker.
ARTICLE 25.
FORCE MAJEURE
Landlord shall be excused for the period of any delay in the performance of any
obligation hereunder when prevented from so doing by a cause or causes beyond
its control, including all labor disputes, civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any material or services, or through acts of God. Tenant
shall similarly be excused for delay in the performance of any obligation
hereunder; provided:
(a) nothing contained in this Section or elsewhere in this Lease
shall be deemed to excuse or permit any delay in the payment
of the Rent, or any delay in the cure of any default which may
be cured by the payment of money;
(b) no reliance by Tenant upon this Section shall limit or
restrict in any way Landlord's right of self-help as provided
in this Lease; and
(c) Tenant shall not be entitled to rely upon this Section unless
it shall first have given Landlord written notice of the
existence of any force majeure preventing the performance of
an obligation of Tenant within five days after the
commencement of the force majeure.
ARTICLE 26.
PARKING
(a) Landlord hereby grants to Tenant the right, in common with others
authorized by Landlord, to use the parking facilities owned by Landlord, if any,
and to use no more than the number of parking spaces made available to Tenant in
the parking ratio set forth in Article 1(R) notwithstanding the number of
Tenant's employees, customers or invitees. Landlord, at its election, may
designate the types and locations of parking spaces within the parking
facilities which Tenant shall be allowed to use. Landlord shall have the right,
at Landlord's election, to change said types and locations from time to time.
(b) Commencing on the Commencement Date, Tenant shall pay Landlord the
Parking Fee, if any, shown in Article 1, as Additional Rent, payable monthly in
advance with the Monthly Rent. If there is a Parking Fee shown in Schedule 1,
then thereafter, and throughout the Term, the parking rate for each type of
parking space provided to Tenant hereunder shall be the prevailing parking rate,
as Landlord may designate from time to time, at Landlord's
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election, for each such type of parking space. In addition to the right reserved
hereunder by Landlord to designate the parking rate from time to time, Landlord
shall have the right to change the parking rate at any time to include therein
any amounts levied, assessed, imposed or required to be paid to any governmental
authority on account of the parking, use, or transportation of motor vehicles,
or the reduction or control of motor vehicle traffic, or motor vehicle
pollution.
(c) If requested by Landlord, Tenant shall notify Landlord of the
license plate number, year, make and model of the automobiles entitled to use
the parking facilities and if requested by Landlord, such automobiles shall be
identified by automobile window stickers provided by Landlord, and only such
designated automobiles shall be permitted to use the parking facilities. If
Landlord institutes such an identification procedure, Landlord may, in its sole
discretion, provide additional parking spaces for use by customers and invitees
of Tenant on a daily basis at prevailing parking rates, if any. At Landlord's
election, Landlord may make validation stickers available to Tenant for any such
additional parking spaces. In the event Tenant exceeds the number of allotted
parking spaces set forth in Article 1(R) or if Landlord has instituted a window
sticker or other parking procedure and Tenant's employees, customers or invitees
do not comply with any such procedure, then in any of such events, Landlord
shall be entitled to tow, without any liability to Tenant, its employees,
customers or invitees, any vehicles not complying with Landlord's procedures or
parking in excess of such allotted number of spaces.
(d) The parking facilities provided for herein are provided solely for
the accommodation of Tenant and Landlord assumes no responsibility or liability
of any kind whatsoever from whatever cause with respect to the automobile
parking areas, including adjoining streets, sidewalks, driveways, property and
passageways, or the use thereof by Tenant or tenant's employees, customers,
agents, contractors or invitees.
ARTICLE 27.
HAZARDOUS MATERIALS
A. DEFINITION OF HAZARDOUS MATERIALS. The term "Hazardous Materials" for
purposes hereof shall mean any chemical, substance, materials or waste or
component thereof which is now or hereafter listed, defined or regulated as a
hazardous or toxic chemical, substance, materials or waste or component thereof
by any federal, state or local governing or regulatory body having jurisdiction,
or which would trigger any employee or community "right-to-know" requirements
adopted by any such body, or for which any such body has adopted any
requirements for the preparation or distribution of a materials safety data
sheet ("MSDS").
B. NO HAZARDOUS MATERIALS. Tenant shall not transport, use, store, maintain,
generate, manufacture, handle, dispose, release or discharge any Hazardous
Materials. However, the foregoing provisions shall not prohibit the
transportation to and from, and use, storage, maintenance and handling within
the Premises of Hazardous Materials customarily used in the business or activity
expressly permitted to be undertaken in the Premises under Article 6, provided:
(a) such Hazardous Materials shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises
and the ordinary course of Tenant's business therein, strictly in accordance
with applicable Law, highest prevailing standards, and the manufacturers'
instructions therefor, (b) such Hazardous Materials shall not be disposed of,
released or discharged in the Building, and shall be transported to and from the
Premises in compliance with all applicable Laws, and as Landlord shall
reasonably require, (c) if any applicable Law or Landlord's trash removal
contractor requires that any such Hazardous Materials be disposed of separately
from ordinary trash, Tenant shall make arrangements at Tenant's expense for such
disposal directly with a qualified and licensed disposal company at a lawful
disposal site (subject to scheduling and approval by Landlord), and (d) any
remaining such Hazardous Materials shall be completely, properly and lawfully
removed from the Building upon expiration or earlier termination of this Lease.
Any clean up, remediation and removal work shall be subject to Landlord's prior
written approval (except in emergencies), and shall include, without limitation,
any testing, investigation, and the preparation and implementation of any
remedial action plan required by any governmental body having jurisdiction or
reasonably
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required by Landlord. If Landlord or any Lender or governmental body arranges
for any tests or studies showing that this Article has been violated by Tenant,
Tenant shall pay for the costs of such tests.
C. NOTICES TO LANDLORD. Tenant shall promptly notify Landlord of: (i) any
enforcement, cleanup or other regulatory action taken or threatened by any
governmental or regulatory authority with respect to the presence of any
Hazardous Materials on the Premises or the migration thereof from or to other
property, (ii) any demands or claims made or threatened by any party relating to
any loss or injury resulting from any Hazardous Materials on the Premises, (iii)
any release, discharge or non-routine, improper or unlawful disposal or
transportation of any Hazardous Materials on or from the Premises or in
violation of this Article, and (iv) any matters where Tenant is required by Law
to give a notice to any governmental or regulatory authority respecting any
Hazardous Materials on the Premises. Landlord shall have the right (but not the
obligation) to join and participate, as a party, in any legal proceedings or
actions affecting the Premises initiated in connection with any environmental,
health or safety law. At such times as Landlord may reasonably request, Tenant
shall provide Landlord with a written list, certified to be true and complete,
identifying any Hazardous Materials then used, stored, or maintained upon the
Premises, the use and approximate quantity of each such materials, a copy of any
MSDS issued by the manufacturer therefor, and such other information as Landlord
may reasonably require or as may be required by Law.
D. INDEMNIFICATIONS. Tenant will indemnify, defend (by counsel reasonably
acceptable to Landlord), protect, and hold Landlord and each of Landlord's
partners, employees, agents, attorneys, successors and assigns, free and
harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorney's fees) or death of or
injury to any person or damage to any property whatsoever, arising from or
caused in whole or in part, directly or indirectly, by:
(i) the presence in, on, under or about the Premises or
discharge in or from the Premises of any Hazardous Materials placed in,
under or about, the Premises by Tenant or at Tenant's direction,
excluding any tenant improvement work done by Landlord; or
(ii) Tenant's use, analysis, storage, transportation,
disposal, release, threatened release, discharge or generation of
Hazardous Materials to, in, on, under, about or from the Premises; or
(iii) Tenant's failure to comply with any Hazardous Materials
Law applicable hereunder to Tenant.
Landlord will indemnify, defend (by counsel reasonably acceptable to Tenant),
protect, and hold Tenant and each of Tenant's employees, agents, attorneys,
successors and assigns, free and harmless from and against any and all claims,
liabilities penalties, forfeitures, losses or expenses (including attorney's
fees) or death of or injury to any person or damage to any property whatsoever,
arising from or caused in whole or in part, directly or indirectly, by:
(i) the presence in, on, under or about the Premises or the
Building or discharge in or from the Premises or the Building of any
Hazardous Materials placed, in, on, under or about the Premises or the
Building by Landlord or at Landlord's direction; or
(ii) Landlord's use, analysis, storage, transportation,
disposal, release, threatened release, discharge or generation of
Hazardous Materials to, in, on, under, about or from the Premises or
the Building; or
(iii) Landlord's failure to comply with any Hazardous
Materials Law.
The obligations of each party ("INDEMNIFYING PARTY") pursuant to this Section
includes, without limitation, and whether foreseeable or unforeseeable, all
costs of any required or necessary repair, cleanup or detoxification or
decontamination of the Premises or the Building, and the preparation and
implementation of any closure, remedial action or other required plans in
connection therewith, and survives the expiration or earlier termination of the
term of the Lease.
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ARTICLE 28.
ADDITIONAL RIGHTS RESERVED BY LANDLORD
In addition to any other rights provided for herein, Landlord reserves the
following rights, exercisable without liability to Tenant for damage or injury
to property, person or business and without effecting an eviction, constructive
or actual, or disturbance of Tenant's use or possession or giving rise to any
claim:
(a) To name the Building and to change the name or street address
of the Building;
(b) To install and maintain all signs on the exterior and interior
of the Building;
(c) To designate all sources furnishing sign painting or lettering
for use in the Building:
(d) During the last ninety (90) days of the Term, if Tenant has
vacated the Premises, to decorate, remodel, repair, alter or
otherwise prepare the Premises for occupancy, without
affecting Tenant's obligation to pay Rent for the Premises;
(e) To have pass keys to the Premises and all doors therein,
excluding Tenant's vaults and safes;
(f) On reasonable prior notice to Tenant, to exhibit the Premises
to any prospective purchaser, Lender, mortgagee, or assignee
of any mortgage on the Building or Land and to others having
an interest therein at any time during the Term, and to
prospective tenants during the last six months of the Term;
(g) To take any and all measures, including entering the Premises
for the purpose of making inspections, repairs, alterations,
additions and improvements to the Premises or to the Building
(including for the purpose of checking, calibrating, adjusting
and balancing controls and other parts of the Building
Systems), as may be necessary or desirable for the operation,
improvement, safety, protection or preservation of the
Premises or the Building, or in order to comply with all Laws,
orders and requirements of governmental or other authority, or
as may otherwise be permitted or required by this Lease;
provided, however, that during the progress of any work on the
Premises or at the Building, Landlord will attempt not to
inconvenience Tenant, but shall not be liable for
inconvenience, annoyance, disturbance, loss of business, or
other damage to Tenant by reason of performing any work or by
bringing or storing materials, supplies, tools or equipment in
the Building or Premises during the performance of any work,
and the obligations of Tenant under this Lease shall not
thereby be affected in any manner whatsoever;
(h) To relocate various facilities within the Building and on the
land of which the Building is a part if Landlord shall
determine such relocation to be in the best interest of the
development of the Building and Property, provided that such
relocation shall not materially restrict access to the
Premises; and
(i) To install vending machines of all kinds in the Building and
to receive all of the revenue derived therefrom, provided,
however, that no vending machines shall be installed by
Landlord in the Premises unless Tenant so requests.
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ARTICLE 29.
DEFINED TERMS
A. "Building" shall refer to the Building named in Article 1 of which the leased
Premises are a part (including all modifications, additions and alterations made
to the Building during the term of this Lease), the real property on which the
same is located, all plazas, common areas and any other areas located on said
real property and designated by Landlord for use by all tenants in the Building.
B. "Common Areas" shall mean and include all areas, facilities, equipment,
directories and signs of the Building (exclusive of the Premises and areas
leased to other Tenants) made available and designated by Landlord for the
common and joint use and benefit of Landlord, Tenant and other tenants and
occupants of the Building including, but not limited to, lobbies, public
washrooms, hallways, sidewalks, parking areas, landscaped areas and service
entrances. Common Areas may further include such areas in adjoining properties
under reciprocal easement agreements, operating agreements or other such
agreements now or hereafter in effect and which are available to Landlord,
Tenant and Tenant's employees and invitees. Landlord reserves the right in its
reasonable discretion and from time to time, to construct, maintain, operate,
repair, close, limit, take out of service, alter, change, and modify all or any
part of the Common Areas.
C. "Default Rate" shall mean eighteen percent (18%) per annum, or the highest
rate permitted by applicable law, whichever shall be less. If the application of
the Default Rate causes any provision of this Lease to be usurious or
unenforceable, the Default Rate shall automatically be reduced to the highest
rate allowed by law so as to prevent such result.
D. "Hazardous Materials" shall have the meaning set forth in Article 27.
E. "Landlord" and "Tenant" shall be applicable to one or more parties as the
case may be, and the singular shall include the plural, and the neuter shall
include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns.
F. "Law" or "Laws" shall mean all federal, state, county and local governmental
and municipal laws, statutes, ordinances, rules, regulations, codes, decrees,
orders and other such requirements, applicable equitable remedies and decisions
by courts in cases where such decisions are binding precedents in the state in
which the Building is located, and decisions of federal courts applying the Laws
of such state.
G. "Lease" shall mean this lease executed between Tenant and Landlord, including
any extensions, amendments or modifications and any Exhibits attached hereto.
H. "Lease Year" shall mean each twelve (12) month period commencing on the
Commencement Date and expiring on each anniversary thereof during the Lease
Term.
I. "Lender" shall mean the holder of a Mortgage at the time in question, and
where such Mortgage is a ground lease, such term shall refer to the ground
lessee.
J. "Mortgage" shall mean all mortgages, deeds of trust, ground leases and other
such encumbrances now or hereafter placed upon the Building or any part thereof
with the written consent of Landlord, and all renewals, modifications,
consolidations, replacements or extensions thereof, and all indebtedness now or
hereafter secured thereby and all interest thereon.
K. "Operating Expenses" shall mean all operating expenses of any kind or nature
which are necessary, ordinary or customarily incurred in connection with the
operation, maintenance or repair of the Building as determined by Landlord.
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Operating Expenses shall include, but not be limited to:
1.1 costs of supplies, including, but not limited to, the cost of
relamping all Building standard lighting as the same may be
required from time to time;
1.2 costs incurred in connection with obtaining and providing
energy for the Building, including, but not limited to, costs
of propane, butane, natural gas, steam, electricity, solar
energy and fuel oils, coal or any other energy sources;
1.3 costs of water and sanitary and storm drainage services;
1.4 costs of janitorial and security services;
1.5 costs of general maintenance and repairs, including costs
under HVAC and other mechanical maintenance contracts and
maintenance, repairs and replacement of equipment and tools
used in connection with operating the Building;
1.6 costs of maintenance and replacement of landscaping;
1.7 insurance premiums, including fire and all-risk coverage,
together with loss of rent endorsements, the part of any claim
required to be paid under the deductible portion of any
insurance policies carried by Landlord in connection with the
Building (where Landlord is unable to obtain insurance without
such deductible from a major insurance carrier at reasonable
rates), public liability insurance and any other insurance
carried by Landlord on the Building, or any component parts
thereof (all such insurance shall be in such amounts as may be
required by any holder of a Mortgage or as Landlord may
reasonably determine);
1.8 labor costs, including wages and other payments, costs to
Landlord of worker's compensation and disability insurance,
payroll taxes, welfare fringe benefits, and all legal fees and
other costs or expenses incurred in resolving any labor
dispute;
1.9 professional building management fees required for management
of the Building;
1.10 legal, accounting, inspection, and other consultation fees
(including, without limitation, fees charged by consultants
retained by Landlord for services that are designed to produce
a reduction in Operating Expenses or to reasonably improve the
operation, maintenance or state of repair of the Building)
incurred in the ordinary course of operating the Building or
in connection with making the computations required hereunder
or in any audit of operations of the Building;
1.11 the costs of capital improvements or structural repairs or
replacements made in or to the Building in order to conform to
changes, subsequent to the date of this Lease, in any
applicable laws, ordinances, rules, regulations or orders of
any governmental or quasi-governmental authority having
jurisdiction over the Building (herein "Required Capital
Improvements") or the costs incurred by Landlord to install a
new or replacement capital item for the purpose of reducing
Operating Expenses (herein "Cost Savings Improvements"), and a
reasonable reserve for all other capital improvements and
structural repairs and replacements reasonably necessary to
permit Landlord to maintain the Building in its current class.
The expenditures for Required Capital Improvements and Cost
Savings Improvements shall be amortized over the useful life
of such capital improvement or structural repair or
replacement (as determined by Landlord). All costs so
amortized shall bear interest on the amortized balance at the
rate of twelve percent (12%) per annum or such higher rate as
may have
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been paid by Landlord on funds borrowed for the purpose of
constructing these capital improvements.
In making any computations contemplated hereby, Landlord shall also be permitted
to make such adjustments and modifications to the provisions of this paragraph
and Article 4 as shall be reasonable and necessary to achieve the intention of
the parties hereto.
L. "Rent" shall have the meaning specified therefor in Article 3.
M. "Tax" or "Taxes" shall mean:
1.1 all real property taxes and assessments levied against the
Building by any governmental or quasi-governmental authority.
The foregoing shall include all federal, state, county, or
local governmental, special district, improvement district,
municipal or other political subdivision taxes, fees, levies,
assessments, charges or other impositions of every kind and
nature, whether general, special, ordinary or extraordinary,
respecting the Building, including without limitation, real
estate taxes, general and special assessments, interest on any
special assessments paid in installments, transit taxes, water
and sewer rents, taxes based upon the receipt of rent,
personal property taxes imposed upon the fixtures, machinery,
equipment, apparatus, appurtenances, furniture and other
personal property used in connection with the Building which
Landlord shall pay during any calendar year, any portion of
which occurs during the Term (without regard to any different
fiscal year used by such government or municipal authority
except as provided below). Provided, however, any taxes which
shall be levied on the rentals of the Building shall be
determined as if the Building were Landlord's only property,
and provided further that in no event shall the term "taxes or
assessment," as used herein, include any net federal or state
income taxes levied or assessed on Landlord, unless such taxes
are a specific substitute for real property taxes. Such term
shall, however, include gross taxes on rentals. Expenses
incurred by Landlord for tax consultants and in contesting the
amount or validity of any such taxes or assessments shall be
included in such computations.
1.2 all "assessments", including so-called special assessments,
license tax, business license fee, business license tax, levy,
charge, penalty or tax imposed by any authority having the
direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting,
water, drainage, or other improvement or special district
thereof, against the Premises of the Building or any legal or
equitable interest of Landlord therein. For the purposes of
this lease, any special assessments shall be deemed payable in
such number of installments as is permitted by law, whether or
not actually so paid. If as of the Commencement Date the
Building has not been fully assessed as a completed project,
for the purpose of computing the Operating Expenses for any
adjustment required herein or under Article 4, the Tax shall
be adjusted by Landlord, as of the date on which the
adjustment is to be made, to reflect full completion of the
Building including all standard Tenant finish work if the
method of taxation of real estate prevailing to the time of
execution hereof shall be, or has been altered, so as to cause
the whole or any part of the taxes now, hereafter or
theretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially,
as a capital levy or otherwise, or on or measured by the rents
received therefrom, then such new or altered taxes
attributable to the Building shall be included within the term
real estate taxes, except that the same shall not include any
enhancement of said tax attributable to other income of
Landlord. All of the preceding clauses M (1.1 and 1.2) are
collectively referred to as the "Tax" or "Taxes".
All other capitalized terms shall have the definition set forth in the Lease.
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ARTICLE 30.
MISCELLANEOUS PROVISIONS
A. RULES AND REGULATIONS. Tenant shall comply with all of the rules and
regulations promulgated by Landlord from time to time for the Building. A copy
of the current rule and regulations is attached hereto as Exhibit D.
B. EXECUTION OF LEASE. If more than one person or entity executes this Lease as
Tenant, each such person or entity shall be jointly and severally liable for
observing and performing each of the terms, covenants, conditions and provisions
to be observed or performed by Tenant.
C. NOTICES. All notices under this Lease shall be in writing and will be deemed
sufficiently given for all purposes if, to Tenant, by delivery to Tenant at the
Premises during the hours the Building is open for business or by certified
mail, return receipt requested or by overnight delivery service (with one
acknowledged receipt), to Tenant at the address set forth below, and if to
Landlord, by certified mail, return receipt requested or by overnight delivery
service (with one acknowledged receipt), at the addresses set forth below.
Landlord: at the address shown in Article 1, item F
with a copy to: Building Manager at the address shown in Article 1,
item G.
Tenant: at the address shown in Article 1, item B
with copy to:
---------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
D. TRANSFERS. The term "Landlord" appearing herein shall mean only the owner of
the Building from time to time and, upon a sale or transfer of its interest in
the Building, the then Landlord and transferring party shall have no further
obligations or liabilities for matters accruing after the date of transfer of
that interest and Tenant, upon such sale or transfer, shall look solely to the
successor owner and transferee of the Building for performance of Landlord's
obligations hereunder.
E. RELOCATION.
F. TENANT FINANCIAL STATEMENTS. Upon the written request of Landlord, Tenant
shall submit financial statements for its most recent financial reporting period
and for the prior Lease Year. Landlord shall make such request no more than
twice during any Lease Year, shall use the information solely for the purpose of
evaluating the Tenant's financial status, and shall keep all financial
statements confidential. All such financial statements shall be certified as
true and correct by the responsible officer or partner of Tenant and if Tenant
is then in default hereunder, the financial statements shall be certified by an
independent certified public accountant.
G. RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease shall be
construed by the parties hereto, or by any third party, as constituting the
parties as principal and agent, partners or joint venturers, nor shall anything
herein render
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either party (other than a guarantor) liable for the debts and obligations of
any other party, it being understood and agreed that the only relationship
between Landlord and Tenant is that of Landlord and Tenant.
H. ENTIRE AGREEMENT; MERGER This Lease embodies the entire agreement and
understanding between the parties respecting the Lease and the Premises and
supersedes all prior negotiations, agreements and understandings between the
parties, all of which are merged herein. No provision of this Lease may be
modified, waived or discharged except by an instrument in writing signed by the
party against which enforcement of such modification, waiver or discharge is
sought.
I. NO REPRESENTATION BY LANDLORD. Neither Landlord nor any agent of Landlord has
made any representations, warranties, or promises with respect to the Premises
or the Building except as expressly set forth herein.
J. LIMITATION OF LIABILITY. Notwithstanding any provision in this Lease to the
contrary, under no circumstances shall Landlord's liability or that of its
directors, officers, employees and agents for failure to perform any obligations
arising out of or in connection with the Lease or for any breach of the terms or
conditions of this Lease (whether written or implied) exceed Landlord's equity
interest in the Building. Any judgments rendered against Landlord shall be
satisfied solely out of proceeds of sale of Landlord's interest in the Building.
No personal judgment shall lie against Landlord upon extinguishment of its
rights in the Building and any judgments so rendered shall not give rise to any
right of execution or levy against Landlord's assets. The provisions hereof
shall inure to Landlord's successors and assigns including any Lender. The
foregoing provisions are not intended to relieve Landlord from the performance
of any of Landlord's obligations under this Lease, but only to limit the
personal liability of Landlord in case of recovery of a judgment against
Landlord; nor shall the foregoing be deemed to limit Tenant's rights to obtain
injunctive relief or specific performance or other remedy which may be accorded
Tenant by law or under this Lease.
K. MEMORANDUM OF LEASE. Neither party, without the written consent of the other,
will execute or record this Lease or any summary or memorandum of this Lease in
any public recorder's office.
L. NO WAIVERS; AMENDMENTS. Failure of Landlord to insist upon strict compliance
by Tenant of any condition or provision of this Lease shall not be deemed a
waiver by Landlord of that condition. No waiver shall be effective against
Landlord unless in writing and signed by Landlord. Similarly, this Lease cannot
be amended except by a writing signed by Landlord and Tenant.
M. SUCCESSORS AND ASSIGNS. The conditions, covenants and agreements contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors and assigns.
N. WAIVER OF JURY TRIAL; GOVERNING LAW. Landlord and Tenant hereby waive all
right to trial by jury in any claim, action proceeding or counterclaim by either
Landlord or Tenant against each other or any matter arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, and/or
Tenant's use or occupancy or the Premises. This Lease shall be governed by the
law of the State where the Building is located.
O. EXHIBITS. All exhibits attached to this Lease are a part hereof and are
incorporated herein by reference and all provisions of such exhibits shall
constitute agreements, promises and covenants of this Lease.
P. CAPTIONS. The captions and headings used in this Lease are for convenience
only and in no way define or limit the scope, interpretation or content of this
Lease.
Q. COUNTERPARTS. This Lease may be executed in one (1) or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
R. TIME. TIME IS OF THE ESSENCE OF THIS AGREEMENT.
28
<PAGE> 32
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have duly executed this Lease with the Exhibits attached hereto, as of
the day and year first written above.
LANDLORD:
CORNERSTONE SUBURBAN OFFICE, L.P.
By: Cornerstone Office Management, Limited
Liability Company a Delaware limited
liability company, its General Partner
By: Cornerstone Real Estate
Advisers, Inc.
a Massachusetts corporation,
its Managing Member
- -----------------------------
Witness
By:
- ----------------------------- -------------------------------
Print Name Print Name: William F. Runge
Title: Vice President
Date:
TENANT:
LINK2GOV CORP.
By:
- ----------------------------- ---------------------------------------
Witness Print Name:
Title:
- ------------------------------ Date:
Print Name
CERTIFICATE OF TENANT
(IF A CORPORATION)
I, _____________________________, Secretary of LINK2GOV Corp., Tenant,
hereby certify that the officer executing the foregoing Lease on behalf of
Tenant is duly authorized to act on behalf of and bind the Tenant.
--------------------------------------
(CORPORATE SEAL) Secretary
<PAGE> 33
EXHIBIT A
Plan Showing Property and Premises
<PAGE> 34
EXHIBIT B
Landlord's Work
Landlord shall provide Tenant an allowance in the amount of $10.00 per rentable
square foot of the Premises as set forth in Article 1D of this Lease (the
"ALLOWANCE") for improvements to be made to the Premises. Such improvements will
be made by Landlord's contractor in accordance with plans and specifications
mutually approved by Landlord and Tenant. Such Allowance shall include all hard
and soft costs of construction, including, without limitation, the costs of
materials, supplies, labor, permit fees, space planning, architectural drawings
and fees, engineering fees, and a construction management fee payable to
Landlord's construction manager. The Allowance must be spent during the first
twelve (12) months of the Lease Term. If the Allowance is not spent within the
first six (6) months of the Lease Term, then Landlord shall not be obligated to
fund any remaining portion of the Allowance and any further costs shall be the
sole responsibility of Tenant. If the hard and soft costs of construction exceed
the Allowance due to any change orders requested by Tenant or any other actions,
changes or modifications requested or required by Tenant, then Tenant shall be
solely responsible for any such excess costs. Such excess costs shall be due and
payable by Tenant within thirty (30) days of Tenant's receipt of a statement
therefor with backup documentation and such amounts shall be considered
Additional Rent hereunder.
<PAGE> 35
EXHIBIT C
Tenant's Work
Tenant shall be responsible for providing and installing its own computer
cabling, telecommunications equipment, wiring and any other equipment or work
not provided for in Landlord's Work, as set forth in Exhibit B.
<PAGE> 36
EXHIBIT D
Building's Rules and Regulations
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls of the Building shall not be obstructed or
encumbered or used for any purpose other than ingress and egress to and from the
premises demised to any tenant or occupant.
2. No awnings or other projection shall be attached to the outside walls
or windows of the Building without the prior consent of Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises demised to any tenant or
occupant, without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens or other fixtures must be of a quality, type,
design and color, and attached in a manner, approved by Landlord.
3. No sign, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or inside of
the premises demised to any tenant or occupant of the Building without the prior
consent of Landlord. Interior signs on doors and directory tables, if any, shall
be of a size, color and style approved by Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed, nor shall any bottles, parcels, or
other articles be placed on any window sills.
5. No show cases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors,
vestibules or other public parts of the Building.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. No tenant
shall bring or keep, or permit to be brought or kept, any inflammable,
combustible, explosive or hazardous fluid, materials, chemical or substance in
or about the premises demised to such tenant.
7. No tenant or occupant shall mark, paint, drill into, or in any way
deface any part of the Building or the premises demised to such tenant or
occupant. No boring, cutting or stringing of wires shall be permitted, except
with the prior consent of Landlord, and as Landlord may direct. No tenant or
occupant shall install any resilient tile or similar floor covering in the
premises demised to such tenant or occupant except in a manner approved by
Landlord.
8. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the premises demised to any tenant. No cooking, except for
microwave cooking, shall be done or permitted in the Building by any tenant
without the approval of the Landlord. No tenant shall cause or permit any
unusual or objectionable odors to emanate from the premises demised to such
tenant.
9. No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods, or property of
any kind at auction, without the prior consent of Landlord.
10. No tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with other tenants or occupants of the
Building or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set or other audio device, unmusical noise,
whistling, singing, or in any other way. Nothing shall be thrown out of any
doors or window.
11. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows, nor shall any changes be made in locks or the mechanism
thereof. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, offices and toilet rooms, either furnished to, or
otherwise procured by, such tenant.
12. All removals from the Building, or the carrying in or out of the
Building or the premises demised to any tenant, of any safes, freight, furniture
or bulky matter of any description must take place at such time and in such
<PAGE> 37
manner as Landlord or its agents may determine, from time to time. Landlord
reserves the right to inspect all freight to be brought into the Building and to
exclude from the Building all freight which violates any of the Rules and
Regulations or the provisions of such tenant's lease.
13. No tenant shall use or occupy, or permit any portion of the premises
demised to such tenant to be used or occupied, as an office for a public
stenographer or typist, or to a barber or manicure shop, or as an employment
bureau. No tenant or occupant shall engage or pay any employees in the Building,
except those actually working for such tenant or occupant in the Building, nor
advertise for laborers giving an address at the Building.
14. No vending machines of any description shall be installed, maintained
or operated upon the premises demised to any tenant without the prior consent of
Landlord.
15. Landlord shall have the right to prohibit any advertising by any
tenant or occupant which, in Landlord's opinion, tends to impair the reputation
of the Building or its desirability as a building for offices, and upon notice
from Landlord, such tenant or occupant shall refrain from or discontinue such
advertising.
16. Landlord reserves the right to exclude from the Building, between the
hours of 6:00 P.M. and 8:00 A.M. on business days and at all hours on Saturdays,
Sundays and holidays, all persons who do not present a pass to the Building
signed by Landlord. Each tenant shall be responsible for all persons patronizing
its Premises and shall be liable to Landlord for all acts of such persons.
17. Each tenant, before closing and leaving the premises demised to such
tenant at any time, shall see that all entrance doors are locked and all windows
closed. Corridor doors, when not in use, shall be kept closed.
18. Landlord shall, at its expense, provide artificial light in the
premises demised to the tenant for Landlord's agents, contractors and employees
while performing janitorial or other cleaning services and making repairs or
alterations in said premises.
19. No premises shall be used, or permitted to be used for lodging or
sleeping, or for any immoral or illegal purposes.
20. The requirements of tenants will be attended to only upon application
at the office of Landlord. Building employees shall not be required to perform,
and shall not be requested by any tenant or occupant to perform, and work
outside of their regular duties, unless under specific instructions from the
office of Landlord.
21. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant and occupant shall cooperate in seeking their prevention.
22. There shall not be used in the Building, either by any tenant or
occupant or by their agents or contractors, in the delivery or receipt of
merchandise, freight, or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards and such
other safeguards as Landlord may require.
23. If the Premises demised to any tenant become infested with vermin,
such tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
24. No premises shall be used, or permitted to be used, at any time,
without the prior approval of Landlord, as a store for the sale or display of
goods, wares or merchandise of any kind, or as a restaurant, shop, booth or
other stand, or for the conduct of any business or occupation which
predominantly involves direct patronage of the general public in the premises
demised to such tenant, or for manufacturing or for other similar purposes.
25. No tenant shall clean any window in the Building from the outside.
26. No tenant shall move, or permit to be moved, into or out of the
Building or the premises demised to such tenant, any heavy or bulky matter,
without the specific approval of Landlord. If any such matter requires special
handling, only a qualified person shall be employed to perform such special
handling. No tenant shall place, or permit
<PAGE> 38
to be placed, on any part of the floor or floors of the premises demised to such
tenant, a load exceeding the floor load per square foot which such floor was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of safes and other heavy matter, which must be
placed so as to distribute the weight.
27. Landlord shall provide and maintain an alphabetical directory board
in the first floor (main lobby) of the Building and no other directory shall be
permitted without the prior consent of Landlord. Each tenant shall be allowed
one line on such board unless otherwise agreed to in writing.
28. With respect to work being performed by a tenant in its premises with
the approval of Landlord, the tenant shall refer all contractors, contractors'
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and any other physical portion of the
Building.
29. Landlord shall not be responsible for lost or stolen personal
property, equipment, money, or jewelry from the premises of tenants or public
rooms whether or not such loss occurs when the Building or the premises are
locked against entry.
30. Landlord shall not permit entrance to the premises of tenants by use
of pass keys controlled by Landlord, to any person at any time without written
permission from such tenant, except employees, contractors, or service personnel
directly supervised by Landlord and employees of the United States Postal
Service.
31. Each tenant and all of tenant's employees and invitees shall observe
and comply with the driving and parking signs and markers on the Land
surrounding the Building, and Landlord shall not be responsible for any damage
to any vehicle towed because of noncompliance with parking regulations.
32. Without Landlord's prior approval, no tenant shall install any radio
or television antenna, loudspeaker, music system or other device on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
33. Each tenant shall store all trash and garbage within its premises or
in such other areas specifically designated by Landlord. No materials shall be
placed in the trash boxes or receptacles in the Building unless such materials
may be disposed of in the ordinary and customary manner of removing and
disposing of trash and garbage and will not result in a violation of any law or
ordinance governing such disposal. All garbage and refuse disposal shall be only
through entryways and elevators provided for such purposes and at such times as
Landlord shall designate.
34. No tenant shall employ any persons other than the janitor or Landlord
for the purpose of cleaning its premises without the prior consent of Landlord.
No tenant shall cause any unnecessary labor by reason of its carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include beating of carpets or rugs or moving of furniture or other
special services. Janitor service shall be furnished Mondays through Fridays,
legal holidays excepted; janitor service will not be furnished to areas which
are occupied after 9:30 P.M. Window cleaning shall be done only by Landlord, and
only between 6:00 A.M and 5:00 P.M.
35. Tenant shall not permit smoking of any type of tobacco product (e.g.,
cigarettes, cigars, pipes, etc.) in or about the Premises or Building by any of
its employees, servants, agents, representatives, visitors, customers,
licensees, invitees, guests, contractors, or any person whomsoever, and, upon
Landlord's request, shall post in a conspicuous place or places in or about the
Premises, "No Smoking" signs or placards. Tenant acknowledges that the Premises
and Building are non-smoking facilities.
<PAGE> 39
EXHIBIT E
COMMENCEMENT DATE CONFIRMATION
DECLARATION BY LANDLORD AND TENANT AS TO DATE OF DELIVERY AND
ACCEPTANCE OF POSSESSION OF PREMISES
Attached to and made a part of the Lease dated the ______ day of
______________________, entered into and by CORNERSTONE SUBURBAN OFFICE, L.P.,
as LANDLORD, and ____________________ as TENANT for Suite _____ in the Building
known as ___________________.
LANDLORD AND TENANT do hereby declare that possession of the Premises was
accepted by TENANT on the day of ________________________. The Premises required
to be constructed and finished by LANDLORD in accordance with the provisions of
the Lease have been satisfactorily completed by LANDLORD and accepted by TENANT,
the Lease is now in full force and effect, and as of the date hereof, LANDLORD
has fulfilled all of its obligations under the Lease. The Lease Commencement
Date is hereby established as _______________________________________ . The Term
of this Lease shall terminate on ____________________________________ .
LANDLORD:
CORNERSTONE SUBURBAN OFFICE, L.P.
By: Cornerstone Office Management, Limited Liability Company
Its General Partner
By: Cornerstone Real Estate Advisers, Inc.
a Massachusetts corporation, its Managing Member
By:
----------------------------------------
Name Printed:
Title: Vice President
Date:
TENANT:
_____________________________________________LINK2GOV, Inc.
By:
----------------------------------------
Name Printed:
Title:
Date:
<PAGE> 40
EXHIBIT F
SPECIAL STIPULATIONS
1. Option to Extend. As long as Tenant has not been in default during the
initial Term of the Lease and is not in default under the Lease at the time of
its exercise of this option, Tenant shall have one (1) option to extend the Term
of this Lease in accordance with the provisions of this paragraph for an
additional term of five (5) years, on all the same terms and conditions with the
exception of Monthly Rent payable under Article 3 hereof, which shall be
the-then prevailing base rent being charged for reasonably comparable space in
the Burton Hills, Nashville, Tennessee market. In addition, Landlord shall not
provide Tenant any improvement allowance in connection with the extension,
unless otherwise agreed to by the parties. If Tenant elects to exercise the
foregoing option to extend, it shall give Landlord written notice of its
election to do so on or before the date which is 180 days prior to the
expiration of the then-current term of the Lease, time being of the essence,
which notice shall also request that Landlord furnish Tenant with the Monthly
Rent for the extended term which shall be derived as aforesaid. Provided,
however, in the event Landlord and Tenant have not signed an amendment to this
Lease for any reason confirming the extended term of the Lease and setting forth
the Monthly Rent for that term by a date which is no less than 60 days prior to
the expiration of the then-current term of the Lease, time being of the essence,
then Tenant's extension of the Lease shall be deemed null and void and this
Lease shall expire on the expiration date as if the above extension option had
not been exercised. This option to extend is personal to Tenant only, and is not
assignable. Tenant has no option(s) to extend this Lease except as set forth in
this paragraph.
2. Right of First Offer. As long as Tenant has not been in default during the
Term of the Lease and is not in default under the Lease at the time of its
exercise of this right, and so long as this right is exercised in connection
with an expansion of Tenant's Premises and for no other purpose, and subject to
the prior rights of any other tenant in the Building, Landlord hereby grants to
Tenant a one-time right of first offer on the terms and conditions contained in
this paragraph to lease any space located in the east side of the Building which
becomes available for lease (the "Offer Space"). In the event any Offer Space
becomes available for lease during the Term, Landlord shall give notice thereof
to Tenant which notice shall contain the terms under which Landlord is willing
to lease the Offer Space. Within seven (7) business days of such notice, time
being of the essence, Tenant shall give Landlord notice that it either does or
does not wish to lease the Offer Space on the terms and conditions contained in
Landlord's notice. In the event Tenant's notice provides that it does not wish
to lease the Offer Space or if Tenant fails to give Landlord notice of its
desires respecting the Offer Space within the foregoing required seven (7) day
period, then Landlord shall be entitled to proceed to market and/or lease the
Offer Space to a third party free and clear of Tenant's right of first offer and
such right shall be deemed terminated in all respects and Tenant shall have no
further rights of first offer.
In the event Tenant gives Landlord a notice as required in the preceding
paragraph that it wishes to lease the Offer Space on the terms and conditions
contained in Landlord's notice to it, then Landlord and Tenant shall have twenty
(20) days from the date of the notice within which to amend this Lease by adding
the Offer Space on the terms and conditions contained in Landlord's notice. In
the event Landlord and Tenant fail to sign such amendment to this Lease using
good faith efforts within said twenty (20) day period, time being of the
essence, then Landlord shall be entitled to proceed to market and/or lease the
Offer Space to a third party free and clear of such right and such right shall
be deemed terminated in all respects.
3. Option to Terminate. Provided Tenant is not then in default under the terms
of this Lease, Tenant shall have the right to terminate this Lease effective as
of the end of the forty-eighth (48th) month of the Lease Term. If Tenant does
not terminate the Lease as of the end of the 48th month of the Lease Term,
Tenant shall also have the right to terminate this Lease effective as of the end
of the sixtieth 60th) month of the Lease Term. Tenant must provide Landlord at
least one hundred eighty (180) days prior written notice (i.e., 180 days prior
to the end of the
<PAGE> 41
48th month of the Lease Term or 180 days prior to the end of the 60th month of
the Lease Term, as applicable) of its election to exercise this option to
terminate. If Tenant fails to provide Landlord with such written notice on or
before such applicable one hundred eighty (180) day period, Tenant's option to
terminate for such particular time period shall become null and void and Tenant
shall have no further options to terminate for such period. If Tenant fails to
terminate the Lease as of the end of the 48th or 60th month of the Lease Term,
Tenant shall have no further options to terminate this Lease. In connection with
said termination and as liquidated damages to compensate Landlord for the damage
it will incur in connection with an early termination, if Tenant terminates this
Lease as of the end of the 48th month of the Lease Term, Tenant shall pay a fee
to Landlord equal to six (6) months Monthly Rent, Operating Expenses and Taxes
at the rates being paid by Tenant as of the 48th month of the Lease Term, and if
Tenant terminates this Lease as of the end of the 60th month of the Lease Term,
Tenant shall pay a fee to Landlord equal to three (3) months Monthly Rent,
Operating Expenses and Taxes at the rates being paid by Tenant as of the 60th
month of the Lease Term. In addition to the foregoing applicable payment, Tenant
shall also pay all unamortized tenant improvement costs and leasing commissions
amortized over eighty-four (84) months at a per annum rate of ten percent (10%)
per annum. The parties acknowledge that it would be difficult to calculate
Landlord's damages in the event of an early termination and that the above sum
is a reasonable estimate of such damages. Tenant shall pay such sum at the time
of its giving the foregoing notice or such notice shall be null and void and
Tenant's option to terminate shall thereupon be null and void. In addition, the
parties shall execute a termination agreement in connection with such early
termination. Landlord shall be entitled to show the Premises to prospective
tenants or purchasers as of the date it receives Tenant's notice of its election
to terminate the Lease.
4. Letter of Credit. On or before the Commencement Date, Tenant shall provide
Landlord a letter of credit in the amount of $304,714.12 from ________________
Bank in Nashville, Tennessee (the "LOC"). Such LOC shall be in a standard and
customary form reasonably acceptable to Landlord and shall name Landlord as
beneficiary. Such LOC shall be for a one (1) year period and shall be
automatically renewed for successive one (1) year periods until the expiration
of the Lease Term or unless written notice of non-renewal is given at least
sixty (60) days prior to expiration to Cornerstone Real Estate Advisers, Inc.,
Suite 300, 5607 Glenridge Drive, Atlanta, GA 30342. After the 24th month of the
lease term, the amount of the LOC shall be reduced by $56,245.71. Thereafter,
the LOC shall be reduced by $28,122.86 per twelve (12) month period of the lease
term until the expiration of the Lease Term or unless written notice of
non-renewal is given at least sixty (60) days prior to expiration to Cornerstone
Real Estate Advisers, Inc., Suite 300, 5607 Glenridge Drive, Atlanta, GA 30342.
If Landlord receives a notice of non-renewal, then Tenant shall either deposit
with Landlord as an additional security deposit a sum equal to the amount of the
LOC or shall obtain a substitute LOC from another bank reasonably acceptable to
Landlord. If the LOC is not renewed and if Tenant fails to obtain a substitute
LOC as set forth above and if Tenant fails to deposit an additional security
deposit with Landlord, any of which at least thirty (30) days prior to the
expiration of the LOC term, then Tenant shall be in default hereunder, and
Landlord shall be entitled to exercise all rights and remedies against Tenant
provided under the Lease and at law. Furthermore, the LOC shall provide that
funds up to $304,714.12 or the maximum amount of the LOC as adjusted herein, may
be drawn, from time to time in one or more draws, upon presentation by Landlord
or its agent at ________________ Bank in Nashville, Tennessee of the original
LOC and an affidavit stating either (a) that the Tenant is in default under the
terms of the Lease past any applicable notice and cure period, or (b) that the
LOC is due to expire in less than 30 days and the Tenant has not renewed or
replaced such letter of credit with a substitute meeting all requirements of
this paragraph or made an additional deposit in the amount of the LOC.
5. Monument Signage. Tenant shall be entitled to place a 3' wide by 2' high
monument sign in front of the Building facing Burton Hills Boulevard in a
location to be approved by Landlord in advance. The design, color, materials,
and general appearance of the sign shall be subject to Landlord's reasonable
approval. The design, creation and installation of such sign shall be at
Tenant's sole cost and expense. At the end of the Lease Term, Tenant shall be
responsible for removing such sign at its sole cost and expense. If it fails to
remove the sign, Landlord shall be entitled to do so and shall bill Tenant for
the costs of same. Any such amount paid by Landlord shall be considered
Additional Rent hereunder.
<PAGE> 1
EXHIBIT 10.3
CONTRACTUAL SERVICES AGREEMENT
This AGREEMENT, made and entered into this 27th day of September, 1996,
by and between the DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES (the
"Department"), State of Florida, and CONCORD COMMUNICATIONS (the "Contractor").
The Department shall not be responsible for attorney fees except as
provided by statute.
The State's fiscal year runs from July 1 through June 30. The State of
Florida's performance and obligation to pay under this contract is contingent
upon an annual appropriation by the Legislature.
CONTRACT PERIOD: From September 27, 1996 through September 27, 1999 (3
years)
The contract may be renewed under the same terms and conditions for two
(2) additional one (1) year periods upon the prior written agreement of both
parties. Renewals are contingent upon satisfactory performance evaluations by
the Department and subject to the availability of funds.
The contractor agrees to provide:
The requirements set forth in Section 4 of ITN 009-97, and Concord
Communications best and final offer, which are here by incorporated into and
made a part of this contract.
This Contract may be amended, in writing, by mutual consent of the
parties with the same degree of formality evidenced in this contract.
The Department is an agency of the State of Florida and holds a tax
exempt status. The Department shall not be responsible for any taxes - local,
state or federal - levied against Contractor as a result of this contract.
A purchase order must be issued by the Department in advance for any
charges not covered by this contract.
This contract shall be governed by the laws of the State of Florida.
The Department shall have the right of unilateral cancellation for
refusal by the Contractor to allow public access to all documents, papers,
letters or other material subject to the provisions of Chapter 119 (Public
Records Law) and made or received by the Contractor in conjunction with the
contract.
Bills for fees, services or expenses shall be submitted in detail
sufficient for a proper pre-audit and post-audit thereof.
The Department's liability in negligence or indemnity for acts of its
employees or officers will be only as provided under Section 768.28, Florida
Statutes, waiver of sovereign immunity in Tort.
With the mutual agreement of both parties, the Contractor or any part
of the Contract may be terminated on an agreed date prior to the end of the
Contract period without penalty to either party.
CONFLICT OF INTEREST: The execution of this contract is subject to the
provisions of Chapter 112, Florida Statutes. The Contractor must disclose the
name of any officer, director or
<PAGE> 2
agent who is also an employee of the State of Florida, or nay of its agencies.
Further, the Contractor must disclose the name of any State employee who owns,
directly or indirectly, an interest of five percent (5%) or more in the
Contractor's firm or any of its branches.
PRISON INDUSTRIES: It is expressly understood and agreed that any
articles which are the subject of, or required to carry out this contract shall
be purchased from the corporation identified under Chapter 946, F.S. in the same
manner and under the same procedures set forth in Section 946.515(2) and (4),
F.S.; and for purposes of this contract the person, firm or other business
entity carrying out the provisions of this contract shall be deemed to be
substituted for this agency insofar as dealings with such corporation are
concerned. The "corporation identified" is Prison Rehabilitative Industries and
Diversified Enterprises, Inc.
Available products, pricing and delivery schedules may be obtained by
contacting: Terrie Brooks, Bid Administrator PRIDE of Florida, 2720 Blair Stone
Road, Suite G, Tallahassee, Florida 32301, telephone (904) 487-3774.
THE TERM OF THE AGREEMENT SHALL PREVAIL OVER ANY INCONSISTENT PROVISIONS OF THE
PRE-PRINTED CONTRACT.
AS TO DEPARTMENT OF HIGHWAY SAFETY
AS TO CONTRACTOR AND MOTOR VEHICLES
/s/ Nollie Peeler /s/ [illegible] Parker for
- --------------------------- ----------------------------------
Signature Signature
Nollie Peeler Russ Rothman, CPPO
- --------------------------- ----------------------------------
Name Name
President Chief of General Services
- --------------------------- ----------------------------------
Title Title
9/26/96 9/27/96
- --------------------------- ----------------------------------
Date Date
62-1634938 FLORIDA STATE SALES TAX EXEMPTION
- --------------------------- CERTIFICATE NO:
FEID # OR SOCIAL SECURITY # 02-000040-04-47
<PAGE> 3
ADDENDUM TO
CONTRACTUAL SERVICES AGREEMENT
DATED SEPTEMBER 27, 1996
This addendum is made and entered into this 28th day of August, 1997,
by and between the DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES, State of
Florida and CONCORD COMMUNICATIONS, the Contractor.
The addendum period shall be consistent with the initial contract
number, ITN 009-97, dated September 27, 1996.
The contractor agrees to provide:
All costs associated with installing a 1-800 number and providing all
services required of Contractor as outlined in ITN No. 009-97 for 1-900
service, dated August 19, 1996 and the Contract for 1-900 services
dated September 27, 1996 by and between the Department of Highway
Safety and Motor Vehicles, State of Florida and Concord Communications
to complete the renewal of driver licenses, address changes, court
reinstatements and vehicle address changes, shall be borne by Concord
Communications. Contractor shall be responsible for all phone charges,
installation of all equipment, merchant accounts, credit card
processing.
Contractor fees to be charged to users are as follows:
<TABLE>
<S> <C>
Driver License Renewal $5.50
Address Change $4.00
Court Reinstatement $4.00
Vehicle Address Change $4.00
</TABLE>
Contractor agrees to provide an electronic cash transfer to the State
of Florida every day. This addendum may be changed anytime by mutual
consent.
ALL OTHER TERMS AND CONDITIONS OF THE CONTRACTUAL SERVICES AGREEMENT DATED
SEPTEMBER 27, 1996 AND THE REQUIREMENTS SET FORTH IN ITN NO. 009-97 REMAIN IN
FULL FORCE AND EFFECT. THE TERMS OF THE AGREEMENT SHALL PREVAIL OVER ANY
INCONSISTENT PROVISIONS OF THE PRE-PRINTED CONTRACT.
AS TO CONTRACTOR AS TO DEPARTMENT OF HIGHWAY SAFETY
AND MOTOR VEHICLES
/s/ Nollie Peeler /s/ Russ Rothman
- --------------------------- ----------------------------------
Signature Signature
Nollie Peeler Russ Rothman
- --------------------------- ----------------------------------
Name Name
President Chief of Purchasing Contracts
- --------------------------- ----------------------------------
Title Title
9/2/97 8/28/97
- --------------------------- ----------------------------------
Date Date
62-1634938 47-04-025953-52C
- --------------------------- FLORIDA STATE SALES TAX
FEID # OR SOCIAL SECURITY # EXEMPTION NO:
<PAGE> 4
AMENDMENT #1 TO CONTRACT BETWEEN THE
DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES
AND CONCORD COMMUNICATIONS, INC.
WHEREAS, the Department of Highway Safety and Motor Vehicles, herein
referred to as the "Department," and Concord Communications, Inc. are under
contract for Concord Communications, Inc. to provide 1-900 driver license
services pursuant to ITN 009-97, and
NOW THEREFORE, the Department and Concord Communications, Inc. agree to
amend the contract entered into by the parties on September 27, 1996 as follows:
1. Concord Communications, Inc. will provide additional access to
the 1-900 program under contract as set forth in ITN 009-97.
2. Concord Communications, Inc. will develop and maintain an
Internet site for those customers who choose to receive driver
license services through an Internet site Web page at no cost
to the State of Florida. Such Web page is to be operational no
later than February 28, 1999.
3. Concord Communications, Inc. will offer the same services on
an Internet site Web page as are available via the 1-900
program and at the same cost to the customer. This includes
the following:
(a) Renewal of a Florida driver license - $5.50
processing fee plus applicable state renewal fee
(b) Renewal of a Florida driver license with an address
change - $5.50 processing fee plus applicable state
renewal fees
(c) Address change on a valid Florida drive license -
$4.00 processing fee plus applicable state license
fees
4. Concord Communications, Inc. will receive Internet site Web
page design approval from the Department prior to
implementation.
5. The department's Web page and Concord Communications, Inc.'s
Web page, created as a result of this Amendment, will be
linked.
6. Concord Communications, Inc. will not advertise, or otherwise
publish, the http address of the Web page created as a result
of this Amendment.
7. Concord Communications, Inc.'s Web server will adhere to the
general Web security standards as outlined in Lincoln Stein's
latest WWW Security FAQ (http://www.w3.org/Security/FAQ). In
particular, the Web site will utilize SSL for server
authentication and encryption of data in transit. A
certificate issued from a certifying authority recognized by
Netscape Version 3 and Microsoft Internet Explorer Version 4,
as shipped by their respective vendors, is required. No
personal information from the user (such as name, driver
license number, telephone number or credit card number) will
be stored in Web log files on the server, or in any publicly
accessible non-encrypted data files. All transmissions of
personal data, as outlined above, which traverse any public
network will employ industry standard encryption technologies.
<PAGE> 5
8. Concord Communications, Inc. will interface this Internet site
with the existing host interface to the Department's database.
Once deemed eligible, the customer will complete the necessary
information and will confirm payment through his or her
telephone bill. The customer will receive confirmation of the
transaction from the Web site provided by Concord
Communications, Inc. The service data will then be batched in
the same file with all phone services and downloaded to
Department. Daily and weekly reports will identify any
Internet services.
9. Execution of this Amendment in no way prohibits the Department
from establishing, creating, operating or administering any
other Internet site Web page offering driver licensing renewal
and/or address change services.
IN WITNESS WHEREOF, the Department and Tax Collector have caused this
agreement to be executed in duplicate by their respective official duly
authorized to do so.
AS TO CONCORD AS TO DEPARTMENT OF HIGHWAY SAFETY
COMMUNICATIONS, INC. AND MOTOR VEHICLES
/s/ Nollie Peeler /s/ Ross Rothman
- -------------------- ----------------------------------
Signature Signature
Nollie Peeler Russ Rothman, CPPO
- -------------------- ----------------------------------
Name Name
President Chief of Purchasing & Contracts
- -------------------- ----------------------------------
Title Title
11/14/99 1/13/99
- -------------------- ----------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 16th day of September, 1999, by and among G-Link Corporation, a Tennessee
corporation (the "Company"), and Richardson M. Roberts (the "Executive").
WHEREAS, the Company desires to provide Executive with compensation and
other benefits on the terms and conditions set forth in this Agreement in order
to induce Executive to serve as the Chief Executive Officer and President of the
Company; and
WHEREAS, Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term of Employment. The Company hereby agrees to
employ the Executive as its Chief Executive Officer and President, and the
Executive hereby agrees to serve the Company, on the terms and conditions set
forth herein, for the period commencing as of the date set forth above and
continuing for three years thereafter (the "Initial Term"), unless sooner
terminated as hereinafter set forth. This Agreement will be renewed
automatically on each anniversary of the date hereof for additional one year
terms (the "Renewal Term(s)" and, together with the Initial Term, the
"Employment Period"), unless the Company or the Executive gives written notice
to the other at least 30 days prior to any such anniversary of its decision not
to renew this Agreement. Executive shall perform the duties normally performed
by a Chief Executive Officer and President. During the Employment Period,
Executive shall serve as a director of the Company; provided, however, that upon
termination of employment for any reason, Executive shall immediately resign as
a director.
2. Extent of Services. The Executive shall devote substantially all
his working time and efforts to the business and affairs of the Company, shall
use his best efforts to advance the best interests of the Company, and shall not
engage in outside business activities that interfere with the performance of his
duties hereunder. Nothing in this Agreement shall preclude executive from
serving on Boards of Directors or making investments in other companies and
participating in charitable or community activities that do not substantially
interfere with his duties and responsibilities hereunder or conflict with the
interest of the Company.
3. Compensation.
a. Base Salary. The Executive shall receive a base salary at the
rate of $225,000 per year ("Base Salary") payable in equal periodic payments,
which payments shall be made no less frequently than monthly during the period
of the Executive's employment hereunder.
<PAGE> 2
b. Annual Bonus. In addition to Base Salary, the Executive will
be entitled to receive, as additional compensation, an annual bonus at the
discretion of the Compensation Committee of the Board of Directors. The annual
bonus to which the Executive is entitled shall be based upon the extent to which
the Executive meets the performance criteria established for each year by the
Compensation Committee in its sole discretion, but to be established prior to or
within the first 90 days of each performance period. These performance criteria
are as initially set forth on Exhibit A hereto and may be amended on an annual
basis by the Compensation Committee.
c. Expenses. During the term of his employment hereunder, the
Executive shall be entitled to be reimbursed (in accordance with the policies
and procedures established by the Board of Directors of the Company) for all
reasonable expenses incurred by him in performing services hereunder, provided
that the Executive properly accounts therefor in accordance with the Company's
policy. In addition, during the Employment Period, the Executive shall (i) be
reimbursed for monthly dues for membership in one country club of his choosing
and (ii) be entitled to a reasonable monthly vehicle allowance.
d. Participation in Benefit Plans. Executive shall be entitled to
participate in or receive benefits under the Company's executive benefit plans
and arrangements, including life and disability insurance, in effect on the date
hereof that are generally made available to all senior executives of the Company
on terms at least as favorable as those offered to other senior executives of
the Company. In addition, the Company may elect to obtain key-man life insurance
coverage on the Executive, and the Executive agrees to submit to any medical
examination that is reasonably required for underwriting purposes. At a minimum,
the Company shall obtain for the Executive (i) disability coverage to replace
Executive's Base Salary for the entire period of his disability and (ii) life
insurance of $500,000.
4. Termination.
a. Disability. If, as a result of the Executive's incapacity due
to physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full time basis for 90 consecutive business days, the
Company may terminate its obligations hereunder, except for those obligations
set forth in Section 5(b) hereof. The determination of whether the Executive is
disabled due to physical or mental illness shall be made by a licensed physician
satisfactory to the Executive and to the Company.
b. Termination Upon Death. If the Executive should die during the
term of this Agreement, the Company's obligations under this Agreement shall
cease, except for those obligations set forth in Section 5(c) hereof, and the
Executive's employment shall be terminated.
c. Termination by the Company. The Company may terminate the
Executive's employment hereunder at any time with or without Cause. For the
purposes of this Agreement, "Cause" shall mean any act that has a material
adverse effect upon the Company, and that constitutes on the part of the
Executive personal dishonesty, willful misconduct, repeated and intentional
failure to perform his duties hereunder, willful violation of any law,
governmental rule or regulation (other
2
<PAGE> 3
than traffic violations or misdemeanors that do not adversely impact Executive's
ability to perform his duties hereunder), or final cease and desist order, or
material breach of this Agreement and failureto cure such violation or breach
(if such violation or breach is curable) within fifteen days of receipt by
Executive of written notice thereof by the Company, in each case as reasonably
determined by the Company's Board of Directors after a diligent and good faith
inquiry.
d. Termination by Executive. Executive may terminate this
Agreement on two weeks' notice, and the Company shall have no obligations to
Executive except as set forth in Section 5(d) hereof; provided, however, if
Executive terminates this Agreement for Good Reason (as defined in Section
6(a)(i)(A),(B) or (C) below), but whether or not a Change of Control (as
hereinafter defined in Section 6) has occurred, Executive shall receive the
payments and benefits as set forth in Section 5(a) below.
e. Notice of Termination. Any termination by the Company pursuant
to Section 4(a) or termination without Cause pursuant to Section 4(c) shall be
communicated by written notice of termination to Executive at least 60 days
prior to the termination date. Notice of termination with Cause shall be
effective upon delivery.
5. Compensation on Termination of Employment (Except Within Six
Months Prior to or Two Years Following a Change of Control). This Section 5
shall apply to termination of the Executive's employment more than six months
prior to a Change of Control and to termination of the Executive's Employment
after more than two years following a Change of Control. This Section 5 shall
not apply to termination of Executive's employment during the Change of Control
Period (as hereinafter defined in Section 6):
a. If Executive's employment is terminated by the Company other
than for disability, death or Cause (as such term is defined in Section 4(c)
hereof), Executive shall receive such payments, if any, under applicable plans
or programs, including but not limited to those referred to in Sections 3(c) and
(d) hereof, to which he is entitled pursuant to the terms of such plans or
programs, and any unpaid payments of Base Salary previously earned, bonus
awarded and expense incurred for which Executive is entitled to reimbursement
hereunder. If Executive is terminated under this Section 5(a), Executive shall
also be entitled to receive (i) an amount (the "Termination Amount") in lieu of
any other cash compensation beyond that provided in the immediately preceding
sentence, which Termination Amount shall be equal to the greater of (x) two
times Executive's annual Base Salary and bonuses paid or owed Executive during
the twelve-month period preceding the date of termination and (y) Base Salary
payable over the then remaining balance of the employment term, in either case,
payable in installments as normal payroll over the 24 months following such
termination of employment (or, if longer, the remaining balance of the
employment term); and (ii) continued coverage for the same period that the
Termination Amount is payable under any employee medical, disability and life
insurance plans in accordance with the respective terms thereof (other than the
requirement of continued employment).
3
<PAGE> 4
b. If the Executive's employment is terminated in accordance with
Section 4(a) as a result of disability due to physical or mental illness, the
Executive shall receive or commence receiving, as soon as practicable:
(i) the actual bonus, if any, he would have received in
respect of the fiscal year in which his termination occurs, prorated by
a fraction, the numerator of which is the number of days of the fiscal
year until termination and the denominator of which is 365, payable at
the same time as bonuses are paid to other executives; and
(ii) accrued but unpaid Base Salary and such payments
under applicable plans or programs, including but not limited to those
referred to in Sections 3(c) and (d) hereof, to which he is entitled
pursuant to the terms of such plans or programs.
(iii) continued payment of periodic Base Salary until the
date that Executive becomes eligible for long-term disability benefits
described in Section 3(d) hereof unless the Executive is otherwise
eligible to receive benefits under a short-term disability program
maintained by the Company.
c. If the Executive's employment shall be terminated because of
the Executive's death, Executive's estate or designated beneficiaries shall
receive or commence receiving, as soon as practicable:
(i) the actual bonus, if any, he would have received in
respect of the fiscal year in which his death occurs, prorated by a
fraction, the numerator of which is the number of days of the fiscal
year until his death and the denominator of which is 365, payable at the
same time as bonuses are paid to other executives; and
(ii) accrued but unpaid Base Salary and such payments
under applicable plans or programs, including but not limited to those
referred to in Sections 3(c) and (d) hereof, to which Executive's estate
or designated beneficiaries are entitled pursuant to the terms of such
plans or programs.
d. If the Executive's employment shall be terminated with Cause
or if the Executive voluntarily terminates his employment for any reason, other
than Good Reason as described in Section 6(a)(i)(A), (B) or (C), the Company
shall pay the Executive his Base Salary earned through the date on which his
employment is terminated and the Company shall not have any further obligations
to the Executive under this Agreement except those required to be provided by
law.
6. Compensation on Termination of Employment Within Six Months Prior
to or Two Years Following A Change of Control. This Section 6 shall apply to
termination of Executive's
4
<PAGE> 5
employment during the "Change of Control Period" (as defined in this Section 6).
This Section 6 shall not apply to termination of Executive's employment more
than six months prior to a Change of Control or more than two years following a
Change of Control:
a. Definition of Certain Terms.
(i) "Good Reason" shall mean the occurrence or
continuation, without consent of Executive, after a Change of Control, of any of
the following events within the Change of Control Period:
(A) the assignment to Executive of any duties
inconsistent with the customary powers of Chief Executive Officer,
President and Director, or an adverse change in the status, position or
conditions of Executive's employment or the nature of Executive's
responsibilities in effect immediately prior to such Change of Control,
or any removal of Executive from, or any failure to re-elect Executive
to, any of such positions;
(B) a reduction by the Company in Executive's
Base Salary as in effect immediately prior to such Change of Control or
a material reduction in the benefits provided in Section 3(c) and
Section 3(d) of this Agreement;
(C) the relocation of Executive's principal
office to a location outside a 35 mile radius from Executive's
principal office immediately prior to such Change of Control, except
for required travel on the Company's business to an extent
substantially consistent with Executive's business travel obligations
immediately prior to such Change of Control;
(D) the failure by the Company to continue in
effect any benefit or compensation plan in which Executive participates
immediately prior to the Change of Control which is material to
Executive's total compensation, including but not limited to any stock
option, employee stock ownership, bonus, insurance, disability and
vacation plans which the Company currently has or any substitute or
additional plans adopted prior to the Change of Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan or plans) has been made with respect to such plan, or the failure
by the Company to continue Executive's participation therein (or in
such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the
level of Executive's participation relative to other participants, as
in existence immediately prior to such Change of Control; or
(E) the failure of the Company to obtain an
agreement from any successor to assume and agree to perform this
Agreement as contemplated herein.
(ii) A "Change of Control" shall be
deemed to have taken place if (A) any person or entity,
including a "group" as defined in Section 13(d)(3) of the
Securities and Exchange Act of 1934, other than Company or a
wholly-owned
5
<PAGE> 6
subsidiary thereof or any employee benefit plan of Company or
any of its it subsidiaries, becomes the beneficial owner of
the Company securities having 50% or more of the combined
voting power of the then outstanding securities of the Company
that may be cast for the election of directors of the Company
(other than as a result of an in issuance of securities
initiated by the Company in the ordinary course of business);
or (B) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing transactions less than a majority
of the combined voting power of the then outstanding
securities of the Company or any successor corporation or
entity entitled to vote generally in the election of the
directors of the Company or such other corporation or entity
after such transaction are held in the aggregate by the
holders of the Company's securities entitled to vote generally
in the election of directors of the Company immediately prior
to such transaction; or (C) during any period of two
consecutive years, individuals who at the beginning of any
such period constitute the Board of Directors of the Company
cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's shareholders, of each director of the Company
first elected during such period was approved by a vote of at
least two-thirds of the directors of the Company then still in
office who were directors of the Company at the beginning of
any such period.
(iii) "Change of Control Period" shall
mean the six month period before or the two year period
following a Change of Control.
(iv) "Change of Control Severance
Benefits" shall mean all of the following payments:
(A) any installments of Executive's
Base Salary through the date of termination of
employment at the rate in effect at the time the
Notice of Termination is given; and
(B) the Special Termination Payment.
(v) "Change of Control Date" shall mean
the date on which a Change of Control occurs.
(vi) "Notice of Termination" shall refer
to written notice described in Section 2(d) indicating the
specific termination provision of this Agreement relied upon,
setting forth in reasonable detail the facts and circumstances
claimed to provide the basis for termination of Executive's
employment under the provision so indicated and stating the
date of termination.
(vii) "Special Termination Payment" shall
mean an amount payable in a single lump sum equal to the
product of (x) the sum of the Executive's
6
<PAGE> 7
maximum annual salary paid during the five year period
preceding the date of termination (inclusive of bonuses paid
or owed to Executive during the 12-month period preceding the
date of termination, but excluding unearned bonuses negotiated
by Executive at the time of Executive's employment with the
Company), multiplied by (y) the number three.
b. Termination Not Giving Rise To Special Termination
Payments or Medical Benefits. If Executive's employment is terminated
during the Change of Control Period for Cause (as defined in Section
4(c), or on account of disability (as determined in accordance with
Section 4(a)), or if Executive dies during the Change of Control
Period, or if Executive terminates Executive's employment during the
Change of Control Period without Good Reason, the Company shall pay to
Executive any installments of Executive's Base Salary as then in effect
that would otherwise be due through the date on which Executive's
employment is terminated. The Company shall then have no further
obligations to the Executive under this Agreement (unless accrued under
the Company's benefit plans) except that in the event of termination by
death, the Executive's estate or beneficiaries, as the case may be,
shall be paid such amounts as may be payable to the Executive under
Section 5(c), and except that in the event of termination by
disability, the Executive shall be paid such amounts as Executive is
entitled to receive under Section 5(b) and except for payment of such
amounts as may be required pursuant to Sections 7 and 12 hereof.
c. Termination Giving Rise to Change of Control Severance
Benefits. If the Executive's employment is terminated by the Company
during the Change of Control Period for any reason other than Cause,
death of the Executive or disability, or if the Executive terminates his
employment during the Change of Control Period for Good Reason, then
Executive shall be entitled to receive the Change of Control Severance
Benefits, all of which shall be paid to Executive within ten days
following the date of termination.
d. Notice of Termination. Any termination of Executive's
employment by the Company or by Executive pursuant to this Section 6
shall be communicated by written notice of termination (the "Notice of
Termination") to the other party hereto 90 days in advance of any such
termination, which shall indicate the specific termination provision in
the Agreement relied upon, shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment and shall state the date of termination.
e. Special Rule Applicable to Termination Within Six
Months Prior to a Change of Control. Upon any termination of Executive's
employment prior to a Change of Control, Executive shall be entitled to
receive amounts as specified in Section 5 of this Agreement. If,
subsequent to such termination, a Change of Control occurs within six
months following the date of such termination, then the Executive shall
be entitled to receive amounts as specified in this Section 6, subject
to a reduction for any amounts previously paid by the Company to
Executive pursuant to Section 5 hereof.
7
<PAGE> 8
7. Tax Reimbursement Payment.
a. Definition of Certain Terms.
(i) The "Tax Firm" shall refer to the independent
accounting firm which is advising the Company
immediately prior to the change in control which
gives rise to payments under this Section 7, or
legal or tax counsel which, in all cases, is
acceptable to the Company and the Executive.
(ii) The "Additional Amount" shall mean an amount
payable to the Executive under the conditions
specified in Section 7(b) and determined as
provided in Section 7(b).
(iii) The "Change of Control Year" shall mean the
calendar year during which occurs the change in
control.
(iv) The "Code" shall mean the Internal Revenue Code of
1986, as amended.
(v) An "Excess Parachute Payment" shall mean any
payment, benefit or any portion thereof, whether
under this Agreement or as a result of Executive's
participation in any of the Company's stock option
or employee incentive plans, which would be an
"excess parachute payment" within the meaning of
Section 280G(b) of the Code, and which would
result in the imposition of an excise tax on the
Executive under Section 4999 of the Code.
b. Payment of Additional Amount. Notwithstanding anything to the
contrary contained in this Agreement, in any plan of the Company, or in any
other agreement or understanding, following a "change in control" (as defined in
Section 280G of the Code) will pay to the Executive, at the times herein
specified, an amount (the "Additional Amount") equal to the excise tax under
Section 4999 of the Code, if any, incurred or to be incurred by the Executive by
reason of the payments under this Agreement, acceleration of vesting of stock
options, stock appreciation rights or restricted stock granted under the
Company's various stock option, stock appreciation or other employee incentive
plans, or payments under any other plan, agreement or understanding between the
Executive and the Company, constituting Excess Parachute Payments, plus all
excise taxes and federal, state and local income taxes incurred or to be
incurred by the Executive with respect to receipt of the Additional Amount.
Attached hereto as Exhibit B is an example illustrating the computation of the
Additional Amount.
c. Opinion of Tax Firm. All determinations required to be made
regarding the Additional Amount, including whether payment of any Additional
Amount is required and the amount of any Additional Amount, shall be made by the
Tax Firm, which shall provide detailed
8
<PAGE> 9
support calculations to the Company and the Executive on or before the last day
of the Change of Control Year. In computing taxes, the Tax Firm shall use the
highest marginal federal, state and local income tax rates applicable to single
taxpayers for the year in which the Additional Amount is to be paid (unless,
within 30 days after the occurrence of the change in control the Executive
specifies in writing to the Company his marginal tax rate) and shall assume the
full deductibility of state and local income taxes for purposes of computing
federal income tax liability.
d. Time of Payment of Additional Amount. The portion of the
Additional Amount based on the excise tax as determined by the Tax Firm to be
due for the Change of Control Year shall be paid to the Executive no later than
March 1 immediately following the end of the Change of Control Year. The portion
of the Additional Amount based on the excise tax as determined by the Tax Firm
to be Due for each calendar year following the Change of Control Year shall be
paid to the Executive on or before March 1 immediately following the end of each
such calendar year. If the Company determines that the excise tax for any year
will be different from the amount originally calculated in the report of the Tax
Firm delivered at the end of the Change of Control Year, then the Company shall
provide to the Executive detailed support calculations by the Tax Firm
specifying the basis for the change in the Additional Amount.
8. Binding Agreement. This Agreement and all obligations of the
Company hereunder shall be binding upon the successors and assigns of the
Company. This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. The Company may assign its rights and delegate its
duties under this Agreement at any time, without the consent of Executive, to
one or more affiliates of the Company.
9. Non-Competition; Non-Solicitation. For a period of three years
following Executive's termination of employment, the Executive will not,
directly or indirectly, within the territorial limits of the United States of
America, without the prior written consent of the Company (i) directly or
indirectly, either as principal, manager, agent, consultant, officer,
shareholder, partner, investor, lender or employee or in any other capacity,
carry on, be engaged in or have any financial interest in, any business in
competition with the business of providing transaction outsourcing services to
government entities in which the Company participated on the date of termination
of employment; or (ii) recruit or hire or solicit for business any person who,
during the 12-month period preceding the date of recruitment or hiring or
solicitation, was an executive, customer, or client of the Company or any of its
subsidiaries or affiliates. Nothing herein shall prohibit the Executive from
acquiring a passive investment in a publicly-held company of up to 1% of the
outstanding common shares thereof.
10. Unauthorized Disclosure.
a. During the period of his employment hereunder, the Executive
shall not, without the prior written consent of the Company, disclose to any
person, other than a person to whom disclosure is necessary or appropriate in
connection with the performance by the Executive of his duties as an executive
of the Company, or any of its subsidiaries or affiliates (including any
9
<PAGE> 10
attorney, accountant, or financial advisor to Executive), any confidential
information obtained by him while in the employ of the Company, or its
subsidiaries or affiliates, with respect to any of the Company's (or any
subsidiary's) products, services, improvements, designs, methodologies,
processes, customers, methods of marketing or distribution, systems, procedures,
plans, proposals, or policies, the disclosure of which he knows, or should have
reason to know, could be damaging to the Company or its subsidiaries or
affiliates. Following the termination of employment hereunder, the Executive
shall not disclose any confidential information of the type described above
except as may be required by order of court in connection with any judicial or
administrative proceeding or inquiry; provided, however, nothing contained in
this Section 10 shall apply to any knowledge or information that (1) is
generally available to the public or becomes generally available to the public
other than as a result of a disclosure in violation hereof by Executive, (2)
prior to its disclosure, was available to Executive prior to his association
with the Company or (3) becomes available to Executive from a source other than
the Company or any of its Representatives, provided that such source is not, to
Executive's knowledge, bound by a confidentiality agreement with respect to such
information. For purposes of this Agreement, the term "Representatives" shall
mean the Company's directors, officers, employees, attorneys, accountants and
others engaged by the Company or intended to be engaged by the Company to advise
it.
b. The foregoing provision of this Section 10 shall be binding
upon the Executive's heirs, successors, and legal representatives.
11. Injunction. The Executive acknowledges and agrees that, in the
event of a breach of Section 9 or Section 10 hereof by the Executive, the
Company would be irreparably harmed and that monetary damages would be an
inadequate remedy in favor of the Company. Accordingly, the parties agree that
in the event of such a breach, the Company shall be entitled to injunctive
relief against the Executive, in addition to any other remedies or damages
available to it.
12. Indemnification.
a. In the event that an excise tax is ever assessed by the
Internal Revenue Service against the Executive (or if the Company and
the Executive mutually agree that an excise tax is payable) by reason of
any payment under this Agreement, acceleration of vesting of stock
options, stock appreciation rights or restricted stock granted under the
Company's stock option, stock appreciation or other employee incentive
plans, or payments under any other plan, agreement or understanding
between the Executive and the Company, constituting Excess Parachute
Payments, and if such excise tax was not included in the determination
by the Tax Firm of the Additional Amount that has been actually paid to
the Executive, the Company agrees to indemnify the Executive by paying
to the Executive the amount of such excise tax, together with any
interest and penalties, including reasonable legal and accounting fees
and other out-of-pocket expenses incurred by the Executive, attributable
to the failure to pay such excise tax by the date it was originally due,
plus all federal, state and local income taxes incurred with respect to
payment of the excise tax calculated in a manner analogous to Exhibit B.
Upon Executive's receipt from the Internal Revenue Service ("IRS") of
any deficiency notice, notice of assessment or any other written
10
<PAGE> 11
communication relating to the excise tax on an Excess Parachute Payment,
Executive shall give notice thereof to the Company within ten business
days of Executive's actual receipt thereof. In the event of any dispute
concerning the potential excise tax (including any administrative
proceedings within the IRS or court proceedings), the Company, as the
indemnifying party. shall be entitled to assume the defense of such a
dispute or proceeding, no compromise or settlement of such claim may be
effected without the Company's and Executive's mutual consent (which
consents shall not be unreasonably withheld) and the Company shall have
no liability with respect to any compromise or settlement of such claims
effected without its consent, unless such consent has been unreasonably
withheld. In addition, in the event the Company assumes defense of any
proceeding, the Executive shall not be entitled to indemnification for
outside legal fees and expenses independently incurred by Executive
after the date on which the Company assumed such defense. This
indemnification obligation shall survive the termination of the
Agreement and shall apply to all such excise taxes on Excess Parachute
Payments, whether due before or after termination of employment.
b. If the excise tax for any year which is actually imposed on
the Executive is finally determined to be less than the amount taken
into accounting the calculation of the Additional Amount that was paid
to the Executive pursuant to Section 7, then the Executive shall repay
to the Company, at the time that the amount of such reduction in excise
tax is finally determined, the portion of the Additional Amount
attributable to such reduction (including the portion of the Additional
Amount attributable to the excise tax and federal and state income taxes
imposed on the Additional Amount being repaid by the Executive, to the
extent that such repayment results in a reduction in such excise tax,
federal or state income tax).
13. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or, if mailed by United States
registered mail, return receipt requested, postage prepaid, three days following
the date of mailing addressed as follows:
If to the Executive:
Richardson M. Roberts
____________________________
____________________________
with a copy to:
Waller Lansden Dortch & Davis, PLLC
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attn: Howard H. Herndon
11
<PAGE> 12
If to the Company:
G-Link Corporation
3841 Green Hills Village Drive, Suite 400
Nashville, Tennessee 37215
Attn: Nollie Peeler
with a copy to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attn: F. Mitchell Walker, Jr.
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
14. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city, and other taxes as shall
be required pursuant to any law or government regulation or ruling.
15. Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable, or void, in whole or in part, then both
parties shall be relieved of all obligations arising under such provision, but
only to the extent such provision is illegal, unenforceable, or void, it being
the intent and agreement of the parties that this Agreement shall be deemed
amended by modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if such is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objectives. The foregoing notwithstanding, if the remainder of
this Agreement shall not be affected by such declaration or finding and is
capable of substantial performance, then each provision not so affected shall be
enforced to the extent permitted by law.
16. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Tennessee, without giving effect to
the choice of laws principles thereof.
17. Amendment; Modification; Waiver. This Agreement may be amended only
by the written agreement of the parties hereto. No provisions of this Agreement
may be modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing signed by Executive and the Company. No waiver
by either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
12
<PAGE> 13
18. Binding Effect. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer, or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided for herein. Without limiting the generality of the foregoing,
Executive's right to receive payments hereunder shall not be assignable,
transferable, or delegable, whether by pledge, creation of a security interest,
or otherwise, other than by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this Section 18, the Company shall not have any liability to pay any amount
so attempted to be assigned, transferred, or delegated.
19. Entire Contract. Except as otherwise set forth herein, this
Agreement constitutes the entire agreement and supersedes all other prior or
contemporaneous agreements, employment contracts, and understandings, both
written and oral, express or implied, with respect to the subject matter of this
Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
[Remainder of page left intentionally blank; signature page follows]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
G-LINK CORPORATION
By: /s/ Mark McDonald
-------------------------------
Title: /s/ Chairman
----------------------------
/s/ Richardson M. Roberts
-----------------------------------
Richardson M. Roberts
14
<PAGE> 15
EXHIBIT A
BONUS CRITERIA
1. Conduct bi-weekly management meetings with Chairman and senior executive
staff.
2. Assemble management team.
3. Complete financings as directed by the Board of Directors.
4. Position Company to achieve strategic alternatives, including an initial
public offering, strategic transaction or strategic alliances.
5. Maintain financial stability of Company.
15
<PAGE> 16
EXHIBIT B
COMPUTATION OF ADDITIONAL AMOUNT
<TABLE>
<S> <C> <C>
1. Excess Parachute Payment Subject to Excise Tax $ 50,000
2. Excise Tax on Item 1 @ 20% $ 10,000
3. Additional Amount Under Agreement* $ 24,752
4. Verification of Additional Amount:
A) Excise Tax on additional $24,752 @ 20% $ 4,950
B) Federal Income Tax on $24,752:
i) Additional Income $ 24,752
ii) State Income Tax Deduction 0
---------
iii) Net Additional Federal
Taxable Income 24,752
iv) Federal Income Tax @ 39.6% $ 9,802
C) Total Taxes on Additional Amount (Line 4A + Line 4B (iv)) $ 14,752
D) Net amount Available to Key Employee to
Pay Excise Tax in line 2 ($24,752 - $14,752) $ 10,000
</TABLE>
- -------------------
* The formula used to compute the Additional Amount is to divide the
initial excise tax amount (line 2) by a percentage equal to 100% less the sum of
the excise tax percentage plus the state income tax percentage, plus the federal
tax percentage less a percentage determined by multiplying the federal tax
percentage times the state tax percentage. Thus, in the example above, the
following percentages should be subtracted from 100%.
1) Excise Tax Percentage 20.00%
2) Assumed State Tax Percentage - Tennessee 0.00%
3) Federal Income Tax Percentage - 39.60%
------
Total 59.60%
Less 39.6% Times 0% (Deduction for state income
tax = 0 in Tennessee) 0.00%
-----
59.60%
The resulting percentage of 100% - 59.60% = 40.40% is divided into $10,000.
$10,000/.4040 = $24,752.
16
<PAGE> 1
EXHIBIT 10.5
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO
OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
STOCK PURCHASE WARRANT
This Stock Purchase Warrant (the "Warrant") is issued as of this 4th day
of October, 1999 by G-Link Corporation, a Tennessee corporation (the "Company"),
to ________________ ("Holder").
AGREEMENT:
Section 1. Issuance of Warrant; Term; Replacement.
(a) For and in consideration of Holder guaranteeing a revolving credit
agreement and promissory note entered into by the Company and other good and
valuable consideration, the receipt and sufficient of which is hereby
acknowledged, the Company hereby grants to Holder the right to purchase 100,000
shares of Common Stock.
(b) The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Shares." This Warrant shall be exercisable
at any time and from time to time from the date hereof until ten (10) years from
the date hereof, or if such day is a day on which banking institutions in
Tennessee are authorized by law to close, then on the next succeeding day that
shall not be such a day.
(c) Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant, and (in the
case of loss, theft, or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
Section 2. Exercise Price. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the terms
of this Warrant shall initially be $1.00.
Section 3. Exercise. This Warrant may be exercised by the Holder hereof
(but only on the conditions hereafter set forth) in whole or in part upon
delivery of written notice of intent to
<PAGE> 2
exercise to the Company at the following address: 3841 Green Hills Village
Drive, Suite 400, Nashville, Tennessee 37215, Attention: President, or such
other address as the Company shall designate in a written notice to the Holder
hereof, together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be payable
by certified or cashier's check, immediately available funds or by the surrender
of the Note or portion thereof having an outstanding principal balance equal to
the aggregate Exercise Price, or such other method mutually acceptable to the
Company and the Holder. Upon exercise of this Warrant as aforesaid, the Company
shall as promptly as practicable, and in any event within fifteen (15) days
thereafter, execute and deliver to the Holder of this Warrant a certificate or
certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new Warrant covering the number of
Shares in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant.
Section 4. Covenants and Conditions. The above provision is subject to
the following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act or any state securities laws ("Blue Sky Laws"). The Holder
acknowledges and agrees that this Warrant has been acquired for investment
purposes and not with a view to distribution or resale in violation of the
registration provisions of the Securities Act. This Warrant may not be pledged,
hypothecated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement for such Warrant
under the Securities Act and such applicable Blue Sky Laws or (ii) an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to the
Company and its counsel, that registration is not required under the Securities
Act or under any applicable Blue Sky Laws; and transfer of Shares issued upon
the exercise of this Warrant shall be restricted in the same manner and to the
same extent as the Warrant, and the certificates representing such Shares shall
bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
2
<PAGE> 3
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
OTHER RESTRICTIONS AND CONDITIONS ALL AS SET FORTH IN THE SHAREHOLDERS AGREEMENT
DATED SEPTEMBER 16, 1999.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) Holder hereby agrees to be bound by the provisions of the
Shareholders Agreement dated as of September 16, 1999 among the Company and the
shareholders of the Company signatory thereto. Upon the Company's request,
Holder agrees to execute a counterpart to the Shareholders Agreement to evidence
the foregoing.
(c) The Company covenants and agrees that all Shares that may be issued
upon exercise of this Warrant will, upon issuance and payment therefor, be
legally and validly issued and outstanding, fully paid and nonassessable, free
from all taxes, liens, charges, and preemptive rights, if any, with respect
thereto or to the issuance thereof. The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
Section 5. Adjustment of Exercise Price and Number of Shares Issuable.
The Exercise Price and the number of Shares (or other securities or property)
issuable upon exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of any of the events enumerated in this Section 5.
(a) Common Stock Reorganization. If the Company shall (i) subdivide or
consolidate its outstanding shares of Common Stock (or any class thereof) into a
greater or smaller number of shares; (ii) pay a dividend or make a distribution
on its Common Stock (or any class thereof) in shares of its capital stock; or
(iii) issue by reclassification of its Common Stock (or any class thereof) any
shares of its capital stock (any such event described in clauses (i), (ii), or
(iii) being called a "Common Stock Reorganization"), then the Exercise Price and
the type of securities for which this Warrant is exercisable shall be adjusted
immediately such that the Holder thereafter shall be entitled to receive upon
exercise of this Warrant the aggregate number and type of securities that it
would have received if this Warrant had been exercised immediately prior to such
Common Stock Reorganization.
(b) Capital Reorganizations. If there shall be any consolidation,
merger, or amalgamation of the Company with another person or entity or any
acquisition of capital stock of the Company by means of a share exchange, other
than a consolidation, merger, or share exchange in which the Company is the
continuing corporation, or any sale or conveyance of the property of the Company
as an entirety or substantially as an entirety, or any reorganization or
recapitalization of the Company (any such event being called a "Capital
Reorganization"), then the Holder of this
3
<PAGE> 4
Warrant shall no longer have the right to purchase Common Stock, but shall have
instead the right to purchase, upon exercise of this Warrant, the kind and
amount of shares of stock and other securities and property (including cash)
that the Holder would have owned or have been entitled to receive pursuant to
such Capital Reorganization if this Warrant had been exercised immediately prior
to the effective date of such Capital Reorganization. As a condition to
effecting any Capital Reorganization, the Company or the successor or surviving
corporation, as the case may be, shall assume by a supplemental agreement,
satisfactory in form, scope, and substance to the Holder (which shall be mailed
or delivered to the Holder of this Warrant at the last address of such Holder
appearing on the books of the Company) the obligation to deliver to such Holder
such shares of stock, securities, cash, or property as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase after giving
effect to the Capital Reorganization, and all other obligations of the Company
set forth in this Warrant.
(c) Adjustment Rules. Any adjustments pursuant to this Section 5 shall
be made successively whenever an event referred to herein shall occur. No
adjustment shall be made pursuant to this Section 5 in respect of the issuance
from time to time of shares of Common Stock upon the exercise of this Warrant or
upon the exercise or conversion of any other stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities") or
any rights to subscribe for or to purchase, or any warrants or options for the
purchase of, Common Stock or Convertible Securities.
(d) Notice of Adjustment. Not less than 10 days prior to the record date
or effective date, as the case may be, of any action that requires or might
require an adjustment or readjustment pursuant to this Section 5, the Company
shall give notice to the Holder of such event, describing such event in
reasonable detail and specifying the record date or effective date, as the case
may be, and, if determinable, the required adjustment and the computation
thereof. If the required adjustment is not determinable at the time of such
notice, the Company shall give notice to the Holder of such adjustment and
computation promptly after such adjustment becomes determinable.
Section 6. Warrant Transfer Provisions. THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS PREVIOUSLY
CONSENTED TO IN WRITING BY THE COMPANY, AND NO SALE, TRANSFER, ASSIGNMENT,
HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT PRIOR TO SUCH DATE SHALL BE
VALID OR EFFECTIVE UNLESS PREVIOUSLY CONSENTED TO IN WRITING BY THE COMPANY. Any
transfer of this Warrant, if previously consented to by the Company, is
registrable at the office or agency of the Company referred to in Section 8
below by the Holder in person or by his duly authorized attorney, upon surrender
of this Warrant properly endorsed.
Section 7. No Rights or Liabilities as a Shareholder. This Warrant shall
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company. No provision of this Warrant, in the absence of affirmative action
by the Holder to purchase Shares, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of Holder
4
<PAGE> 5
for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
Section 8. Notices. All notices, requests and other communications
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail, postage prepaid and addressed, to Holder at the
address shown for Holder on the books of the Company, or at such other address
as shall have been furnished to the Company by notice from Holder. All notices,
requests and other communications required or permitted to be given or delivered
hereunder to the Company shall be in writing and shall be personally delivered,
or shall be sent by certified or registered mail, postage prepaid and addressed
to the office of the Company at 3841 Green Hills Village Drive, Suite 400,
Nashville, Tennessee 37215, or at such other address as shall have been
furnished to the Holder by notice from the Company. All notices, requests and
other communications shall be deemed to have been given either at the time of
the delivery thereof to the person entitled to receive such notice at the
address of such person for purposes of this Section 8, or, if mailed, at the
completion of the third full day following the date of such mailing thereof to
such address, as the case may be.
Section 9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant.
Section 10. Applicable Law. The Warrant is issued under and shall for
all purposes be governed by and construed in accordance with the laws of the
State of Tennessee applicable to contracts made and to be performed wholly
within such state without regard to its conflict of laws rules.
Section 11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
Paragraphs of this Warrant are inserted for purposes of reference only and shall
not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
[Remainder of page intentionally left blank. Signature page follows.]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
G-LINK CORPORATION,
a Tennessee corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
_________________________________________
6
<PAGE> 7
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _______________ shares of Common Stock of
G-Link Corporation, a Tennessee corporation, and hereby makes payment of
______________ in payment therefor.
------------------------------------
Signature
-------------------------------------
Signature, if jointly held
-------------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or
Taxpayer Identification Number _________________________________________________
7
<PAGE> 1
EXHIBIT 10.6
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO
OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
STOCK PURCHASE WARRANT
This Stock Purchase Warrant (the "Warrant") is issued as of this ____
day of _______, 2000, by G-Link Corporation, a Tennessee corporation (the
"Company"), to _________________ ("Holder").
AGREEMENT:
Section 1. Issuance of Warrant; Term; Replacement.
(a) For and in consideration of Holder making an investment in the
Company and other good and valuable consideration, the receipt and sufficient of
which is hereby acknowledged, the Company hereby grants to Holder the right to
purchase 50,000 shares of Common Stock.
(b) The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Shares." This Warrant shall be exercisable
at any time and from time to time from the date hereof until three (3) years
from the date hereof, or if such day is a day on which banking institutions in
Tennessee are authorized by law to close, then on the next succeeding day that
shall not be such a day.
(c) Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant, and (in the
case of loss, theft, or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
Section 2. Exercise Price. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the terms
of this Warrant shall initially be $2.13.
Section 3. Exercise. This Warrant may be exercised by the Holder hereof
(but only on the conditions hereafter set forth) in whole or in part upon
delivery of written notice of intent to exercise to the Company at the following
address: One Burton Hills Blvd., Suite 150, Nashville,
<PAGE> 2
Tennessee 37215, Attention: President, or such other address as the Company
shall designate in a written notice to the Holder hereof, together with this
Warrant and payment to the Company of the aggregate Exercise Price of the Shares
so purchased. The Exercise Price shall be payable by certified or cashier's
check, immediately available funds or by the surrender of the Note or portion
thereof having an outstanding principal balance equal to the aggregate Exercise
Price, or such other method mutually acceptable to the Company and the Holder.
Upon exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to this Warrant.
Section 4. Covenants and Conditions. The above provision is subject to
the following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act or any state securities laws ("Blue Sky Laws"). The Holder
acknowledges and agrees that this Warrant has been acquired for investment
purposes and not with a view to distribution or resale in violation of the
registration provisions of the Securities Act. This Warrant may not be pledged,
hypothecated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement for such Warrant
under the Securities Act and such applicable Blue Sky Laws or (ii) an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to the
Company and its counsel, that registration is not required under the Securities
Act or under any applicable Blue Sky Laws; and transfer of Shares issued upon
the exercise of this Warrant shall be restricted in the same manner and to the
same extent as the Warrant, and the certificates representing such Shares shall
bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
OTHER RESTRICTIONS AND CONDITIONS ALL AS SET FORTH IN THE SHAREHOLDERS AGREEMENT
DATED SEPTEMBER 16, 1999.
The Holder hereof and the Company agree to execute such other documents and
instruments as
2
<PAGE> 3
counsel for the Company reasonably deems necessary to effect the compliance of
the issuance of this Warrant and any shares of Common Stock issued upon exercise
hereof with applicable federal and state securities laws.
(b) Holder hereby agrees to be bound by the provisions of the
Shareholders Agreement dated as of September 16, 1999 among the Company and the
shareholders of the Company signatory thereto. Upon the Company's request,
Holder agrees to execute a counterpart to the Shareholders Agreement to evidence
the foregoing.
(c) The Company covenants and agrees that all Shares that may be issued
upon exercise of this Warrant will, upon issuance and payment therefor, be
legally and validly issued and outstanding, fully paid and nonassessable, free
from all taxes, liens, charges, and preemptive rights, if any, with respect
thereto or to the issuance thereof. The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
Section 5. Adjustment of Exercise Price and Number of Shares Issuable.
The Exercise Price and the number of Shares (or other securities or property)
issuable upon exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of any of the events enumerated in this Section 5.
(a) Common Stock Reorganization. If the Company shall (i) subdivide or
consolidate its outstanding shares of Common Stock (or any class thereof) into a
greater or smaller number of shares; (ii) pay a dividend or make a distribution
on its Common Stock (or any class thereof) in shares of its capital stock; or
(iii) issue by reclassification of its Common Stock (or any class thereof) any
shares of its capital stock (any such event described in clauses (i), (ii), or
(iii) being called a "Common Stock Reorganization"), then the Exercise Price and
the type of securities for which this Warrant is exercisable shall be adjusted
immediately such that the Holder thereafter shall be entitled to receive upon
exercise of this Warrant the aggregate number and type of securities that it
would have received if this Warrant had been exercised immediately prior to such
Common Stock Reorganization.
(b) Capital Reorganizations. If there shall be any consolidation,
merger, or amalgamation of the Company with another person or entity or any
acquisition of capital stock of the Company by means of a share exchange, other
than a consolidation, merger, or share exchange in which the Company is the
continuing corporation, or any sale or conveyance of the property of the Company
as an entirety or substantially as an entirety, or any reorganization or
recapitalization of the Company (any such event being called a "Capital
Reorganization"), then the Holder of this Warrant shall no longer have the right
to purchase Common Stock, but shall have instead the right to purchase, upon
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property (including cash) that the Holder would have owned or
have been entitled to receive pursuant to such Capital Reorganization if this
Warrant had been exercised immediately prior to the effective date of such
Capital Reorganization. As a condition to effecting any Capital
3
<PAGE> 4
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall assume by a supplemental agreement, satisfactory in form,
scope, and substance to the Holder (which shall be mailed or delivered to the
Holder of this Warrant at the last address of such Holder appearing on the books
of the Company) the obligation to deliver to such Holder such shares of stock,
securities, cash, or property as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase after giving effect to the Capital
Reorganization, and all other obligations of the Company set forth in this
Warrant.
(c) Adjustment Rules. Any adjustments pursuant to this Section 5 shall
be made successively whenever an event referred to herein shall occur. No
adjustment shall be made pursuant to this Section 5 in respect of the issuance
from time to time of shares of Common Stock upon the exercise of this Warrant or
upon the exercise or conversion of any other stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities") or
any rights to subscribe for or to purchase, or any warrants or options for the
purchase of, Common Stock or Convertible Securities.
(d) Notice of Adjustment. Not less than 10 days prior to the record date
or effective date, as the case may be, of any action that requires or might
require an adjustment or readjustment pursuant to this Section 5, the Company
shall give notice to the Holder of such event, describing such event in
reasonable detail and specifying the record date or effective date, as the case
may be, and, if determinable, the required adjustment and the computation
thereof. If the required adjustment is not determinable at the time of such
notice, the Company shall give notice to the Holder of such adjustment and
computation promptly after such adjustment becomes determinable.
Section 6. Warrant Transfer Provisions. THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS PREVIOUSLY
CONSENTED TO IN WRITING BY THE COMPANY, AND NO SALE, TRANSFER, ASSIGNMENT,
HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT PRIOR TO SUCH DATE SHALL BE
VALID OR EFFECTIVE UNLESS PREVIOUSLY CONSENTED TO IN WRITING BY THE COMPANY. Any
transfer of this Warrant, if previously consented to by the Company, is
registrable at the office or agency of the Company referred to in Section 8
below by the Holder in person or by his duly authorized attorney, upon surrender
of this Warrant properly endorsed.
Section 7. No Rights or Liabilities as a Shareholder. This Warrant shall
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company. No provision of this Warrant, in the absence of affirmative action
by the Holder to purchase Shares, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of Holder for the
Exercise Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
Section 8. Notices. All notices, requests and other communications
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and
4
<PAGE> 5
shall be personally delivered, or shall be sent by certified or registered mail,
postage prepaid and addressed, to Holder at the address shown for Holder on the
books of the Company, or at such other address as shall have been furnished to
the Company by notice from Holder. All notices, requests and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing and shall be personally delivered, or shall be sent
by certified or registered mail, postage prepaid and addressed to the office of
the Company at One Burton Hills Blvd., Suite 150, Nashville, Tennessee 37215, or
at such other address as shall have been furnished to the Holder by notice from
the Company. All notices, requests and other communications shall be deemed to
have been given either at the time of the delivery thereof to the person
entitled to receive such notice at the address of such person for purposes of
this Section 8, or, if mailed, at the completion of the third full day following
the date of such mailing thereof to such address, as the case may be.
Section 9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant.
Section 10. Applicable Law. The Warrant is issued under and shall for
all purposes be governed by and construed in accordance with the laws of the
State of Tennessee applicable to contracts made and to be performed wholly
within such state without regard to its conflict of laws rules.
Section 11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
Paragraphs of this Warrant are inserted for purposes of reference only and shall
not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
[Remainder of page intentionally left blank. Signature page follows.]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
G-LINK CORPORATION,
a Tennessee corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
_________________________________________
6
<PAGE> 7
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _______________ shares of Common Stock of G-Link
Corporation, a Tennessee corporation, and hereby makes payment of ______________
in payment therefor.
------------------------------------
Signature
------------------------------------
Signature, if jointly held
------------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or
Taxpayer Identification Number _________________________________________________
7
<PAGE> 1
EXHIBIT 10.7
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO
OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
STOCK PURCHASE WARRANT
This Stock Purchase Warrant (the "Warrant") is issued as of this 25th
day of January, 2000, by G-Link Corporation, a Tennessee corporation (the
"Company"), to _________________ ("Holder").
AGREEMENT:
Section 1. Issuance of Warrant; Term; Replacement.
(a) For and in consideration of Holder's assistance in placing and
providing financing for the Company and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company hereby
grants to Holder the right to purchase ________ shares of Common Stock. Holder
further agrees that Holder will provide such additional consulting services as
may be reasonably requested by the Company from time to time during the term of
this Warrant.
(b) The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Shares." This Warrant shall be exercisable
at any time and from time to time from the date hereof until three (3) years
from the date hereof, or if such day is a day on which banking institutions in
Tennessee are authorized by law to close, then on the next succeeding day that
shall not be such a day.
(c) Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant, and (in the
case of loss, theft, or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
Section 2. Exercise Price. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the terms
of this Warrant shall initially be $2.84.
<PAGE> 2
Section 3. Exercise. This Warrant may be exercised by the Holder hereof
(but only on the conditions hereafter set forth) in whole or in part upon
delivery of written notice of intent to exercise to the Company at the following
address: One Burton Hills Blvd., Suite 150, Nashville, Tennessee 37215,
Attention: President, or such other address as the Company shall designate in a
written notice to the Holder hereof, together with this Warrant and payment to
the Company of the aggregate Exercise Price of the Shares so purchased. The
Exercise Price shall be payable by certified or cashier's check, immediately
available funds or by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price, or such
other method mutually acceptable to the Company and the Holder. Upon exercise of
this Warrant as aforesaid, the Company shall as promptly as practicable, and in
any event within fifteen (15) days thereafter, execute and deliver to the Holder
of this Warrant a certificate or certificates for the total number of whole
Shares for which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised with respect
to less than all of the Shares, the Holder shall be entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant shall not
have been exercised, which new Warrant shall in all other respects be identical
to this Warrant.
Section 4. Covenants and Conditions. The above provision is subject to
the following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act or any state securities laws ("Blue Sky Laws"). The Holder
acknowledges and agrees that this Warrant has been acquired for investment
purposes and not with a view to distribution or resale in violation of the
registration provisions of the Securities Act. This Warrant may not be pledged,
hypothecated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement for such Warrant
under the Securities Act and such applicable Blue Sky Laws or (ii) an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to the
Company and its counsel, that registration is not required under the Securities
Act or under any applicable Blue Sky Laws; and transfer of Shares issued upon
the exercise of this Warrant shall be restricted in the same manner and to the
same extent as the Warrant, and the certificates representing such Shares shall
bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
2
<PAGE> 3
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
OTHER RESTRICTIONS AND CONDITIONS ALL AS SET FORTH IN THE SHAREHOLDERS AGREEMENT
DATED SEPTEMBER 16, 1999.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) Holder hereby agrees to be bound by the provisions of the
Shareholders Agreement dated as of September 16, 1999 among the Company and the
shareholders of the Company signatory thereto. Upon the Company's request,
Holder agrees to execute a counterpart to the Shareholders Agreement to evidence
the foregoing.
(c) The Company covenants and agrees that all Shares that may be issued
upon exercise of this Warrant will, upon issuance and payment therefor, be
legally and validly issued and outstanding, fully paid and nonassessable, free
from all taxes, liens, charges, and preemptive rights, if any, with respect
thereto or to the issuance thereof. The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
Section 5. Adjustment of Exercise Price and Number of Shares Issuable.
The Exercise Price and the number of Shares (or other securities or property)
issuable upon exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of any of the events enumerated in this Section 5.
(a) Common Stock Reorganization. If the Company shall (i) subdivide or
consolidate its outstanding shares of Common Stock (or any class thereof) into a
greater or smaller number of shares; (ii) pay a dividend or make a distribution
on its Common Stock (or any class thereof) in shares of its capital stock; or
(iii) issue by reclassification of its Common Stock (or any class thereof) any
shares of its capital stock (any such event described in clauses (i), (ii), or
(iii) being called a "Common Stock Reorganization"), then the Exercise Price and
the type of securities for which this Warrant is exercisable shall be adjusted
immediately such that the Holder thereafter shall be entitled to receive upon
exercise of this Warrant the aggregate number and type of securities that it
would have received if this Warrant had been exercised immediately prior to such
Common Stock Reorganization.
(b) Capital Reorganizations. If there shall be any consolidation,
merger, or amalgamation of the Company with another person or entity or any
acquisition of capital stock of the Company by means of a share exchange, other
than a consolidation, merger, or share exchange in which the Company is the
continuing corporation, or any sale or conveyance of the property of the Company
as an entirety or substantially as an entirety, or any reorganization or
recapitalization of the Company (any such event being called a "Capital
Reorganization"), then the Holder of this
3
<PAGE> 4
Warrant shall no longer have the right to purchase Common Stock, but shall have
instead the right to purchase, upon exercise of this Warrant, the kind and
amount of shares of stock and other securities and property (including cash)
that the Holder would have owned or have been entitled to receive pursuant to
such Capital Reorganization if this Warrant had been exercised immediately prior
to the effective date of such Capital Reorganization. As a condition to
effecting any Capital Reorganization, the Company or the successor or surviving
corporation, as the case may be, shall assume by a supplemental agreement,
satisfactory in form, scope, and substance to the Holder (which shall be mailed
or delivered to the Holder of this Warrant at the last address of such Holder
appearing on the books of the Company) the obligation to deliver to such Holder
such shares of stock, securities, cash, or property as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase after giving
effect to the Capital Reorganization, and all other obligations of the Company
set forth in this Warrant.
(c) Adjustment Rules. Any adjustments pursuant to this Section 5 shall
be made successively whenever an event referred to herein shall occur. No
adjustment shall be made pursuant to this Section 5 in respect of the issuance
from time to time of shares of Common Stock upon the exercise of this Warrant or
upon the exercise or conversion of any other stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities") or
any rights to subscribe for or to purchase, or any warrants or options for the
purchase of, Common Stock or Convertible Securities.
(d) Notice of Adjustment. Not less than 10 days prior to the record date
or effective date, as the case may be, of any action that requires or might
require an adjustment or readjustment pursuant to this Section 5, the Company
shall give notice to the Holder of such event, describing such event in
reasonable detail and specifying the record date or effective date, as the case
may be, and, if determinable, the required adjustment and the computation
thereof. If the required adjustment is not determinable at the time of such
notice, the Company shall give notice to the Holder of such adjustment and
computation promptly after such adjustment becomes determinable.
Section 6. Warrant Transfer Provisions. THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS PREVIOUSLY
CONSENTED TO IN WRITING BY THE COMPANY, AND NO SALE, TRANSFER, ASSIGNMENT,
HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT PRIOR TO SUCH DATE SHALL BE
VALID OR EFFECTIVE UNLESS PREVIOUSLY CONSENTED TO IN WRITING BY THE COMPANY. Any
transfer of this Warrant, if previously consented to by the Company, is
registrable at the office or agency of the Company referred to in Section 8
below by the Holder in person or by his duly authorized attorney, upon surrender
of this Warrant properly endorsed.
Section 7. No Rights or Liabilities as a Shareholder. This Warrant shall
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company. No provision of this Warrant, in the absence of affirmative action
by the Holder to purchase Shares, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of Holder
4
<PAGE> 5
for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
Section 8. Notices. All notices, requests and other communications
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail, postage prepaid and addressed, to Holder at the
address shown for Holder on the books of the Company, or at such other address
as shall have been furnished to the Company by notice from Holder. All notices,
requests and other communications required or permitted to be given or delivered
hereunder to the Company shall be in writing and shall be personally delivered,
or shall be sent by certified or registered mail, postage prepaid and addressed
to the office of the Company at One Burton Hills Blvd., Suite 150, Nashville,
Tennessee 37215, or at such other address as shall have been furnished to the
Holder by notice from the Company. All notices, requests and other
communications shall be deemed to have been given either at the time of the
delivery thereof to the person entitled to receive such notice at the address of
such person for purposes of this Section 8, or, if mailed, at the completion of
the third full day following the date of such mailing thereof to such address,
as the case may be.
Section 9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant.
Section 10. Applicable Law. The Warrant is issued under and shall for
all purposes be governed by and construed in accordance with the laws of the
State of Tennessee applicable to contracts made and to be performed wholly
within such state without regard to its conflict of laws rules.
Section 11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
Paragraphs of this Warrant are inserted for purposes of reference only and shall
not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
[Remainder of page intentionally left blank. Signature page follows.]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
G-LINK CORPORATION,
a Tennessee corporation
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
____________________________________________
6
<PAGE> 7
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _______________ shares of Common Stock of G-Link
Corporation, a Tennessee corporation, and hereby makes payment of ______________
in payment therefor.
-------------------------------------
Signature
-------------------------------------
Signature, if jointly held
-------------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or
Taxpayer Identification Number _________________________________________________
7
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The Registrant has one wholly-owned subsidiary, Link2Gov.com, Inc., a Delaware
corporation.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of LINK2GOV Corp. for the years ended December 31,
1997, 1998 and 1999, dated March 21, 2000, included in or made a part of the
LINK2GOV Corp. registration statement, and to all references to our Firm
included in this registration statement.
Arthur Andersen LLP
Nashville, Tennessee
March 21, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Link2gov.com, Inc. for the period from inception
(February 1998) through December 31, 1998 and the year ended December 31, 1999,
dated March 16, 2000, included in or made a part of the LINK2GOV Corp.
registration statement, and to all references to our Firm included in this
registration statement.
Arthur Andersen LLP
Nashville, Tennessee
March 21, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LINK2GOV.COM FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 704
<SECURITIES> 0
<RECEIVABLES> 268
<ALLOWANCES> 89
<INVENTORY> 0
<CURRENT-ASSETS> 1,190
<PP&E> 36
<DEPRECIATION> 6
<TOTAL-ASSETS> 1,250
<CURRENT-LIABILITIES> 1,637
<BONDS> 0
0
0
<COMMON> 780
<OTHER-SE> (1,167)
<TOTAL-LIABILITY-AND-EQUITY> 1,250
<SALES> 0
<TOTAL-REVENUES> 979
<CGS> 0
<TOTAL-COSTS> 780
<OTHER-EXPENSES> 1,439
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> (1,273)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,273)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,273)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
